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2016 (4) TMI 534

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..... noting those features. The salient features flowing out as conditions in the contract and the entire conspectus of law on the issues as notice earlier, leave us with no option but to hold that the movement of goods by way of imports or by way of inter-state trade in this case was in pursuance of the conditions and/or as an incident of the contract between the assessee and DMRC. The goods were of specific quality and description for being used in the works contract awarded on turn key basis to the assessee and there was no possibility of such goods being diverted by the assessee for any other purpose. Hence the law laid down in M/s. K.G. Khosla & Co. v. Deputy Commissioner of Commercial Taxes, Madras [1966 (1) TMI 54 - SUPREME COURT OF INDIA] has rightly been applied to this case by the High Court. Therefore, no reasons found to take a different view. - Apex Court decided against the revenue - Civil Appeal Nos. 2989-3008 of 2016 [Arising out of S.L.P. (C) Nos. 30045-30064 of 2013] - - - Dated:- 5-4-2016 - Dipak Misra And Shiva Kirti Singh, JJ. For the Appellant : Mr. Ajit Kumar Sinha, Sr. Adv. Ms. Niranjana Singh, Adv. Mr. Vibhushankar Mishra, Adv. Mr. Shashank Singh, Adv. .....

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..... er case. According to respondent the claim of sale in course of imports occasioned by the contract was negatived in the case of Binani Bros. on peculiar facts of that case which were quite different from the facts of the instant case, as correctly noticed by the High Court. 3. Before adverting to the main issue as to whether the High Court judgment is correct in law as well as in facts or not, it would be appropriate to notice some of the relevant facts. The respondent is a Public Limited Company engaged, inter alia, in manufacture and sale of engineering goods including power distribution system and SCADA system. It appears to be a market leader in power and automation technologies. It is a subsidiary of ABB Ltd., Zurich Switzerland which has operational presence in over 100 countries and employs around 1,30,000 personnel. On 15.05.2003 DMRC invited tenders for supply, installation, testing and commissioning of traction electrification, power supply, power distribution and SCADA system for Line 3 Barakhamba Road-Connaught Place-Dwarka Section of the DMRC. Respondent responded. 4. DMRC short listed the respondent and then executed the contract under which the respondent had t .....

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..... ee, DMRC and the supplier of goods that were imported by the respondent and hence on account of lack of any privity of contract the requirements of Section 3(a) of the CST Act were not satisfied in respect of movement of goods from outside Delhi to the required site of DMRC in Delhi. Similar finding was returned in respect of movement of the goods under import, i.e., it can not be held to have been occasioned by the contract between DMRC and the respondent. 7. The High Court heard the matter in detail and considered all the relevant facts particularly terms, conditions and stipulations in the contract in the context of contention on behalf of respondent that the revenue authorities and tribunal had failed to consider relevant clauses and conditions of the contract which demonstrate and clarify that the importation of equipment was strictly as per requirement and specification set-out by DMRC in the contract and only to meet such requirement of supply the specified goods were imported and hence the event of import and supply was clearly occasioned by the contract awarded to the respondent by the DMRC. There was a similar contention in respect of procurement of goods within the co .....

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..... ses of Materials which are in accordance with the standards specified in the Contract or provisions of labour or for the sub-contracts for which the Sub contractor is named in the Contract. (b) The prior approval of the Engineer shall be obtained for other proposed Sub-contractors; (c) Not less than 28 days before the intended date of each Sub-contractor commencing work, the Contractor shall notify the Engineer of such intention; and (d) The contractor shall give fair and reasonable opportunity for contractors in India to be appointed as Sub-contractors. The Contractor shall be responsible for observance by all Sub-contractors of all the provisions of the contract. The Contractor shall be responsible for the acts or defaults of any Sub-contractor, his representatives or employees, as fully as if they were the acts or defaults of the Contractor, his representatives or employees and nothing contained in sub-clause 4.5 (a) shall constitute a waiver of the Contractor s obligations under this Contract. 38 (c) Approved Sub-contractors: Approved Sub-contractors shall be appointed in accordance with the procedure described as hereunder. If the Engineer/ .....

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..... listing out the approved or authorized list of suppliers which reads as: TO WHOMSOEVER IT MAY CONCERN This is to certify that following is a list of the approved vendors for 3E21 contract entered into between the DMRC Ltd. and ABB Ltd. On 4th August 2004. 1. 40 MVA Traction Transformer M/s. ABB Limited, Vadodara 2. 15 MVA Power Transformer M/s. Crompton Greaves Ltd., Bhopal 3. 66 KV/25 KV Circuit Breakers M/s. ABB Limited, Vadodara 4. 66 KV Capacity Voltage Transformer M/s. ABB Limited, Vadodara 5. 66 KV Current Transformer M/s. ABB Limited, Italy 6. 66 KV/25 KV Isolators M/s. Switchgear and Structural Limited, Hyderabad 7. 60 KV/42KV lighting arresters M/s. Elpro International Ltd., Pune 8. Control an .....

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..... the case of Tata Iron and Steel Co. Ltd. v. S.R. Sarkar (1960) 11 STC 655 = AIR 1961 SC 65 that where the goods moved from one state to another as a result of a covenant in the contract of sale it would be clearly a sale in the course of inter-state trade. The conclusion of the High on this issue also finds ample support from the following case laws which were noticed by the High Court (1) Oil India Ltd. v. The Superintendent of Taxes (1975) 35 STC 445 (SC) = (1975) 1 SCC 733 (2) English Electric Company of India Ltd. v. The Deputy Commercial Tax Officer (1976) 38 STC 475 (SC) = (1976) 4 SCC 460 (3) South India Viscose Ltd. v. State of Tamil Nadu (1981) 48 STC 232 (SC) = (1981) 3 SCC 457. In Oil India Ltd. this Court held that the inter-state movement must be the result of a covenant, express or implied in the contract of sale or an incident of the contract. In other words, the covenant regarding inter-state movement need not be specified in the contract, It would be enough if the movement was in pursuance of or incidental to the contract of sale. In English Electric Co. of India Ltd. the law was clarified thus: if there is a conceivable link between the movement of the goods a .....

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..... ase 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) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export. 11. A Constitution Bench of this Court had the occasion to consider in the case of M/s. K.G. Khosla Co. (supra) whether sales in that case were in the course of imports. The assessee in that case had a contract with the Director General of Supplies, New Delhi for supply of axle bodies manufactured by its principals in Belgium. Although goods were inspected in Belgium also but under the contract they could be rejected on further inspection in India. After supplying the goods the asse .....

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..... onsequently we hold that the sales took place in the course of import of goods within Section 5(2) of the Act, and are, therefore, exempt from taxation. 12. For analysing the main contention advanced on behalf of the appellant that the present case is identical to that of the assessee in the case of Binani Bros. (supra), we have examined the facts of Binani Bros. (supra) with meticulous care. In para 13 of that judgment the most peculiar and conspicuous aspect of K.G. Khosla case (supra) was noticed and highlighted that under the contract of sale the goods were liable to be rejected after a further inspection by the buyer in India. In the same paragraph it was further highlighted with the help of a quotation from K.G. Khosla case (supra) that movement of goods imported to India was in pursuance of the conditions of the contract between the assessee and the Director General of Supplies. There was no possibility of such goods being used by the assessee for any other purpose. In the next paragraph of the Report the peculiar facts of Binani Bros. (supra) were highlighted in the following words, .. the sale by the petitioner to the DGS D did not occasion the import. It was pur .....

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..... also based upon the salient facts, particularly the various conditions in the contract and other related covenants between DMRC and the respondent which have been spelt out in paragraph 31 of the High Court judgment, enumerated and described as follows : (1) Specifications were spelt out by DMRC; (2) Suppliers of the goods were approved by the DMRC; (3) Pre-inspection of goods was mandated; (4) The goods were custom made, for use by DMRC in its project; (5) Excise duty and Customs duty exemptions were given, specifically to the goods, because of a perceived public interest, and its need by DMRC; (6) The Project Authority Certificate issued by DMRC the name of the subcontractors as well as the equipment/goods to be supplied by them were expressly stipulated; (7) DMRC issued a Certificate certifying its approval of foreign suppliers located in Italy, Germany, Korea etc. from whom the goods were to be procured. (8) Packed goods were especially marked as meant for DMRC s use in its project. 16. Before us there was no attempt to assail the aforesaid features and to even remotely suggest any factual error on the part of the High Court .....

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