1973 (7) TMI 75 - HC - VAT and Sales Tax

Summary

Issues:
- Whether the sale of marine engines by the assessee is exempt from tax under the General Sales Tax Act.
- Whether the turnover relating to the sale of Lister Marine Diesel Engine is exigible to sales tax at the hands of the appellant.

Analysis:
The High Court of Kerala dealt with the issue of exemption from sales tax concerning the sale of marine engines by the assessee. The Sales Tax Officer initially assessed the respondent on a turnover that included the sale of marine engines. The assessee contended that the sale of marine engines was exempt from tax as it was effected in the course of import. The assessing authority and the first appellate authority rejected this contention, but the Appellate Tribunal, by a majority of 2:1, held that the assessee was entitled to exemption in respect of the marine engines. The Tribunal found that the sale of the marine engine satisfied all conditions for exemption under the General Sales Tax Act. The Tribunal's decision was based on the inextricable link between the contract of sale and import, as well as the absence of any possibility for diversion of the goods. The High Court, therefore, upheld the Tribunal's decision, concluding that the turnover relating to the sale of the marine engine was not exigible to sales tax at the hands of the appellant.

The Court further analyzed the connection between the sale and import of the marine engine. The contract between the assessee and the buyer, Mr. Austin, involved the sale of the engine at the imported invoice price, along with an agreement for Mr. Austin to sell all catches of fish from his boat to the assessee. An advance amount was paid for the purchase of the engine, and the engine was imported and sold to Mr. Austin in pursuance of this contract. The Court found that there was an intention to import and an obligation to import, which formed an integral connection between the sale and import of the goods. The Court referenced the principle laid down by the Supreme Court regarding sales in the course of export, stating that a similar principle applies to sales in the course of import. The Court emphasized that the import license was in the name of the assessee, and any attempt to sell the imported engine to another party would constitute a breach of the contract with Mr. Austin. Therefore, the Court concluded that the transaction fell within the scope of previous decisions and satisfied the requirements for exemption from sales tax.

In conclusion, the High Court dismissed the revision petition challenging the Tribunal's decision, stating that the Tribunal had correctly held the transaction as a sale in the course of import and not taxable. The Court found the petition to be without merit and ordered its dismissal with costs.