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TMI Blog1973 (4) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... rm is importing foreign cotton and supplying the same to several mills in India; and the assessments were on the sales effected by the firm to the several mills of the foreign cotton imported by it. The firm objected to the assessments contending that the transactions under which the foreign cotton was passed on to the mills were not sales but were only the result of agency agreements, so that those transactions were not assessable to sales tax; and that even if the transactions were sales, article 286(1)(b) of the Constitution read with section 5(2) of the Central Sales Tax Act of 1956 saved such transactions from assessment to tax. Both these contentions were rejected by the assessing authority as well as the appellate authority; but the Appellate Tribunal accepted both the contentions. Hence, the State has filed these revision cases. 2.. On the first question the Government Pleader has contended, on the strength of two decisions of the Madras High Court, that the transactions involved in these cases were really sales and not transfers under agency arrangements. We have seen those decisions; and we have also heard fairly elaborate arguments on the second question. We feel that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, the sale occasioned the import. And such an import came within sub-section (2) of section 5 of the Central Sales Tax Act. In considering this question, the Supreme Court considered two sections, section 5 and section 3, relating to import or export of goods and inter-State trade and commerce respectively. The Supreme Court said that the expression "sale occasioning import" occurred in both the above sections and it should have the same meaning in both the sections; and the Supreme Court further observed that, if as a result of a covenant or as a result of an incident of such contract the import was effected, then the import preceding the actual sale or transfer of goods was also an import coming within the mischief of section 5(2) of the Central Sales Tax Act. 5.. Whether an import was occasioned by the particular contract of sale has thus to be considered in the light of the provisions in the contract of sale. In the case before the Supreme Court, the contract of sale provided that the goods imported should not be diverted for any other purpose. In that case, the goods were manufactured by the foreign manufacturer according to the needs of the consumer, then imported by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amachandran and K.Jayaram, Advocates, for the respond- ents in C.A. Nos. 1892 to 1896 of 1970. Ram Phal Bansal, S.P. Pande and Ganpat Rai, Advocates, for the respondents in C.A. Nos. 1898 to 1900 of 1970. JUDGMENT The judgment of the court was delivered by HEGDE, J-In these appeals by certificate a common question of law arises for decision and that question is whether the sales effected by the respondent with which we are concerned in these cases occasioned import of Egyptian cotton. The Sales Tax Officer as well as the Appellate Assistant Commissioner, rejecting the contention of the assessee, came to the conclusion that the sales in question were intra-State sales. But, on appeal, the Sales Tax Tribunal held that the assessee's case fell within section 5(2) of the Central Sales Tax Act, 1956, read with article 286 of the Constitution. The High Court on revision affirmed the decision of the Tribunal. In support of its conclusion the High Court observed thus: "One of the conditions in the contracts is that the goods imported should not, under any circumstances, be diverted from its determined destination, i. e., the mills. Secondly, the relative shipping documents were is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., one of the mills to whom supply was made by the firm is detailed in the said note and it is stated that the supply made to the other mills also are under similar circumstances. According to the appellant, after receiving enquiries from the mills the firm contacts the American suppliers in New York. The foreign suppliers agreed to supply the quantity at the price agreed upon. Thereafter the firm entered into a contract with the mills dated March 20, 1964, that the import licence issued in favour of the mills was made available to the firm for utilisation of the contract, that the letter of authority issued authorising the firm to import cotton was also issued, that the bill of lading obtained by the foreign supplier on shipment of the goods was also obtained by the firm and the cotton is thus sent on to India. The contention of the appellant is that under the contract entered into with the mills the quantity of cotton agreed to be supplied to the mills is specified as also its quality and places from where it was to be imported. The price was fixed on c. i. f-Cochin terms. Payment was to be made by the mills to the firm against the document. The other conditions governing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as could be seen from the letter of authority issued by the Government that one of the conditions of the letter of authority was, to quote the words of that letter, "The person or firm in whose favour it has been issued, will act purely as an agent of the licensee and the goods imported will be the property of the licence-holder both at the time of clearance through the customs and subsequent thereto. The licence-holder will have to ensure that the goods on importation will be delivered to him and shall not be disposed of otherwise. The licensee shall not cause or permit the holder of the letter of authority to dispose of the goods". This clause must be read as a part of the contract entered into between the respondents and the mills. Even if this clause had not been there, there would have been no difficulty in coming to the conclusion that the respondents were precluded from selling the goods to any- body other than the mills to whom the user's import licence had been granted. From the facts set out above, it is obvious that the respondents could not have sold the goods to anybody other than the licence- holders. From the facts set out above it is clear that this case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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