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TMI Blog2012 (1) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ll of entry dated 10.2.2003. In the bill of entry, which has been placed on record, the petitioner has been described as the importer. In the said bill of entry M/s Zion Express Cargo Private Ltd. have been described as the cargo agent. 4. The case of the appellant is that this import vide bill of entry dated 10.2.2003 was back to back import in view of the order placed by Canara Bank, Bangalore dated 30.12.2002. The said order it is admitted was placed on the appellant and not on the German manufacturer. Copy of the said order has been placed on record at page 43 of the paper book and is addressed to the appellant. The appellant has not been described as an agent of the German manufacturer. After this order was placed on the appellant, they placed the order on the German company by the name of Giesecke & Devrient GMBH for the said equipment. (The appellant and Giesecke & Deevrient GMBH though associated, are distinct and separate identities.) This order was placed by the appellant and not by Canara Bank, Bangalore. It is also not disputed that on the import, the customs duty clearances etc. were all made by the importer i.e. the appellant and not by Canara Bank, Bangalore. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose whether these imports were covered by Section 5(2) of CST Act and therefore no sales tax was payable. The Supreme Court referred to earlier decisions in the case of Ben Gorm Nilgiri Plantations Company, Conoor Vs. STO, (1964) 15 STC 753; State Bank Vs. Kochi Company Ltd., (1952) 3 STC 436 (SC); State of Travancore-Cochin Vs. Shanmugha Vilas Cashew-nut Factory, (1953) 4 STC 405(SC) and K G Khosla and Co, (P) Ltd. Vs. Deputy Commissioner of Commercial Taxes, Madras Division, Madras (1966) 17 STC 473(SC). The last case which was heavily relied upon by the Union of India in the said case as K.G.Khosla Co. Pvt. Ltd. were allowed benefit under Section 5(2), but this decision was distinguished inter alia recording as under : "In Khosla Case, it might be recalled that Khosla and Co. entered into the contract of sale with the DGS&D for the supply of axle bodies manufactured by its principal in Belgium and the goods were to be inspected by the buyer in Belgium but under the contract of sale the goods were liable to be rejected after a further inspection by the buyer in India. It was in pursuance to this contract that the goods were imported into the country and supplied to the buyer at P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of price would take place in a particular way. Condition No. 26 headed "export guarantee" provided that it was an essential condition of the auction that the coffee sold thereat shall be exported to the destination stipulated in the Catalogue of lots, or to any other foreign country outside India as may be approved by the Chief Coffee Marketing Officer, within three months from the date of Notice of Tender issued by the Agent and that it shall not under any circumstances be diverted to another destination, sold, or be disposed of, or otherwise released in India. Condition 30 stated that if the buyer failed or neglected to export the coffee as aforesaid within the prescribed time or within the period of extension, if any granted to him, he shall be liable to pay a penalty calculated a Rs. 50 per 50 kilos which shall be deductible from out of the amount payable to him as per condition 31. And Condition 31 provided that no default by the buyer to export the coffee aforesaid within the prescribed time or such extension thereof as may be granted, it shall be lawful for the Chief Coffee Marketing Officer, without reference to the buyer; to seize the unexported coffee and take possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction of sale in India. The sale should not be considered as covered by Section 5(2) if the import is effected merely by a purchase from abroad for a further sale in India but would be covered by Section 5(2) if the sale is "in course of import". The term "in course of import" was elucidated and explained in Deputy Commissioner of Agricultural Income Tax and Sales Tax, Ernakulam Vs. Indian Explosives Ltd. (1985) 4 SCC 119 as under:- "The test of integral connection or inextricable link between the sale and the actual import or export in order that the sale could become a sale in the course of import or export had been clearly enunciated by this Court in Ben Gorm Nilgiri Plantations Company's case (supra). There the question related to sale of tea which was claimed to be in the course of export out of the territory of India and though by majority it was held that the sales in question were not "in the course of export", the Court at p. 711 of the Report laid down the test thus: A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... countries. He had entered into four contracts for sale of chrome concentrates. Two of them were directly with foreign buyers. The other two were with the State Trading Corporation (STC) ever since export of mineral ores was canalised through it. The STC in turn entered into contracts with foreign buyers. The High Court held sales under the first two contracts directly with foreign buyers exempt from sales tax being in the course of export. But it held sales under the contract with STC not exempt from sales tax under Article 286(1)(b) of the Constitution read with Section 5(1) of the Central Sales Tax Act. The majority of the Constitution Bench speaking through Ray, CJ., upheld the decision of the High Court against the assessee. It was held that Section 5 of the Central Sales Tax Act has given a legislative meaning to the expression 'in the course of export' and 'in the course of import'. The expression 'in the course' implies not only a period of time during which the movement is in progress but postulates a connected relation. Sale in the course of export out of the territory of India means sale taking place not only during the activities directed to the end of exportation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the course of export. Applying this principle to the facts of the case it was held that the sale by the assessee to the STC which was the canalising agency for exports had no connection with the export by STC of the purchased goods to the foreign buyers and, therefore, the sale by the assessee in favour of the canalising agency, namely, STC was held no to be a sale in the course of export but was found to be a sale for export. In this connection the following pertinent observations were made in paragraphs 25 and 26 of the Report: "Hence the contention on behalf of the appellant that the contract between the appellant and the Corporation and the contract between the Corporation and the foreign buyer formed integrated activities in the course of export is unsound. The pre-eminent question is as to which is the sale or purchase which occasions the export. The distinction between sales for export and sales in the course of export cannot be disregarded." The features which point with unerring accuracy to the contract between the appellant and the Corporation on the one hand and the contract between the Corporation and the foreign buyer on the other as two separate and independent con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. Back to back contracts by themselves do not establish and prove that the first part of Section 5(2) is attracted and applicable. The import may have been with the intention to supply the imported goods to the Canara Bank, Bangalore but this by itself is not sufficient to satisfy requirement of Section 5(2) of the CST Act. The imported goods could have been diverted to another third person, without violation/default of the contract between the appellant and the Canara Bank, Bangalore. It may be noted that pending the supply of the new machine, the appellant had provided a standby machine to the Canara Bank, Bangalore as per the terms of the contract. In view of the aforesaid position it cannot be said that the import was occasioned by said import and therefore qualifies for exemption under Section 5(2). 14. Ld. counsel for the appellant has relied on judgments of the Supreme Court in Indure Ltd. Vs. Commissioner of Commercial Taxes, West Bengal & Ors. (2010) 34 VST 509 (SC) and State of Maharashtra Vs. Embee Corporation (1997) 107 STC 196 (SC). In Indure Ltd. (supra) the ownership of equipment imported as per the contract exclusively vested with NTPC upon dispatch to India and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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