1973 (7) TMI 78 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Taxability of sales in the course of import.
2. Interpretation of "in the course of import" under the General Sales Tax Act.
3. Applicability of Supreme Court precedents on sales in the course of import.

Detailed Analysis:

1. Taxability of Sales in the Course of Import:
The core issue was whether the sales made by the respondent for the years 1961-62, 1962-63, and 1963-64, on the turnover of goods imported under actual user's import licenses, were taxable under the General Sales Tax Act. The turnovers for the respective years were Rs. 3,15,596.19, Rs. 13,40,949.98, and Rs. 4,03,427.72.

2. Interpretation of "In the Course of Import" Under the General Sales Tax Act:
The respondent contended that these sales were in the course of import and hence not taxable. The assessing authority and the Appellate Assistant Commissioner rejected this contention, but the Appellate Tribunal accepted it, holding that the disputed turnovers were not taxable. The Tribunal's finding was based on the fact that the goods were imported and supplied on the strength of actual user's import licenses obtained by the customers. The Tribunal noted that the contract of sale provided for the import of specified goods from abroad, and the sale occasioned the movement of goods from outside India to the country, making it a sale in the course of import.

3. Applicability of Supreme Court Precedents on Sales in the Course of Import:
The revision petitioner argued that the principles laid down by the Supreme Court in Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer and Coffee Board v. Joint Commercial Tax Officer should be applied. The Supreme Court in Ben Gorm Nilgiri Plantations Co. held that for a sale to be in the course of export, the export must be inextricably linked to the sale. Similarly, in Coffee Board v. Joint Commercial Tax Officer, the Court held that the introduction of a third party dealing independently breaks the link between the exporter and the importer, making it two separate sales.

However, the Tribunal distinguished these cases, noting that in the current case, the first sale was an outside sale by the foreign supplier and the movement of goods was inextricably linked to fulfilling the contract with the consumer in India. The Tribunal relied on the Supreme Court decision in Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, where the Court held that if the movement of goods from a foreign country is a result of a covenant in the contract of sale or incidental to such a contract, and there is no possibility of the goods being diverted for any other purpose, the sale is in the course of import.

The Tribunal also referred to the Supreme Court decision in State of Bihar v. Tata Engineering & Locomotive Co. Ltd., which summarized the principles for determining sales in the course of export or import. According to this decision, if the contract of sale requires the goods to be imported to fulfill the contract or if it is a necessary incidence of the contract, the sale is in the course of import.

In the present case, the import license in favor of M/s. Hindustan Insecticides Limited was integral to the contract of sale. The license was referred to in the agreement between the assessee and the consumer company, and in the contract with the foreign supplier. The license stipulated that the goods imported would be the property of the license-holder at the time of customs clearance, establishing an inextricable link between the sale and the import.

Conclusion:
The Tribunal concluded that the transactions were indeed sales in the course of import and exempt from taxation under the General Sales Tax Act. The revision petitions were dismissed, upholding the Tribunal's finding, with no order as to costs. The judgment emphasized that the integral connection between the import and the sale, as established by the terms of the import license and the contractual obligations, was crucial in determining the taxability of the transactions.