1977 (10) TMI 69 - AT - Income Tax

Summary

Issues Involved:
1. Determination of whether the sales of imported machines were local sales or sales in the course of import.
2. Applicability of tax exemption under Section 5(2) of the CST Act, 1956 for sales in the course of import.
3. Interpretation of the nature of transactions under the actual user's licence and letter of authority.

Issue-wise Detailed Analysis:

1. Determination of whether the sales of imported machines were local sales or sales in the course of import:
The appellants reported different turnovers for the assessment years 1974-75 and 1975-76, claiming that the sales of imported machines to Tvl. Savera Hotel and Tvl. Hotel Sudersan International were in the course of import and thus not liable to tax. However, the assessing authorities determined the sales as local sales after the import of goods into the country. The AAC upheld this view, leading to the present appeals.

2. Applicability of tax exemption under Section 5(2) of the CST Act, 1956 for sales in the course of import:
The appellants argued that the transactions were exempt from tax under Section 5(2) of the CST Act, 1956, as they were sales in the course of import. The Tribunal examined the nature and course of transactions, noting that the appellants acted on the strength of the actual user's licence and letter of authority obtained by the customers. The transactions included indents placed on foreign principals, references to import licence particulars, and shipping documents indicating the import licence numbers. The Tribunal concluded that the sales were indeed in the course of import, drawing parallels to the Supreme Court decision in Dy. CIT vs. Kotak & Company, where similar transactions were deemed exempt from tax.

3. Interpretation of the nature of transactions under the actual user's licence and letter of authority:
The appellants contended that they acted as agents of the import licence holders, not as independent buyers and sellers. The Tribunal reviewed the conditions in the letters of authority, which stipulated that the appellants were to act purely as agents of the licence holders and that the imported goods remained the property of the licence holders at all times. The Tribunal found that the appellants adhered to these conditions, establishing a clear nexus between the manufacture, import, and sale of the goods. The Tribunal distinguished the present case from other cases like Binani Bros. and Sirajuddin, where the nature of transactions differed, and upheld the applicability of the Kotak & Co. decision.

Conclusion:
The Tribunal concluded that the sales involving the disputed turnovers were sales occasioning the import of goods and thus were sales in the course of import, not liable to tax under the CST Act. Consequently, the assessments on the disputed turnovers were set aside, and both appeals were allowed.