TaxTMI 
TaxTMI 
2015 (6) TMI 1154
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....he consignment was detained at Hosdurg and notice under section 47 of the KVAT Act was issued demanding security. This was objected to by the respondent mainly contending that the transaction is covered by the provisions of the Central Sales Tax Act, 1956 (hereinafter, the 'CST Act', for short). They also contended that for installation and for supply of accessories, there were separate contracts between them and the purchaser attracting the provisions of the CST Act. In the mean time, on furnishing Bank Guarantee towards security, the goods were released. After adjudication, order was passed rejecting the contentions of the respondent that the transaction was covered by section 5(2) of the CST Act, penalty of Rs. 34,74,400/-, being double the amount of tax, was levied. This order was confirmed by the first appellate authority also. However, the Tribunal, by the impugned order, upheld the contention of the respondent that the transaction is covered by section 5(2) of the CST Act and accordingly penalty was set aside. It is this order which is challenged before us. 4. We heard learned Government Pleader appearing for the petitioner and the learned counsel appearing for th....
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....purchases of the goods and import of the goods in pursuance to the contracts of purchases were, no doubt, for sale to the DGS & D. But it would not follow that the sales or contracts of sales to DGS & D occasioned the movement of the goods into this country. There was no privity of contract between DGS & D and the foreign sellers. The foreign sellers did not enter into any contract by themselves or through the agency of the petitioner to the DGS & D and the movement of goods from the foreign countries was not occasioned on account of the sales by the petitioner to DGS & D." 8. The principles laid down in M/s.Binani Bros. (supra) was re-considered in the Apex Court's judgment in MD.Serajuddin v. State of Kerala [(1975) 2 SCC 47] where, it was held thus: "27. The expression "sale" in Section 5 of the Act has the same meaning as in Sale of Goods Act. String contracts or chain contracts are separate transactions even when there is similarity relating to quantity, quality of goods, shipment, sampling and analysis, weighment and force majeure etc. or other similar terms. A contract of sale is a contract whereby the seller transfers or agrees to transfer the property in goods to....
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....e agency of necessity does not arise. Other instances of agency of necessity are where the master of a ship is entitled in the case of accident to enter into a contract which binds the owner of the cargo, notwithstanding that it transcends his express authority if it is bona fide made in the best interests of the owners concerned. The same power is possessed by a land carrier in respect of perishable goods. In the present case, the relationship between the appellant and the Corporation is between two principals and there is no aspect whatever of principal and agency. Further, this question of agency was never raised before the sales tax authorities." 9. Again, in the judgment in K.Gopinathan Nair v. State of Kerala [(1997) 10 SCC 1], section 5(2) of the CST Act was interpreted and it was held thus: "14. In the light of the aforesaid settled legal position emerging from the Constitution Bench decisions of this Court the following propositions clearly get projected for deciding whether the concerned sale or purchase of goods can be deemed to take place in the course of import as laid down by Section 5(2) of the Central Sales Tax Act : (1) The sale or the purchase, as t....
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....ipt of the imported goods in India by the local users, the integrity or the entire transaction would get disrupted and would be substituted by two independent transactions, one between the canalising agency and the foreign exporter which would make the canalising agency the owner of the goods imported and the other between the import canalising agency and the local users for whose benefit the goods were imported by the wholesale importer being the canalising agency. In such a case the sale by the canalising agency to the local users would not be a sale in the course of import but would be a sale because of or by import which would not be covered by the exemption provisions of Section 5 sub-section (2) of the Central Sales Tax Act." 10. Applying the principles laid down in the aforesaid judgments, this Court decided BPL Telecom Limited v. State of Kerala [(2009) 17 KTR 521(Ker)]. That judgment was confirmed by the Apex Court by dismissing SLP.21016/09 by order dated 4.9.2009. In the judgment of this Court, the facts involved were noticed in paragraphs 10 to 14 and the law laid down in paragraphs 18 to 23 reads thus: "18. The second point raised is that, BPL is acting as the pr....
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....e in the course of import, if there is a direct privity of contract between the Indian importer and the foreign exporter and the intermediary through which such import is effected merely acts as an agent or a contractor for and on behalf of the importer. In our view, even this finding is difficult to accept. This is not the true intent of section 5(2) of the CST Act. If for every import, the Indian buyer has to make a direct contract with the foreign seller, then the industry can come to a halt, since it would not be possible for a dealer to go through a process of sourcing the goods and placing the order and all the risk and expenditure associated with it. It is to remove this difficulty, the term "deemed" appearing in section 5(2) makes it possible for one to engage another agency to do the import. As long as there is a link, such as the purchase order of the Indian buyer specifying that the goods have to be imported from the predetermined foreign supplier, the goods imported and if it is completely in relation with the ultimate Indian Buyer's purchase order, the transaction can be said to be one falling under section 5(2) of the CST Act. In the instant case, the import can b....
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....act of sale or an incident of such contract. It seems to us that it is quite clear from the contract that it was incidental to the contract that the axle-box bodies would be manufactured in Belgium, inspected there and imported into India for the consignee. Movement of goods from Belgium to India was in pursuance of the conditions of the contract between the assessee and the Director-General of Supplies. There was no possibility of these goods being diverted by the assessee for any other purpose. Consequently we hold that the sales took place in the course of import of goods within Section 5(2) of the Act, and are, therefore, exempt from taxation." 39. In the case in hand, it is to be noted that import had occasioned only on account of the covenant entered into between the Company and N.T.P.C. and the imported pipes were used exclusively for erection and commissioning of the plant. Respondents have failed to establish that these pipes were not used in the plant of N.T.P.C. Similar question had again come up for consideration before two learned Judges of this Court, reported in (1997) 7 SCC 190 : (AIR 1998 SC 1549), State of Maharashtra v. Embee Corporation, Bombay wherein it has....
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....e. We are, therefore, of the view that the appellant cannot derive any assistance from the said decision. The last case which was brought to our notice was K. Gopinathan Nair v. State of Kerala. In the said case, on facts it was found that on account of the sale to CCI by foreign exporters raw cashewnuts were imported into India. The importer being the CCI and not the local user, this Court held that principles evolved by it in para 12 of the judgment were not applicable to that case. We do not, therefore, find that this decision is helpful to the appellant's case. 12. The result of the aforesaid discussion is that while interpreting the expression "sale occasions import" occurring in sub-section (2) of Section 5 of the Act, it is not necessary that a completed sale should precede the import." 40. Test to determine if the sales were in the course of import has been elaborately considered in a judgment of learned three-Judges' Bench of this Court reported in Deputy Commissioner of Agricultural Income Tax and Sales Tax, Ernakulam v. Indian Explosives Ltd.(1985) 4 SCC 119." 12. We were also referred to the judgment of the Delhi High Court in ABB Limited v. Commi....