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TMI Blog2001 (2) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sub-section (3) of section 5 may not be relevant for the purpose of our case. 2.. Without, first, adverting to the facts of the case, one cannot go to legal principles. The petitioner is doing business in fertilisers. For the assessment year 1983-84, under the Tamil Nadu General Sales Tax Act, 1959, they reported a total and taxable turnover of Rs. 6,89,16,928.81 and Rs. 6,88,84,258.91 respectively in their returns. The assessing authority found that the assessee had imported liquid ammonia at Madras Port and sold it to M/s. Southern Petrochemical Industries Corporation Ltd. (hereinafter called SPIC) for a sum of Rs. 17,74,93,753.27 during the year 1983-84, through the sales depot at No. 1, Vanniar Street, Madras-1. There were no documents to suggest that the sales were effected while the goods were on board the ship. The assessing authority, therefore, included the above turnover in the taxable turnover and assessed the same to tax under the TNGST Act, 1959 at 3 per cent single point. The assessment was as follows: Taxable turnover as per accounts Rs. 6,88,84,258.00 Add: Sales suppressions noticed on Rs. 17,74,93,753.00 inspection by the Enforcement Wing Officer, Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were taken delivery by the assessee and subsequently supplied to SPIC Ltd. at Tuticorin. The first appellate authority, however, records the modus operandi involved in the import of goods. The import was made by the assessee to meet the requirements of IFFCO, SPIC, FACT and the assessee (RCF) from Petrochemical Industries Company (KSC), Kuwait. The agreement between the assessee and the SPIC Ltd. was produced. The fact of joint purchase by assessee and SPIC Ltd., was noticed. But, the first appellate authority lays emphasis on the fact that the import was not for SPIC alone, but to certain others also. He also notices that the SPIC Ltd., Tuticorin, did not possess any import licence. He makes another mistake when he says, "the import was necessary only because of the contract between RCF Ltd., and the foreign sellers". This is contrary to his own finding earlier that the Government of India formed a committee, in which, the assessee, SPIC Ltd. and other fertiliser companies mentioned above were parties. The quantum of import and the price were to be decided by the committee. It was only in pursuance of this consortium meeting that the assessee proceeded to buy the requirements fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority to the assessee in the following terms: "Kindly recall the discussions held on the 10th July, 1978 in regard to the organisational arrangement for import, sale and transport of ammonia." From the above letter, the Appellate Tribunal concludes that the assessee imported the goods and then sold the same to SPIC Ltd. They also referred to the fact that the assessee did not raise a sale invoice on SPIC Ltd., but raised a debit note for the value of the goods plus profit in the guise of service charges at 1.5 per cent. This inference may not be factually correct and we can refer to the same, a little later. The Appellate Tribunal also makes a mistake that the assessee had a right to redistribute the imported goods according to the demand of the fertiliser manufacturers at the time of arrival of the ship. We do not find any warrant for the above conclusion from the records. They have also laid unnecessary emphasis on the fact that the goods discharged to Tuticorin for SPIC Ltd. was lesser than the quantity mentioned in the bill of lading. The Appellate Tribunal also found that the assessment was made on the basis of figures in the accounts and therefore, there was a clear case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rative Ltd., Kandla". There is also a reference to joint purchase by SPIC Ltd., and assessee in clear terms, in clause 2 of the contract entered between the assessee and SPIC Ltd. On the above admitted terms of purchase, what is the legal inference one can draw regarding the relationship of the assessee and SPIC Ltd., or the other customers? 10.. Learned counsel for the petitioner refers to Halsbury's Laws of England regarding the meaning of the words "joint purchase". In the 4th Edition of Halsbury's Laws of England, at page 622 of volume 35, it is stated as follows: "Possession by co-owners.-Where two or more persons are concurrent owners of the same property each ordinarily has both the possession and the right to possession of the whole contemporaneously with the others. Hence one of two co-owners cannot ordinarily maintain an action against the other for the common chattel while it is in the other's possession. In the case of joint ownership, the joint owners have both single possession and a single joint right to possess. Owners in common have single possession, but several rights to possess." Further at page 637, it is explained that joint ownership or joint tenancy is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was no sale by the association to its members. It was held that there was no sale by the association to its members and no tax could be imposed on the transaction. In fact, the Madras High Court held that the case in Mod. Serajuddin v. State of Orissa reported in [1975] 36 STC 136 (SC), did not apply and that an agency could exist under the facts and circumstances of the case. Similarly, in [1965] 16 STC 436 (Mad.) (K.P. Sitaram Co. v. State of Madras), the assessee claimed that certain sum represented turnover of transaction, in which, they acted as buying agents and they were, therefore, not liable to sales tax thereon. The Madras High Court, on consideration of facts and circumstances of the case, held that the correspondence showed that the assessee acted as buying agents. In the case before us also, the materials placed before us clearly indicate that the goods were imported on behalf of SPIC Ltd. Therefore, according to the learned counsel for the petitioner, it was a clear case of the assessee acting as agent of the disclosed principal, SPIC Ltd. and consequently, there was no sale by the assessee to SPIC Ltd. 13.. Reference is also made to the import and export polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts like, maintenance of temperature at 33OF. This is precisely the reason why the requirements are assessed on a six monthly basis. Clause of the agreement says that the bill of lading shall be in the name of the assessee. Clause 6 says that it shall be open to the assessee and SPIC Ltd., to agree on reduction or increase in the quantities to be delivered to SPIC. Learned counsel for the Revenue was trying to interpret this clause as giving a right to the assessee to reduce the quantity of supply. In fact, the authorities below have also made a mistake in thinking that the assessee has a right to make a supply at its own sweet pleasure, after the import of the goods. On the other hand, Mr. Sriprakash rightly points out that there can be a reduction only on mutual agreement and no unilateral right is given to the assessee. The above conclusion also follows from the fact that the purchase was a joint purchase and the parties were joint tenants. We have already explained the meaning of those expressions. The only clause which is in favour of the Revenue is clause 7 which says that it is the assessee's responsibility for taking out a comprehensive open insurance policy. But, it is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commit a breach of contract. 16.. In [1997] 107 STC 196 (SC) (State of Maharashtra v. Embee Corporation), the bill of lading described the name of the assessee in the case, as the consignee of the goods. On arrival, the consignment was forwarded to the consignee name in the contract. The assessee claimed exemption from sales tax on the ground that the supply was under the contract and it was in the course of import of goods into India. The High Court also held that there were two sales, but both the sales were integrated and inter-linked so as to form one transaction and as such, the sale by the assessee had occasioned the import of goods and was exempt from sales tax. The Supreme Court of India affirmed the decision that the import of goods was the direct result of the contract of sale between the assessee and that there was a one single transaction though there was a tripartite arrangement. 17.. The case in [1997] 105 STC 580 (SC) (K. Gopinathan Nair v. State of Kerala) is relied upon by both the parties. Import of raw cashewnuts from the year 1970 could be undertaken only through canalysing agents. The canalysing agency (CCI) imported the raw cashewnuts on its own on a who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29 (Minerals and Metals Trading Corporation of India Ltd. v. State of Andhra Pradesh), wherein the Andhra Pradesh High Court held on facts that the canalysing agent, State Trading Corporation was not acting as an agent of the actual user. In that case, they found that the title to the goods passed on to the canalysing agent after unloading of the goods at Visakhapatnam Port and sale in favour of the actual user took place thereafter. The facts in our case are totally different as adverted to by us earlier. [1992] 84 STC 544 (Mysore Chemical Supplies v. State of Tamil Nadu) is a judgment of the Madras High Court and the decision is not helpful to the Revenue, because ultimately the Madras High Court remanded the case back to the Joint Commissioner to decide the issue on factual details. [1993] 90 STC 283 (K. Gopinathan Nair v. State of Kerala) is the decision of the Kerala High Court, which was affirmed in K. Gopinathan Nair v. State of Kerala [1997] 105 STC 580 (SC), to which, we have already made a reference and we have shown how the facts are different. [1994] 93 STC 159 (Hindustan Motors Ltd. v. State of Tamil Nadu) is a judgment of the Madras High Court, wherein it was held on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee selling the goods to SPIC Ltd.? So far as payment for the imported goods is concerned, no doubt, the assessee paid the same through bank. But, here again, the authorities make a vital mistake in thinking that the assessee acquired title immediately on the goods being loaded in the ship. They forget the fact that there is a 45 days period for retirement of the bank documents which would indicate that the assessee never acquired title immediately on the loading of the goods in the ship. 21.. Another mistake committed by the authorities is that they make a facile assumption that the debit note was raised by the assessee on SPIC Ltd., and in the guise of collecting service charges, the assessee received the same consideration. 22.. There is yet another mistake in thinking that the goods were imported not only for SPIC Ltd., but three others. One cannot understand what difference this makes. The fact remains that the goods were imported for the disclosed principal, SPIC Ltd., and the goods meant of them were unloaded at Tuticorin Port. Necessarily, the entire goods cannot be unloaded and the only goods meant for SPIC Ltd., could be unloaded at Tuticorin. In our opi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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