Sale in the course of import: importing agent's possession of newsprint did not justify sales tax or penalty.

Imported newsprint brought in for the actual user under a pre-existing arrangement was treated as a sale in the course of import, so local sales tax could not be levied where the importer retained possession only as agent pending payment. The materials showed that the import documents stood in the newspaper's name and that the petitioner held the goods merely until dues were paid; without a clear finding of taxable diversion or ownership in the importer, the demand and penalty could not be sustained. The assessment, revisional order, and consequential penalty action were therefore set aside.

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Issues: Whether the petitioner, acting as importing agent for a newspaper, was liable to sales tax and penalty on newsprint reels imported from abroad and stored in a warehouse pending payment, or whether the transaction was in the course of import and exempt from tax.

Analysis: The materials showed that the newsprint was imported on the strength of the newspaper's registration and import licence, that the invoices and offer/acceptance documents stood in the newspaper's name, and that the petitioner retained the goods only until payment was made. The Court accepted the principle that an agent may retain the principal's property until dues are paid, and relied on the settled law that where the movement of goods from abroad to India is integrally connected with a pre-existing arrangement for delivery to the local purchaser, the sale is in the course of import. The authorities had only suspicions of diversion and no definite finding that the goods were the petitioner's own stock or that taxable local sales had occurred. In those circumstances, the assumption of tax liability and penalty could not be sustained.

Conclusion: The petitioner was held to be only an importing agent, the transaction was treated as exempt from tax as a sale in the course of import, and the tax demand and penalty were quashed.

Final Conclusion: The writ petition succeeded, and the impugned assessment, revisional order, and consequential penalty action were set aside.

Ratio Decidendi: Where imported goods are brought in for and on behalf of the actual user pursuant to a pre-existing arrangement, and the importer retains possession only as an agent pending payment, the transaction is a sale in the course of import and cannot be subjected to local sales tax or penalty absent a clear finding of taxable diversion or ownership in the importer.

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