1980 (11) TMI 146 - HC - VAT and Sales Tax

Issues Involved:
1. Taxability of turnover under the Kerala General Sales Tax Act, 1963.
2. Applicability of Section 5 of the Central Sales Tax Act, 1956.
3. Privity of contract between foreign suppliers and customers.
4. Agency relationship between the assessee and its customers.
5. Relevance of Supreme Court rulings in similar cases.

Detailed Analysis:

1. Taxability of Turnover under the Kerala General Sales Tax Act, 1963:
The primary issue was whether the turnover of Rs. 14,67,873.28 should be included in the taxable turnover of the assessee for the year 1969-70. The assessing officer had included this turnover, but the assessee contended that these transactions were in the course of import and thus not taxable. The Appellate Tribunal reversed the decisions of the assessing officer and the first appellate authority, concluding that the turnover was not includible in the taxable turnover.

2. Applicability of Section 5 of the Central Sales Tax Act, 1956:
The assessee argued that the transactions were exempt from sales tax under Section 5 of the Central Sales Tax Act, 1956, as they were sales in the course of import. The Tribunal accepted this argument, noting that the assessee acted merely as an agent for its customers, without any right to divert the goods for its own use or sale to others. The Court upheld this view, stating that the transactions evidenced a sale in the course of import, exempted from liability to tax under Section 5(2) of the Central Sales Tax Act.

3. Privity of Contract between Foreign Suppliers and Customers:
The Government Pleader argued that there was no privity of contract between the foreign suppliers and the assessee's customers. He contended that the invoices from the foreign suppliers were in the name of the assessee, and the assessee issued separate invoices to its customers after clearing the goods from customs. However, the Court found that the import was made on behalf of the customers under their actual user's licenses and that the contract between the assessee and the customers resulted in the movement of goods from the foreign company, thus constituting a sale in the course of import.

4. Agency Relationship between the Assessee and its Customers:
The Court noted that the assessee acted purely as an agent of the licensees, as indicated by the letters of authority and other documents. The goods were the property of the licensee at the time of import and after customs clearance. The Tribunal's finding that the assessee was acting as an agent of its customers was upheld by the Court, reinforcing the view that the transactions were exempt from sales tax.

5. Relevance of Supreme Court Rulings in Similar Cases:
The Court referenced the Supreme Court's decision in Deputy Commissioner v. Kotak & Co. [1973] 32 S.T.C. 392, which established that sales under similar circumstances were sales in the course of import. The Court distinguished the present case from Mod. Serajuddin v. State of Orissa [1975] 36 S.T.C. 136 (S.C.), where there were two distinct sales. In the present case, there was an integral connection between the sale and the import, and it was not possible for the assessee to divert the goods without breaching the contract. Therefore, the transactions were sales in the course of import and exempt from taxation.

Conclusion:
The revision petition was dismissed, and the Court upheld the Tribunal's decision that the turnover of Rs. 14,67,873.28 was not includible in the taxable turnover of the assessee. The transactions were deemed sales in the course of import, exempt from liability to sales tax under Section 5(2) of the Central Sales Tax Act, 1956. The Court directed the parties to bear their respective costs.

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