TMI Blog2010 (9) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of the court was delivered by DEEPAK VERMA J. The following questions of law projected, are required to be adjudicated by this court in the aforesaid appeal: (i) Whether import of MS pipes by the appellants was pursuant to a term of contracts between appellant No. 1 and National Thermal Power Corporation Limited (for short, "the N.T.P.C."). (ii) Whether import of the said MS pipes and supply thereof by the appellant No. 1 to N.T.P.C. constitutes an integral and inseparable part of the contracts between them. A brief history of the case is as under: Appellant No. 1 is a limited company duly incorporated under the provisions of the Companies Act, 1956, engaged in the business of works contract. Appellant No. 2 was working for gain as senior manager of appellant No. 1 (hereinafter referred to as, "the company"). Tenders were invited by N.T.P.C on January 8, 1988 for submitting bids for ash handling plant package for its Farakka super thermal power project, Stage II, by way of international competitive bidding, popularly known as global tender. The scope of work involved in such package included designing and engineering, manufacture, inspection and testin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancel the other contract also. In the said meeting itself, it was agreed between the company and N.T.P.C that separate formulae shall be applicable in respect of calculation of price adjustment for indigenous supplies and imported supplies. It was, further, agreed that if sales tax on imported items is leviable due to future enactment of sale/interpretation of law/interpretation of law by court, the same will be reimbursed by N.T.P.C. to the company at actuals against documentary evidence. By way of letter of award dated August 16, 1988, N.T.P.C. awarded two contracts to the company for performing the work of erection of aforesaid plant on turnkey basis. Even though two contracts were entered into between the parties but in nutshell it was only one contract for the simple reason that N.T.P.C. kept a right with it with regard to cross-fall breach clause meaning thereby that default in one contract would tantamount to default in another and whole contract was liable to be cancelled. In the said letter of award, clause 2 deals with intent and scope of award and is reproduced hereinbelow: "2.1 We confirm having accepted your proposal dated March 28, 1988 and mentioned in at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was decided that the project would need certain imported items to be used exclusively for the plant, the company had written a letter to N.T.P.C. on November 2, 1988 inviting its attention, with regard to clause 4.5.2 of the letter of award, giving details of the items to be imported for the said project. As many as twelve different type of components were sought to be imported for completion of the project. MS pipes to be imported from M/s. Daewoo Corporation, South Korea, was one of the items shown in the list prepared by the company which was subsequently presented to N.T.P.C. The company, thereafter, submitted an application before DGTD, Import Export Directorate, New Delhi on February 23, 1989 for special imprest import licence against turnkey contract for supply of complete ash handling system to N.T.P.C.'s Farakka super thermal power project (2 x 500 MW). Along with the annexures submitted by the company full specifications of the MS pipes were also given. It also contained details of other items required to be imported by the company in accordance with the list presented to N.T.P.C., for completion of the project. Necessary declaration required to be furnished by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the West Bengal Commercial Taxes Appellate and Revisional Board, but after contest the said revision application was also dismissed against the company. It, thereafter, preferred an application under section 8 of the West Bengal Taxation Tribunal Act, 1987 before the West Bengal Taxation Tribunal, challenging the orders passed by the authorities below but the same was also rejected See Indure Limited v. commissioner of Commercial Taxes [2002] 125 STC 145 (WBTT). The appellants were then constrained to file a writ petition before the Division Bench of the High Court of Calcutta, challenging the said orders. However, the appellant's writ petition also came to be dismissed by the Division Bench of the said court on October 19, 2001, giving rise to this appeal. The case of the respondents right from the very beginning had been that it was neither obligatory nor mandatorily required for the company to have imported the goods in question. There was no contractual or legal obligation on their part to do so. The only obligation required to be performed by the company under the terms of the letter of award and the contract was to design, supply, erect and commissioning the ash hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction of import and the transaction of sale have to be so integrated to each other as to form one single chain without a break. The various factors, including contractual stipulation, are considered only to ascertain if the integrated chain is maintained to fulfil the conditions laid down in section 5(2) of the Act. That is to say such sale or purchase occasioned the import. They have, therefore, strenuously submitted that the appellants have lost before all the authorities below and the reasoning adopted by the West Bengal Taxation Tribunal has been affirmed by the Division Bench of the High Court, thus, no case for interference has been made out in this appeal, which deserves dismissal. In the written submissions of the respondents, they have further taken the following plea: It is thus clearly established that the goods which were imported by the appellant, were to be imported by them for their own purposes though ultimately to be utilised for N.T.P.C's ash handling plant. The goods were to undergo processing at the premises of the appellant and only after their conversion into a final product were to be handed over to N.T.P.C. The appellants thus clearly admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. A. K. Ganguli, learned senior counsel and Mr. Avijit Bhattacharjee, advocate for the respondents at length and perused the record. For proper adjudication of the appeal it is foremost important to consider the provision of section 5(2) of the Act, which is reproduced hereinbelow: "5. When is a sale or purchase of goods said to take place in the course of import or export. (1) . . . (2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. (3) to (5) . . ." Before we proceed to decide the questions of law as projected hereinabove, one material fact pertinent to the issue involved in this appeal requires special mention. We have already mentioned hereinabove that along with MS pipes, the disputed goods in this appeal, the company had also imported 11 other components/items to be used in the plant for its erection and commissioning. The other 11 imported goods, utilised by the company in the erection of the plant have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 5(2) of the Act, and are, therefore, exempt from taxation." In the case in hand, it is to be noted that import had occasioned only on account of the covenant entered into between the company and N.T.P.C. and the imported pipes were used exclusively for erection and commissioning of the plant. The respondents have failed to establish that these pipes were not used in the plant of N.T.P.C. Similar question had again come up for consideration before two learned judges of this court reported in State of Maharashtra v. Embee Corporation, Bombay [1997] 107 STC 196 (SC)., [1997] 7 SCC 190 wherein it has been held as under at page 202 and 203 of 107 STC.: "9. In this case (K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 STC 473 (SC). [1966] 3 SCR 352), the Constitution Bench specifically held that sale need not precede the import and this decision is complete answer to the argument advanced by the learned counsel for the appellant. 10.. The learned counsel then tried to argue that the decision of the Constitution Bench in Khosla's [1966] 17 STC 473 (SC). case [1966] 3 SCR 352 is not applicable to the present case as in the said case, the materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was found that on account of the sale to CCI by foreign exporters raw cashewnuts were imported into India. The importer being the CCI and not the local user, this court held that principles evolved by it in para 12 of the judgment were not applicable to that case. We do not, therefore, find that this decision is helpful to the appellant's case. 12.. The result of the aforesaid discussion is that while interpreting the expression 'sale occasions import' occurring in sub-section (2) of section 5 of the Act, it is not necessary that a completed sale should precede the import." The test to determine if the sales were in the course of import has been elaborately considered in a judgment of a learned three-judge Bench of this court reported in Deputy Commissioner of Agricultural Income-tax and Sales Tax, Ernakulam v. Indian Explosives Ltd [1985] 60 STC 310 (SC). [1985] 4 SCC 119. Para 4 thereof dealing with the issue is reproduced hereinbelow and finally in para 6 while distinguishing in the matter of Binani Bros. (P.) Ltd. v. Union of India(1) [1974] 1 SCC 459, it has been held as under at page 313 of 60 STC.: "4. The test of integral connection or inextricable link between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t fairly conceded that the facts in K.G. Khosla Co.'s [1966] 17 STC 473 (SC)., case [1966] 3 SCR 352 were on all fours with the facts obtaining in the instant appeals and that the ratio of that decision would appear to govern the question arising in these appeals, but he contended that a different view has been taken by this court in Binani Bros. (P.) Ltd. v. Union of India [1974] 33 STC 254 (SC); [1974] 1 SCC 459., and in view of this later decision the High Court ought not to have applied the ratio of K.G. Khosla Co.'s [1966] 17 STC 473 (SC); [1966] 3 SCR 352. decision to this case. It is not possible to accept this contention as in our view Binani Bros. case is clearly distinguishable on two material aspects. In that case the assessee itself held the import licence and the goods were imported on the strength of such import licence and not on the strength of any actual users' licence as is the case here. Secondly, unlike in the present case there was no term or condition prohibiting diversion of the goods after the import. In fact, it is these two factors obtaining in the instant case which establish the integral connection or inextricable link between the transactions of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clearly spelt out that the facts of the case in hand are different. Thus, the ratio of the said case would not be applicable to it. In fact, the ground, sought to be raised for the first time before this court that MS pipes were put to manufacturing process and thereby converted into a distinct end-product had not been raised before any of the authorities earlier. It was not the respondents' case that the pipes so imported were not necessary components for the erection and commissioning of the plant. Admittedly, the said pipes were used as components in the ash handling plant in the same condition as they were imported without altering their originality. Thus, the ground which was sought to be raised before us for the first time has not been considered by any of the authorities and in our opinion rightly so. Thus, we also do not deem it fit and proper to consider the same at this belated stage. Apart from the aforesaid reasons, we are also of the considered opinion that such import would fall within the Constitutional umbrella. It is also to be noted that the company had admittedly imported the goods into India for completion of the project on turnkey basis of N.T.P.C. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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