1988 (7) TMI 395 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of Section 5(2) of the Central Sales Tax Act (C.S.T. Act) to the disputed turnover.
2. Whether the sale of rock phosphate by the petitioner-corporation to Coromandel Fertilisers occasioned the import of the commodity into India.
3. Interpretation of relevant constitutional and statutory provisions, including Article 286 of the Constitution of India and Section 38 of the Andhra Pradesh General Sales Tax Act (A.P.G.S.T. Act).

Detailed Analysis:

Issue 1: Applicability of Section 5(2) of the C.S.T. Act
The petitioner-corporation argued that the transactions were covered by Section 5(2) of the C.S.T. Act, which exempts sales or purchases made in the course of import. The Commercial Tax Officer, however, rejected this claim, stating that the shipping documents were dispatched only after the goods had crossed the customs barriers of India. Consequently, the transactions were deemed local sales under the A.P.G.S.T. Act. This view was upheld by the Assistant Commissioner (CT) (Appeals) and the Sales Tax Appellate Tribunal.

Issue 2: Whether the Sale Occasioned the Import
The core question was whether the sale of rock phosphate by the petitioner-corporation to Coromandel Fertilisers occasioned the import of the commodity into India. The petitioner contended that the sale to Coromandel Fertilisers was the transaction that occasioned the import, thus falling under the first part of Section 5(2) of the C.S.T. Act. However, the Tribunal found that the contract between the State Trading Corporation (S.T.C.) and International Minerals and Chemical Corporation (I.M.C.) was independent and that the S.T.C. acted as a principal, not as an agent of Coromandel Fertilisers. This finding was based on several clauses in the agreement, including the fact that the S.T.C. could sell the commodity to other consumers in India and bore the risk of loss upon loading the goods at the Florida port.

Issue 3: Interpretation of Constitutional and Statutory Provisions
The judgment delved into the interpretation of Article 286 of the Constitution of India, which prohibits the imposition of tax on sales or purchases in the course of import or export. It also examined Section 38 of the A.P.G.S.T. Act and Section 5 of the C.S.T. Act, which define transactions in the course of import or export. The court referenced several Supreme Court judgments to elucidate the principles governing such transactions, including the necessity of an integral connection between the sale and the import/export, the role of intermediaries, and the contractual obligations between the parties.

Conclusion:
The court concluded that the petitioner-corporation was acting as a principal and not as an agent of Coromandel Fertilisers. The sales to Coromandel Fertilisers did not occasion the import of rock phosphate into India. Consequently, the transactions were subject to local sales tax under the A.P.G.S.T. Act, and the revision petition was dismissed. The court upheld the Tribunal's decision, emphasizing that the sale must be integrally connected with the import/export to qualify for exemption under Section 5(2) of the C.S.T. Act.