Report No. 30
116. Associated Electricals' case.-
The facts in a Calcutta case 1 are almost similar to those in the case of Khosla. That was a direct decision under Article 286(1)(6) of the Constitution read with section 5(2) of the Central Sales Tax Act. The terms of contract in that case were, that the assessee was to import and supply electrical equipment to the Government of Punjab;
that the equipment supplied was to be manufactured in England by a specified firm; that, after import, the equipment would be coordinated by the assessee and the assessee would be responsible for the transport, insurance and handling of the material up to the Indian port of entry and also beyond the port of entry, if so required; and that the Government also reserved to itself the right to inspect the goods during the course of the manufacture as well as afterwards.
The price of the equipment to be supplied by the firm was detailed per item as f.o.b. price plus extra for c.i.f. and the Government was described as the purchaser. The assessee was also to supply the services of competent Engineers, who would supervise and be responsible for the erection of the plant, and for paying for these purposes. As regards the price, 90 per cent of the price was payable (in instalments) on arrival of the goods at the Indian port of entry, and the balance was payable "after completion of the acceptance tests and the commissioning of the plant."
1. Associated Electrical Industries (Delhi) Ltd. v. Commercial Tax Officer, 68 CWN 776: AIR 1965 Cal 236 (238, 339, 241), paras. 4, 11, 14, 25, 23 (D. Basu J.)
117. On these facts, the High Court of Calcutta held the sale to be a sale which had occasioned the movement by way of import. The High Court observed:-
"it is now settled that a sale will come within the expression when the movement of the goods from abroad into the territory of India is caused by a covenant in the contract between the seller and the buyer and that it is to be distinguished from the first sale effected by an importer after he has imported the goods into the territory of India1."
It was pointed out, that from the terms of the contract entered into between the assessee and the purchaser, it was clear that the import of the materials by the assessee from the manufacturers in the United Kingdom and the sale to the purchase were parts of the same transaction, and that it was because of the contract of the sale between the parties that the materials had their movement from U.K. to India.
1. Decisions in the Second Travancore case and Cement Marketing Co. v. State of Mysore, referred to.