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2015 (6) TMI 1154 - HC - VAT and Sales TaxScope of section 5(2) of the CST Act - installation and for supply of accessories - whether the finding of the Tribunal that section 5(2) of the CST Act is attracted to the transaction in question is correct or not? Held that - Section 5(2) of the CST Act provides that a sale or purchase of goods shall be deemed to take place in the course of import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by transfer of documents of title to the goods before the goods have crossed the customs frontiers of India - In the judgment reported in M/s.Binani Bros. (P) Ltd. v. Union of India 1973 (12) TMI 77 - SUPREME COURT OF INDIA the question considered was whether the sales by the assessee to Government Department were in course of import and exempted under section 5(2) of the CST Act. Referring to the precedents the Apex Court held that to occasion import there must exist such a bond between the contract of sale and the actual importation with each link inextricably connected with one immediately preceding it and that without such a bond a transaction of sale cannot be called a sale in the course of the import of goods into the territory of India. The genuineness of the documents produced are undisputed. Once the genuineness of these documents are accepted it could definitely be concluded that in the import of the goods by the respondent there exists a bond between the contract of sale land the actual importation and each link thereof is inextricably connected with one immediately preceding it. This therefore shows that in the transaction in question leading to import and the sale of the equipment to MMDC all the requirements that are laid down by the Apex Court are satisfied. The order of the Tribunal concluding that section 5(2) of the CST Act is attracted to the case in hand is perfectly legal and does not merit any interference - revision dismissed.
Issues Involved:
1. Whether the transaction in question is covered by Section 5(2) of the CST Act. 2. Whether the penalty imposed was justified. Issue-wise Detailed Analysis: 1. Whether the transaction in question is covered by Section 5(2) of the CST Act: The primary issue revolves around whether the transaction qualifies as a sale in the course of import under Section 5(2) of the CST Act. Section 5(2) specifies that a sale or purchase of goods is deemed to take place in the course of import if it occasions such import or is effected by transfer of documents of title to the goods before they cross the customs frontiers of India. The court cited several precedents to elucidate the interpretation of Section 5(2): - M/s. Binani Bros. (P) Ltd. v. Union of India: The Apex Court held that for a sale to occasion import, there must be an inextricable bond between the contract of sale and the actual importation. - MD. Serajuddin v. State of Kerala: It was reiterated that separate contracts, even if related, do not automatically qualify as a sale in the course of import unless they are integrally connected. - K. Gopinathan Nair v. State of Kerala: The court laid down several propositions, including that the sale or purchase must itself occasion the import, and there must be direct privity of contract between the Indian importer and the foreign exporter. Applying these principles, the court examined the facts of the case. The respondent's proforma invoice and the purchase order from MMDC explicitly stated that the equipment was to be imported from Siemens, Germany, specifically for MMDC. The purchase order to Siemens also contained a clause that the equipment was dispatched against the order from the respondent's client. These documents demonstrated an inextricable link between the contract of sale and the importation, satisfying the criteria under Section 5(2). 2. Whether the penalty imposed was justified: The penalty of Rs. 34,74,400 was levied on the respondent, being double the amount of tax, on the grounds that the transaction did not qualify under Section 5(2) of the CST Act. However, the Tribunal set aside the penalty, concluding that the transaction was indeed covered by Section 5(2). In light of the binding precedents and the specific terms of the contracts and purchase orders, the court upheld the Tribunal's decision. The court found that the transaction met all the requirements laid down by the Apex Court and this Court in previous judgments, thereby validating the Tribunal's finding that Section 5(2) was applicable. Conclusion: The court dismissed the revision petition, affirming that the transaction in question was covered by Section 5(2) of the CST Act and that the penalty imposed was not justified. The order of the Tribunal was deemed perfectly legal and did not merit any interference.
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