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Report No. 30

80. Dhan Lakshmi case.- The facts in Dhan Lakshmi Mills Ltd. v. State of Madras, AIR 1961 Mad 87, were similar to those in the present case (Khosla's case), if not somewhat more in favour of the assessee. The Dhan Lakshmi Mill at Tirupur was the assessee in that case. The Mill intimated its requirement to the Bombay dealers, who then placed orders which suppliers in Africa. The shipments were directed from African ports to Cochin.

In the meantime, the assessee (the Mill) applied for the import quota, and requested the authorities to issue the licence to the seller at Bombay. The Bombay dealers sent the shipping documents to their clearing agents at Cochin. These clearing agents presented the shipping documents, cleared the goods through the customs and then despatched the goods to Tirupur to the Mill and the railway receipts were sent to the Mill through banks.

On these facts, the High Court observed (p. 88, AIR 1961 Mad):-

"It is no doubt true the dealer in Bombay ordered the Cotton from his Vendor abroad (Africa) only to carry out the importer's contractual obligations to sell the cotton so imported to the assessee (the Mill). The assessee provided the facilities by arranging for the grant of import licence to the dealer in Bombay, even as the assessee provided further facilities for the transport of the cotton by rail in this country after the cotton had been imported and after it had been cleared through the customs.

The relationship between the assessee and the importer at Bombay was that of a buyer and seller, both being principals, and the sale was only after the import of the goods even where the contract to sell (between the Bombay dealer and the Mill) preceded the order to the exporter abroad (African exporter) to ship the goods in India.

It was the seller's agent at Cochin that cleared the goods by rail to the assessee and it was that agent that consigned the goods by rail to the assessee and the assessee's contractual obligation was normally to pay for the cotton against delivery of the railway receipt at Tirupur. We agree with the Tribunal that these purchases of the imported cotton effected by the assessee did not fall within the scope of Article 286(1)(b) of the Constitution.".

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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