TMI Blog1983 (2) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... This is an appeal against the order of the Board of Revenue which exercising suo motu power under section 34, set aside the order of the Appellate Assistant Commissioner who allowed exemption in respect of turnover for Rs. 1,18,865 holding that the same represented sales in the course of import and restored the order of the assessing officer. The appeal is thus directed against the inclusion of Rs. 1,18,865 as taxable turnover on rejection of the assessee's claim for exemption on the ground that they are sales in the course of import. The Board of Revenue reached its conclusion on the following facts as culled out from its order: (1) In all the five cases in respect of which exemption is claimed, the goods were imported from Germany by the assessee and then sold to the local buyers, though the goods were imported after orders were obtained by the assessee from local buyers. (2)(a) There is no stipulation in the contracts with the local buyers that the goods should be imported from the foreign country. (2)(b) One of the local buyers in his letter dated 30th July, 1969, requested the assessee to supply them with one Brusting Strength Tester DP. 30 with usual accompaniments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect Equipment Corporation of India which is a wing of State Trading Corporation of India. (3) The goods had been imported after the actual users' orders, but not by the actual users' licences. (4) (a) There was no privity of contract between the local buyers and the foreign seller and the movement of the goods from the foreign country was not occasioned on account of the actual user's licence, but only against the orders placed by the assessee with the foreign seller. (4)(b) In the case of Amaravathi Sri Venkateswara Paper Mills, the documents show that the assesses had sold the machinery from out of the stock held by it after import and as such, it is not a sale in the course of import, but only a sale from out of the stock held by the assessee. It is necessary to state here that this factual basis is disputed by the assessee (see ground No. 10). The common question to be determined is whether in the circumstances of the case, the sales for Rs. 1,36,005 and Rs. 1,18,865 were sales in the course of import falling within the ambit of section 5(2) of the Central Sales Tax Act or not. Section 5(1) and (2) runs thus: "5. (1) A sale or purchase of goods shall be deemed to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re two sales one to the intermediary and the other to the importer. The first sale is not in the course of export for the export begins from the intermediary and ends with the importer." It is useful to remember that practically, there is no difference between sub-section (1) and sub-section (2) as to their effect that the former concerns the export, while the latter the import, and therefore the principles laid down by their Lordships of the Supreme Court in the above case are applicable to sub- section (2) as well. The above principle was reiterated by the Supreme Court in Binani Brothers (P.) Ltd. v. Union of India [1974] 33 STC 254 (SC) and it is noteworthy to notice the facts in that case, (a) There was no privity of contact between DGS D and the foreign sellers. (b) The foreign sellers did not enter into any contract by themselves or through the agency of the petitioner to DGS D. (c) The movement of goods from foreign countries was not occasioned on account of the sales by the petitioner to DGS D. (d) Though under the contract DGS D undertook to provide all facilities for the import of the goods for fulfilling the contract including an import recommendat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he allottees. This Division Bench had noticed another decision of the Supreme Court in Murarilal Sarawagi v. State of A.P. [1977] 39 STC 294 (SC) where the Supreme Court from the facts on record held that there was a sale by the assessee of the minerals to the MMTC and that the MMTC in turn exported the commodity to the foreign purchaser; in that view, the court treated the MMTC as the last purchaser in that State and that the assessee before them was not the last purchaser. From the foregoing precedents, we find, two principles are well settled: (1) Where two sales are involved in the integrated transactions resulting in the import, section 5(2) of the Central Sales Tax Act will never be attracted and (2) Unless the intermediary who actually imports, is held to be the agent of either the actual users or the foreign seller, there can be no privity of contract between the actual users and the foreign seller. In either case, it is not possible to hold that the sale or purchase occasioned the import. Indeed, the learned counsel for the assessee, conscious of the legal position, submitted that in the circumstances of the case, the assessee only acted as agent of the actual users. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee's contracts with its foreign suppliers. Again, in clause 3, sub-clause (i), there are the following covenants, viz., (a) to facilitate the expeditious import, the assessee will conclude the contract with its foreign buyers direct and settle terms of payment and schedule of delivery and that the contract of the foreign suppliers will be finalised by the assessee only after receipt of intimation from PEC that import licences had been issued by the licensing authority for the goods; (b) according to clause 3, sub-clause (iii), to facilitate sales to actual users, the assessee will put one advertisement every quarter from the date of receipt of import licence of minimum 6 x 2 column inches in at least three leading English and vernacular newspapers at the assessee's cost and the advertisement shall indicate the items which the assessee is importing and the ceiling selling margins allowed to the assessee by PEC on the ex-godown port prices, as also the fact that the goods are available only to actual users. It is also provided in clause 3 that the goods imported under this contract will be sold to the actual users whose requirements have been certified essential by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the imported machines till PEC named the actual users. (d) There was also a duty cast on the assessee to guarantee the goods so imported so far as the actual users are concerned. (e) PEC will not be responsible in any manner if the goods for any reason whatsoever remained unsold for any length of time. (f) The contract in general related not only to import but also to stocking and selling of metal testing machines from GDR to actual users only. All these considered with the facts set out in the opening part of our judgment in our view clearly establish that the import is necessitated only because of the contract between the assessee and the foreign seller and has nothing to do with the sales between the assessee and the actual users. To put it differently, the transactions envisage two sales: (i) between the assessee and the foreign seller and (ii) between the assessee and the actual users. Then, there can be no escape in holding that the disputed sales are not sales in the course of import as visualised under section 5(2) of the Central Sales Tax Act. We may add, so far as the appeal is concerned, the facts referred to in paragraph No. 3 themselves will rule out the pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn seller on the strength of contracts entered into between itself and the actual users and further that in some of the assessee's contracts with the foreign seller, the names of actual users were shown at the bottom, an unilateral decision vested with PEC to call upon the assessee to deliver the goods to some other actual users. (2) There is no evidence in this case that in the contract between actual users and the assessee, the former placed any specification of the machine it indented for, nor is there any evidence that the goods supplied by the foreign seller were manufactured in accordance with such specification. In such cases, there can be (no) scope for the contention that there was appropriation of the goods within the meaning of section 4 of the Central Sales Tax Act. Indeed, in the decision relied on by the learned counsel, Ramamurti, J., in his leading judgment had observed thus: "The conditions of the contract in the instant case provide for the inspection of the materials during all the stages of the manufacture of the goods in London. The goods are to be manufactured in accordance with the specifications set out in the Schedule. The contract also provides for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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