TMI Blog1973 (12) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... ntracts envisaged the import of goods and their supply to the DGS & D from out of the goods imported, it did not follow that the movement of the goods in the course of import was occasioned by the contracts of sale by the petitioner with the DGS & D - W.P. No. 39, 92 of 1969 - - - Dated:- 11-12-1973 - RAY A.N., KHANNA H.R., MATHEW K.K., ALAGIRISWAMI A. AND BHAGWATI P.N. JJ. V.M. Tarkunde, Senior Advocate (G.R. Chopra and Miss C.M. Kohli, Advocates, with him), for the petitioners. Gobind Das and S.P. Nayar, Advocates, for the respondents in W.P. No. 39 of 1969 and respondents Nos. 1 to 4 in W.P. No. 92 of 1969. P.K. Chatterjee and G.S. Chatterjee, Advocates, for respondents Nos. 5 and 6 in W.P. No. 92 of 1969. -------------------------------------------------- The judgment of the court was delivered by MATHEW, J.- These are petitions filed under article 32 of the Constitution praying for issue of appropriate direction or order for the enforcement of the fundamental right of the petitioners under article 31(1) of the Constitution. The question raised in the two petitions is the same; we propose to deal with Writ Petition No. 39 of 1969 and our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Scarce Industrial Materials Control Order, 1965, was also repealed on June 6, 1966. The Government of India, in placing orders with the petitioner used to grant import licences in terms of the contract. The petitioner had been importing and supplying non-ferrous metals to respondents 1, 2 and 3 during the last 19 years. Respondent No. 2 had agreed to pay and was paying the Central sales tax and/or West Bengal sales tax whichever was applicable to the petitioner in terms of the contract. In 1966, this court held in K. G. Khosla and Co. v. Deputy Commissioner of Commercial Taxes, hereinafter referred to as the Khosla case, that the sale by Khosla Co. to the DGS D in India of axle- box bodies manufactured in Belgium by their principal occasioned the movement of goods in the course of import and sales tax was not exigible on the transaction in view of section 5(2) of the Central Sales Tax Act, 1956. On the basis of this judgment, respondent No. 2 issued an order (annexure P-1) to all the authorities concerned including respondent No. 4, namely, the Pay and Accounts Officer, Ministry of Works, Housing and Supply, directing that sales tax should not be allowed in respect of suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was contended on behalf of the petitioner that the transactions in question, namely, the sales which the petitioner made to the DGS D were not the sales which occasioned the movement of the goods in the course of import and as those sales were separate and distinct from the contracts of purchase made by the petitioners with the foreign sellers which alone occasioned the movement of goods in the course of import, tax was exigible upon the transactions of sale by the petitioner to the DGS D and, therefore, the decision in Khosla case [1966] 17 S.T.C. 473 (S.C.); [1966] 3 S.C.R. 352., has no application to the facts here. Article 286(1)(b) provides: "286. (1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place- (b) in the course of import of the goods into, or export of the goods out of, the territory of India." In State of Travancore-Cochin v. Bombay Co. Ltd.[1952] 3 S.T.C. 434 (S.C.); [1952] S.C.R. 1112., Patanjali Sastri, C.J., said that a sale by export involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export linking them as parts of the same transaction. The sellers had no concern with the export, the sale imposed or involved no obligation to export and there was possibility that the goods might be diverted for internal consumption. The court considered the sales as sales for export and not in the course of export. The court observed that to occasion export there must exist such a bond between the contract of sale and the actual exportation, that each link is inextricably connected with the one immediately preceding it and that without such a bond, a transaction of sale cannot be called a sale in the course of export of goods out of the territory of India. The court further said that in general where the sale is effected by the seller, and he is not connected with the export which actually takes place, it is a sale for export and where the export is the result of the sale, the export being inextricably linked up with the sale so that the bond cannot be dissociated without a breach of the obligation arising by statute, contract or mutual understanding between the parties arising from the nature of the transaction, the sale is in the course of export. In the Khosla case [1966] 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Madras General Sales Tax Act, 1959. The rules framed by the Coffee Board provided that only dealers who had registered themselves as exporters of coffee with the Coffee Board or their agents and who held permits from the Chief Coffee Marketing Officer in that behalf would be permitted to participate in the auctions, and after the bidding comes to an end, the payment of price would take place in a particular way. Condition No. 26 headed "export guarantee" provided that it was an essential condition of the auction that the coffee sold there- at shall be exported to the destination stipulated in the catalogue of lots, or to any other foreign country outside India as may be approved by the Chief Coffee Marketing Officer, within three months from the date of notice of tender issued by the agent and that it shall not under any circumstances be diverted to another destination, sold, or be disposed of, or otherwise released in India. Condition 30 stated that if the buyer failed or neglected to export the coffee as aforesaid within the prescribed time or within the period of extension, if any granted to him, he shall be liable to pay a penalty calculated at Rs. 50 per 50 kilos which s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here were two independent sales involved in the export programme: the first sale by the Coffee Board to the export promoter, and the second sale by the export promoter to a foreign buyer which occasioned the movement of goods, and that the latter sale alone could earn the exemption from sales tax as being a sale in the course of export. In Khosla case [1966] 17 S.T.C. 473 (S.C.); [1966] 3 S.C.R. 352., it might be recalled that Khosla and Co. entered into the contract of sale with the DGS D for the supply of axle-box bodies manufactured by its principal in Belgium and the goods were to be inspected by the buyer in Belgium but under the contract of sale the goods were liable to be rejected after a further inspection by the buyer in India. It was in pursuance to this contract that the goods were imported into the country and supplied to the buyer at Perambur and Mysore. From the statement of facts of the case as given in the judgment of the High Court it is not clear that there was a sale by the manufacturers in Belgium to Khosla Co., their agent in India. It would seem that the only sale was the sale by Khosla Co. as agent of the manufacturer in Belgium. In the concluding porti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign countries was not occasioned on account of the sales by the petitioner to the DGS D. It was contended on behalf of the Central Government that the contracts of sale between the petitioner and the DGS D envisaged the import of goods for fulfilling the contracts and it was for that reason that there was first the recommendation for issue of import licences by the DGS D and then the actual issue of import licences and, as the contracts of sale visualised the import of goods for fulfilling them, the movement of goods in the course of import was occasioned by the contracts of sale to the DGS D, and, therefore, the sales to the DGS D were the sales which occasioned the movement of goods in the course of import. There was no obligation under the contracts on the part of the DGS D to procure import licences for the petitioner. On the other hand, the recommendation for import licence made by the DGS D did not carry with it any imperative obligation upon the Chief Controller of Imports and Exports to issue the import licence. Though under the contract the DGS D undertook to provide all facilities for the import of the goods for fulfilling the contracts including a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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