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TMI Blog1996 (1) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 5,27,686.77 and tax thereon to be Rs. 42,214.94 for sale of goods. He further assessed contractual transfer price (C.T.P.) to be Rs. 74,51,254.39 and tax thereon to be Rs. 2,98,050.17. On appeal the appellate authority, the respondent No. 1, though modified the order appealed against refusal to take cognizance of the fact that the zinc worth Rs. 3,11,974.50 consumed in executing the works contract of M/s. Gram Engineering, was actually a sale in the course of import and hence was not liable to be taxed under section 6D in view of the prohibition contained in section 27(1)(a) of the 1941 Act. The applicant is not liable to pay tax to the tune of Rs. 12,500, being the tax on the deemed sale of zinc worth Rs. 3,11,974.50 which has been consumed in galvanising M.S. cable trays and accessories given by M/s. Gram Engineering for the purpose. The applicant on the above facts prays: (a) for declaring section 6D as ultra vires for transgressing the limit prescribed by the Constitution of India; (b) for quashing the impugned assessment made by the respondent No. 2 as well as its modification as made by the respondent No. 1; and (c) for restraining the respondents from applying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of legislative power conferred in the State Legislature under entry 54 of the State List inasmuch as it enables tax being imposed on 'deemed sale' resulting from the transfer of property in goods as goods or in some other forms involved in execution of works contract which takes place in the course of inter-State trade or commerce or which takes place outside the State in the course of import and export......" From the language it is, thus, clear that the applicant-company's challenge is directed against clause (a) of sub-section (1) of section 6D and not against the whole of section 6D which includes other ancillary and incidental matters. It is not clear (i) if the applicant disputes the concept of "deemed sale" as expounded in clause (a) of section 6D(1) or (ii) if it disputes the legality of this clause on the ground that it imposes sales tax even on sales in the course of export/import or inter-State trade which are protected under the provisions of section 27 of the 1941 Act from such taxation. If the applicant relies on the first plea, it can be dismissed immediately on the ground that clause (a) of sub-section (1) of section 6D derives its spirit and legality from sub-cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ratan Company and the applicant. Again, transfer of zinc in executing the works contract constitute a "deemed sale" transacted between the applicant-company and M/s. Gram Engineering. The second sale may merge into and form a part of the first one to constitute an integrated sale taking place in the course of import only in special circumstances, and only then the protection as provided under section 27 of the 1941 Act is attracted. The expression "sale or purchase taking place in the course of import of goods into or export of goods out of the territory of India" though finds place in this section, it has not been defined in the 1941 Act. However, large number of reported decisions on the point are available. The ratio of the same will give the guideline in arriving at a decision as to what really constitutes a "sale or purchase taking place in the course of import of goods into or export of goods out of the territory of India." The terms "import of goods" and "export of goods" for the purpose of the aforesaid expression must fulfil some identical conditions. We shall first advert to some reported decisions relating to export. The Supreme Court of India in the case of State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the sales by the assessee to the Government departments were in the course of import. It was held by the Supreme Court (i) that movement of goods from Belgium to India was "incidental to the contract that the axle-box bodies could be manufactured in Belgium, inspected there and imported into India for consignee" and was in pursuance of the condition of the contract between the assessee and the D.G.S. D.; and (ii) that there was no possibility of goods being diverted by the assessee for any other purpose. It was therefore, concluded by the court that the sale took place in the course of import. A similar issue came for consideration of the Supreme Court in a case reported in [1973] 32 STC 6 (Deputy Commissioner of Agricultural Income-tax and Sales Tax, Central Zone, Ernakulam v. Kotak Co). Here, the respondentfirm entered into a contract with certain textile mills to import cotton for the latter's use on the basis of latter's import licence. The contract was irrevocable and sale was subject to import licence under the letter of authority issued to the firm by the Government. Though the firm was authorised to import goods, the mills remained the importer and liable as su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the petitioner from the foreign sellers which occasioned the import of goods and there was no privity of contract between D.G.S. D. and the foreign sellers through the agency of the petitioner; (ii) that though under the contract the D.G.S. D. undertook to provide all facilities for import of goods for fulfilling the contracts including an Import Recommendation Certificate there was no absolute obligation on it to provide such facilities. It was the petitioner's obligation to obtain import licence. Here the D.G.S. D. had some role in the matter of import of goods because it helped the petitioner-company in obtaining Import Recommendation Certificate on the basis of which the company was in a position to import the goods from the foreign seller. In spite of such role of the D.G.S. D., it was held that there was no privity of contract between the D.G.S. D. and foreign seller. But in the case before us the applicant-company stands on much weaker footing. Here, M/s. Gram Engineering gave some M.S. trays and other articles for galvanisation to the applicant-company; but the former had absolutely no concern as to wherefrom the applicant-company was to procure the zin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et the protection of section 27 of the 1941 Act. Before we conclude, it is desirable to make a brief reference to the reported decisions which the learned counsel for the applicant relied on. He referred to the decisions reported in (i) Singareni Collieries Co. Ltd. v. Commissioner of Commercial Taxes [1966] 17 STC 197 (SC), (ii) Projects and Services Centre v. State of Tripura [1991] 82 STC 89 (Gauhati); (1991) 24 STA 213 (Gauhati). (iii) Union of India v. K.G. Khosla and Co Ltd [1979] 43 STC 457 (SC), (iv) Cement Marketing Co. of India (Private) Ltd. v. State of Mysore [1963] 14 STC 175 (SC), (v) Tata Iron and Steel Co. Ltd v. S.R. Sarkar [1960] 14 STC 655 (SC), (vi) Gannon Dunkerley Co v. State of Rajasthan [1993] 88 STC 204 (SC), (vii) Builders' Association of India v. State of Karnataka [1993] 88 STC 248 (SC) and (viii) Bijoy Processing Industries v. Commercial Tax Officer [1994] 92 STC 503 (WBTT). The case reported in [1966] 17 STC 197 (SC) (Singareni Collieries Co. Ltd. v. Commissioner of Commercial Taxes) relates to sales of coal by the applicant-colliery to some specified allottee outside the State of Hyderabad pursuant to the direction of the Coal Commissioner. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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