1985 (9) TMI 334 - HC - VAT and Sales Tax

Summary

Issues:
Whether the sale of tyres and tubes worth Rs. 18,072 to the Gun Carriage Factory, Jabalpur, was in the course of import of goods into the territory of India from a foreign country and hence not liable to tax under article 286(1)(b) of the Constitution of India?

Analysis:

The High Court of Madhya Pradesh was presented with a reference under section 44(1) of the M.P. General Sales Tax Act, 1958, regarding the tax liability on the sale of tyres and tubes to the Gun Carriage Factory, Jabalpur. The Tribunal initially raised this question, leading to the need for a supplementary statement of the case to be submitted. The material facts revealed that the assessee sold the goods to the Gun Carriage Factory, claiming the sales were in the course of import as the goods were imported from the UK based on a contract with the Director-General of Supplies and Disposals. The Tribunal concluded that the transaction fell within the scope of import under section 5(2) of the Central Sales Tax Act, drawing parallels with the Supreme Court decision in K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, where it was emphasized that the contract between the parties occasioned the import.

During the proceedings, the importance of determining whether there was a sale between the foreign exporter and the assessee was highlighted. The supplementary statement clarified that there was no evidence of a sale between a foreign exporter and the assessee, supporting the assessee's claim that it was the importer. Referring to the test established in K.G. Khosla's case, the Court affirmed that when goods are imported as per a contract without the possibility of diversion for other purposes, the sales occur in the course of import, as required by section 5(2) of the Act. The Tribunal's decision was deemed justified based on the evidence presented, leading to the Court ruling in favor of the assessee, exempting the sales from tax under the import provision.

In conclusion, the High Court of Madhya Pradesh resolved the issue by affirming that the sale of tyres and tubes to the Gun Carriage Factory, Jabalpur, was indeed in the course of import from a foreign country, thereby exempting it from tax liability.