2000 (2) TMI 817 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the assessment order and corresponding appellate and revisional orders.
2. Whether the sale of M.S. pipes in the process of supply and erection of AHP at Farakka qualifies as a "sale in course of import" under Article 286(1)(b) of the Constitution of India.
3. Interpretation of "sale in course of import" as per Section 5(2) of the Central Sales Tax Act, 1956.
4. Whether the transactions involved two independent contracts or a single works contract.
5. Applicability of tax exemption under the concept of deemed sale as per the 46th Amendment of the Constitution of India.

Detailed Analysis:

1. Validity of the Assessment Order and Corresponding Appellate and Revisional Orders:
The applicant, a limited company, challenged the validity of an assessment order and the corresponding appellate and revisional orders. The Commercial Tax Officer (C.T.O.), Durgapur Charge, did not entertain the company's claim under section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941, but allowed a deduction only in respect of Rs. 12,60,745 under section 5(2)(b) of the 1941 Act. The company was unsuccessful before the appellate authority and the West Bengal Commercial Taxes Appellate and Revisional Board, which held that the import procedure ended with taking up delivery at Calcutta Port.

2. Whether the Sale of M.S. Pipes Qualifies as a "Sale in Course of Import":
The core issue was whether the sale of M.S. pipes fulfilled the conditions for a "sale in course of import" under Article 286(1)(b) of the Constitution of India. The respondents argued that the essentials of "sale in course of import" were lacking because the imported goods were used in the factory for erection of the ash handling plant, thus disrupting the course of import. They contended that the import of goods and their use in erection constituted two separate transactions.

3. Interpretation of "Sale in Course of Import" as per Section 5(2) of the Central Sales Tax Act, 1956:
The court examined whether the sale of M.S. pipes occasioned the import within the meaning of Section 5(2) of the Central Sales Tax Act, 1956. The company did not claim tax exemption based on the transfer of documents of title before the goods crossed customs frontiers. The court needed to determine if the sale actually occasioned the import.

4. Whether the Transactions Involved Two Independent Contracts or a Single Works Contract:
The court analyzed the nature of the contracts and concluded that it was difficult to conceive them as two independent contracts. The scope of work covered the entire process from designing to commissioning of the AHP, indicating it was a single contract despite being shown as two separate contracts on paper. The "cross-fall breach clause" suggested that a breach in one contract would affect the other, reinforcing the idea of a single integrated contract.

5. Applicability of Tax Exemption Under the Concept of Deemed Sale:
The company argued that the goods imported were exclusively meant for the contract job and that the transfer of such goods amounted to a sale in course of import. The court referred to the 46th Amendment of the Constitution, which introduced the concept of deemed sale, including the transfer of property in goods involved in the execution of a works contract. However, the court held that the import for the contract was at most an "import for sale," distinct from a "sale in course of import."

Conclusion:
The court concluded that the sale to NTPC did not qualify as a sale in course of import. The import was not an essential part of the contract, and there was no privity of contract between NTPC and the foreign seller. The sale of M.S. pipes to NTPC was liable to be taxed, and the assessment, appellate, and revisional orders were upheld. The application was dismissed without any order as to costs.