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Sri Rani Lakshmi Ginning, Spinning and Weaving Mills (Private) Ltd. Vs. State of Madras - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 353 of 1966 (Appeal No. 21 of 1966)
Judge
Reported in[1973]30STC387(Mad)
AppellantSri Rani Lakshmi Ginning, Spinning and Weaving Mills (Private) Ltd.
RespondentState of Madras
Appellant Advocate V. Parameswaran, Adv. for ;R. Viswanathan and ; S.M. Subramaniam, Advs.
Respondent Advocate K. Venkataswami, the First Assistant Government Pleader (Commercial Taxes)
DispositionAppeal allowed
Cases ReferredKhosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes
Excerpt:
- .....it is because of this categorical pronouncement of the supreme court as to the nature of an import sale, this court in larsen and toubro ltd. v. joint commercial tax officer [1967] 20 s.t.c. 150, has specifically stated:we may in passing observe that in view of khosla and co. (p.) ltd. v. deputy commissioner of commercial taxes, [1966] 17 s.t.c. 473, rajeswari mills ltd. v. the state of madras [1964] 15 s.t.c. 1 can no longer be regarded as laying down the correct proposition as to the scope of section 3(a) and section 5(2) of the central sales tax act.5. as already stated, the board has taken the view that the sale of cotton to the assessee by patel and co. will not be an import sale, following the view in rajeswari mills ltd. v. the state of madras [1964] 15 s.t.c. 1 which is no.....
Judgment:

Ramanujam, J.

1. The assessee in this case is a ginning, spinning and weaving mill, and it had an actual user's licence to import cotton from Africa. But, for facilitating the import, the assessee gave a letter of authority to one Patel and Co. The said Patel and Co., on the basis of the letter of authority given by the assessee, entered into a contract with the foreign sellers and actually imported the goods, and thereafter delivered the same to the assessee.

2. On these facts, the question that was .canvassed before the assessing authority was that the purchase turnover of cotton imported through Patel and Co. should be exempted as import purchases. The assessing authority did not accept this contention. But the same contention was accepted by the appellate authority, who held that the turnover in cotton purchased by the assessee through Patel and Co. is liable to be exempted under Section 5(2) of the Central Sales Tax Act, 1956, as sales in the course of import. This view of the Appellate Assistant Commissioner has been set aside by the Board of Revenue in exercise of its suo motu revision.

3. Before the Board, it was contended by the assessee that the import of cotton by Patel and Co. was on its behalf, and that, therefore, the sale turnover of the cotton purchased from Patel and Co. should be treated as sales in the course of import, and exempted from levy of tax and that, in any event, there has been a transfer of documents of title from Patel and Co. to the assessee when the goods were on the high seas and, therefore, they should be treated as sales in the course of import. The Board of Revenue rejected both the contentions and held that the purchase made by the assessee from Patel and Co. cannot be said to have occasioned the import of goods and that there was no privity between the assessee and the foreign seller, so that it could be said that the goods were imported as a result of that contract. For this view, the Board of Revenue relied on the decision rendered by this court in Rajeswari Mills Ltd. v. The State of Madras [1964] 15 S.T.C. 1. The Board of Revenue also rejected the assessee's contention that there has been a transfer of documents of title from Patel and Co. to the assessee when the goods were on the high seas, for the reason that it has not been established that there has been transfer of documents of title from Patel and Co. to the assessee long before the goods reached the customs frontier.

4. The learned counsel for the assessee contends that even if the finding of the Board of Revenue that there has been no transfer of documents of title before the goods reached the customs frontier is accepted, its finding on the first question as to whether the purchases made from Patel and Co. by the assessee is not a purchase in the course of import cannot be correct in view of the decision of the Supreme Court in Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, [1966] 17 S.T.C. 473 and of this court in Larsen and Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 S.T.C. 150. The view taken by this court in Rajeswari Mills Ltd. v. The State of Madras [1964] 15 S.T.C. 1 that the movement of the goods should be in pursuance of or incidental to the contract entered into by the assessee, and that there should be a privity between the foreign seller and the assessee so as to bring the transaction within Section 5(2) of the Central Sales Tax Act has not been accepted as correct in the decision in Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 S.T.C. 473. The Supreme Court in that decision had held that before a sale could be said to have occasioned the import, it was not necessary that the sale should have preceded the import, that if the movement of the goods from the foreign country was incidental to or in pursuance of the conditions of the contract between the assessee and the local seller, who actually imported, that would come within the expression 'occasions the movement of goods' occurring in Section 5(2) of the Central Sales Tax Act. One- of the circumstances that was considered in that case was that according to the contract entered into between the assessee and the local seller there was no possibility of the goods being diverted by the seller for any other purpose after import. The Supreme Court specifically dealt with the question as to whether there should be privity between the assessee and the foreign seller for the purpose of bringing the sale within the scope of Section 5(2) of the Act, and expressed the view that the question of privity is immaterial so long as the sale has occasioned the import. It is because of this categorical pronouncement of the Supreme Court as to the nature of an import sale, this court in Larsen and Toubro Ltd. v. Joint Commercial Tax Officer [1967] 20 S.T.C. 150, has specifically stated:

We may in passing observe that in view of Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, [1966] 17 S.T.C. 473, Rajeswari Mills Ltd. v. The State of Madras [1964] 15 S.T.C. 1 can no longer be regarded as laying down the correct proposition as to the scope of Section 3(a) and Section 5(2) of the Central Sales Tax Act.

5. As already stated, the Board has taken the view that the sale of cotton to the assessee by Patel and Co. will not be an import sale, following the view in Rajeswari Mills Ltd. v. The State of Madras [1964] 15 S.T.C. 1 which is no longer good law in view of Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 S.T.C. 473. We are of the view that the facts in this case directly attract the principles laid down in Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 S.T.C. 473.

6. We, therefore, allow the appeal and set aside the order of the Board of Revenue. There will be no order as to costs.


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