Commr. of Sales Tax Vs.
M/S Tata Iron & Steel Co., Ltd.  INSC 1566 (16 September 2008)
JURISDICTION CIVIL APPEAL NO.5693 OF 2008 (Arising out of S.L.P.(C)
No.7650/2007) Commissioner of Sales Tax ...Appellant(s) Versus M/s. Tata Iron
& Steel Co. Ltd. ...Respondent(s) ORDER Leave granted.
Was the High Court
right in rejecting the Reference Application No.3/2002 and Reference
Application No.4/2002 in terms of the following observation made in paragraph
11 of the impugned judgment, which reads as under:
findings recorded by the Tribunal that the sales occasioned the movement of
goods into the country and hence covered under the first limb of section 5(2)
of the Central Act are findings passed on analysis of facts which are
The Department has
sought to levy sales tax on sales made by M/s. Tata Iron & Steel Co. Ltd.
(TISCO) in favour of Indian buyer(s) which was challenged by the respondent-assessee
on the ground that the said sale had occasioned the import and, consequently,
they fell within the first limb of Section 5(2) of the Central Sales Tax Act,
1956, which reads as under:
1 "A sale shall
be deemed to take place in the course of the import of goods into the territory
of India only if it occasions such import."
In the present case,
there were two contracts, broadly speaking. One was between TISCO and the
Indian buyer(s). The other was between TISCO India on one hand and Tata Inc. (USA)
on the other hand. The question which arose before the High Court was whether
the two contracts were so integrated so as to constitute a "sale"
which, in turn, occasioned the imports. According to the assessee, the Indian
buyer(s) had entered into the contract on tripartite basis. According to the
assessee, the tripartite contract and its terms mentioned therein occasioned
the import of the goods from USA to the Indian buyer(s) into India, therefore,
the goods stood exempted in terms of the first limb of Section 5(2) of the 1956
Act. It is urged on behalf of the assessee that if there is contract between
the Indian importer (TISCO) and its customer in India just not only for sale of
goods as such but for import of goods which can only be supplied to the Indian
buyer and which cannot be diverted and if the foreign source is clearly
identifiable under the contract, then, the Indian importer (TISCO) is importing
goods only for the Indian buyer and that it was not necessary for the foreign
supplier to know about the identity of the Indian buyer. According to the
learned counsel appearing for the assessee, once there is a contract between
the Indian importer and its customer in India for import of goods to be
supplied to the Indian buyer, the contract would come within the first limb of
Section 5(2) of the 1956 Act.
As against this
argument, Shri Dholakia, learned counsel appearing for the Department, submits,
on the facts of the case, that in this case, the Indian buyer was promised by
TISCO, the assessee, to procure goods from USA. According to the Department,
two contracts, referred to above, were not inextricably interlinked.
According to the
Department, TISCO was the only supplier of the goods to the Indian buyer. The
only obligation undertaken by TISCO was to arrange for imports from abroad.
Therefore, according to the Department, the sales effected by TISCO to the
Indian buyer did not fall within the first limb of Section 5(2) of 1956 Act.
In our view, the High
Court had failed to consider various documents which were placed on record
before it, namely, the invoices, the bill of lading, the modality of payment,
the name of the consignee etc. We do not wish to express any opinion on these
documents at this stage. Suffice it to state that the above question needs to
be examined by the High Court de novo in accordance with law. The High Court
had erred in proceeding on the basis that no question of law arose on the
interpretation of the documents placed on record before it.
To simplify the
matter, we re-frame the question as under:
"Whether on the
facts and circumstances of the case, could it be said that the contract between
the Indian buyer and TISCO on the one hand and the contract between TISCO and
Tata Incorporated, USA on the other are so inextricably interlinked so as to
attract the first limb of Section 5(2) of the 1956 Act?"
All contentions on
both sides are expressly kept open. Parties are given liberty to file
additional documents, if so advised, before the High Court.
Before concluding, it
may be mentioned that before the High Court one additional question arose for
determination from the decision of the Tribunal, namely, whether the sales were
in any event exempt under the second limb of Section 5(2) of the 1956 Act. This
question remained unanswered as the High Court was of the opinion that since
the assessee has succeeded in showing that the sales stood covered under the
first limb of Section 5(2), it was not necessary to examine the question as to
whether such sales stood exempted under the second limb of Section 5(2).
However, since we are of the view that an important question of law arises in
the facts and circumstances of the case, as indicated hereinabove, the High
Court shall also consider whether such sales were exempt in any event under the
second limb of Section 5(2) of the 1956 Act.
For the aforestated
reasons, the Department's Appeal stands allowed. The matter stands remitted to
the High Court for its decision in accordance with law and in accordance with
the directions given hereinabove.
No order as to costs.
(B. SUDERSHAN REDDY)