1963 (6) TMI 29 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether Galiokotwala & Co. was the assessee's agent in the import of raw cotton.
2. Whether the purchase of cotton was in the course of import and thus exempt from tax under Article 286 of the Indian Constitution.

Detailed Analysis:

1. Agency Relationship:
The petitioner, a company producing and selling cotton yarn, contended that Galiokotwala & Co. was merely its agent in importing raw cotton from Sudan, and not a seller. The Court examined the statutory framework under the Imports and Exports (Control) Act, 1947, and the Imports (Control) Order, 1955, which require a licence for importing raw cotton. The petitioner had obtained such a licence and issued a letter of authority to Galiokotwala & Co. to import the cotton.

The Court scrutinized the contract between the parties, noting that it explicitly described Galiokotwala & Co. as the seller and the petitioner as the buyer. The contract included terms for payment, insurance, and arbitration, consistent with a sale agreement rather than an agency relationship. The Court emphasized that agency is a consensual relationship requiring mutual assent, which was not evident here. The Court also clarified that the term "statutory agent" should not be misconstrued as creating a principal-agent relationship without mutual consent. Thus, the Court concluded that Galiokotwala & Co. was not acting as an agent but as a seller.

2. Course of Import:
The petitioner argued that the purchase was in the course of import and thus exempt from tax under Article 286 of the Indian Constitution. The Court examined the procedural details of the import, noting that Galiokotwala & Co. imported the cotton, cleared it from customs, and transported it to the petitioner. The Tribunal had found that the import was completed once Galiokotwala & Co. took delivery and cleared the goods from the harbour, and the subsequent sale to the petitioner occurred after the goods had crossed the customs barrier.

The Court agreed with the Tribunal's view that the sale was not in the course of import. The import was completed by Galiokotwala & Co., and the sale to the petitioner was a separate transaction occurring after the import was finalized. Therefore, the transaction did not qualify for exemption under Article 286.

Conclusion:
The Court dismissed the petition, holding that Galiokotwala & Co. was not the petitioner's agent and that the purchase was not in the course of import. The inclusion of Rs. 1,34,426-80 in the taxable turnover was upheld, and the petition was dismissed with costs.