THE STATE OF MAHARASHTRA versus M/S. EMBEE CORPORATION, BOMBAY

Citation: [1997] SUPP. 3 S.C.R. 497 · Decided: 21-08-1997 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed

Judgment (excerpt)

THE STATE OF MAHARASHTRA 
A 
v. 
MIS. EMBEE CORPORATION, BOMBAY 
AUGUST 21, 1997 
B 
[S.P. BHARUCHA AND V.N. KHARE, JJ.] 
Central Sales Tax Act-Sec. 5(2j-Sale of Goods Act-Sec. 4-5, 18-24-
Claim of exemption from Sales Tax on imp01t_J'Sale or purchase occasions 
such impo1t''-Meaning of-Import of raw materials by respondent-As a C 
direct result of contract of sale-Whether provision requires a completed sale 
to precede-Held,-It is not necessary that a completed sale should precede 
the import for exemption from sales tax. 
The Respondent-assessee, entered into a contract with Director 
General of Supplies & Disposal (DGS. & D) for supply of carbamite to be D 
used in the manufacture of propellant explosives in Cordite Factory, 
Aruvankadu. The materials were to be imported from West Germany and 
inspected by the General Manager, Cordite Factory as the indentor. The 
Respondent obtained recommendation certificate from DGS & D and the 
necessary export permit from the Government of West Germany. After 
obtaining the import recommendation certificate the Respondent was E 
given an import licence on condition that the goods imported shall be 
utilised or disposed of in the manner stipulated by DGS & D and it shall 
not be utilised or disposed of in any other manner. The DGS & D had also 
furnished end-use certificate to the effect that Carbamite be allowed to be 
imported by the Indian Government as it was intended for consumption F 
in India and not re-exported or re-utilised for any purpose 'other than 
consumption by the Government factory. In the Bill of Lading the name of 
assessee was shown as a party to be notified and the General Cordite 
Factory Aruvankadu was described as the consignee of Carbamite. 
The Respondent claimed exemption before the Sales Tax Officer G 
from levy of sales tax, since the sale was in the course of import of the 
goods into India. The claim of the Respondent was rejected by the Sa_les 
Tax Officer and the said order was upheld in Appeal. The Second Appeal 
was rejected by the Tribunal. The matter was thereafter referred to the 
High Court on request by Respondent. 
H 
497 
498 
SUPREME COURT REPORTS [1997] SUPP. 3 S.C.R. 
A 
The High Court held that there were two sales viz., the sale between 
B 
the assessee and DGS & D and the foreign supplier and the assessee, but 
both the sales were integrated or inter-linked so as to from one transaction 
and, as such, the sale had occasioned the import of material liable for 
exemption from sales tax under the Act. 
Before this Court the appellant-State, after referring to the 
provisions of Central Sales Tax Act & Sale of Goods Act contended that 
the expression "sale occasions such import" occurring in sub-section 5(2) 
of the Central Sales Tax Act means a completed sale, that it should precede 
the import, that in the present case since there was no sale in terms of the 
C Sale of Goods Act and that the sale has not occasioned the import and as 
such the respondent is not entitled to any exemption from Central Sales 
Tax. 
Dismissing the appeal, this Court 
D 
HELD : 1.1. While interpreting the expression "sale occasions import" 
occurring in sub-section (2) of Section 5 of the Central Sales Tax Act, it is 
not necessary that a completed sale should precede the import. (506-B] 
. 1.2. The definition of 'Sale' in Section 2 (g) of the Act and employed 
E 
in Section 3 and other sections of the Act would embrace not only com-
pleted contract, but also the contract of sale or agreement of sale if such 
contract of sale or agreement of sale provides for movement of goods or 
movement of goods is incident of the contract of sale. (503-D] 
1.3. The interpretation of Section 3(a) of the Act when applied to 
F Section 5 (2) of the Act would mean that if an agreement for sale stipulates 
import of goods or import of goods is incident of contract of sale and goods 
have entered the import stream, such import would fall within the expres-
sion "sale occasions import". In the present case, the import of carbamite 
was direct result of the contract of sale and as such it can be safely held 
G that sale has occasioned the import. (503-F] 
1.4. The decision in Khosla's case that sale need not precede the 
import is correct. There is no distinction on facts between the present case 
and that of Khosla's. It has held the field for nearly more than three 
decades and its correctness has not been doubted so far. Hence the plea 
H for referring it to larger Bench

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