2009 (4) TMI 955 - SC - VAT and Sales Tax

Supreme Court Remits Sales Tax Case for Reconsideration

Commissioner of Sales Tax Versus Tata Iron & Steel Co. Ltd.

The Supreme Court allowed the Department's appeal in a case concerning the levy of sales tax on sales by TISCO to Indian buyers. The Court found that the ... Whether, on the facts and circumstances of the case, could it be said that the contract between the Indian buyer and TISCO on the one hand and the contract between TISCO and Tata incorporated, USA on the other are so inextricably interlinked as to attract the first limb of section 5(2) of the 1956 Act? Held that:- Department appeal allowed. As according to the Department, the sales effected by TISCO to the Indian buyer did not fall within the first limb of section 5(2) of 1956 Act. In our view, the High Court had failed to consider various documents which were placed on record before it, namely, the invoices, the bill of lading, the modality of payment, the name of the consignee, etc. We do not wish to express any opinion on these documents at this stage. Suffice it to state that the above question needs to be examined by the High Court de novo in accordance with law. The High Court had erred in proceeding on the basis that no question of law arose on the interpretation of the documents placed on record before it. Issues:Was the High Court correct in rejecting Reference Application No. 3 of 2002 and Reference Application No. 4 of 2002 based on the Tribunal's findingsRs. Did the contracts between TISCO and the Indian buyer(s), and TISCO India and Tata Inc. (USA), constitute a sale that occasioned the import of goods into IndiaRs. Was the High Court justified in not considering various documents and failing to examine the interlinking of the contractsRs. Did the High Court correctly decide not to address the question of exemption under the second limb of section 5(2) of the Central Sales Tax Act, 1956Rs.Analysis:The case involved a dispute regarding the levy of sales tax on sales made by M/s. Tata Iron & Steel Co. Ltd. (TISCO) to Indian buyers. The respondent-assessee contended that the sales had occasioned the import of goods and thus fell within the first limb of section 5(2) of the Central Sales Tax Act, 1956. The High Court had to determine if the contracts between TISCO and the Indian buyers, and TISCO India and Tata Inc. (USA), were integrated enough to constitute a sale that led to the import of goods into India.The assessee argued that the contracts were tripartite and clearly identified the foreign source, thereby meeting the criteria for exemption under the first limb of section 5(2) of the Act. On the other hand, the Department contended that the contracts were not closely linked, with TISCO being the sole supplier obligated to arrange imports. The Supreme Court noted that the High Court had failed to properly consider crucial documents like invoices and bills of lading, and directed a fresh examination of the matter. The Court reframed the question to focus on the interlinking of the contracts to determine if they attracted the first limb of section 5(2) of the Act.Additionally, the High Court had not addressed the question of exemption under the second limb of section 5(2) of the Act. The Supreme Court found this to be an important legal issue that needed consideration. Therefore, the Department's appeal was allowed, and the case was remitted back to the High Court for a fresh decision, including an examination of the exemption under the second limb of section 5(2) of the Act. The parties were given the liberty to submit additional documents, and all contentions were kept open for further review by the High Court.