Indure Ltd. & ANR.
Vs. Commercial Tax Officer & Ors.  INSC 753 (20 September 2010)
REPORTABLE IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1123 OF
2003 The Indure Ltd. and Another ....Appellants Versus Commercial Tax Officer
and Ors. ....Respondents
Deepak Verma, J.
questions of law projected, are required to be adjudicated by this Court in the
aforesaid Appeal:- (i)Whether import of MS Pipes by Appellants was pursuant to
a term of contracts between Appellant No.1 and National Thermal Power
Corporation Limited (for short 'N.T.P.C.').
(ii)Whether import of
said MS Pipes and supply thereof by the Appellant No. 1 to N.T.P.C. C.A. No.
1123 of 2003 -2- Constitutes an integral and inseparable part of the Contracts
history of the case is as under:- Appellant No. 1 is a Limited Company duly
incorporated under the provisions of Companies Act, 1956, engaged in the
business of Works contract. Appellant No. 2 was working for gain as Senior
Manager of Appellant No. 1 (hereinafter referred to as 'the Company').
were invited by N.T.P.C on 08.01.1988 for submitting bids for Ash Handling
Plant Package for its Farakka Super Thermal Power Project, Stage-II, by way of
International Competitive Bidding, popularly known as Global Tender.
scope of work involved in such package included designing and engineering,
manufacture, inspection and testing at suppliers works, packing, transportation
to site, unloading, storage and handling at site, erection, testing and
commissioning of complete Ash Handling Plant for 2 x 500 MW Steam Generating
Units (for short 'the plant'). Such type of works contract is known as 'On C.A.
No. 1123 of 2003 -3- Turnkey Basis'. Bids made by bidders were to cover whole
of the work as abovementioned. Bid made by any person not covering the entire
scope of work was liable to be treated as incomplete and could be rejected on
that ground only.
The bidder was
required to quote a lump sum price in its proposal for the entire scope of work
covered under the bid documents. It further required that bidders shall
indicate the bid price in their home currency or in US dollars.
aforesaid project of Ash Handling Plant for 2 x 500 MW Steam Generating Units
was to be partially financed by a credit/loan from International Bank for
Reconstruction and Development (for short 'IBRD') or by International
Development Association (for short 'IDA').
to issuance of notice to invite tender, the Company submitted its bid
furnishing therein all the information as required by the aforesaid notice and
also indicated its bid price inclusive of foreign expenditure.
a meeting was convened between the officials of N.T.P.C. and authorized
representatives of C.A. No. 1123 of 2003 -4- the Company, at N.T.P.C's Office
on 21.07.1988, wherein various terms and conditions were discussed between the
parties regarding erection of plant for which the Company had submitted its
project was partially financed by credit/loan from IDA or IBRD and in view of
the terms of Import Export Policy, Volume-I (April, 1988 to March, 1991)
supplies made in such project under the procedure of International Competitive
Bidding were to be treated as 'deemed exports'. Suppliers to such project enjoyed
benefit of customs duty exemption for import and unless the part of the
contract involving importation of equipments and accessories for use in such
project is not separately treated as a supply contract such benefit cannot be
availed of at all by the importer on such importation.
total contract was agreed to be divided into two separate contracts, (i) Supply
Contract, and (ii) Erection Contract, with a cross fall breach clause wherein
breach of either of the contracts would entitle the owner/ contractee (N.T.P.C)
to cancel the other contract also.
C.A. No. 1123 of 2003
the said meeting itself, it was agreed between the Company and N.T.P.C that
separate formulae shall be applicable in respect of calculation of price
adjustment for indigenous supplies and imported supplies. It was, further,
agreed that if Sales Tax on imported items is leviable due to future enactment
of sale/interpretation of law/ interpretation of law by court, the same will be
reimbursed by N.T.P.C to the Company at actuals against documentary evidence.
way of Letter of Award dated 16.08.1988, N.T.P.C awarded two contracts to the
Company for performing the work of erection of aforesaid plant on Turnkey
Basis. Even though, two contracts were entered into between the parties but in
nutshell it was only one contract for the simple reason that N.T.P.C kept a
right with it with regard to cross fall breach clause meaning thereby that
default in one contract would tantamount to default in another and whole contract
was liable to be cancelled.
the said Letter of Award, clause 2 deals with intent and scope of award and is
reproduced herein below:-
C.A. No. 1123 of 2003
-6- "2.1 We confirm having accepted your proposal dated March 28, 1988 and
mentioned in at para
1.1 (ii) above, read
in accordance with communications/ clarifications/ agreements referred to at
para 1.1 above and award on you the 'Supply Contract' for the work of design,
engineering, manufacture, shop testing, inspection and testing of manufacture
works, inspection and testing at manufacturer's works, packing and forwarding
from your manufacturing works/ place of despatch (both in India) and successful
performance testing at NTPC site and handling over of the 2 x 500 MW Ash
Handling Plant for Farakka STPP, Stage-II on F.O.R. place of despatch in India
basis. The items which are not specifically mentioned in the specifications,
but are needed to complete the equipment package shall also be furnished by you
unless otherwise specifically excluded in our bid documents read with Agreed
In clause 4.5, the
exchange rate of currencies of the various countries had been indicated.
In clause 4.5.1 and
4.5.2, Price Adjustment is indicated but relevant portion thereof, is
reproduced hereinbelow:- "4.5.1. ........For equipment of Non-Indian
origin, you shall submit the details of the indices and co-efficient in line
with the provisions of Bid Documents within three months of the date of this
C.A. No. 1123 of 2003
-7- 4.5.2 The list of components/ material/ equipment to be imported by you,
for which the adjustment on exchange rate variation is to be made under US$, DM
and J Yen will be furnished by you within three months of the date of this
Award Letter. The items as declared as per these lists shall only be eligible
for exchange rate variation claims."
further, contemplated that ownership of equipment supplied by the Company,
under the supply portion of the contract shall vest exclusively with N.T.P.C
upon despatch in India and negotiation of despatch document with N.T.P.C. Term
of Contract Agreement contemplated that the Company guaranteed to the N.T.P.C
that the equipment package under the contract shall meet the ratings and
performance parameters, as stipulated in the Technical Specifications
(Volume-II) and in the event of any deficiencies found in the requisite
performance figures, N.T.P.C. may at its option reject the equipment package
and recover the payment already made or alternatively accept it on the terms
and conditions and subject to levy of the liquidated damages in terms of
C.A. No. 1123 of 2003
during the course of the discussion it was decided that project would need
certain imported items to be used exclusively for the plant, the Company had
written a letter to N.T.P.C on 02.11.1988 inviting its attention, with regard
to clause 4.5.2 of the Letter of Award, giving details of the items to be
imported for the said project.
As many as twelve
different type of components were sought to be imported for completion of the
Pipe to be imported from M/s. Daewoo Corporation, South Korea, was one of the
items shown in the list prepared by the Company which was subsequently
presented to N.T.P.C.
Company, thereafter, submitted an application before DGTD, Import Export
Directorate, New Delhi on 23.02.1989 for Special Imprest Import License against
Turnkey contract for supply of complete Ash Handling System to N.T.P.C's
Farakka Super Thermal Power Project (2 x 500 MW).
the Annexures submitted by the Company full specifications of the MS Pipes were
also given. It also C.A. No. 1123 of 2003 -9- contained details of other items
required to be imported by the Company in accordance with the list presented to
N.T.P.C., for completion of the project.
declaration required to be furnished by the Company was complied with, the
Licensing Authority clearly mentioning therein that all components sought to be
imported were to be exclusively used by it for the aforesaid project of
N.T.P.C. Accordingly, Special Import License was granted to the Company for
importing MS Pipes of various diameters upto 500 MB with different wall
thickness together with other components to be imported for usage in the said
there is no dispute that MS Pipes were imported from outside India (South
Korea) and were sold to N.T.P.C., Farakka. According to Appellant such sales
were covered under Section 5(2) of the Central Sales Tax Act, 1956 (hereinafter
shall be referred as 'Act') and had been exempted from imposition of Sales Tax
under Section 5(2)(a)(v) of the Bengal Finance (Sales Tax) Act, 1941 (for short
'BFST Act'). C.A. No. 1123 of 2003
is worth mentioning here that M/s. Daewoo Corporation Limited, South Korea was
specifically directed by the Company to emboss on each pipe the following
STG-II (2 X 500 MW) INDURE LIMITED (ASH HANDLING)"
special marking on each pipe would go to show that it was to be exclusively
used as an integral component of the said project. The Special Imprest Import
License was granted to the Company on 21.08.1989 by Controller of Imports and
Exports with specific condition that the goods supplied therein shall be used
exclusively for the plant of N.T.P.C. only.
the pipes were received at Calcutta port the same were transported to Farakka
in the month of December, 1989 and End Use Certificate was issued on 03.06.1991
by N.T.P.C., Farakka Super Thermal Power Project certifying that MS Pipes
imported from M/s. Daewoo Corporation of South Korea had been supplied fully
C.A. No. 1123 of 2003
-11- to N.T.P.C. in terms of their Letter of Award/ purchase order.
Company, thereafter, filed its Return claiming benefit under Section 5(2) of
the Act as sale in the course of import. The Commercial Tax Officer, Durgapur
Charge, in assessment proceedings disallowed the claim of the Company and
raised a demand of Rs. 12,60,795.00/- as Sales Tax. Company preferred an appeal
under Section 11(1) of the BFST Act before Assistant Commissioner (Commercial
Taxes) but the same also came to be dismissed and the order of the Commercial
Tax Officer was confirmed. The Revision Application was moved against the said
order before West Bengal Commercial Taxes Appellate and Revisional Board, but
after contest the said Revision Application was also dismissed against the
Company. It, thereafter, preferred an application under S.8 of the West Bengal
Taxation Tribunal Act, 1987 before the West Bengal Taxation Tribunal,
challenging the orders passed by the authorities below but the same was also
The Appellants were
then constrained to file a Writ C.A. No. 1123 of 2003 -12- Petition before
Division Bench of the High Court of Calcutta, challenging the said orders.
However, the Appellant's Writ Petition also came to be dismissed by the
Division Bench of the said Court on 19.10.2001, giving rise to this appeal.
case of the Respondents right from the very beginning had been that it was
neither obligatory nor mandatorily required for the Company to have imported
the goods in question. There was no contractual or legal obligation on their
part to do so. The only obligation required to be performed by the Company
under the terms of the Letter of Award and the contract was to design, supply,
erect and commissioning the Ash Handling Plant for N.T.P.C., irrespective of
the components to be used therein. Appellant's further obligation was that the
materials used in the execution of the said contract should conform to the
specification stipulated by N.T.P.C. Such supplies would be effected by the
Company either from imports or procured from within the country.
C.A. No. 1123 of 2003
learned counsel for the Respondents have contended that the imports effected by
the Company were on its own accord and under special licensing scheme which enabled
it to import raw materials and components, for manufacturing in India. The
imports if at all to be made were subject to a further condition that the
Company would in the process of manufacturing of the goods add at least 33
percent value to them before exporting the manufactured goods. In terms of the
declarations made by the Company to the Licensing Authority, the Appellant was
not to 'trade' in the imported goods and undertook to re- export them after
further manufacturing and value addition of atleast 33 percent. The sale made
to N.T.P.C. by the Company was, therefore, not of the goods which were imported
by the Company. Thus, provisions contained in Section 5(2) of the Act would not
at all be attracted.
per the Special Import License granted to the Company, it was entitled to
divert the goods by re-using them in the manufacture of other goods or by
transferring C.A. No. 1123 of 2003 -14- them to another actual user in
accordance with the Import Export Policy.
imports thus, made by the Company was neither pursuant to any stipulation in
the Contract nor as an incidence thereof. Section 5(2) of the Act, covers only
those cases, which occasions the import. The decisions on which the Appellants
have placed reliance have considered the question whether the sales therein had
occasioned the import. In none of those cases did the contracts for sale
stipulate any condition with regard to the imports in question. In other words,
they have contended that imports or exports, as the case may be, did not
occasion the sales in question. It has also been their case that actual user
license had not been obtained by the assessee. The Company was only acting on
behalf of the ultimate purchaser for whom the work was being conducted.
has also been contended by them that the decisions on which reliance has been
placed by the Appellants, in unequivocal terms emphasised that the transaction
of import and the transaction of sale have to C.A. No. 1123 of 2003 -15- be so
integrated to each other as to form one single chain without a break. The
various factors, including contractual stipulation, are considered only to
ascertain if the integrated chain is maintained to fulfill the conditions laid
down in Section 5(2) of the Act. That is to say such sale or purchase
occasioned the import.
have, therefore, strenuously submitted that the Appellants have lost before all
the Authorities below and the reasoning adopted by West Bengal Taxation
Tribunal has been affirmed by Division Bench of the High Court, thus, no case
for interference has been made out in this Appeal, which deserves dismissal.
the Written Submissions of the Respondents, they have further taken the
following plea:- It is thus clearly established that the goods which were
imported by the Appellant, were to be imported by them for their own purposes
though ultimately to be utilised for N.T.P.C'S Ash Handling Plant.
The goods were to
undergo processing at the premises of the Appellant and only after their
conversion into a final product were to be handed over to N.T.P.C. The
Appellants thus clearly admitted that there was to be a value addition to the
equipments which were to be imported from the foreign sellers C.A. No. 1123 of
2003 -16- before they could be utilised for the Ash Handling Plant.
Not only the
Appellant utilised the Special Imprest License on import of the goods with the
declaration that the imports were in the nature of raw material components
which would be utilised for further manufacturing in its premises and with
value addition thereon would be sold to N.T.P.C, but even when the imported
goods were dispatched to the site office of the Appellant at N.T.P.C Farakka,
the Appellant made a declaration under FORM XXX, prescribed under the West
Bengal Sales Tax Rules to the following effect:
undertake to duly account to you the disposal of above goods and to pay tax on
the sales thereof in accordance with the provisions of the said Act."
('Act' in this context, refers to Bengal Finance (Sales Tax) Act, 1941).
this Court Respondents have taken a further plea that Company had admitted that
the raw materials imported by it were manufactured by it. Further, with a view
to secure the value addition of at least 33 percent, such raw materials cannot
remain the same after being processed into final product. At least the Company
has produced no material to substantiate the claim that the raw material
imported by it remained the same even after value addition.
C.A. No. 1123 of 2003
-17- Since the Company was seeking exemption under the Act, the burden squarely
fell on it to establish that they were entitled to such exemption. Furthermore,
the Respondents have also argued that it was required to be established by the
Company that the goods imported and dispatched to Farakka would also be in the
nature of raw materials or components or it underwent further processing at the
site office of the Company and then with value addition thereon were sold to
N.T.P.C to be used exclusively for the plant which it failed to establish or
prove. For all these reasons Respondents have contended that the matter having
been dealt with and considered from all angles, no case for interference has
been made out and the Appeal being devoid of any merit and substance deserves
to be dismissed.
have, accordingly, heard learned Senior Counsel Shri S. Ganesh and Mr. Amar
Dave, Mr. Gaurav Goel, Mr. Mahesh Agarwal, Mr. Rishi Agrawala and Mr. E.C.
Agrawala, Advocates for the Appellants and Mr. A.K. Ganguli, learned Senior
Counsel and Mr. Avijit Bhattacharjee, Advocate for Respondents at length and
perused the record.
C.A. No. 1123 of 2003
proper adjudication of the Appeal it is foremost important to consider the
provision of Section 5(2) of the Act, which is reproduced hereinbelow:- "5
When is a sale or purchase of goods said to take place in the course of import
5.1 xxx xxx xxx xxx
5.2 A sale or
purchase of goods shall be deemed to take place in the course of the import of
the goods into the territory of India only if the sale or purchase either
occasions such import or is effected by a transfer of documents of title to the
goods before the goods have crossed the customs frontiers of India."
5.3 xxx xxx xxx xxx
5.4 xxx xxx xxx xxx
5.5 xxx xxx xxx xxx"
we proceed to decide the questions of law as projected hereinabove, one
material fact pertinent to the issue involved in this Appeal requires special
mention. We have already mentioned hereinabove that alongwith MS Pipes, the
disputed goods in this Appeal, the Company had also imported 11 other
components/ items to be used in the plant for its erection and commissioning.
Other 11 imported goods, utilised by the Company in the erection of the plant
have C.A. No. 1123 of 2003 -19- been held to be sales in the course of import
made by Company to N.T.P.C and accordingly benefit under Section 5(2) of the
Act has been granted by the concerned State Government. It was only this
particular component MS Pipes, which has been denied this benefit.
Tax Assessment Order passed by Assistant Commissioner (Commercial Tax),
Ghaziabad, State Of Uttar Pradesh has been filed before us to show that such
benefit has been accrued to the Company for remaining 11 items. Since MS Pipes
were shipped at Calcutta Port, thus it was Respondents who treated them
exigible for Sales Tax. If the benefit of the Sales Tax exemption has been
given to the Company for 11 components/ items there is no reason why it is to
be denied in respect of MS Pipes. This we are quoting so that the facts may be
put on record correctly.
case dealing with Section 5(2) of the Act is Commissioner of Commercial Taxes
decided by a Constitution Bench of this Court. In the aforesaid judgment, two C.A.
No. 1123 of 2003 -20- questions were projected for consideration by the
Constitution Bench namely, if the sales were in the course of import within the
meaning of Section 5(2) of the Act;
and, secondly if the
property in the goods passed in Belgium and consequently the sales were outside
the State within the meaning of Article 286(1)(a) of the Constitution. The
Constitution Bench was of the opinion that the assessee must succeed on the
first point and it will not be necessary to deal with the second point. Court
has held as under:- "The next question that arises is whether the movement
of axle-box bodies from Belgium into Madras was the result of a covenant in the
contract 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."
C.A. No. 1123 of 2003
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, State of been
held as under:- "9. In this case (K.G. Khosla & Co.(P) Ltd. the
Constitution Bench specifically held that sale need not precede the import and
this decision is a complete answer to the argument advanced by the learned
counsel for the appellant.
10. Learned counsel
then tried to argue that the decision of the Constitution Bench in Khosla case
is not applicable to the present case as in the said case, the materials were
to be inspected at Belgium and London and thereafter the goods were to enter
into India. This argument is not correct. In Khosla case the inspection of
goods was to be carried out in Belgium as well as on arrival into India. In the
present case, the inspection was to be done on arrival of goods into India and
as such, there is no C.A. No. 1123 of 2003 -22- distinction on facts between
the present case and that of Khosla. Learned counsel then urged that the
decision of the Constitution Bench in Khosla case has not been correctly
decided and as such this case be referred to a larger Bench. We have considered
the matter and found that Khosla case has held the field nearly more than three
decades and its correctness has not been doubted so far. We, therefore, reject
the prayer of learned counsel for the appellant.
11. Learned counsel
then urged that this case is covered by decisions of this Court in the cases of
Binani Bros. (P) Ltd. v. Union of India, Mohd. Serajuddin v. State of Orissa
and K. Gopinathan Nair v. State of Kerala.
The decision of this
Court in the case of Binani Bros. is distinguishable as in that case no
obligation was imposed on the appellant to supply the imported goods to
DGS&D after they had been imported and the same could be directed to other
decision of this Court in the case of Mohd. Serajuddin is not applicable to the
present case as in that case it was found that the appellant in the said case
sold the goods directly to the Corporation which entered into a contract with a
foreign buyer and it was found that the immediate cause of export was the contract
between the foreign buyer who was the importer and the Corporation who was the
exporter. Such sales were described as back-to-back contract. This decision
rested on the peculiar facts of that case. 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 C.A. No. 1123 of 2003 -23- 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
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."
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 (1985) 4 SCC 119, Deputy Commissioner of Agricultural Ltd.
4 thereof dealing with the issue is reproduced hereinbelow and finally in para
6 while distinguishing (1974) 1 SCC 459 in the matter of M/s. Binani Bros (P)
C.A. No. 1123 of 2003
-24- "4. The test of integral connection or inextricable link between the
sale and the actual import or export in order that the sale could become a sale
in the course of import or export has been clearly enunciated by this Court in
Ben Gorm Nilgiri Plantations Company case. There the question related to sale
of tea which was claimed to be in the course of export out of the territory of
India and though by majority it was held that the sales in question were not
"in the course of export", the Court at p. 711 of the Report laid
down the test thus:
A sale in the course
of export predicates a connection between the sale and export, the two
activities being so integrated that the connection between the two cannot be
voluntarily interrupted, without a breach of the contract or the compulsion
arising from the nature of the transaction. In this sense to constitute a sale
in the course of export it may be said that there must be an intention on the
part of both the buyer and the seller to export, there must be obligation to
export, and there must be an actual export. The obligation may arise by reason
of statute, contract between the parties, or from mutual understanding or
agreement between them, or even from the nature of the transaction which links
the sale to export.
A transaction of sale
which is a preliminary to export of the commodity sold may be regarded as a
sale for export, but is not necessarily to be regarded as one in the course of
export, unless the sale occasions export. And to occasion export there must
exist such a bond between the contract of sale and the actual C.A. No. 1123 of
2003 -25- exportation, that each link is inextricably connected with the one
immediately preceding it. Without such a bond, a transaction of sale cannot be
called a sale in the course of export of goods out of the territory of India.
Conversely, in order
that the sale should be one in the course of import it must occasion the import
and to occasion the import there must be integral connection or inextricable
link between the first sale following the import and the actual import provided
by an obligation to import arising from statute, contract or mutual
understanding or nature of the transaction which links the sale to import which
cannot, without committing a breach of statute or contract or mutual
understanding, be sapped (sic snapped).
6. Counsel for the
appellant fairly conceded that the facts in K.G. Khosla & Co. case were on
all fours with the facts obtaining in the instant appeals and that the ratio of
that decision would appear to govern the question arising in these appeals, but
he contended that a different view has been taken by this Court in Binani Bros
(P) Ltd. v. Union of India and in view of this later decision the High Court
ought not to have applied the ratio of K.G. Khosla & Co. decision to this
case. It is not possible to accept this contention as in our view Binani Bros
case is clearly distinguishable on two material aspects. In that case the
assessee itself held the import licence and the goods were imported on the
strength of such import licence and not on the strength of any Actual Users'
Licence as is the case here. Secondly, unlike in the present case there was no
term or condition prohibiting C.A. No. 1123 of 2003 -26- diversion of the goods
after the import. In fact, it is these two factors obtaining in the instant
case which establish the integral connection or inextricable link between the
transactions of sale and the actual import making the sales in the course of
import. In fact as pointed out earlier, the movement of the goods from the
foreign country to India was in pursuance of the requirements flowing from the
contract of sale between the respondent- assessee and the local purchaser and
as such the sales in question must be held to be in the course of import."
Counsel for Respondents has placed reliance on Binani Bros. supra specially
para 14, reproduced hereinbelow:- "14. Be that as it may, in the case
under consideration we are concerned with the sales made by the petitioner as
principal to the DGS&D. No doubt, for effecting these sales, the petitioner
had to purchase goods from foreign sellers and it was these purchases from the
foreign sellers which occasioned the movement of goods in the course of import.
In other words, the movement of goods was occasioned by the contracts for
purchase which the petitioner entered into with the foreign sellers. No
movement of goods in the course of import took place in pursuance to the
contracts of sale made by the petitioner with the DGS&D. The petitioner's
sales to DGS&D were distinct and separate from his purchases from foreign
sellers. To put it differently, the sales by the petitioner to
C.A. No. 1123 of 2003
-27- the DGS&D did not occasion the import. It was purchases made by the
petitioner from the foreign sellers which occasioned the import of the goods.
The 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."
we are of the considered opinion that it has not been the Respondents' case
that the MS Pipes imported by the Company were not used for the erection and
commissioning of the plant for N.T.P.C. Thus, from the facts of Binani Bros
supra, it is clearly spelt out that the facts of the case in hand are
different. Thus, the ratio of the said case would not be applicable to it.
fact, the ground, sought to be raised for the first time before this Court that
MS Pipes were put to manufacturing process and thereby converted into distinct
end product had not been raised before any of the C.A. No. 1123 of 2003 -28-
Authorities earlier. It was not the Respondents case that pipes so imported
were not necessary components for the erection and commissioning of the plant.
Admittedly, the said pipes were used as components in the Ash Handling Plant in
the same condition as they were imported without altering its originality.
Thus, the ground which was sought to be raised before us for the first time has
not been considered by any of the Authorities and in our opinion rightly so.
Thus, we also do not deem it fit and proper to consider the same at this
from the aforesaid reasons, we are also of the considered opinion that such
import would fall within the Constitutional umbrella. It is also to be noted
that Company had admittedly imported the goods into India for completion of the
Project on Turnkey Basis of N.T.P.C.
Thus, by virtue of
Article 286 (1) (b) of the Constitution, it would not be taxable. For ready
reference, Article 286 (1) (b) of the Constitution is reproduced herein below:
Restrictions as to imposition of tax on the sale or purchase of goods - (1) No
law C.A. No. 1123 of 2003 -29- of a State shall impose, or authorise the
imposition of, a tax on the sale or purchase of goods where such sale or
purchase takes place- (a) outside the State; or (b) in the course of the import
of the goods into, or export of the goods out of, the territory of India.
See (1998) (7) SCC 19
Minerals & Metals Trading
the facts and circumstances of the case we are of the opinion that the order
passed by Division Bench of the High Court as also the orders passed by
Tribunal and other Authorities cannot be sustained in law. Same are hereby set
aside and quashed. Appellant is held entitled to claim benefit of Section 5(2)
of the Act.
have been given to understand that pursuant to the demand notice issued by
Respondents, the Company has already deposited the Sales Tax liability
would refund the same to the Company with Simple Interest at the rate of 6
percent from the date of C.A. No. 1123 of 2003 -30- its deposit till its refund
within a period of three months, from the date of communication of the said
order. In case amount is not refunded within three months, from the date of
communication of said order, then Respondents would be liable to pay Compound
Interest on the amount deposited by Appellants with the Respondents at the rate
of 12 percent per annum.
Appeal thus, stands allowed with costs throughout, Counsel's fee Rs. 50,000/-.