G. Viswanatha Iyer, J.
1.The Deputy Commissioner of Sales Tax, Ernakulam, is the revision petitioner. For the assessment year 1964-65, the Sales Tax Officer, Special Circle, Mattancherry, assessed the respondent on a turnover of Rs. 22,53,719 and the tax and surcharge demand were Rs. 46,537.50 and Rs. 2,326 respectively. Out of this, the turnover of Rs. 1,43,261.19 represented the sale of marine engines. The assessee contended that the sale of marine engines was effected in the course of import and so it is exempt from tax under the General Sales Tax Act. This contention was rejected by the assessing authority and the first appellate authority. But, on second appeal, the Appellate Tribunal by a majority of 2 : 1 held that the assessee is entitled to exemption in respect of the marine engines. The finding of the majority is in these terms :
The copies of the agreements have been furnished before us. The agreements are in the form of a letter addressed to M/s. India Sea Foods (Regd.), Cochin-5. It states that, with reference to an earlier conversation in the matter of the transfer of the rights and interests of M/s. India Sea Foods in one Lister Marine Diesel Engine to be imported under the licence standing in the name of M/s. India Sea Foods, issued by the Deputy Chief Controller of Imports and Exports, on behalf of the person as agreed to between the parties at the imported invoice price, duty and all charges and expenses, in consideration of his having agreed to sell to the firm all the catches of various varieties of fish in his deep sea fishing boat in which the said imported marine engine is to be installed; he requests the firm to place the order for the engine immediately. An amount of Rs. 6,000 was remitted as advance of purchase price of the engine to be handed over to the local agents of the foreign sellers on behalf of the person. The balance purchase price, duty, etc., shall be paid on intimation. As the eagine could be imported only by the firm as licensees, everything necessary in the matter of importing and taking delivery of the engine on its arrival in Cochin Port should be made by the firm and that it is clearly understood that the person had become the owner of the engine to be imported under the licence as stated above and that the firm was acting for him in this behalf with no right or interest in the engine subject to its rights to enforce delivery of fish catches as per terms and conditions.
These clauses on a careful analysis would reveal that the appellant had the licence to import. The particular person could not import the marine engine direct as he had no import licence. The appellant was, therefore, requested to Import the engine on behalf of Mr. Austin and it was in pursuance of this agreement that the goods were moved from their original place to Cochin. K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras  17 S.T.C. 473 (S.C.), lays down that before a sale could be said to have occasioned the import it was not necessary that the sale should have preceded the import and that the movement of goods into India was incidental to the contract. If it is proved that there was no possibility of the goods being diverted by the assessee for any other purpose, the sales can be said to take place in the course of import of goods within the meaning of Section 5(2) of the Act.
If, as a matter of fact, it was under the terms of the agreement that the goods were imported and if there was no possibility of a diversion, we feel, that the dictum laid down in Khosla's case  17 S.T.C. 473 (S.C.) has clearly to apply in this case.
Both the elements in our view are satisfied here. From the letter addressed to the firm, we find that the engine was imported under the terms of the contract entered into between the purchaser and the appellant. There was absolutely no possibility for any diversion of the goods. Rs. 6,000 was paid in advance towards the sale price. In our view, the sale of this marine engine in fact satisfies all the conditions for exemption. We, therefore, hold that the turnover relating to the sale of Lister Marine Diesel Engine is not exigible to sales tax at the hands of the appellant.
2. The department has come up in revision challenging this conclusion.
3. The assessee had an import licence to import one Lister Marine Diesel Engine. One Mr. Austin entered into a contract with the assessee for the purchase of this engine. The assessee agreed to sell the said engine at the imported invoice price plus duty and all charges and expenses and as part of that agreement it was also agreed by Mr. Austin to sell to the assessee all the catches of the various varieties of fish in his deep sea fishing boat in which the said imported marine engine is to be installed. An amount of Rs. 6,000 was paid as advance for the purchase of the engine. In pursuance to this contract, the assessee imported the engine and sold it to Mr. Austin. There is an inextricable link between the contract of sale and import. There is the intention to import and an obligation to import. The contract of sale occasioned the movement of the goods from a foreign country and a diversion of the goods if made on import, will be a breach of the contract of sale entered into by the with Mr. Austin. Therefore, the facts of this case clearly come within the scope of the principle laid down by the Supreme Court in Ben Gorm Nilgiri Plantations Co. v. Sales Tax Officer  15 S.T.C. 753 (S.C.), wherein their Lordships stated the principle thus :
A sale in the course of export predicates a connection between the sale and export, the two activities being so integrated that the connection between the two cannot be voluntarily interrupted, without a breach of the contract or the compulsion arising from the nature of the transaction. In this sense to constitute a sale in the course of export it may be said, that there must be an intention on the part of both the buyer and the seller to export, there must be. an obligation to export and there must be an actual export. The obligation may arise by reason of statute, contract between the parties, or from mutual understanding or agreement between them, or even from the nature of the transaction which links the sale to export.
4. The principle which applies to a sale in the course of export applies to a sale in the course of import. In both kinds of dealings, there must be an integral connection between the sale and the import or export, whether the sale takes place before or after import or export. In this case, there is the further fact that the import licence is in the name of the assessee and the assessee imported the goods only for the performance of the contract with Mr. Austin. The contract of sale required the goods to be imported, alternatively, as a necessary incidence of the contract of sale the goods had to be imported. If this engine on import is attempted to be sold otherwise than to Mr. Austin, there will be a breach of contract entered into by the assessee with Mr. Austin. Therefore, it satisfies the requirement of the rule laid down in Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes  17 S.T.C. 473 (S.C.) as well. Recently, in an appeal from a judgment of this court, namely, Deputy Commissioner of Agricultural Income-tax and Sales Tax, Central Zone, Ernakulam v. Kotak & Co., Bombay  32 S.T.C. 6 (S.C.), their Lordships of the Supreme Court had occasion to consider a transaction of sale entered into by making use of an actual user's import licence. In that case, their Lordships came to the conclusion that if the terms of the contract read along with the import licence and letter of authority precluded the importer from selling the goods to anybody other than the person with whom he has contracted to sell, such a transaction will be a sale in the course of import. The facts of this case clearly come within the scope of these decisions.
5. Therefore, the Tribunal by the majority came to a correct conclusion in holding that the transaction is a sale in the course of import and not taxable. The revision petition is without merit. It is dismissed with costs.