1990 (1) TMI 282 - HC - VAT and Sales Tax

Issues Involved:
1. Inclusion of customs duty in the sale price under the Bombay Sales Tax Act, 1959, and the Central Sales Tax Act, 1956.

Detailed Analysis:

Issue 1: Inclusion of Customs Duty in Sale Price

Background and Contract Terms:
The applicant, M/s. Gujarat Export Corporation Limited, was a registered dealer under the Bombay Sales Tax Act, 1959, and the Central Sales Tax Act, 1956. During the financial years 1973-74 and 1974-75, the applicant imported chemicals and sold them to various dealers in Bombay. One representative contract dated 18th April 1973, between the applicant and M/s. Ashok Traders, was considered for this case. According to the contract, the buyers paid the customs duty and cleared the goods from customs. The sales tax authorities included these customs duties in the sale price, which the applicant disputed.

Contract Clauses:
The contract included several relevant clauses:
- Clause 1: The c.i.f. value of the goods.
- Clause 2: Compensation over and above the c.i.f. value.
- Clause 3: Sales tax applicable at the time of delivery.
- Clause 5: Full payment of the c.i.f. value and all applicable charges, including customs duties, for clearing the goods.
- Clause 7: Any changes in c.i.f. value or import duty were to the buyer's account.
- Clause 8: Brokerage on c.i.f. value.

Applicant's Argument:
The applicant argued that the sale was complete upon delivery of documents and receipt of the c.i.f. value plus compensation. The customs duty paid by the buyers, who were the owners of the goods at the time of customs clearance, should not be included in the sale price.

Legal Definitions and Precedents:
- Section 2(28) of the Bombay Sales Tax Act defines "sale" as a sale of goods for cash or deferred payment.
- Section 2(29) defines "sale price" as the amount of valuable consideration paid or payable, including any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery.

The case referred to Mahabir Commercial Co. Ltd. v. Commissioner of Income-tax, where the Supreme Court observed that under a c.i.f. contract, the property in the goods passes once the documents are tendered. In this case, the sale was complete when the documents were handed over, and the customs duty paid by the buyers could not be included in the sale price.

Respondent's Argument:
The respondent contended that since the bill of entry was in the applicant's name, the customs duty paid by the buyers should be included in the sale price. This argument was rejected.

Customs Act Provisions:
- Section 2(26) of the Customs Act defines "importer" to include any owner or person holding himself out to be the importer.
- Section 12 and Section 46 of the Customs Act impose the liability to pay customs duties on the importer.

In this case, the buyers were the owners at the time of clearance and thus liable to pay customs duties. Therefore, the customs duty paid by the buyers was on their own account and not on behalf of the applicant.

Relevant Case Law:
- McDowell & Company Ltd. v. Commercial Tax Officer (First McDowell Case): The Supreme Court held that excise duties paid by buyers did not form part of the sale price.
- McDowell & Company Ltd. v. Commercial Tax Officer (Second McDowell Case): The Supreme Court held that if the payment of excise duty is the primary obligation of the manufacturer, it forms part of the sale price.

In the present case, the liability to pay customs duty was on the buyers, aligning with the first McDowell case.

Conclusion:
The customs duty paid by the buyers was not part of the sale price for the purposes of the Bombay Sales Tax Act or the Central Sales Tax Act. The question referred was answered in the negative and in favor of the assessee. The respondents were ordered to pay costs to the applicant, and the Rs. 100 deposited by the applicant was to be refunded. References were answered in the negative.

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