Import-linked sales and tax exemption: pre-existing contracts can bring a transaction within the first limb of section 5(2).

A sale is in the course of import under the first limb of section 5(2) of the Central Sales Tax Act, 1956 where the evidence shows an inextricable link between a pre-existing local sales contract and the import movement, including supporting documents such as letters of credit, invoices and bills of lading identifying the buyer. On those facts, the transaction is exempt from sales tax. Once that exemption is established, further questions on the second limb of section 5(2), the Sale of Goods Act, 1930 and consequential interest become academic and need not be referred.

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Issues: (i) Whether the sales were in the course of import and therefore fell within the first limb of section 5(2) of the Central Sales Tax Act, 1956. (ii) Whether the Tribunal was justified in declining to refer the questions relating to the second limb of section 5(2) of the Central Sales Tax Act, 1956 and the applicability of the Sale of Goods Act, 1930 as academic.

Issue (i): Whether the sales were in the course of import and therefore fell within the first limb of section 5(2) of the Central Sales Tax Act, 1956.

Analysis: The Tribunal had examined the contractual documents and the chain of events in detail and found that the contract with the local buyers preceded the import contract, that irrevocable letters of credit were opened in accordance with the arrangements, that the foreign invoices and bills of lading identified the local buyers, and that the goods were cleared by the purchasers. On those facts, the movement of goods into India was found to be occasioned by the pre-existing sales contracts, establishing an inextricable link between the sale and the import. The finding was treated as one based on evidence on record and not as a perverse conclusion.

Conclusion: The sales were held to be covered by the first limb of section 5(2) of the Central Sales Tax Act, 1956 and were not taxable.

Issue (ii): Whether the Tribunal was justified in declining to refer the questions relating to the second limb of section 5(2) of the Central Sales Tax Act, 1956 and the applicability of the Sale of Goods Act, 1930 as academic.

Analysis: Once the sales were found to be exempt under the first limb of section 5(2), any further examination of whether they also fell within the second limb became unnecessary. The Tribunal was therefore justified in treating the remaining questions, including the challenge based on section 18 of the Sale of Goods Act, 1930 and the consequential interest issue, as not requiring reference for decision.

Conclusion: The refusal to refer those questions was upheld.

Final Conclusion: The reference applications failed because the Tribunal's conclusion that the transactions were imports-linked sales was supported by the recorded facts, and the remaining proposed questions were rightly treated as academic or consequential.

Ratio Decidendi: Where the evidence shows an inextricable link between the pre-existing sale contract and the import, the sale is in the course of import under the first limb of section 5(2); once that exemption is established, questions on alternative bases of exemption become academic and need not be referred.

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