Sale in the course of import prevails where foreign movement is integral to the contract, barring State sales tax.

A sale is in the course of import where the movement of goods from abroad to India is the direct result of, and inseparably linked with, the contract of sale. On the stated facts, the goods were to be manufactured abroad, inspected in London, shipped from the United Kingdom, and delivered at Madras under a CIF arrangement, so the transit was an essential incident of the bargain and not an independent local sale. Sections 3, 4 and 5 of the Central Sales Tax Act, read with Article 286, prevent such a transaction from being treated as an intra-State sale merely because delivery or payment occurred in Madras; passing of property was not decisive, and appropriation was treated as having occurred outside Madras.

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Issues: Whether the disputed turnover represented a sale in the course of import and therefore escaped State sales tax, or whether it was an intra-State sale taxable in Madras; and whether the place of appropriation and the passing of property altered that conclusion.

Analysis: The contract expressly required the goods to be manufactured abroad, inspected in London, shipped from the United Kingdom, and delivered at Madras against a CIF arrangement. The movement of the goods from London to Madras was not independent of the sale but was occasioned by and formed an essential incident of the contract. The statutory scheme under sections 3, 4 and 5 of the Central Sales Tax Act, 1956, read with the constitutional embargo in Article 286, shows that a sale which falls within section 5(2) cannot be treated as a local sale merely because delivery or payment occurred in Madras. The reasoning also rejects passing of property as the decisive test for such transactions and treats appropriation, on the facts, as having occurred outside Madras.

Conclusion: The sale was in the course of import into India and was not taxable by the State of Madras.

Ratio Decidendi: A sale is in the course of import when the movement of goods from abroad to India is the direct result of, and is inseparably connected with, a covenant or incident of the contract of sale, and such a transaction cannot be subjected to State sales tax by characterising it as an intra-State sale.

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