1972 (6) TMI 59 - HC - VAT and Sales Tax

Summary

Issues:
- Whether the turnover in cotton purchased by the assessee through a third party for import is exempt under section 5(2) of the Central Sales Tax Act, 1956 as sales in the course of import.
- Whether the transfer of documents of title from the third party to the assessee when the goods were on the high seas qualifies as sales in the course of import.

Analysis:
The case involved an assessee, a ginning, spinning, and weaving mill, which had an actual user's license to import cotton from Africa. The assessee facilitated the import by giving a letter of authority to a third party, Patel and Co., who then entered into a contract with foreign sellers to import the goods on behalf of the assessee. The assessing authority initially did not exempt the purchase turnover of cotton imported through Patel and Co. However, the appellate authority ruled in favor of the assessee, considering the turnover as exempt under section 5(2) of the Central Sales Tax Act, 1956, as sales in the course of import.

The Board of Revenue, in a suo motu revision, set aside the appellate authority's decision, stating that the purchase made by the assessee through Patel and Co. did not occasion the import of goods, and there was no privity between the assessee and the foreign seller. The Board relied on a previous decision by the court in a similar matter. The assessee argued that even if there was no transfer of documents of title before the goods reached the customs frontier, the purchases should still be considered as in the course of import based on Supreme Court and previous court decisions.

The assessee contended that the movement of goods should be in pursuance of or incidental to the contract and that privity between the assessee and the foreign seller was not necessary for the sale to qualify as an import sale. Citing the Supreme Court decision in Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, the assessee argued that as long as the sale occasioned the import, privity was immaterial. The court agreed with the assessee, noting that the principles in the Khosla case applied directly to the facts of this case, and set aside the Board of Revenue's decision, allowing the appeal with no order as to costs.