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TMI Blog1975 (12) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... rge Wills and Sons (India) Private Limited (hereinafter referred to as "the foreign suppliers' agents") were at all relevant times the agents of the said Japanese suppliers. In about May, 1958, the manufacturers placed an order with the foreign suppliers' agents for importing certain quantity of wood of particular specifications from the said Japanese suppliers. By their letter of confirmation bearing No. GW/956-JAP/467 dated 27th May, 1958, the foreign suppliers' agents wrote to the manufacturers that they confirmed having booked on their behalf about 1,000 cubic feet of Japanese beech wood of 1 7/8" X 1 7/8" X 11 " lengths and about 125 cubic feet of Japanese beech wood of 1 5/8" X 1 5/8" X 9 " lengths at the rate of 17s. 2d. Stg. per cubic foot c. i. f. Bombay. The mode of payment specified in the said letter of confirmation was to be by a confirmed irrevocable letter of credit for 970 Stg. c. i. f. Bombay, to be established by the manufacturers in favour of the said Japanese suppliers, valid for shipment up to 31st July, 1958, and further 15 days for negotiation of documents. The said letter of confirmation further provided that the goods were to be shipped under import lice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of the credit opened by you." Thereafter by their letter dated 3rd July, 1958, addressed to the Joint Chief Controller of Imports, Bombay, the manufacturers stated that as they did not have banking facilities for direct import, they wished to import the goods under the said licence through the applicants, and for this purpose requested the Joint Chief Controller to issue a letter of authority in favour of the applicants. Along with the said letter, the manufacturers enclosed both the copies of their said licence for the purpose of issuing the necessary letter of authority. The letter of authority in favour of the applicants was thereafter issued by the Joint Chief Controller of Imports, and was dated 17th July, 1958. The said letter of authority was in the following terms: "Messrs. Navjivan Bobbin Industries (Indent or Commission Agents/ Dealers), Bombay-28, holders of licence No. 992566 dated 17th February, 1958, are hereby authorised to permit Messrs. Dean and Webber Mill Stores Co., Bombay (Indent or Commission Agents/Dealers), to import goods as stated in the licence and open letter of credit and make remittance of foreign exchange against the above licence to the ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely, the amended contract No. 956, the said contract No. 987 and the said contract No. 991, were thereafter shipped and received in Bombay. They were cleared from the customs by the applicants and delivered by the applicants to the manufacturers. The goods under each of the said three contracts were shipped on different ships, and in respect of each of these shipments so received the applicants submitted to the manufacturers their debit notes. The first debit note is dated 31st October, 1958, and though it does not specify the number or the date of the contract under which the goods in question were shipped, it is quite clear from the quantity and the description of the goods mentioned in the said debit note that it was in respect of the shipment made under the said amended contract No. 956. The second debit note is dated 31st January, 1959. Here again, though the contract number or the date of the contract are not mentioned, it is quite clear from the quantity and the description of the goods shipped that this debit note related to goods shipped under the said contract No. 987. The third debit note is also dated 31st January, 1959, and here again the number or the date of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so totally disconnected with what had actually happened, as to make one wonder whether this was a judgment delivered in this very matter. The judgment of the learned Member of the Tribunal began by stating that the dispute had arisen "in respect of one solitary transaction of sales of Japanese beech wood". The learned Member of the Tribunal who heard this matter held that wanting to import goods under their said import licence, the manufacturers approached the foreign suppliers' agents for importing the required quantity of beech wood from Japan from the said Japanese suppliers and that thereupon the foreign suppliers' agents booked an order of the manufacturers by the said amended contract No. 956, and on the same day, that is, on 23rd June, 1958, the foreign suppliers' agents contacted the applicants for financing the import. In the judgment of the learned Member of the Tribunal the said letter of authority is stated to be dated 17th February, 1958. Repeatedly it is mentioned that according to the applicants they financed the import because the foreign suppliers' agents did not have the finance to import the goods. It is further stated that the applicants' case was that they had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber of the Tribunal held that the sale had not been effected by the applicants by transfer of shipping documents, and as the applicants had not produced relevant documents it was not possible to hold that the sale had occasioned the import or had taken place in the course of import. He accordingly dismissed the applicants' revision application. Thereafter the applicants filed a rectification application to correct the errors which, according to the applicants, were apparent on the face of the record in the aforesaid order of the Tribunal passed on 30th September, 1966. By that time the learned Member of the Tribunal who had heard the applicants' revision application had ceased to be a Member, and the rectification application was heard by a Bench of the Sales Tax Tribunal consisting of two Members. By its order dated 12th November, 1968, the said Bench rectified in the said order dated 30th September, 1966, each of the mistakes asked to be rectified except one, namely, the part of the order which stated, "The learned Advocate (of the applicants) has not cared to produce the relevant documents". What was sought to be rectified in this sentence was that "The learned Advocate has prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby protected under article 286(1)(b) of the Constitution read with section 46 of the Bombay Sales Tax Act, 1953?" The Tribunal granted the application and made a reference in respect of the said two questions, after reframing question No. (2). The two questions which have been submitted to us, namely, question No. (1), as asked for by the applicants, and question No. (2) as reframed by the Tribunal from the reframed question No. (2) of the applicants, with the necessary grammatical corrections made therein by us, are as follows: "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the supplies of goods made by the applicants under their debit notes Nos. 2/K/58 dated 31st October, 1958, 1/M/58 dated 31st January, 1959, and 1/M/59 dated 31st January, 1959, to Navjivan Bobbin Industries on importing the goods on the strength of the actual user's import licence held by Navjivan Bobbin Industries is a transaction of 'sale' in law? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the applicants had not produced the relevant documents and, therefore, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t they should go to the applicants for whom the goods were to be manufactured from the wood to be imported and who were, therefore, interested in seeing that the wood contracted for came to India and was converted into bobbins which they required. It was in their mutual interest, therefore, that the applicants would agree to finance these transactions. The sales tax authorities and the Tribunal have totally overlooked the importance of a very significant fact that all that the applicants had recovered from the manufacturers were the actual costs and expenses incurred by them. There obviously never was any profit-motive. The sales tax authorities and the Tribunal have gone on an entirely wrong line in observing that it is not necessary that a transaction of sale should result in profit. Here, it is not the question of a person entering into a transaction of sale failing to make a profit by reason of the market turning against him or incurring a loss. Here is a person who has himself billed, by sending his debit notes to the other party, for the exact amounts spent by him. Another important fact, the legal effect of which has been totally ignored by the authorities and the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... older could not import the goods directly. The said notification further states: "3. The letter of authority will authorise the person or firm in whose favour it is issued to operate the licence on behalf of the licensee and to open letter or letters of credit against the exchange control copy. It will be deemed to be the condition of the letter of authority that (a) the person or firm in whose favour it has been issued, will act purely as an agent of the licensee and the goods imported will be the property of the licence-holder both at the time of clearance through the customs and subsequent thereto. The licence-holder will have to ensure that the goods on importation will be delivered to him and shall not be disposed of otherwise. The licensee shall not cause or permit the holder of the letter of authority to dispose of the goods; (b) the indentor/agent acting on the authority letter shall clearly indicate on all the relevant customs documents including the triplicate copy of the customs bill of entry that the goods have been imported by him on behalf of the licensee. This endorsement will be duly attested by the customs authorities; and (c) the holder of the letter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact the goods were delivered to the manufacturers, and they manufactured bobbins out of them for supply to the applicants. It is true that the said letter taken by itself is equivocal and can show either that the applicants were acting as the agents of the manufacturers or that they were acting on their own, but the other facts and circumstances on the record leave no doubt that they were acting only as the agents of the manufacturers. Another letter on which emphasis was laid was the letter dated 23rd July, 1958, from the foreign suppliers' agents to the applicants requesting the applicants to open the necessary letter of credit for the full quantity of goods to be imported under the said amended contract No. 956. It was said, why should the applicants open a letter of credit unless they were purchasing the goods? Instead of asking the applicants to finance them, the manufacturers could have, had they sufficient security to give to a bank or a desire to pay the bank rate of interest, obtained finances from a bank. Could it then have been said that the bank has purchased the goods and sold them to the manufacturers? If a bank, when it finances a transaction of import, does not b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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