1972 (9) TMI 117 - HC - VAT and Sales Tax

Summary

Issues:
1. Taxability of transactions involving import and distribution of copra from Ceylon.
2. Whether the sales in question are in the course of import and exempt from sales tax.
3. Imposition of penalty under section 12(3) of the Madras General Sales Tax Act.

Analysis:
The case involved a cooperative society that imported copra from Ceylon on behalf of allottees in Kerala State. The society entered into agreements with the State Trading Corporation and the allottees for the import and distribution of copra. The assessing authority assessed the society to sales tax and imposed a penalty, which was upheld on appeal to the Sales Tax Appellate Tribunal. The society contended that it did not act as a dealer or effect any sale, and even if sales occurred, they should be considered in the course of import and not liable to tax.

The High Court analyzed the nature of the transactions and agreements involved. It was observed that the society acted as an agent of the allottees and did not purchase or sell goods on its own behalf. The court referred to a previous case to support the view that the society was merely an intermediary facilitating direct purchases by the allottees from foreign sellers. The court emphasized that there was only one sale by the foreign seller to the allottees, with the society authorized to import and distribute copra on behalf of the allottees.

Regarding the taxability of the sales, the court considered whether the transactions could be classified as sales in the course of import. It was noted that the purchase orders were signed by the foreign seller, the society, and the allottees, indicating a direct purchase relationship. The court cited a Supreme Court decision to support the view that the sales by the society to the allottees had occasioned the import of goods, meeting the criteria for sales in the course of import.

Ultimately, the High Court held that the transactions were not taxable under the Madras General Sales Tax Act as they were sales in the course of import. Consequently, there was no basis for imposing the penalty under section 12(3) of the Act. The court allowed the petition, setting aside the Tribunal's order and ruling in favor of the cooperative society.

In conclusion, the judgment addressed the taxability of transactions involving the import and distribution of copra, determining that the sales were in the course of import and therefore exempt from sales tax. The court's decision focused on the intermediary role of the cooperative society and the direct purchase relationship between the allottees and foreign sellers, leading to the dismissal of the penalty imposed under the Act.