Sale in the course of import: contractual movement of goods into India and final rejection rights made the sale exempt.

Sales of axle-box bodies manufactured in Belgium and imported into India were held to be in the course of import under section 5(2) of the Central Sales Tax Act, 1956. The contract required manufacture and inspection in Belgium, despatch to named Indian consignees, and payment linked to inspection, delivery and final acceptance; the buyer also retained a right of rejection on arrival. Those terms showed that preliminary inspection abroad did not complete the sale or pass property, and that the movement from Belgium to India was a direct incident of the contract. The sales were therefore exempt from tax under section 5(2).

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Issues: Whether the sales of axle-box bodies manufactured in Belgium and imported into India pursuant to the supply contract were sales in the course of import within section 5(2) of the Central Sales Tax Act, 1956.

Analysis: The contract required manufacture in Belgium, inspection there, despatch to India, delivery to named consignees, and payment linked to inspection, despatch, delivery, and final acceptance. The buyer retained a right of rejection on arrival at destination, and the supplier remained responsible for safe arrival. On these terms, the preliminary inspection in Belgium did not amount to final appropriation or passing of property to the buyer. Section 5(2) deems a sale to be in the course of import if it occasions such import, and the expression is to be understood consistently with section 3 of the same Act, under which a sale occasions movement where the movement is the result of a covenant or incident of the contract. The movement of the goods from Belgium to India was wholly in pursuance of the contract and not an independent event. The existence of a right of final rejection and the contractual requirement of import into India showed that the import was integral to the sale.

Conclusion: The sales were sales in the course of import and were exempt from taxation under section 5(2) of the Central Sales Tax Act, 1956.

Ratio Decidendi: A sale is in the course of import when the import is the direct result of, and integral to, the contractual covenant or incident of the sale, and contractual provisions preserving final inspection and rejection negate any conclusion that the sale was completed abroad.

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