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TMI Blog1983 (4) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... ividually. Question No. (1): At the outset, it is necessary to notice that in respect of five supplies made in the debit note for a total value of Rs. 40,897.40 and also in respect of supplies to M/s. Southern Switchgear Ltd. covered by the debit note 132/68-69 dated 28th December, 1968, in the sum of Rs. 350 and in respect of supply of tools to the ancillary product manufacturers to the extent of Rs. 92,345.93, the Tribunal held that they were outright sales and therefore exigible to tax. Such finding was not challenged by the assessees and it is thus, the revision is restricted to a sum of Rs. 1,22,889.66, though the assessees contested exigibility to tax for a sum of Rs. 2,56,464.39. Therefore, we avoid reference to the particulars of transactions relied on by the Tribunal to hold that they are outright sales. The facts relevant for the disposal of this question are as follows: The assessees are manufacturers of automobile trucks. For the purpose of such manufacture, raw materials like sheets, rods and other iron and steel materials are being allotted to them by the Government. The assessees placed orders with manufactures of ancillary products for the manufacture of compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks on the assessees. On the above facts, the Tribunal held that the transactions between the assessees on the one hand and the ancillary product manufacturers on the other are only works contract, but are not sales. The Tribunal fortified its said conclusion on the strength of the decisions reported in P.A. Raju Chettiar and Brothers v. State of Madras [1955] 6 STC 131, South India Metal Works and Rolling Mills v. State of Madras [1960] 11 STC 507, T.P.S.R. Factory P. Ltd. v. Deputy Commercial Tax Officer [1967] 20 STC 419 and State of Madras v. Sheik Ismail and Sons [1974] 34 STC 464. In our view, the conclusion of the Tribunal is unassailable. What is relevant to ascertain whether there is an element of sale or not in the course of transactions between an assessee and the other party to the contract is the essence in such transactions, but not the form of the contract or the nomenclature given by the parties as sales by the parties themselves. In T.P.S.R. Factory P. Ltd. v. Deputy Commercial Tax Officer [1967] 20 STC 419, a Division Bench of this Court has ruled that: "So far as the first category of transactions was concerned, the assessing officer was merely led by the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and rings could not be correlated to and established with the scrap supplied by the customer and that the total weight of the scrap tallied with the total weight of the sheets and rings given to the customer. The ratio laid down by the said two precedents is to the effect that there was no element of sale when the finished products were handed over by one contracting party to the other, and is only favourable to the assessee. Question (2): The assessing authority disallowed the claim under sales returns for which credit notes had been issued by the assessees as per particulars below: 1.. Credit note No. 95 dated 24th July, 1968, for Rs. 46,175. 2. Credit note No. 27 dated 22nd November, 1968, for Rs. 1,47,219. 3. Credit note No. 48 dated 31st December, 1968, for Rs. 65,608. It is found that the original invoices issued by the respondent in favour of T.V. Sundaram Iyengar and Sons, Madurai and T.V. Sundaram Iyengar and Sons, Madras, were cancelled and fresh invoices were raised in favour of T.V.S., Trivandrum, and Sundaram Motors Pvt. Ltd., Bangalore. Further the first appellate authority found that when the buyers had expressed their inability to take delivery of all t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December, 1968, for Rs. 95,608 relating to sales to M/s. Sundaram Motors Pvt. Ltd., Bangalore, was disallowed, though the entire invoice was cancelled and subsequent invoices were raised for the sales of vehicles. The Tribunal had perused the statement filed at the instance of the assessees with reference to the invoices and credit notes and as a matter of fact found that the original invoices had been cancelled in toto and fresh invoices had been raised for the sales of the vehicles either locally or outside the State and that tax was paid thereon under the local Sales Tax Act and the Central Sales Tax Act. On the above facts, we are unable to hold that T.V. Sundaram Iyengar and Sons, Madurai and Madras, in whose favour original invoices were issued by the assessees, have become the owners of the vehicles and in respect of these three transactions which were subsequently sold by the assessees in M/s. T.V. Sundaram Iyengar and Sons Pvt. Ltd., Trivandrum, for Rs. 46,175 and Sundaram Motors Pvt. Ltd., Madras and Bangalore, the assessees acted as agents of the former. If T.V. Sundaram lyengar and Sons, Madurai and Madras, had not become the owners, any subsequent dealing by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. W. Mills (P.) Ltd. v. State of Madras [1972] 30 STC 387 are as follows: The assessee in that case is a ginning, spinning and weaving mill. It had an actual user's licence to import cotton from Africa. But, for facilitating the import, the assessee gave a letter of authority to one Patel and Co. The said Patel and Co., on the basis of the letter of authority given by the assessee, entered into a contract with the foreign sellers and actually imported the goods, and thereafter delivered the same to the assessee. A Division Bench of this Court to which one of us was a party, relying upon the decision of the Supreme Court in Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 STC 473 (SC) observed thus: "The Supreme Court in that decision had held that before a sale could be said to have occasioned the import, it was not necessary that the sale should have preceded the import, that if the movement of the goods from the foreign country was incidental to or in pursuance of the conditions of the contract between the assessee and the local seller, who actually imported, that would come within the expression 'occasions the movement of goods' occurring in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser to take delivery of the goods. But the purchaser would have to pay the amount as per the invoice of the foreign sellers and also the customs and excise dues, wharf charges, clearing and forwarding charges and all such other dues including sales tax, if any, payable. If, after receiving the premium or part of the price, the purchaser failed to take necessary steps for importation of the goods in the name of the assessees within the time allowed according to the licence or failed to utilise the licence or caused its validity to expire, the advance amount received by the assessees as part of the sale price was liable for forfeiture. The agreement also provided that the assessees were at liberty after an advance information to the purchaser to make sales of the imported goods to others or deliver the licence at their option to anybody else, if the assessees were not able to get a fair profit from the purchaser. From the above facts, it is easy to perceive the distinguishing features such as that if the purchaser failed to take necessary steps for importation of the goods in the names of the assessees within the time allowed according to the licence or failed to utilise the licence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted after the actual users' orders but not by actual users' licences. There was no privity of contract between the local buyers and the foreign seller and the movement of the goods from the foreign country, was not occasioned on account of the actual user's licence, but only against the orders placed by the assessee with the foreign seller. The Project and Equipment Corporation had the unfettered right to nominate actual users to whom the assessee shall give priority in selling the goods. The contract in general related not only to import, but also to stocking and selling of metal testing machines from GDR to actual users only. Thus, it is on those facts, this Division Bench held that the transaction envisaged two sales, (i) between the assessee and the foreign seller and (ii) between the assessee and the actual users. If the assessee had acted as an agent either of the foreign seller or the actual user, there would be privity of contract between the foreign seller and the actual consumer and that, consequently, the transaction would amount to a purchase in the course of import within the meaning of section 5(2) of the Central Sales Tax Act. Section 5(2) provides that a purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be entertained in view of the plain language employed in section 5(2) of the Central Sales Tax Act. Assuming that there is already a sale between the assessees and Ashok Leyland, U.K., it is not possible to hold in the above established facts that the sale between the assessees and Ashok Leyland, U.K., occasioned the import of the goods; on the other hand, it is patent from the established facts referred to supra that it is by the sale brought about at the assessees' initiative between Ashok Leyland, U.K., and the actual users, the import was occasioned. To put it differently, it is the sale which had occasioned the import which is relevant and decisive. It might be that while the assessees brought about these transactions between Ashok Leyland, U.K., and the actual consumers, they are incidentally honouring their contract entered into long before, but as long as it is the subsequent transaction between Ashok Leyland, U.K., and the actual users which has occasioned the import, the earlier contract between the assessee and the U.K., the foreign seller will have no impact on the subsequent transactions. We reiterate that in all these thirteen transactions, the assessees were o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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