1984 (4) TMI 263 - HC - VAT and Sales Tax

High Court confirms exemption under Central Sales Tax Act for turnover in import sales. Tax cases dismissed.

The State of Tamil Nadu Versus I. BM World Trade Corporation

The State of Tamil Nadu Versus I. BM World Trade Corporation - [1985] 60 STC 118 (Mad) Issues Involved:1. Whether the turnover of Rs. 1,50,06,766 represents sales in the course of import.2. Applicability of the principles laid down in previous judgments by the Supreme Court and High Court.Issue-wise Detailed Analysis:1. Whether the turnover of Rs. 1,50,06,766 represents sales in the course of import:The assessees, IBM World Trade Corporation, claimed exemption on a turnover of Rs. 1,50,06,766.75 for the sale of IBM Computer System Type No. 370/155 to the Indian Institute of Technology (IIT), Madras, arguing that it was a sale in the course of import. The assessing officer rejected this claim, treating it as a local sale. The Appellate Assistant Commissioner confirmed the assessment, and the Sales Tax Appellate Tribunal later ruled in favor of the assessees, determining that the sale was indeed in the course of import and thus exempt from tax.The High Court examined the terms of the agreement between the assessees and IIT, which included provisions for import licenses, letter of authority, and restrictions on the disposal of goods. The import license and letter of authority issued to IIT precluded the assessees from selling the goods to anyone else. The agreement also stipulated that the title to the goods would remain with the assessees until full payment was made, and IIT was responsible for transit insurance.The Court found that the facts of the case aligned with the principle laid down by the Supreme Court in Deputy Commissioner of Agricultural Income-tax and Sales Tax, Central Zone, Ernakulam v. Kotak & Co. [1973] 32 STC 6 (SC), where the importer acted as an agent for the purchaser, and the goods were imported based on the purchaser's license. The Court held that the sale of computer equipment to IIT, Madras, was in the course of import and exempt from sales tax under section 5(2) of the Central Sales Tax Act.2. Applicability of the principles laid down in previous judgments by the Supreme Court and High Court:The Revenue argued that the principle laid down in Krishnados Kikani v. State of Tamil Nadu [1976] 38 STC 223 should apply, which was distinguished by the Court. The Court noted that in Krishnados Kikani's case, the purchaser did not obtain an import license, and the seller acted independently, resulting in two sales. However, in the present case, IIT obtained the import license and issued a letter of authority to the assessees, making them agents for the import.The Court also considered the ruling in Binani Bros. (P.) Ltd. v. Union of India [1974] 33 STC 254 (SC), where the sale did not occasion the import of goods, and there was no privity of contract between the purchaser and the foreign seller. This case was found distinguishable as the purchaser in the present case (IIT) obtained the import license and authorized the assessees to import the goods.In Mod. Serajuddin v. State of Orissa [1975] 36 STC 136 (SC), the State Trading Corporation acted as an independent entity, not as an agent of the assessee, which differed from the present case where the assessees acted as agents for IIT.The Court concluded that the facts of the present case were in pari materia with Kotak's case, where the import was made by the assessee as an agent for the purchaser, and the sale was considered in the course of import. The stipulation of title remaining with the assessees until full payment was seen as a safeguard for securing the price, not altering the nature of the sale.Conclusion:The High Court upheld the Tribunal's decision, confirming that the turnover of Rs. 1,50,06,766 represented sales in the course of import and was exempt from sales tax under section 5(2) of the Central Sales Tax Act. The tax cases were dismissed, and the Revenue was ordered to pay the costs of the assessees.