LexTHE DEPUTY COMMISSIONER OF AGRICULTURAL INCOME TAX & SALES TAX, ERNAKULAM versus INDIAN EXPLOSIVES LTD.
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THE DEPlJTy COMMISSIONER OF AGRICULTURAL INCOME TAX & SALES TAX, ERNAKllLAM v. INDIAN EXPLOSIVES LTD. AUGUST 19, 1985 [V .u. TULZAPURKAR, SABYASACHI MUKHARJf AND RANGANATH MISRA, JJ. J Sales "in the course of import of the goods into India" - Whether the goods imported and supplied to customers . on the strength of Actual Users' Im.port Lic"ences of the customers are A B exempt from sales tax under the Kerala General Sales Tax Act, C 1950 - Constitution of India, 1950 Article 286 (I) (b). The Respondent,-assessee deals in chemicals, dyes etc. import goods on the strength of the Actual Users' Import Licences that had been obtained by the customers and supply the same for use by the latter in their factories. The sales in question were D put through by the respondent asseasee in the following manner. The indigenous purchaser used to place orders with the respon- dent-asseasee quoting his Import Licence Number, quantity of goods, rate, etc. as agreed to by previous correspondence with the respondent-assessee; the respondent-assessee then placed orders with the foreign supplier for the supply of the goods and in such orders the name of the local purchaser who required the E goods as also its licence numbers, were specified; the actual import was done on the strength of two documents like, (a) the Actual Users' Import Licence and (b) Letter of Authority issued by Chief Controller of Imports and Exports whereunder the local purchaser was authorised to permit the respondent-assessee on his behalf to import the goods, to open letters of credit and make F reml,ttance of foreign exchange against the said licence to the extent of vaiue specified therein. The import licence expreasly contained two conditions (i) that the goods impot:ted will be the property of the licence-holder at the time of clearance through the Customs and (ii) that the goods will be utilised only_ for consumption as raw material or accessories in · the licence- G holder's factory and that .no portion thereof will be sold to or be permitted to be utilised by any other party. On receipt of the· goods the respondent-a.Ssessee used to invoice the local purchaser. The respondent-assessee was assessed to Sales Tax during H the assessment years 1961-62, 1962-63 and 1963-64 under the 624 SUPREME COURT REPORTS [1985] SUPP.2 s.c.R. A General Sales Tax Act, 1950 on the turn over of sales effected by them in those years of goods, imported on the strength of the customers' Actual Users' import Licences and supplied to them. Such turnover subjected to tax was to the tune of Rs. 3,15,586.19 in the year 1961-62 and Rs. 4,03,427.72 in the year 1963-64. The respondent-assessee contended thst these sales were in the course B of Article 286 (I) (b) of the Constitution. The contention was negatived by the assessing authority as also by the Appellate Assistant Commissioner but the Appellate Tribunal in second appeal accepted the contention and beld thst the disputed tum over in each year was not taxable. In the revisions preferred by the Deputy Commissioner the High Court confirmed the Tribunal's view. Hence the Revenue appeals by special leave of the Court. c Dismissing the appeals, the Court, HEU>: 1.1 In order thst 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 import and .the actual import D provided by an obligation to import arising from statute, contract or mutual understanding or nature of the transaction which links tbe sale to import which cannot, without cOlllldtting a breach of statute or contract or mutual understanding, be sapped. [628 B-C] E Ben Gorm Nilgiri Plantations CalpiJily, Cocmoor and Ors. v. Sal.es Tax Officer, Special Circle ErMlmlaw & Ors. [1964] 7 SCR 706 relied on. • 1.2 Reading the two documents, namely the Actual Users' Import Licence and letter of Authority issued by the Chief F Controller of Imports and Exports together, it is clear that tbe import of the goods by the respondent-assessee was for and on behalf of the local purchaser and the respondent-assessee could not without committing a breach of the contract, divert the goods so imported for any other purpose. Having regard to the terms and conditions on which the respondent-assessee imported the G goods and the manner in which the· transactions were put through
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