BINANI BROS. (P) LTD. versus UNION OF INDIA & ORS.

Citation: [1974] 2 S.C.R. 619 · Decided: 11-12-1973 · Supreme Court of India · Bench: A.N. RAY · Disposal: Case Allowed

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Judgment (excerpt)

A 
B 
c 
D 
E 
F 
G 
ff 
BINANI BROS. (P) LTD. 
v. 
UNION OF INDIA & ORS. 
December ll, J 973 
[A. N. RAY, C. J., H. R. KHANNA, K .K. MATHEW, 
A. ALAGIRlSWAMI AND p; N. BHAGWATI, J J.] 
Constitution of India, Art. 28.6-The meaning of the exp ession, 'sale or purchase 
of goods in the course of the in1ports' into India 
1n \V, P. No. 92 of 1969, the Petitioner Company prayed for issue of appropriate 
direction or order for the enforcement of its fundamental rights guaranteed under 
A'rt. 31(1) of the Constitution. The facts are as follows: 
The petitioner company was a dealer in non-ferrous n1etals and was a registered 
supplier to the Directorate General of Supplies and Disposals. The company 
was also a registered dealer in the State of West Bengal. The petitioner used to 
procure non-ferrous metals fron1 various countries and also from within the country 
for fulfilling its contracts with D.G.S. & D. The in1port of non-ferrous metals was 
under open General licence till June, 30, 1957. Thereafter, a licensing system 
was introduced µy the Gove!'llment . of lnd_ia and the petitio!1er was asked to get 
their quotas fixed on the basis of their past imports. On Apnl 2, 1958, the Govern-
ment of India promulgated the Non-ferrous Metals Control Order, 1958 by virtue 
of which free sale of copper was banned. Any import of copper by the licence-
holders was to be distributed under the directions of the Controller of Non-ferrous 
metals. 
Under the Non-ferrous Metals Control Oi'der, 1958, and also under the Import 
Trade Regulations, the established in1porters were not free to sell the metals impor-
ted by them against their quota licences even to D.G.S.& D. The petitioner in 
order to effect supplies to D.G.S. & D. had to obtain additional import licenc~. 
The petitioner Obtained quota licences for import of non-ferrous metals for tr~ 
licensing periods upto April 1964, March 1965; but the imports were to be dis-
tributed only under the directions of the Controller. , 
On Sept. 14, 1965, the Govt. of India promulgated the Scarce Industrial Materi-
als Control Order 1965, under the Defence of India Rules. Stacks of non-ferrous 
metals including incoming imports were thus frozen. The Non·ferrous Metals 
Control Order 1958 and the Scarce Industrial Materials Control Order 196~ were 
both repealed. The Government of India in placing orders with the petitioner 
used to grant import licences in tenns of the contract. 
The petitioner had been importing and. supplying 
non~ferrous metals to res~ 
pendents 1,2 and 3 during the last 19 years. Respondent No. 2 had agreed to pay 
and was paying the Central Sales Tax. and/or West BengaJ Sales Tax, whichever 
was applicable to the petitioners in terms of the contract. 
In 1966, the Supreme Court held in K. G. Khos/a and Co. v. Deputy Con11nissiolier 
of Commercial tax [1966] 3 S.C.R. 352 that the sale by Khosla & Co. to DGS & D 
in India of axle-box bodies manufactured in Belgium by their principal, occasioned 
the movement of goods in the course of import and sales tax was not exigible on the 
transaction in view of Sec. 5(2) of the Central Sales Tax Act 1956, and Art. 286 of 
the Constitution. 
Thereafler, respondent No. 2 issued an order to respondent]No. 4 that Sales 
Tax. should not be allowed in respect of supply of stores which had been specificallf 
I
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620 
SUPREME COURT REPORTS 
[1974] 2 s.C.R. 
i1nported against contracts placed by D.G.S. & D. Respondent No. 4, acting in 
tenns of the order, deducted Rs. 60,780/ being the Sales Tax already paid from 
the pending bills of the petitioner and also threatened to recover more than Rs. 2 
Iakhs being the amont paid by respondent No. 2 as Sales Tax in respect of contracts 
which had already been executed. 
The petitioner, thereafter, approached the Sales Tax Authorities in W. Bengal 
and filed revised returns in the pending assessments 'and claimed refund of taxes 
paid on the sales, treating the sales a~ having been made in the course of import 
on the basis of the judgment in Kfwsfa's case. 
The West Bengal Sales Tax Authorities took the view that there w~re two sales-
; o 1i~. to the petitioner by the foreign seller and the other, by the petitioner to D.G.S. 
~ & D. and that there was no privity of contract between D.G.S. & D. and the foreign 
sellers, that the p2titioner under the import licences granted to it, was entitled to 
import the goods from any person or country and that the import licences issued as 
against the contr

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