TMI Blog1981 (2) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the applicants to Kirloskars the applicants set out a telex which was sent by them to Kirloskars. In the telex they had mentioned that the machine was under offer to the defence department until the end of June, 1972, and that they could sell the machine to M/s. Kirloskar Brothers Ltd., provided the defence department released the same. In the offer which was set out in the said letter the applicants set out the term relating to delivery as follows: "Ready at works in Czechoslovakia, subject to prior sale, to be imported against our own import licence,....." Thereafter by their letter dated 3rd April, 1972, addressed to the applicants, Kirloskars placed an order with the applicants for the purchase of this machine. This order stipulated for erection and commissioning of the machine by the applicants with the help of erection engineers from the works in Czechoslovakia. By another letter of 5th April, 1972, addressed by Kirloskars to the applicants, Kirloskars added a further stipulation in the purchase order to the effect that the property in the machine offered by the applicants shall stand transferred to Kirloskars as soon as the machine is ready-packed in crates for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o take place in the course of import or export. The relevant provision for the present case is laid down in section 5, sub-section (2), of the Central Sales Tax Act, 1956, which provides as follows: "5. (1) .................. (2) 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." 3.. In the present case, admittedly, it is not necessary to consider the latter part of section 5, sub-section (2), because in the present case, the documents of title to the goods were not transferred by the applicants to the name of Kirloskars at any time. The delivery of the goods was taken by the applicants when the goods arrived from Czechoslovakia. It was only after the goods were cleared by the applicants from the customs, that they were sent by the applicants by rail to Kirloskars under railway receipts which were in the name of Kirloskars. 4.. The only argument that was advanced before us by Mr. Shah was that the import of this mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the event of the Czech manufacturers selling this machine to somebody else, they would not be able to supply the machine to Kirloskars within the time agreed upon. They relied upon a letter dated 9th October, 1974, written by them to their chartered accountants. This second explanation clearly appears to be an afterthought and the Tribunal rightly rejected this second explanation offered by the applicants. In these circumstances, it is quite clear that the import of this machine by the applicants was independent of the sale in question. The applicants had an import licence for the import of machinery. Under this licence they had placed an order for the import of the machine in question. They initially offered this machine to the defence department and thereafter sold it to Kirloskars. The sale to Kirloskars had not, therefore, occasioned the import of the machine in question from Czechoslovakia. Mr. Shah relied upon a term in the contract of sale relating to the erection of the machine by Czechoslovakian technicians as showing that the machine was imported pursuant to the contract of sale. The chronological sequence of events in the present case, however, clearly shows that an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... many to India. In the light of these circumstances, the court held that the contract of sale in question had occasioned the import of the goods. Similarly in the last case cited before us, namely, Deputy Commissioner of Agricultural Income-tax and Sales Tax, Ernakulam v. India Sea Foods, Cochin[1973] 32 S.T.C. 454., the contract of sale required the goods to be imported and the goods were imported pursuant to this contract of sale. Hence the court came to the conclusion that the sale in question had occasioned the import. The facts of the present case are totally different. The sale in question is really an alternative arrangement which the applicants had made for the disposal of the machine. The applicants had placed an order for the import of the machine prior to the sale which they effected in favour of Kirloskars. It cannot, therefore, be said that the import of the machine from Czechoslovakia is occasioned by the sale in favour of Kirloskars. There is no integral link between the two transactions and hence the authorities which have been cited by the applicants cannot help the applicants. This is not a sale which has occasioned the import of the goods in question. 7.. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate trade or commerce. Section 4 lays down the principles for determining when a sale or purchase of goods takes place outside a State. Section 4 is as follows: "4. (1) Subject to the provisions contained in section 3, when a sale or purchase of goods is determined in accordance with sub-section (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. (2) A sale or purchase of goods shall be deemed to take place inside a State if the goods are within the State- (a) in the case of specific or ascertained goods, at the time the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. Explanation.-............" Thus, under section 4(1), when a sale or purchase of goods takes place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. From this provision it is clear that section 4 deals with sales or purchases of goods within India and it lays down the principles for determini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however, have advanced elaborate arguments on the basis of the tests laid down in section 4 of the Central Sales Tax Act, 1956, this contention may be briefly examined, though, in our opinion, the entire argument in this connection is based on a fallacy. 9.. Under section 2(28) of the Bombay Sales Tax Act, 1959, a sale is defined to mean a sale of goods within the State and it includes, inter alia, a sale determined to be inside the State in accordance with the principles formulated in sub-section (2) of section 4 of the Central Sales Tax Act, 1956. Under section 4(2) of the Central Sales Tax Act a sale or purchase of goods shall be deemed to take place inside a State if the goods are within the State (a) in the case of specific or ascertained goods, at the time the contract of sale is made, and (b) in the case of unascertained or future goods at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. 10.. Under the tests laid down by section 4 of the Central Sales Tax Act, 1956, the goods must be inside the State, in the case of unascertained or future goods, at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h seas. 12.. Likewise there is no substance in the contention that the property in the goods passed to the buyers in Czechoslovakia. In the first place, before the applicants can transfer the property in the goods to Kirloskars they must themselves be the owners of the goods in question. The applicants cannot pass the property in the goods of somebody else to Kirloskars. The applicants are thus required to establish in the first place that the property in the machinery had already passed to them when the machine was crated and was ready for shipment from Czechoslovakia. From the documents which are on record it is not clear what was the nature of the agreement between the applicants and their Czech manufacturers regarding the sale of the machine by the manufacturers to the applicants. Under section 23, sub-section (1), of the Sale of Goods Act, in the case of a contract for the sale of unascertained goods or future goods, the property in the goods passes when the goods are unconditionally appropriated to the contract. Under sub-section (2) of section 23 such appropriation takes place where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping documents were made out. But in any case these shipping documents were admittedly not in the name of Kirloskars. Delivery of the goods was also not taken by Kirloskars when the goods arrived in Bombay from Czechoslovakia. It was only after the goods were cleared from the customs by the applicants that they sent the goods by rail to Kirloskars. The conduct of the parties shows that they had not intended the property in the goods to pass to the buyers in Czechoslovakia. The applicants considered the machinery as of their ownership at least till the time that they sent the machinery by rail from Bombay to Kirloskarwadi. Thus the earliest occasion when the property could be said to have been transferred by the applicants to Kirloskars would be when the goods were sent from Bombay to Kirloskarwadi by the applicants. There is, therefore, no substance in the contention of the applicants that the goods were appropriated to the contract either in Czechoslovakia or on the high seas. The earliest point of time when the goods were appropriated to the contract was when the goods were sent by railway from Bombay to Kirloskarwadi by the applicants. The appropriation, therefore, of these good ..... X X X X Extracts X X X X X X X X Extracts X X X X
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