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Report No. 30

65. Universal Import Agency case.- In Universal Import Agency v. Chief Controller of Imports (1961) 1 SCR 305: AIR 1961 SC 41, the Supreme Court again referred to the two Travancore cases at p. 47, para. 19, and observed:-

"This Court had in the context of Article 286(1)(b) of the Constitution to consider the connotation of the words "in the course of export or import" in State of Travancore Cochin v. Bombay Co. Ltd. (I Travancore case)."

Patanjali Sastri C.J. described the nature of export sale thus at p. 367 (AIR):-

"Such sales must of necessity be put through by transporting the goods by rail or ship or both out of the territory of India, that is to say, by employing the machinery of export. A sale by export thus involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of goods to a common carrier for transport out of the country by land or sea. Such a sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and resultant export form parts of a single transaction,".

The same principle has been restated by the learned Chief Justice in (II Travancore case).

The learned Chief Justice stated at p. 336 (AIR) thus:-

"The phrase integrated activities was used in the previous decision to denote that a sale, that is a sale which occasions the export cannot be dissociated from the export without which it cannot be effectuated and the sale and the resultant export from parts of a single transaction."

66. I have repeated these passages here, only with a view to facilitating comparison of these passages with the statement of law made by the Supreme Court on what constitutes a purchase by import. An identical language has been employed in explaining and setting out the connotation of import purchase. In para. 20 (AIR), the Supreme Court observes:-

"Applying the said principles (i.e., principles laid down in the two Travancore cases) to an import sale, it may be stated that a purchase by import involves a series of integrated activities commencing from the contract of purchase with a foreign firm "(emphasis supplied by me) and ending with the bringing of goods into the importing country and that the purchase and resultant import form parts of the same transaction."

These observations, which are directly applicable in the present case, make it clear that an import stream can be started only by an Indian buyer entering into an agreement of purchase with a foreign seller. This is the same thing as saying that there must be privity between the Indian buyer and the seller overseas. Let me, however, proceed with the later cases before I set down all the principles of law as deduced from the several decisions of the Supreme Court.

67. Endupuri Narasimham v. State of Orissa, (1962) 1 SCR 314: AIR 1961 SC 1344, is a case of intra-State sales. But the observations made by the Supreme Court on Article 286(1)(b) are apposite. Indeed, the whole law on the subject of sale or purchase of goods in the course of export or import has been succinctly and precisely set out in these observations. The Supreme Court says (Page 1346, AIR):-

"With reference to the analogous provision under Article 286(1)(b) prohibiting imposition of tax on the sale or purchase of goods in the course of import or export, it has been held by this Court that it is only a sale or purchase which occasions the export or import of the goods out of, or into, the territory of India, or a sale in the State by the exporter or importer by transfer of shipping documents while the goods are beyond the customs barrier, that is within the exemption and that a sale which precedes such export or import or follows it is not exempt, vide (the two Travancore cases)"

Section 5 of the Central Sales Tax Act, 1956 - Taxation by the States of Sales in the Course of Import Back

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