TMI Blog2015 (6) TMI 1154X X X X Extracts X X X X X X X X Extracts X X X X ..... at without such a bond a transaction of sale cannot be called a sale in the course of the import of goods into the territory of India. The genuineness of the documents produced are undisputed. Once the genuineness of these documents are accepted, it could definitely be concluded that in the import of the goods by the respondent, there exists a bond between the contract of sale land the actual importation and each link thereof is inextricably connected with one immediately preceding it. This, therefore, shows that in the transaction in question leading to import and the sale of the equipment to MMDC, all the requirements that are laid down by the Apex Court are satisfied. The order of the Tribunal concluding that section 5(2) of the CST Act is attracted to the case in hand is perfectly legal and does not merit any interference - revision dismissed. - O. T. Rev. No. 139 of 2013 - - - Dated:- 16-6-2015 - Antony Dominic AND Shaji P. Chaly JJ. Liju Stephan, Senior Government Pleader, for the petitioner. Jose Joseph for the respondent. JUDGMENT This revision petition is filed by the State, challenging the order passed by the Kerala Value Added Tax Appellate T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customs frontiers of India. This provision of the CST Act has been considered by various courts, including the Apex Court and this Court and the scope thereof has been explained in detail. 7. In the judgment reported in M/s.Binani Bros. (P) Ltd. v. Union of India [(1974) 1 SCC 459], the question considered was whether the sales by the assessee to Government Department were in course of import and exempted under section 5(2) of the CST Act. Referring to the precedents, the Apex Court held that to occasion import there must exist such a bond between the contract of sale and the actual importation with each link inextricably connected with one immediately preceding it and that without such a bond a transaction of sale cannot be called a sale in the course of the import of goods into the territory of India. Applying this principle, the transaction involved in that case was examined and the Apex Court held thus: 14. Be that as it may, in the case under consideration we are concerned with the sales made by the petitioner as principal to the DGS D. No doubt for effecting these sales, the petitioner had to purchase goods from foreign sellers and it was these purchases from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCR 862]; Dava Son of Bhimji Gohil v. Joint Chief Controller of Imports Exports [(1963) 2 SCR 73]; and Messrs.Daruka Co. v. Union of India [(1973) 2 SCC 617] that the system of canalisation of exports or imports to the State Trading Corporation is constitutionally valid. The broad reasons for the system of canalisation are control of foreign exchange and prevention of abuse of foreign exchange. Counsel for Minerals and Metals Trading Co. which became the successor to the Corporation did not contend that the Corporation is an agency. Agency is created by actual authority given by principal to the agent or principal's ratification of contract entered into by the agent on his behalf but without his authority. Agency arises by an ostensible authority conferred by the principal on the agent or by an implication of law in cases of necessity. On behalf of the appellant it was said that the Corporation is an agent of necessity because the Corporation is a special agency to carry out certain public policies. The appellant contends that it is the exporter and the foreign buyer is the importer and the contract is said to be processed through the agency of the Corporation. Agency of ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d through the agreement between foreign exporter and an intermediary who does not act on his own in the transaction with the foreign exporter and who in his turn does not sell as principal the imported goods to the local users. (6) There must be either a single sale which itself causes the import or is in the progress or process of import or though there may appear to be two sale transactions they are so integrally inter-connected that they almost resemble one transaction so that the movement of goods from a foreign country to India can be ascribed to such a composite well integrated transaction consisting of two transactions dovetailing into each other. (7) A sale or purchase can be treated to be in the course of import if there is a direct privity of contract between the Indian Importer and the foreign exporter and the intermediary through which such import is effected merely acts as an agent or a contractor for and on behalf of Indian importer. (8) The transaction in substance must be such that the canalising agency or the intermediary agency through which the imports are effected into India so as to reach the ultimate local users appears only as a mere name lender thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -condition under section 5(2) of the Act. However, the fact that purchase order of ONGC indicates that the goods have to be sourced from the foreign seller, establishes that ONGC knew the source of supply and the rates were also pre-decided. 20. The fourth issue is the right to reject the goods by ONGC. In our view, the agreement of ONGC with BPL specifies this right to reject the goods. There is an inherent right to the consumer to reject, if the goods are not to the specification of damaged, but this will not alter the nature of transaction as being under section 5(2) of the Act. 21. The fifth issue is that, the delivery taken by BPL constitutes an inter-state sale from Thiruvananthapuram to Karaikkal. In our view, it is not the delivery of the goods that determines whether the transaction is a local sale, interstate sale or a sale in the course of import. The transaction has to be looked into in its entirety. In order to come within section 5(2), it must be seen whether there existed a contract which occasioned the import. In the instant case, as we have already explained, there are three stages in the entire transaction: firstly, the purchase order of ONGC with BPL, purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ishes that the goods cleared by BPL are the same goods ordered by ONGC. 23. Lastly, it is stated by the first appellate authority that ONGC does not come into picture with the foreign seller at any time during the course of import of the goods. In our view, the ONGC need not come into the picture directly with the import. ONGC can be the deemed importer, if there is sufficient evidence to comply with the requirement of section 5(2). The contents of the agreement and the purchase order of ONGC with BPL have clearly occasioned the movement of the goods from the foreign supplier. The purchase order of ONGC, therefore, falls under the category deemed import. 11.The issue was again considered by the Apex Court in almost similar circumstances in its judgment in Indure Ltd. v. Commercial Tax Officer [(2010)18 KTR 547 (SC)] where the law was laid down thus in paragraphs 38 to 43: 38. The leading case dealing with Section 5(2) of the Act is reported in (1966) 3 SCR 352 : (AIR 1966 SC 352), K.G. Khosla and Co. v. Deputy Commissioner of Commercial Taxes decided by a Constitution Bench of this Court. In the aforesaid judgment, two questions were projected for consideration by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to enter into India. This argument is not correct. In Khosla case the inspection of goods was to be carried out in Belgium as well as on arrival into India. In the present case, the inspection was to be done on arrival of goods into India and as such, there is no distinction on facts between the present case and that of Khosla. Learned counsel then urged that the decision of the Constitution Bench in Khosla case has not been correctly decided and as such this case be referred to a larger Bench. We have considered the matter and found that Khosla case has held the field nearly more than three decades and its correctness has not been doubted so far. We, therefore, reject the prayer of learned counsel for the appellant. 11. Learned counsel then urged that this case is covered by decisions of this Court in the cases of Binani Bros. (P) Ltd. v. Union of India (AIR 1974 SC 1510), Mohd. Serajuddin v. State of Orissa (AIR 1975 SC 1564) and K. Gopinathan Nair v. State of Kerala (AIR 1997 SC 1925). The decision of this Court in the case of Binani Bros. is distinguishable as in that case no obligation was imposed on the appellant to supply the imported goods to DGS and D after they had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company shall be importing the equipment in order to fulfil the obligation specifically in the event purchase order is placed on Siemens Ltd. It is also stated that since the equipment is being imported to comply with the purchaser's requirement, the supplier proposes to sell the same during the course of import as envisaged under section 5(2) of the CST Act. 15. The purchase order issued by MMDC also contained various terms among which it is stated that the respondent had procured the equipment from Siemens, Germany and none else and that they shall import the equipment for the purpose of delivery thereof to MMDC at the address specified in the purchase order. It is also provided that the respondent shall not deliver the equipment of the above type from any other source or from their stock in India or otherwise and that it was specifically and mutually understood that the above equipment is imported from abroad into India solely and specifically for the purpose of the present contract. There is a specific provision that the equipment imported shall be delivered to MMDC and shall not be diverted for any other purpose. 16. The purchase order issued by the respondent t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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