1. The petitioner in this case is a co-operative society. It entered into an agreement dated 21st September, 1962, with the State Trading Corporation (hereinafter referred to as the corporation) which had a bulk import licence to import on the latter's behalf copra from Ceylon and distribute the same to crushers in Kerala State, who were called allottees and who were registered with the Ministry of Commerce and Industry, Government of India. The list of allottees with the quantity allotted to each of them was given in annexure 1 to the said agreement. The petitioner, in accordance with the terms of the agreement, had to notify each allottee his allocation from time to time and require him to indicate the quality of copra, the pattern of delivery and his preference, if any, as to the foreign supplier. The petitioner has to import copra from time to time in accordance with the agreement entered into with the State Trading Corporation and distribute it to the allottees as per their requirements. The petitioner was allowed to take half a per cent of the c. i. f. value of the goods for meeting its overhead expenses. The petitioner has undertaken the liability to pay as premium a sum of Rs. 290 per ton on the landed weight of copra to the corporation. The petitioner had also entered into an agreement with each one of the allottees undertaking to import the quantity of copra allotted to each of them on account of the allottee's share of copra from the bulk licence of the corporation on each of the allottees making a particular amount as a deposit having regard to the tonnage to cover the initial expenses towards insurance, etc. Under the said agreements, the allottees have undertaken to honour the drafts from the bankers of the petitioner for the c. i. f. value of the shipment, the import duty, the clearing and handling charges and the premium payable by the society to the corporation as also the society's commission of half a per cent and other incidental charges. The modus operandi adopted by the society in importing copra from Ceylon was as follows: The various allottees write to the petitioner selecting the dealers from Colombo from whom they require copra as also the quantity, quality and rate, etc. and on that basis the petitioner contacts the foreign suppliers and settle the price as well as the quantities to be supplied according to the delivery pattern suggested by the allottees. Thereafter, the petitioner sends to the allottees purchase orders in quadruplicate to be duly filled up for confirmation by the allottees as also the Colombo sellers or their agents, as the case may be. The purchase order contains the price and the other terms such as the time and place of delivery, etc. and it is signed by the petitioner, allottee and the Colombo seller. In pursuance of the said purchase order the goods are shipped by the Colombo seller and the necessary insurance is effected by the allottees to cover 110 percent value of the goods shipped. The Ceylon seller however prepares the documentary bills in the name of the petitioner which had instructed its bankers, the Canara Bank Ltd., to honour the bills drawn on it by the Colombo seller and take delivery of the documents. The petitioner in its turn draws a bill of exchange as well as invoice on the allottee and asks its bankers to collect the amount from the allottee and deliver the documents to the allottee on payment. On receipt of payment from the allottees, the bank directs clearing agents to deliver the goods to the allottees. Thereafter, in the accounts of the petitioner credit is given to the allottees for the payments made by them and debits are made for the monies paid to the foreign seller, the freight and clearing charges incurred and the commission paid to the petitioner.
2. For the assessment year 1963-64, the petitioner was assessed to sales tax under the Madras General Sales Tax Act, 1959, on best judgment basis on a turnover of Rs. 7,92,402.64 and a tax of Rs. 15,848.05 and a penalty of Rs. 23,772.08 Under Section 12(3) of the Act were levied. The assessing authority had rejected the petitioner's contention that it was not a dealer, that it imported goods only on behalf of the allottees already named by the corporation, that it did not purchase or import any goods on its own account, that it was a clear case of direct purchase by the allottees from the Ceylon sellers and that there was neither a purchase nor a sale by the petitioner. The assessing authority also rejected the petitioner's further contention that, in any event, the alleged sales were in the course of import within the meaning of Section 5(2) of the Central Sales Tax Act and as such not liable to tax under the Madras General Sales Tax Act, 1959. The order of assessment was also confirmed on appeal.
3. There was a further appeal to the Sales Tax Appellate Tribunal. Though it upheld the assessment, it reduced the penalty from Rs. 23,772.08 to Rs. 1,000. Before us, the learned counsel for the petitioner challenges the view taken by the Tribunal as regards the taxability of the transactions in question.
4. On behalf of the petitioner it is contended that in importing copra from Ceylon and in supplying the same to the various allottees it has neither acted as a dealer nor effected any sale and that, in any event, even if the import and the distribution are taken to be sales, such sales will be in the course of import not liable to be taxed under the Madras General Sales Tax Act. The learned counsel has taken us through the various terms of the two agreements, one entered into between the corporation and the petitioner on the one hand and the other entered into between the society and the allottees. According to the learned counsel, the Tribunal went wrong in holding that there was no direct purchases by the allottees from the foreign sellers and that it was the petitioner who had purchased from the Ceylon seller. We are inclined to agree with the contention of the learned counsel for the petitioner that the Tribunal has not appreciated properly the nature of the transactions. As already stated, the purchase order has been signed by the foreign seller, the allottee and the petitioner-society. There is thus privity between the foreign seller and the allottee on whose requirement and specification the goods have been consigned. Though the goods have been shipped in the name of the petitioner, it cannot be said that the petitioner had any right of disposal over the goods for under the agreement entered into by the petitioner with the corporation, the goods have to be imported and delivered only to the allottees and the goods had been insured at the cost of the allottees. In similar circumstances, this court in National Chamber of Commerce v. State of Madras  25 S.T.C. 185, held that a person like the petitioner can be treated only as an agent of the allottees and that he cannot be treated as a 'dealer' purchasing and selling goods on his own behalf. The fact that the purchase order has been signed by the allottee and the foreign seller indicates that the purchase was directly by the allottee from the foreign seller through the petitioner as an intermediary for the purpose of import. As a matter of fact, the petitioner had no import licence in its name and it had been merely authorised by the corporation to import copra on the basis of the bulk licence issued in its name by the Government of India on behalf of the named allottees. Therefore, we are of the view that the Tribunal is not right in holding that there has been a sale by the foreign seller to the petitioner and a further sale by the petitioner to the allottees. On the facts, there is only one sale by the foreign seller to the allottees though the goods are routed through the petitioner which has merely been authorised to import and distribute copra by the corporation in pursuance of an agreement entered into between them.
5. On the further question as to whether even if the petitioner-society is taken to have sold the goods to the various allottees, such sales could be brought in for charge as a local sale. The contention of the petitioner is that such a sale will be in the course of import. The Tribunal has taken the view that the transaction is not a sale in the course of import on the ground that the movement of the goods from Ceylon was not as a result of a covenant in the contract of sale between the petitioner and the allottees that there was no direct purchase by the allottees from the foreign sellers and that the goods from Ceylon were shipped to the petitioner. But, we are of the view that on the facts of this case, the conclusion is inescapable that the transaction will be a sale in the course of import. As already stated, the purchase order has been signed by the seller in Ceylon and the petitioner-society as well as the allottee. Therefore, when the goods were shipped by the foreign seller he was aware as to whom the same are intended. The quality and the quantity of the goods shipped were as per the requirements of the allottees, though it is the petitioner-society that actually placed the purchase order. It can, therefore, be said that the sale by the petitioner-society to the allottee has occasioned the import of the goods, especially when the agreement between the petitioner-society and the allottee preceded the import. In Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes  17 S.T.C. 473, the Supreme Court expressed the view 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 it is sufficient if the movement of the goods from the foreign territory was incidental to, or in pursuance of, the contract between the acutal importer and the local purchaser and if there was no possibility of the goods being diverted by the importer for any other purpose. It is common ground that the petitioner-society placed orders with the foreign seller only after it entered into an agreement with the various allottees and that the agreement between the petitioner-society and the allottees specifically provided that the goods are to be imported from Ceylon and supplied to them as per their requirements on the basis of the bulk licence given in the name of the corporation. We, therefore, accept the contention of the petitioner that even if the petitioner-society can be said to have sold the goods to the allottees, such sales will be sales in the course of import.
6. As we have already held the transactions in question are not taxable under the Madras General Sales Tax Act, there is no question of any penalty being imposed.
7. The tax case is, therefore, allowed and the order of the Tribunal is set aside. There will be no order as to costs.