THE INDURE LTD. AND ANOTHER versus COMMERCIAL TAX OFFICER AND ORS.

Citation: [2010] 11 S.C.R. 556 · Decided: 20-09-2010 · Supreme Court of India · Bench: DALVEER BHANDARI · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
B 
(2010] 11 S.C.R. 556 
THE INDURE LTD. AND ANOTHER 
v. 
COMMERCIAL TAX OFFICER AND ORS. 
(Civil Appeal No. 1123 of 2003) 
SEPTEMBER 20, 2010 
[DALVEER BHANDARI AND DEEPAK VERMA, JJ.] 
Central Sales Tax Act, 1956 -
s. 5(2) - Sales tax 
exemption - Award of works contract by NTPC to appellant 
c Company - For erection of plant on turnkey basis - Appellant 
Company importing pipes and thereafter, selling them to 
NTPC - Claim for sales tax exemption u/s. 5(2) by appellant 
Company - Held: Appellant Company is entitled to claim 
benefit uls. 5(2) - Pipes were imported on account of the 
D contract entered into between the Company and NTPC, and 
were used exclusively for erection and commissioning of plant 
- Failure on part of Revenue Authorities to establish that the 
pipes were not used in the plant - Goods were imported for 
completion of project of NTPC on turnkey basis - Thus, by 
E virtue of Article 286(1)(b) pipes not taxable - Also certain 
other items imported by the Company to be used in the plant 
were given benefit of sales tax - Thus, order passed by 
Authorities, tribunal as also High Court rejecting the claim not 
sustainable and are set aside - Constitution of India, 1950 -
F Article 286(1)(b). 
N.T.P.C awarded contracts to the appellant-Company 
for performing the work of erection of Ash Handling plant 
on Turnkey Basis. Certain items were sought to be 
imported for completion of the project. The Company was 
G granted Special Import License for importing 'MS' Pipes. 
The pipes were imported and, thereafter, sold to N.T.P.C. 
The Company sought exemption from imposition of sales 
tax under Section 5(2) of the Central Sales Tax Act, 1956 
as the sale was in the course of import. The Commercial 
H 
556 
INDURE LTD. AND ANR. v. COMMERCIAL TAX 
557 
OFFICER AND ORS. 
Tax Officer, rejected the claim and raised a demand of A 
certain amount as sales tax. The other Authorities, the 
tribunal and the Division Bench of the High Court upheld 
the order. Therefore, the appellant filed the instant appeal. 
Allowing the appeal, the Court 
B 
HELD: 1.1 Import had occasioned only on account 
of the covenant entered into between the appellant-
Company and N.T.P.C. and the imported pipes were used 
exclusively for erection and commissioning of the plant. 
The respondents failed to establish that these pipes were 
C 
not used in the plant of N.T.P.C. [Para 37] [571-B-C] 
Mis. Binani Bros (P)" Ltd. vs. Union of India and Ors. 
(1974) 1 sec 459, held inapplicable. 
K.G. Khosla and Co. vs. Deputy Commissioner of 
Commercial Taxes (1966) 3 SCR 352; State of Maharashtra 
vs. Embee Corporation, Bombay 1997' (7) SCC 190; Deputy 
Commissioner of Agricultural Income Tax And Sales Tax, 
Ernakulam vs. Indian Explosives Ltd. 1985 ( 4) SCC 119, 
referred to. 
1.2. The appellant-Company had imported the goods 
into India for completion of the Project on Turnkey Basis 
of N.T.P.C. Such import would fall within the 
Constitutional umbrella. Thus, by virtue of Article 286(1)(b) 
of the Constitution of India, 1950, it would not be taxable. 
[Para 43] (576-E-F] 
Minerals and Metals trading Corporation of India Ltd. v. 
Sales Tax Officer 1998 (7) SCC 19, referred to. 
1.3. The ground sought to be raised for the first time 
before this Court that 'MS' Pipes were put to 
manufacturing process and thereby converted into 
· distinct end product, had not been raised before any of 
the Authorities earlier. It was not the respondent's case 
D 
E 
F 
G 
H 
558 
SUPREME COURT REPORTS 
[2010] 11 S.C.R. 
A that pipes so imported were not necessary components 
for the erection and commissioning of the plant. The said 
pipes were used as components in the Ash Handling 
Plant in the same condition as they were imported 
without altering its originality. Thus, the ground which 
B was sought to be raised before this Court for the first time 
was not rightly considered by any of the Authorities. It is 
not fit and proper to consider the same at this belated 
stage. [Para 42) [576-C-E] 
1.4. Alongwith 'MS' Pipes, the Company also 
C imported 11 other components/ items to be used in the 
plant for its .erection and commissioning. Other 11 
imported goods, utilised by the Company in the erection 
of the plant were held to be sales in the course of import 
made by the Company to N.T.P.C and accordingly benefit 
D under Section 5(2) of the Central Sales Tax Act, 1956 was 
granted by the State Government. Only the component 
'MS' Pipes was denied the benefit.

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