9911796707
TMI Blog1990 (7) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... f buying and selling chemicals. In response to a tender invited by the Director-General of Supplies and Disposals, Government of India, New Delhi, on 26th March, 1971, the assessee had submitted a tender for supply of carbamite (undyed) 29,100 kgs. for use in the manufacture of different types of propellant explosives as per specifications. Messrs. Chemisches Werk Lowi, West Germany, were shown as the suppliers in the tender. The assessee had quoted the price c.i.f. per kg. (without commission) at Rs. 11.97 and added to the said quotation licence application fees, duty 60 per cent, port charges and miscellaneous expenses all of which were shown separately. To the said figures the Corporation had added 15 per cent as its profit. The Director-General of Supplies and Disposals, by letter dated 29th May, 1971, had accepted the assessee's above quoted tender to the extent of 25,000 kgs., subject, inter alia, to the condition that the contract would be governed by the conditions of the contract as contained in form DGS D-68 (revised) including clause 24 thereof as amended up to date. The ordered material was to be inspected by the Chief Inspector, C.I.M.E., Kirkee, Pune, at Bombay Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed to be imported by the Indian Government and it was intended for consumption in India and would not be reexported or reutilised for any purpose other than consumption by the Government factory for whose consumption the same was being imported. The same was, however, without prejudice to the terms and conditions of the contract. In the bill of lading the name of the assessee was shown as the party to be notified and the General Manager, Cordite Factory, Aruvankadu, was described as the consignee of 216 consignments of carbamite. After the aforesaid consignments of carbamite had arrived at Bombay Port, they had been forwarded to the consignee named in the contract, viz., the General Manager, Cordite Factory, Aruvankadu. 3.. The Sales Tax Officer disallowed the assessee's claim that the supply of carbamite under contract with the Director-General of Supplies and Disposals, was a sale in the course of import of the goods into India and, therefore, exempt from payment of sales tax. The Assistant Commissioner also dismissed the appeal against the said assessment order. The assessee's second appeal before the Tribunal was also dismissed. Referring to the Supreme Court decisions in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e alternate plea that the assessee had acted only as an agent. However, it allowed the appeal in part inasmuch as while it confirmed the order of the lower authority disallowing the transaction as a sale in the course of import, the matter was remanded to the Assistant Commissioner of Sales Tax in order to enable the present applicant to produce the necessary declaration in form D and thereafter for redetermination of the amount of tax. 4.. Article 286(1)(b) of the Constitution of India forbids imposition of any tax on sale or purchase of goods where such sale or purchase takes place in the course of the import of the goods into or exportation of the goods out of the territory of India. Section 5(2) of the Central Sales Tax Act, 1956, in pursuance of clause (2) of article 286 formulates the following principle: "A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India." In the instant case, the moot point was whether the sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract between the assessee and the DirectorGeneral of Supplies. The Supreme Court had also emphasised the fact that in Khosla Co. (P.) Ltd.'s case [1966] 17 STC 473, there was no possibility of these goods being diverted by the assessee for any other purpose. Although in the judgment delivered in Khosla Co. (P.) Ltd.'s case [1966] 17 STC 473 (SC), there was no categorical statement to the effect that Messrs. Khosla Co. had acted as agents and not as principals, in some of the subsequent Supreme Court decisions, the decision in Khosla Co. (P.) Ltd.'s case [1966] 17 STC 473, was distinguished on the ground that the arrangements between Messrs. Khosla Co. and the Belgium manufacturer was that of principal and agent vide observations of Mathew, J., who delivered the majority judgment in the case of Binani Bros. (P.) Ltd. v. Union of India [1974] 33 STC 254, at pages 259-260 and pages 261-262. See also the majority judgment of A.N. Ray, C.J. in the case of Mod. Serajuddin v. State of Orissa [1975] 36 STC 136 at pages 147-148. In the case of Binani Bros. (P.) Ltd. [1974] 33 STC 254 (SC), the claim that a sale made by the petitioner was in the course of import into India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessarily to be regarded as one in the course of export, unless the sale occasions export. And to occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it. Without such a bond, a transaction of sale cannot be called a sale in the course of export of goods out of the territory of India." The Supreme Court in the case of Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Indian Explosives Ltd. [1985] 60 STC 310, had reviewed some of its earlier decisions, but no reference, however, had been made to Mod. Serajuddin's case [1975] 36 STC 136 (SC). The Supreme Court in Indian Explosives Ltd.'s case [1985] 60 STC 310, applied the test of integral connection or inextricable link for determining whether a sale was in the course of an import or export. The decision in Binani Bros. (P.) Ltd.'s case [1974] 33 STC 254 (SC), was distinguished on two grounds. Firstly, in Binani Bros. (P.) Ltd.'s case [1974] 33 STC 254 (SC), the assessee itself held the import licence and the goods were imported not on the strength of any actual user's licence. Secondly, in Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a sale which causes the export to take place or is the immediate cause of the export. Therefore, a sale made to the exporter for exporting under separate and independent contract was not covered by the expression "sale in the course of export". According to the majority judgment in the Coffee Board's case [1970] 25 STC 528 (SC), the tests were that there must be a single sale which itself causes the export or is in the progress or process of export. There is no room for two or more sales in the course of export. The only sale which can be said to cause the export is the sale which itself results in the movement of the goods from the exporter to the importer. Sikri, J., who had delivered the judgment in Khosla Co. (P.) Ltd.'s case [1966] 17 STC 473 (SC), had dissented in Coffee Board's case [1970] 25 STC 528 (SC), from the view expressed by Hidayatullah, C.J. Thereafter the legislature inserted subsection (3) in section 5 of the Central Sales Tax Act to extend the expression "sale in the course of export" to the last sale or purchase which took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export. Shri Jetly has pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... independent contracts of sale. We may also mention that Tulzapurkar, J., in the Indian Explosives Ltd.'s case [1985] 60 STC 310 (SC), had adopted the said tests laid down in Ben Gorm Nilgiri Plantations Co.'s case [1964] 15 STC 753 (SC). 7.. For the foregoing reasons, we hold that for deciding whether a particular sale occasions import, it is necessary to examine these facts. Merely because there was more than one sale in respect of goods imported from abroad a fortiori the court cannot hold that it is only the sale which is immediate or proximate to the import which comes within the scope of article 286(1)(b) of the Constitution read with section 5(2) of the Central Sales Tax Act. If upon examination of the facts it is found that under a second contract a party was constituted an agent either of the importer or the foreign seller, then the ratio of the decision in Khosla Co. (P.) Ltd.'s case [1966] 17 STC 473 (SC), would be attracted. Even in case it is found that there are two sale transactions concerning a commodity imported from abroad-(1) between the foreign seller and the importer and (2) between the importer and the buyer in India-the court is required to consider whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision in the contract for inspection in Belgium on behalf of Director-General of Supplies and Disposals, in the case herein no manufacture as such was involved and there was no provision for inspection at that end. In our opinion this difference in facts is of no consequence particularly as the foreign supplier from whom the material was to be imported was a part of the contract itself. The Supreme Court has held in Khosla Co. (P.) Ltd.'s case [1966] 17 STC 473, that before a sale could be said to have occasioned the import, it was not necessary that the sale should have preceded the import and that movement of goods from Belgium to India was incidental to the contract that they would be manufactured in Belgium and brought into India after inspection for the consignee. Finding all that happening in Khosla's case [1966] 17 STC 473 (SC), in pursuance of the contract between the assessee and DirectorGeneral of Supplies and Disposals and that there was no possibility of diverting the goods by the assessee for any other purpose, the Supreme Court held that the sale by the assessee to Director-General of Supplies and Disposals took place in the course of import of goods. All these co ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
