TMI Blog1983 (4) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... -------------------------------------------- The State of Tamil Nadu is the petitioner in this tax revision case. The assessment year is 1968-69. Three points of dispute arise in this tax revision case and they are: (1) Whether the supply of raw materials by the assessees, viz., Thiruvalargal Ashok Leyland Ltd., Madras, to their customers on purchase orders were all towards works contract not exigible to tax or whether they are sales exigible to tax? (2) Whether the dismissal of the enhancement petition filed by the State is right in respect of turnover of Rs. 2,89,002 where original invoices had been cancelled in toto and fresh invoices had been raised for the sale of vehicles either locally or outside the State and tax paid thereon under the local Sales Tax Act, and Central Sales Tax Act were paid? and (3) Whether the transactions amounting to Rs. 5,13,968.53 are sales in the course of import and are exempt from taxation? It is convenient to refer to the facts relevant for every one of the questions stated above and to deal with them individually. Question No. (1): At the outset, it is necessary to notice that in respect of five supplies made in the debit not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industries. On the above facts, it was contended by the State that the pattern of transactions would indicate that they are all only outright sales. Further, when debit notes are drawn by the assessees as against ancillary product manufactures, they are not shown in terms of weight, but in terms of the cost of the materials. This feature is taken advantage of by the State to support the contention that the transactions are only outright sales. 11 debit notes issued to M/s. N.K. Krishna Rao Body Works during the assessment year 1968-69 were produced before the Tribunal. The Tribunal found on its examination of debit notes that one set for the period from 1st October, 1969, to 30th October, 1969, showed that the debits raised against M/s. N.K. Krishna Rao Body Works at the time of issue of raw materials were cancelled on the supply of finished products. The second set from 1st January, 1970, to 31st January, 1970, indicated works orders for manufacture of body. The third set of documents pointed out that wages labour invoices were raised by the said Body Works on the assessees. On the above facts, the Tribunal held that the transactions between the assessees on the one hand and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tern of transaction between the assessees and the ancillary product manufacturers, we have no hesitation to hold that there is no element of sale in all these works contracts. As regards P.A. Raju Chettiar and Brothers v. State of Madras [1955] 6 STC 131 and South India Metal Works and Rolling Mills v. State of Madras [1960] 11 STC 507, the first case related to supply of silver from time to time to manufacturers of silverware and silver jewellery and debiting of the accounts of the manufacturers with the weight of such silver in tolas. Besides, when the finished articles were received from the manufacturers they were credited with the weight of the finished articles and the manufacturers were also credited with the wages or making charges when the finished articles were received and were debited when they were paid in cash. While in the other, the facts are that the assessee collected scrap metal from its customers, melted the scrap, manufactured sheets and rings and gave back to the customers the new sheets and rings and that the identity of the new sheets and rings could not be correlated to and established with the scrap supplied by the customer and that the total weight of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2/67-68 were cancelled and the four vehicles were re-invoiced in the name of T.V. Sundaram Iyengar and Sons Pvt. Ltd., Trivandrum, T.V. Sundaram Iyengar and Sons, Madurai, Sundaram Motors Pvt. Ltd., Madras and T.V. Sundaram Iyengar and Sons, Madurai. In respect of the invoice relating to M/s. Sundaram Iyengar and Sons Pvt. Ltd., Trivandrum, as regards the sum of Rs. 46,175 out of the total extent of Rs. 2,15,824, the sales returns had been disallowed. Similarly, in invoices Nos. 233/67-68 and 268/67-68, five vehicles were sold to M/s. Sundaram Motors Pvt. Ltd., Madras and Bangalore. These invoices are subsequently cancelled and credit notes were issued. In respect of sales to M/s. Sundaram Motors Pvt. Ltd., Bangalore, for Rs. 1,47,219 for which credit note No. 27 dated 22nd November, 1968, was issued, the exemption claimed by the assessees was not accepted by the assessing authority; so too, in the invoice No. 289 dated 30th September, 1968, four vehicles were sold to M/s. Sundaram Motors Pvt. Ltd., Madras, for Rs. 2,14,161.92, only the credit note dated 31st December, 1968, for Rs. 95,608 relating to sales to M/s. Sundaram Motors Pvt. Ltd., Bangalore, was disallowed, though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adu [1983] 52 STC 85, Deputy Commissioner v. Kotak Co. [1973] 32 STC 6 (SC), Krishnados Kikani v. State of Tamil Nadu [1976] 38 STC 223, S.R.L.G.S. W. Mills (P.) Ltd. v. State of Madras [1972] 30 STC 387, Larsen and Toubro Ltd. v. joint Commercial Tax Officer [1967] 20 STC 150, State of Bihar v. Tata Engineering Locomotive Co. Ltd [1971] 27 STC 127 (SC), Binani Bros. (P.) Ltd. v. Union of India [1974] 33 STC 254 (SC) as also the decision of this Court in Blue Star Ltd. v. State of Tamil Nadu (T.C. Nos. 1397 of 1977 and 196 of 1978) [1984] 56 STC 172. As some of the decisions were considered in Krishnados Kikani v. State of Tamil Nadu [1976] 38 STC 223 and Blue Star Ltd. v. State of Tamil Nadu (T.C. Nos. 1397 of 1977 and 196 of 1978) [1984] 56 STC 172, we propose to refer only in detail the following: Voltas Ltd. v. Commercial Tax Officer [1982] 51 STC 151, S.R.L.G.S. W. Mills (P.) Ltd. v. State of Madras [1972] 30 STC 387 and the decision in Blue Star Ltd. v. State of Tamil Nadu (T.C. Nos. 1397 of 1977 and 196 of 1978 [1984] 56 STC 172. The facts in S.R.L.G.S. W. Mills (P.) Ltd. v. State of Madras [1972] 30 STC 387 are as follows: The assessee in that case is a ginning, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : In respect of export of cotton yarn and cotton textiles under the Cotton Textiles Export Promotion Incentive Scheme, the assessees were granted import licence for importation of textile chemicals, dyes and gums. One R agreed to purchase from the assessees the imported dyes and chemicals. But as the licence was not transferable, it was agreed that the assessees would sell to R on monopoly basis the imported goods on forward, afloat or c.i.f. basis at a certain price. On receipt of a part of the sale price, which was the premium, the assessees agreed to hand over the licence to enable the purchaser to take steps for importing the goods in the name of the assessees. The assessees would place an order with the foreign seller suggested by the purchaser for the quantity of goods required by the purchaser. They would also open a letter of credit through a bank or otherwise. All the import documents would have to be in the name of the assessees who agreed to subscribe their signatures to all the papers and documents so as to make the importation possible and enable the purchaser to take delivery of the goods. But the purchaser would have to pay the amount as per the invoice of the foreig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue Star Ltd. v. State of Tamil Nadu (T.C. Nos. 1397 of 1977 and 196 of 1978) [1984] 56 STC 172 had held that 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 user's or the foreign seller, there can be no privity of contract between the actual user's and the foreign seller and that, in either case, it is not possible to hold that the sale or purchase occasioned the import. It is true that the ultimate decision therein went against the assessee. But some of the important factors relied on by the Bench to hold against the assessee are relevant to be noticed: The goods had been imported not against the actual user's licence held by the customers but only on the basis of the recommendatory certificates issued by the Project and Equipment Corporation of India which is a wing of the State Trading Corporation of India. The goods had been imported after the actual users' orders but not by actual users' licences. There was no privity of contract between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst their import licence. A sample of import trading control form was furnished to us. Some of the conditions of the licence are that the goods for the import of which this licence has been granted, shall be the property of the licensee at the time of clearance through the customs and that all the items of goods imported under it shall be used only in the licence-holder's factory and no portion thereof will be sold or permitted to be utilised by any other party. From the above facts, we have no hesitation to hold that the assessees acted only as agents of the actual users and that the sales were in the course of import within the meaning of section 5(2) of the Central Sales Tax Act. However, the learned Additional Government Pleader laid stress on the fact that the assessees had entered into a contract with Ashok Leyland, U.K., long before the actual indents were placed by the former to the latter and therefore contended that there were two sales: (i) a sale by Ashok Leyland, U.K., to the assessees and (ii) a sale by the assessees to actual users. We find, such an argument cannot be entertained in view of the plain language employed in section 5(2) of the Central Sales Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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