1963 (5) TMI 50 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Claim of exemption on turnover for sales in the course of import.
2. Inclusion of customs duty in the sale consideration.
3. Transfer of property and appropriation of goods to the contract.

Issue-wise Detailed Analysis:

1. Claim of exemption on turnover for sales in the course of import:

The assessees, dealers in arecanuts, claimed exemption on a turnover of Rs. 76,521, asserting that the sales were in the course of import, which is constitutionally exempt from taxation. The appellate authority initially agreed, finding that the transfer of documents of title to the buyer made the transaction a sale in the course of import. However, the Board disagreed, concluding that the sales were not in the course of import because the goods were cleared by the assessees, and all documents, including customs duty payments, were in their name. The High Court upheld the Board's view, emphasizing that the property in the goods did not pass to the ultimate buyer until after customs clearance, thus making the sale a local transaction.

2. Inclusion of customs duty in the sale consideration:

The assessing authority included the amounts paid towards customs duty as part of the sale consideration, recomputing the turnover to Rs. 1,32,905. This inclusion was contested by the assessees, but the High Court supported the assessing authority's decision. The court noted that since the goods were cleared and the customs duty paid in the name of the assessees, these amounts were rightly included in the sale consideration.

3. Transfer of property and appropriation of goods to the contract:

The assessees argued that the property in the goods passed to the buyer at Penang, citing the "sovereign" mark on the packages and the buyer's payment to the bank for the documents. The High Court rejected this argument, stating that mere affixing of the "sovereign" mark had no legal significance in transferring property. The court clarified that appropriation of goods to a contract requires the seller's intent to transfer property, which was not evident here. The property in the goods remained with the assessees until customs clearance, as all relevant documents were in their name. The court further dismissed the notion that the buyer's payment to the bank and subsequent clearance arrangements transferred property, reiterating that these actions were performed on behalf of the assessees.

Conclusion:

The High Court concluded that the property in the goods did not pass to the ultimate buyer until after customs clearance, and all actions taken by the buyer were on behalf of the assessees. Consequently, the sales were not in the course of import, and the inclusion of customs duty in the sale consideration was appropriate. The appeal was dismissed, affirming the Board's order and the recomputed turnover. The judgment underscores the importance of documentary evidence and the legal principles governing the transfer of property in goods.