State Taxation Tribunal - West Bengal
Indure Limited vs Commissioner Of Commercial Taxes And ... on 11 February, 2000
Equivalent citations: [2002]125STC145(TRIBUNAL)
JUDGMENT
J. GUPTA (Judicial Member)
1. The applicant, a limited company having its registered office at New Delhi and a unit office at Durgapur Projects Limited, Durgapur (Burdwan), has challenged the validity of an assessment order and the corresponding appellate and revisional orders. In connection with erection of an ash handling plant (in short, AHP) at Farakka, global tenders were invited by the National Thermal Power Corporation Ltd. (NTPC). The applicant-company (hereinafter referred to as "the company") secured through such international competitive bidding two contracts from NTPC--one for supply of the plant and the other for erection of the same for Rs. 11,81,00,000 and Rs. 1,13,00,000 respectively for Farakka Super Thermal Power Project Stage-II. As per the award letter the quoted prices were inclusive of all taxes and duties and other levies. The award letter, inter alia, specified the exchange rate for different foreign currencies, and required the company to specify within three months the list of equipments and materials to be imported from outside the country. It also laid down the condition that the ownership of the equipment supplied under the supply contract would vest with NTPC. To discharge such contractual obligations the company made an application to the Joint Controller of Imports and Exports for import licence under the Duty Exemption Scheme, stating that it was for the special imprest import licence for duty-free import of the materials list of which was given in Part III of the application, In Part IV of the application the company declared that the goods to be imported would be utilised exclusively for consumption as raw materials and components for the contract job and that no part of the same would be sold or used for any other purpose. The company claims that an actual user's import licence (No. 3275408 dated August 21, 1989) was issued by the Joint Controller of Imports and Exports, New Delhi, for importation of the goods specified in the list appended to the licence for supply of the same to NTPC. Daewoo Corporation of Seoul, Korea, as the consignor despatched the M.S. pipes (ERW) A.P. 95L GRADES, BARRELLED ENDS with shipping marks "NTPC-Farakka STG-II (2 x 500 MW) INDURE LIMITED (ASH HANDLING) SPEC/SIZE PCS/BDL No. 1-UP". The company contends that since it was the buyer and the destination was Calcutta it had to obtain permit in form XXXA from the Commercial Tax Officer, Durgapur Charge, because the M.S. pipe was a commodity specified under Section 4A of the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act"). According to the company, the sale of M.S. pipes was in course of import into the territory of India and hence the sale to NTPC was not an intra-State sale. The entire gross turnover of Rs. 3,27,80,671.50 for the sale of M.S. pipe being connected to sale in course of import a claim under Section 5(2)(a)(v) was made by the company. The company filed one consolidated revised return accordingly. But the Commercial Tax Officer (C.T.O.), Durgapur Charge, did not entertain the claim but allowed deduction only in respect of Rs. 12,60,745 under Section 5(2)(b) of the 1941 Act, and he assessed tax, on the remaining part of the turnover, at Rs. 12,60,795. Being aggrieved, the company moved the appellate authority but without success. The company was unsuccessful even before the revisional authority, viz., West Bengal Commercial Taxes Appellate and Revisional Board (in short, "the Board"), because the Board took the view that import procedure ended with taking up of delivery at Calcutta Port. The company has, therefore, moved the instant application before us praying for an order quashing the impugned assessment order, the corresponding appellate order and the order of the Board.
2. In disputing the validity of the company's claim, the respondents in their combined affidavit-in-opposition assert that essentials of "sale in course of import" are lacking in the sale by the company to NTPC. They point out that while in its application for import licence the resultant product has been described as "complete ash handling system (plants), equipments and components thereof on turn-key basis", the self-same application company has declared that the goods intended to be imported would be consumed as raw materials or components or accessories in its factory in its ultimate erection of the plant, and hence, there was no scope for delivery of the imported goods as such, i.e., in the original form to NTPC and accordingly the course of import was disrupted the moment the imported goods were taken delivery of at Calcutta port and were used in the factory for erection of ash handling plant. According to the respondents, the import of goods and use thereof in erection of the plant consisted of two sale transactions--one between the exporter in the foreign land and the company and the other between the company and NTPC whereby imported goods were utilised as raw material or accessories for erecting the plant. They add that according to the company itself the materials were imported against the "actual users' import licence" which indicates that imported materials were to be utilised by the importer itself, i.e., the company, and not by NTPC ; consequently, the course of import was broken before the imported goods in different form were delivered to NTPC. They point out the futility of the company's plea of prohibition on use of the imported goods in breach of condition of the import, because according to them, the company admittedly used the goods in its factory without delivery of the same to NTPC in the form they were imported. According to the respondents, therefore, the import cannot be said to have been on account of NTPC, particularly when the terms of the contract did not make it obligatory to import goods of any particular make or country. The respondents do not admit that sales of goods to NTPC were inextricably connected in any manner with the import, particularly when there was no privity of contract between NTPC and the foreign supplier. They also contend that it is the purchase by the company that occasioned the import and not the sale to NTPC and that mention of NTPC's name in the import licence will not make the sale in course of import by the company because the licence in question was "the actual users' import licence", the company being the actual user.
3. The question to be probed into is whether the impugned sale of M.S. pipe in the process of supply and erection of AHP at Farakka after import of the same from foreign country fulfils the conditions as are essential for a "sale in course of import" within the meaning of Article 286(1)(b) of the Constitution of India.
4. Sub-clause (b) of Clause (1) of Article 286 of the Constitution restricts imposition of tax by a State on a sale or purchase of goods where such sale or purchase takes place in the course of the import of the goods into, or export of the goods out of, the territory of India. In giving a meaning to the expression "sale in the course of import" the Parliament in Sub-section (2) of Section 5 of the Central Sales Tax Act, 1956 has declared that a sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase (1) either occasions such import or (2) is effected by transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.
5. Since the company does not claim tax exemption on the ground that sale of M.S. pipe imported from Korea was sold by it to NTPC by transfer of documents of title to the same (NTPC) before the goods had crossed the customs frontiers of India, we are only to examine if the sale of M.S. pipes actually occasioned the import in question within the meaning of above Sub-section (2) of Section 5 of the 1956 Act. According to the company it got two independent contracts--one for supply of the plant and the other for erection of the said plant. Mr. K.K. Saha, learned counsel for the respondents, contends that the course of import terminated as soon as the company, after delivery of the M.S. pipes at the port, subjected the same to the factory process to transform them into the integral part of the plant, erection of which was the part of a separate contract. He adds that contract of erection, being an independent one, could be validly given to any other contractor. It is, therefore, necessary to be seen if there existed two separate independent contracts.
6. Perusal of the documents relating to the erection of a complete AHP at Farakka and the nature of the contract make it difficult to conceive that they were two independent contracts. During the hearing of the case a bunch of additional documents were filed before us by the company and the authenticity of such documents have not been disputed by the respondents. "The scope of the work" as given in the advertisement published inviting tenders covers the whole process right from designing till commissioning of a complete AHP, keeping within its fold, the intervening processes like manufacture, inspection, testing, packing, transportation, unloading, storage and handling at site. Again, in section INB titled "Instructions to bidders" of the condition of contract the terms of bid have been spelt out. Paragraph 1.1 of the same speaks of bids in respect of "equipments to be furnished and erected". The scope of the work has been stated in greater details in paragraph 5.1 under the heading "scope of the proposal". It mentions that it shall be the "single bidder's responsibility" to completely cover the activities from designing to completion of trial operation. Para 18.1, under the heading "Price Basis, Currencies and Payments", requires the bidders to quote in the proposal lumpsum price for the entire scope of the work. Thus, quotation was to be for the work as a whole covering of the phases as mentioned in paragraph 5.1. Again, in terms of para 27.1 bid price is to include among others the erection cost (EC). The general terms and conditions of the contract are given in section GCC. Para 1.1 of the said section again reiterates the scope of the contract making the whole process from designing to satisfactory operation of the plant as integral parts of the contract. Para 3.7 defines the expression "works" as follows :
" 'Works' shall mean and include furnishing of equipment, labour and services as per specifications and complete erection, testing, putting into satisfactory operation including transportation, handling, unloading and storage at the site as defined in the contract."
7. In the context of the above position it is pertinent to refer to para 11 where meaning of contract price is given as follows :
"The lumpsum price quoted by the contractor in his bid with additions and deletions as may be agreed and incorporated in the letter of award for the entire scope of the works shall be treated as the contract price."
Thus, there is little practical scope to split the contract into two, viz.-- one for the supply of the plant and other for erection of the same. However, in between submission of the tender by the company and the issue of the "award of work" by NTPC there were discussions and meetings as evident from the "award of work"--document. Pursuant to such discussion it was agreed upon by the sides that in the case of the award two separate contracts, i.e.,--one for the supply and the other for erection of the plant, would be made, but that too with "cross-fall breach clause". The reason for such splitting up of the contract has, however, been explained by Mr. G.C. Mookerji, learned counsel for the company. He submits that the project in question is partially financed by credit/loan from International Development Association (IDA)/International Bank of Reconstruction and Development (IBRC) and hence in terms of Import Export Policy, Volume I (April 1988--March 1991) supplies made in such project under the procedure of international competitive bidding, are treated as "deemed exports". He draws our attention to Clause 199 of such policy. He points out that such suppliers to such schemes enjoy, inter alia, benefit of customs duty exemption for import and that unless the part of the contract involving importation of accessories, equipments, etc., for the purpose of use in the AHP is not treated as "supply contract", such benefit cannot be availed of, and that a single contract of the nature of works contract for erection of such plant according to the specifications as given in the "scope of works" will not be eligible for the benefit. Though the scope of work was split up into two parts for the purpose of benefit mentioned above, for all practical purposes it is a single contract. An assembled unit of AHP is not a portable item so that its supply from the assembly site is possible for the ultimate purpose of erection at a different spot. At the site the erection process in reality is the assembly of plant, parts including the imported ones. That the parties are quite aware of inseparability of the one part from the other is evident from the documents executed even after they agreed to show the whole contract-job as consisting of two parts. The letter (vide page 4 of the annexure to the application) in para 3 makes it clear that though there are two contracts on paper, they were not independent ones. Not only the so-called two contracts form parts of the same contract-document, para 3.2 contains a recital as follows :
".................It is expressly understood and agreed by you that any breach under the erection contract shall automatically be deemed as a breach of this supply contract vice versa and any such breach or default giving us a right to terminate the erection contract and/or recover damages thereunder shall give us an absolute right to terminate this supply contract and/or recover damages under the supply contract as well, and vice versa. However, such breach or default in the erection contract shall not automatically relieve you of any of your obligation under this supply contract. It is also expressly understood and agreed that the materials/equipments supplied by you under this supply contract when erected and commissioned under erection contract shall give satisfactory performance in accordance with the contract."
8. This clearly leaves out of consideration Mr. Saha's contention that the erection contract could be separately given to another contractor. In their letter to the DGTD, Import & Export Directorate (vide page 29 of the application) the company has made abundantly clear that it is a turn-key contract. Similarly, in their application for licence under the "Duty Exemption Scheme" (annexure to the application, at page 35) too the company declares it as a turn-key contract. Though in their certificate (annexure B to the application) NTPC mentions of value of AHP supply and its erection separately, it (NTPC) at the same breath speaks of turn-key contract. A supply order on turn-key basis is meaningless unless it includes the stage of commissioning of the plant.
9. In view of the above circumstances, we are of the opinion that it was a single works contract within the meaning of Section 6D of the 1941 Act.
10. Mr. Mookerji submits that be it a works contract for erection of an AHP or a transaction consisting of two contracts, viz., supply contract and erection contract, there is no escape from the position that the goods imported from Korea were exclusively meant for use in the job and that for transfer of such goods, be it in the same form as imported or not, amounts to sale in course of import. He points out that by virtue of the 46th Amendment of the Constitution of India, incorporating Clause (29A) into Article 466, a concept of deemed sale has been introduced for the purpose of sales tax and such deemed sale shall include transfer of property in goods (whether as goods or in some other form) involved in execution of a works contract. He adds that such deemed sale has all the connotations and limitations of a "sale" in the context of sales tax. He, refers to the Supreme Court's decision in the case of Builders Association of India [1989] 73 STC 370. The observation of the Supreme Court in the said decision, as is material for us, is as follows :
"We, therefore, declare that sales tax laws passed by the Legislatures of States levying taxes on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract are subject to the restrictions and conditions mentioned in each clause or sub-clause of Article 286 of the Constitution."
11. Be it mentioned that Sub-clause (b) of Clause (1) of Article 286 prohibits, inter alia, imposition of tax on sales in course of import of goods into the territory of India. Therefore, if the company is in a position to establish that the deemed sale by way of transfer of the M.S. pipes and other accessories imported by them into India can be treated as deemed sale "in course of the import", it shall be entitled to exemption from sales tax.
12. According to Mr. Mookerji, the whole transaction consisting of filing of tender, terms of acceptance of the same, actual importation of the M.S. pipes, etc., and utilisation of the same in course of erection of AHP contain the essential elements of sale "in course of the import". He points out (i) that import was exclusively for execution of the contract job, (ii) that the necessity to import is recognised in the terms of the contract, (iii) that even the foreign seller was made aware of the purpose of the import and (iv) that there was no scope for diversion of imported goods for any purpose other than the execution of the contract job in question, According to him, the deemed sale and the import formed the part of the same integrated activity and hence the sale of the materials to NTPC is in course of the import of the same from Korea. In elaborating his point he firstly says that para 4.5.2 of the award letter speaks of furnishing, within three months from the date of the award letter, of the list of components/materials/equipments to be imported by the company for which adjustment in the exchange rate variation is to be made under U.S. $ (doller), D.M. and Jy. According to him, it is clear that import of the components/materials/equipments is a part of contracted job and it has the approval of NTPC. But we are unable to give such a construction to the clause appearing in para 4.5,2. Firstly, it is to be borne in mind that it was a case of global tender. The award letter was drafted keeping in mind the prospective foreign bidders who might participate in the bid. Secondly, the above clause or any other document executed in connection with the contract imposes no obligation to import. Para 4.5.2 simply indicates that in case of import of any material/component/equipment, etc., from a foreign country, the successful bidder has to furnish within the specified time period a list of components/materials/equipments, etc., to be imported for which adjustment on exchange-rate variation would be available. The contract documents do not demand use of component/material/ equipment of any foreign brand, viz., any particular manufacturer, obligatory, so that by necessary implication it becomes obligatory to import goods of any particular foreign make or foreign origin having the brand name. The position in this regard is made clear in Clause 7.1 in section INB of the conditions of contract by the following expression :
"The specific reference to these specifications and documents to any material/equipment by brand name, make or catalogue number shall be construed as establishing standard of quality and performance and not as limiting competition. However, bidders may offer other similar material/equipment provided they meet the specified standard, design and performance requirements."
13. Thus, only for indicating the standard of quality the brand name, make or catalogue numbers are relevant for the purpose of the contract, and the bidder is at liberty to go for similar materials provided such materials are of the specified standard. Para 8.0 of the same document gives liberty to offer, in addition to a base proposal, alternative proposals for reasons of economy or better performance provided such materials would fully meet the requirements of the bid-documents. Therefore, import of materials/equipments is not essential part of the contract. Use of indigenously manufactured material/equipment of the standard quality could have, thus, served the purpose without offending the terms of the contract. That the company decided to import or not to purchase necessary materials/ equipments from other importers in India is the matter of company's own choice.
14. Mr. Mookerji's next plea is that undisputedly the import having been made for the exclusive purpose of its contract with NTPC, the transfer of the imported goods if amounts to sale or at least deemed sale, such sale cannot but be a sale in course of import. But even if the import by the company was to meet its contractual obligation such import was at most an "import for sale" which is distinct from a "sale in course of import". We shall embark upon its elaboration in the latter part of our judgment.
15. Mr. Mookerji next contends that knowledge of the foreign seller about the intended sale to NTPC and also the instruction on the seller for a shipping marking "NTPC-FARAKKA STG-II, (2 x 500 MW) INDURE LIMITED (ASH HANDLING) SPEC/SIZE-PCS/BDL No. 1-UP" left no scope for diversion of the goods to any destination other than NTPC-FARAKKA-STG-II. He also argues that since import licences are issued for the purpose of use of the imported material in execution of the supply and erection of AHP, the company was exposed to a penal measure for any use of the materials other than the said purpose. But none of the factors provides absolute prohibition from diversion of the imported materials to other destination. The shipping marking was done by the foreign seller on the request of the company, but the seller had little concern with how or where the materials were to be used by its purchaser after taking delivery. There was no privity of contract between the foreign seller and NTPC direct or NTPC through agency of the applicant. In the bill of lading the company is the notified party and the port of discharge was Calcutta where the applicant on its own behalf took the delivery. Diversion of the materials after such delivery would not amount any breach of the company's contract with the foreign seller or with NTPC. According to para 5 of its application, the declared purpose for the import was to consume of the imported goods as raw materials/components in the company's factory. Therefore, the licence was to an actual user. Since under the contract use of the material of any particular brand was not obligatory, the company, as the actual user, could even use the imported materials for the purpose other than the professed purpose of the import provided the goods similar to those imported has already been supplied in the context of the job for which the import was made. In this context, it may be mentioned that appendix 13B of the Import Export Policy, Vol. I (April, 1988 to March, 1991) contains specific provisions (vide para 1A of Notification No. 210/82-Customs, dated September 10, 1982). Again, paragraph 108 of the said policy further provides that where the actual user is unable to utilise the imported materials he can also transfer to other actual user under certain circumstances. This position has not been disputed by Mr. Mookerji. So, it cannot be said that diversion of the imported goods was not permissible under any circumstances. Moreover, as we have already stated that the failure to use the imported materials for supply to the NTPC would not have any rate cause any breach of contract either with NTPC or with the foreign seller. Such failure to use atmost would have been against the condition of the import licence.
16. We now refer to certain reported decisions of the apex Court of our country as well as some decisions of other High Courts to ascertain how the expression "in course of export" and "in course of import" has been interpreted and how far the company's claim stands vis-a-vis the said decisions. Before the Central Sales Tax Act, 1956 (the "1956 Act") came into force the Supreme Court in the case of State of Travancore-Cochin v. Bombay Company Ltd. [1952] 3 STC 434 examined what consisted a sale in course of export. Patanjali Sastri, C.J., observed that a sale by export involves a series of integrated activities commencing from the agreement of sale with a foreign buyer and ending with the delivery of the goods to a common carrier for transport out of the country by land or sea and that such sale cannot be dissociated from the export without which it cannot be effectuated, and the sale and the resultant export form parts of a single transaction. After the Central Sales Tax Act, 1956 came into force, the expressions "in course of import" and "in course of export" were given legislative meaning in Sub-sections (1) and (2) of Section 5 of the Act. The Supreme Court was called upon in the case of Ben Gorm Nilgiri Plantations Co., Coonoor v. Sales Tax Officer, Special Circle, Ernakulam [1964] 15 STC 753, to decide the implications of such expression. Mr. Mookerji has relied on this decision. In that case a tea exporter after obtaining allotment of export quota sold tea chests in public auction. The agent and intermediaries of foreign buyers being successful bidders obtained licence from the Central Government for export. The court held that there was nothing in the transactions which could link the sale and the intended export so as to form them parts of the same transaction. The deciding factor was that the seller had no concern with the export nor did the sale impose or involve any obligation to export, leaving the possibility of the goods being diverted for internal consumption. The court considered these sales were "for export" but not "in course of export". In laying down the principle the court observed :
"In general where the sale is effected by the seller, and he is not connected with the export which actually takes place it is a sale for export. Where the export is the result of sale, the export being inextricably linked up with the sale so that the bond cannot be dissociated without a breach of the obligation arising by statute, contract or mutual understanding between the parties arising from the nature of the transaction, the sale is in the course of export."
17. In the above reported case claim for exemption of tax on the ground of sale in course of export was rejected by the majority decision. The reason for such decision is explicit in the part of the decision quoted above. The position in regard to sale "in course of import" may be made clear if we refer to the case of K.G. Khosla and Co. (P) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras Division, Madras [1966] 17 STC 473 (SC). In that case the applicant-company (assessee) entered into a contract with the Director-General of Supplies and Disposals, New Delhi, for supply of axle-box bodies which according to the contract was to be manufactured according to the specifications in Belgium. D.G.I.S.D., London or his representatives were to inspect the goods at the works of the manufacturer. As regards payment, the term included that in the case of delivery on f.o.r. basis the assessee was entitled to 90 per cent payment after inspection of proof of despatch and balance 10 per cent after receipt of the stores by the consignees (Southern Railway at Perambur Works and at Mysore) in good condition. The assessee was entirely responsible for execution of the contract. If the stores supplied were found to be not in terms of contract in all respects, it was lawful for the consignee to reject the stores on arrival at the destinations. The question for decision was whether the sale by the assessee was in course of import, and exempted from sales tax on that ground. While the court decided it in affirmative it observed as follows :
"The next question that arises is whether the movement of axle-box bodies from Belgium into Madras was the result of a covenant in the contract of sale or an incident of such contract. It seems to us that it is quite clear from the contract that it was incidental to the contract that the axle-box bodies would be manufactured in Belgium, inspected there and imported into India for the consignee. Movement of goods from Belgium to India was in pursuance of the conditions of the contract between the assessee and the Director-General of Supplies. There was no possibility of these goods being diverted by the assessee for any other purpose. Consequently we hold that the sales took place in the course of import of goods within Section 5(2) of the Act, and are, therefore, exempt from taxation."
18. Thus, manufacture of axle-box bodies in Belgium and import of the same into India were in pursuance of the sale contract and hence the sale was in course of import. It is equally pertinent to refer to the decision of the Calcutta High Court in the case of Linotype and Machinery Limited v. Commercial Tax Officer, Sealdah Charge [1973] 32 STC 246. In that case the assessee, a company incorporated in England and having its works in England and an office in Calcutta, was a manufacturer of linotype machines. The Government of India placed two orders for two such machines of certain specifications for supply to the Government of India Press, New Delhi. Similar order was placed by the Controller of Stores, Punjab, for supply to the Controller of Printing and Stationery, Chandigrah. The contract of sale provided that the prices quoted was provisional and subject to change according to the price prevailing at the time of shipment and subject to other expenses like sea freight, insurance, customs duty, etc. The delivery date was also settled with reference to the expected date of shipment from England. The goods were manufactured accordingly and shipped from England. The Commercial Tax Officer assessed tax on these transactions but both the Government of India and the Government of Punjab declined to pay taxes on the ground that the sales were exempted from tax under Section 5(2) of the 1956 Act. The issue before the High Court was whether the sales were in course of import. The High Court while answering the question in affirmative pointed out the following aspects of the transaction :
"The goods under the contract of sale were to be manufactured by the petitioner at its works in England and were to be shipped from England. The said delivery dates were fixed with reference to the expected dates of shipment from England. The machines were prepared according to the special specifications of the buyers. The prices quoted were provisional and the actual prices were to be fixed according to the prices of the goods ruling at the time of shipment of the same from England. Costs of carriage to the port of shipment and also sea freight and insurance charges were added to the prices for the machines. It has also admitted that machines were actually imported from England and supplied to the Government of India and the then Government of Punjab."
The court held that sales were in course of import. There could be little doubt to the position that import from England was the inextricable part of the contract.
19. Next we advert to the decision in the case of Binani Bros. (P) Ltd. v. Union of India [1974] 33 STC 254 (SC). Mr. K.K. Saha, learned counsel for the respondent has relied on this decision in support of the respondents' stance. In that case the petitioner before the Supreme Court was a company engaged in an import and delivery of non-ferrous metals and was one of the registered suppliers to the Directorate-General of Supplies and Disposals (DGS & D). The appellant had been supplying, on import, such non-ferrous metal to the respondents Nos. 1, 2 and 3 and the Government of India, in placing the orders, used to grant import licence. On the basis of the decision in K.G. Khosla's case [1966] 17 STC 473 (SC) the respondent No. 2 issued direction on the Pay and Accounts Officer, Ministry of Works, Housing and Supply (respondent No. 4) not to pay sales tax in respect of supply of stores imported against import licences issued by the Government of India in connection with the supply orders placed by the DGS & D. The respondent No. 4 threatened to recover a tax already paid and deducted tax amount from a pending bill. When the appellant's prayer for refund of the tax already paid was refused by the sales tax authorities the appellant moved the honourable Supreme Court under Article 42 of the Constitution. The court, after referring to various earlier decisions, negated the claim of the petitioner on the ground as set-forth below :
"To put it differently, the sales by the petitioner to the DGS & D did not occasion the import. It was the purchases made by the petitioner from the foreign sellers which occasioned the import of the goods. The purchases of the goods and import of the goods in pursuance to the contracts of purchases Were, no doubt, for sale to the DGS & D. But it would not follow that the sales or contracts of sales to the DGS & D occasioned the movement of the goods into this country. There was no privity of contract between the DGS & D and the foreign sellers. The foreign sellers did not enter into any contract by themselves or through the agency of the petitioner to the DGS & D and the movement of goods from the foreign countries was not occasioned on account of the sales by the petitioner to the DGS&D...................
There was no obligation under the contracts on the part of the DGS & D to procure import licences for the petitioner, On the other hand, the recommendation for import licence made by the DGS & D did not carry with it any imperative obligation upon the Chief Controller of Imports and Exports to issue the import licence. Though under the contract the DGS & D undertook to provide all facilities for import of the goods for fulfilling the contracts including an Import Recommendation Certificate, there was no absolute obligation on the DGS & D to procure these facilities. And, it was the obligation of the petitioner to obtain the import licence. Therefore, even if the contracts envisaged the import of goods and their supply to the DGS & D from out of the goods imported, it did not follow that the movement of the goods in the course of import was occasioned by the contracts of sale by the petitioner with the DGS & D."
20. Mr. Saha has relied on the decision of this Tribunal in the case of National Galvanising Company Put. Limited v. Deputy Commissioner of Commercial Taxes [1997] 104 STC 521. In that case the Tribunal was called upon to decide a similar dispute. In that case the applicant-company engaged in hot dip galvanizing works, got certain M.S. cable trays and accessories from Gram Engineering for galvanizing. To accomplish the job the applicant purchased from M. Ratan & Company, a consignment of zinc which was still in high seas in the course of import from Zanzibar. The applicant's plea was that the sale of zinc to Gram Engineering in accomplishing the works contracts for galvanising work was in course of import because the zinc in question was transferred to it (the applicant) before it crossed the customs frontier of India, This Tribunal following various reported decisions dismissed the plea of the applicant, pointing out that Gram Engineering has no concern as to wherefrom the applicant-company was to procure the zinc necessary for accomplishing the job. The Tribunal observed as follows :
"The applicant-company was in need of zinc for galvanising the articles given by its customers. It is just a coincidence that M. Ratan and Company was at the relevant point of time importing zinc from Zanzibar and the applicant-company took the opportunity of purchasing the same while the zinc was in high sea. In the contract between Gram Engineering and the applicant-company there was absolutely no stipulation that the galvanising job was to be executed with the zinc to be imported from Zanzibar or to be purchased from M. Ratan and Company while the consignment of zinc was still in high seas. The fact that there was no sufficient stock of zinc in the custody of the applicant at the time the applicant undertook the job of Gram Engineering does not make the import of particular consignment of zinc a part of contract between Gram Engineering and the applicant."
21. We now advert to the case of import as is before us. NTPC has no concern wherefrom the company would procure the accessories/equipments in accomplishing the contract relating to the AHP, according to the specification, on turn-key basis. It was the company's own choice to import the M.S. pipes and other equipments from Korea. The foreign seller had also no concern with the manner the company was to deal with the imported material. That the foreign seller, on the request of the company, put some specified markings on the materials will not make the sale of the goods to NTPC an inextricable part of the works contract. Failure to import the said materials from Korea or from that particular manufacturer of Korea would not have caused any breach of condition of the contract. The materials of prescribed specification obtained from any other source could have been utilised in accomplishing the contract job without the breach of the contract. The fact that under the import licence the company was to use the imported goods only for its works contract with NTPC is itself of no avail. Be it mentioned that in case of Binani Bros. (P) Ltd. [1974] 33 STC 254 (SC), import licences were issued to the petitioner on the basis of import recommendation certificates issued by DGS & D and even then the sales to DGS & D by the petitioner was not held to have occasioned the import. We also hold that in the case before us there was no privity of contract between NTPC and the foreign sellers either directly or through the applicant as the agent of NTPC. Hence, the sale to NTPC was not in course of import.
22. Mr. Mookerji has referred to certain other reported decisions which are related to export ; but in all the cases the sales in question were so inter-connected with the corresponding export that the exports and the sales formed the part of one integrated transaction and hence could be treated as sale in course of export. But we have already seen that such factor does not exist in the case before us. Moreover, it is worth mentioning that after the decision in the case of Mod. Serajuddin v. State of Orissa [1975] 36 STC 136, the Supreme Court has taken a more restricted view in the matter of sale in course of import. "On the principle laid down by the Supreme Court in the said case there is no question of two sales coming within the scope of Section 5(1) of the 1956 Act and it is only an export sale, i.e., a sale between an exporter and the foreign buyer that will come under the definition of sale in course of export, and all other sales even if inter-connected or integrated with export cannot be treated as sales in course of export."
23. In the result, we are of the opinion that the applicant company is not entitled to the benefit of tax exemption in respect of impugned sales on the ground of its being a sale in course of import.
24. Hence, the sale of the M.S. pipes to NTPC is liable to be taxed. Therefore, there is no reason to hold that either the assessing officer or the appellate authority or the Board erred in their respective findings in that regard. The application is, therefore, dismissed without any order as to costs.
D. BHATTACHARYYA (Technical Member).--I agree.