Course of import test for sales tax: import must be inseparably linked to the sale, not merely used in contract execution.

A sale is treated as occurring in the course of import only when the import is the direct result of the sale and the movement of goods is inseparably linked to the contract of sale. In this discussion, a turn-key works contract for an ash handling plant was split on paper into supply and erection components, but the documents showed a single integrated project. The contract did not require import of any particular foreign goods, the supplier abroad had no contractual nexus with the buyer, and the imported M.S. pipes were procured by the assessee as actual user. On those facts, the import was not occasioned by the sale and the transaction was held taxable.

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Issues: Whether the sale of M.S. pipes imported from Korea and used in the execution of the ash handling plant contract for NTPC was a sale in the course of import within Article 286(1)(b) of the Constitution of India and section 5(2) of the Central Sales Tax Act, 1956.

Analysis: The contract documents showed that the project was a single turn-key works contract, even though it was split on paper into supply and erection portions. The obligation to import any particular foreign goods did not arise from the contract itself, because materials of the required specification could be procured from other sources and the foreign seller had no contractual link with NTPC. The import was undertaken by the assessee as actual user and the imported goods were not shown to have been sold under a contract that occasioned the import. A sale is in the course of import only when the import is the result of the sale and the movement of goods is inextricably connected with the contract of sale; that connection was absent here.

Conclusion: The sale was not in the course of import and was liable to tax.

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