V. Ramaswami, J.
1. The respondents to this case are dealers in non-ferrous metals carrying on business at No. 122, Mint Street, Madras-I. They will be hereafter referred to as the importers. They had with them an import licence for importing a good quantity of zinc. The distribution of imported zinc was controlled and it will have to be done under the directions of the Controller of Non-ferrous Metals. Established importers like the respondents have to distribute the zinc to such of those local purchasers to whom the Controller of Non-ferrous Metals had issued a permit. On 18th September, 1964, the Controller directed the importers to sell the zinc that would be imported by them to M/s. India Metal and Metallurgical Corporation (hereinafter referred to as the linked customer) and adviced the importers to contract the said corporation to ascertain their requirements as regards the quantity and specification of the materials and the programme of delivery. Thereafter, the linked customer placed a purchase order and paid a portion of the price. The importers then placed an order with the foreign seller for the goods. Later on, the importers endorsed the bill of lading in favour of the linked customer who cleared the goods. The Joint Commercial Tax Officer while determining the taxable turnover for 1965-66 included in it a sum of Rs. 70,333.97, which represented the sale value of the zinc imported by the respondent-importers. The importers contended that the sale in favour of the linked customer was made in the course of import within the meaning of Section 5(2) of the Central Sales Tax Act and that, therefore, such turnover could not be included in the taxable turnover. But this contention was not accepted by the Joint Commercial Tax Officer and the appellate authority. But on a further appeal, the Tribunal held that since the linked customer had placed a firm order for the import of goods by the appellants and in consequence of the order the goods were imported and the bills of lading were endorsed in favour of the linked customer, it is the sale in favour of the linked customer that occasioned the import of the goods into India and that, therefore, was not liable to be included in the taxable turnover. It is against this order, the State of Tamil Nadu has filed this petition.
2. The learned Government Pleader contended that the contract of sale between the importers and the linked customer did not occasion the import and it is only the contract between the importers and the foreign seller that had occasioned the import and that therefore the turnover is liable to be taxed under the Tamil Nadu General Sales Tax Act.
3. The point that arises for consideration is directly covered by an authority. The Supreme Court in Binani Bros. (P.) Ltd. v. Union of India : 2SCR619 , on almost identical facts, held that the sale could not be said to have occasioned the import of the goods. That case related to copper. The sale and distribution of copper was not free, but controlled and it will have to be distributed only under the directions of the Controller of Non-ferrous Metals or the Import Trade Control Authority to such of those licence-holders to whom such permission was given. The Supreme Court pointed out that placing of the orders by the local purchaser with the importer had not caused the import itself. But it was the contract by the importer with the foreign seller that caused the import. The fact that the import was made for selling to the local customer or to comply with an existing contract with a local purchaser will not make the import itself as having been caused by the contract entered into by the importer with the local purchaser. After referring to the distinction between 'sale for export' or 'import for sale' and the words ''sale or purchase, which occasioned the import or export', the Supreme Court held that unless there is a privity of contract between the foreign seller and the local purchaser, the sale could not be said to have been made in the course of import.
4. In the case on hand, as already noticed, the linked customer had no concern with the foreign seller. It placed an order only with the importers. The importers in their turn, though for the purpose of complying with the contract placed with them, placed an order with the foreign seller and it is the second order placed by the importers with the foreign seller that occasioned the movement of the goods. The interposition of the importers between the linked customer and the foreign seller had broken the link between the sale and the movement of goods in the import stream. We have, therefore, to hold that the sale by the importers to the linked customer did not occasion the import and that, therefore, it would not come within the purview of the first part of Section 5(2) of the Central Sales Tax Act.
5. The respondents also contended before the Tribunal that in any case since the bills of lading relating to the goods were endorsed in favour of the linked customer before the goods have crossed the customs frontier, the sale in favour of the linked customer shall be deemed to have taken place in the course of import within the meaning of the latter part of Section 5(2) On the other hand, the learned Government Pleader contends that the sale had taken place after the goods had crossed the customs frontier and that, therefore, the sale cannot be deemed to be in the course of import. Though there is a statement in the order of the Tribunal that the documents of title were handed over to the linked customer after necessary endorsement on the bills of lading when the goods were received in the port of Madras, the learned counsel for the respondents stated that there were documents to show that the endorsement on the bills of lading was long before the goods have crossed the customs frontier. In the view that the sale was in the course of import within the meaning of the first part of Section 5(2), the Tribunal did not go into the question as to whether the transfer of documents of title was before the goods crossed the customs frontier or not. We have therefore to remand the case for a consideration of this question by the Tribunal afresh. Accordingly, we set aside the order of the Tribunal and remand the case for a fresh disposal in the light of the observations made above. It would be open to the respondents to file such of those documents as they consider it necessary in support of their claim that the documents of title to the goods were transferred to the linked customer even before the goods crossed the customs frontier. The learned counsel for the revenue contended that the importers could not have transferred the bills of lading to the linked customer before the goods have been imported as per certain Control Orders. This point also, the Tribunal will have to consider in deciding the question as to whether there was a sale by transfer of documents of title when the goods were on the high seas.
6. In the result, the tax case is allowed and remanded. The petitioner is entitled to its costs. Counsel's fee Rs. 260.