Leave granted.
Was the High Court right in rejecting the Reference Application No.3/2002
and Reference Application No.4/2002 in terms of the following observation made in
paragraph 11 of the impugned judgment, which reads as under:
“Thus, the findings recorded by the Tribunal that the sales
occasioned the movement of goods into the country and hence
covered under the first limb of section 5(2) of the Central Act are
findings passed on analysis of facts which are recorded.”
The Department has sought to levy sales tax on sales made by M/s. Tata
Iron & Steel Co. Ltd. (TISCO) in favour of Indian buyer(s) which was challenged by
the respondent-assessee on the ground that the said sale had occasioned the import
and, consequently, they fell within the first limb of Section 5(2) of the Central Sales
Tax Act, 1956, which reads as under:
“A sale shall be deemed to take place in the course of the import
of goods into the territory of India only if it occasions such import.”
In the present case, there were two contracts, broadly speaking. One was
between TISCO and the Indian buyer(s). The other was between TISCO India on
one hand and Tata Inc. (USA) on the other hand. The question which arose before
the High Court was whether the two contracts were so integrated so as to constitute
a “sale” which, in turn, occasioned the imports. According to the assessee, the
Indian buyer(s) had entered into the contract on tripartite basis. According to the
assessee, the tripartite contract and its terms mentioned therein occasioned the
import of the goods from USA to the Indian buyer(s) into India, therefore, the goods
stood exempted in terms of the first limb of Section 5(2) of the 1956 Act. It is urged
on behalf of the assessee that if there is contract between the Indian importer
(TISCO) and its customer in India just not only for sale of goods as such but for
import of goods which can only be supplied to the Indian buyer and which cannot be
diverted and if the foreign source is clearly identifiable under the contract, then, the
Indian importer (TISCO) is importing goods only for the Indian buyer and that it
was not necessary for the foreign supplier to know about the identity of the Indian
buyer. According to the learned counsel appearing for the assessee, once there is a
contract between the Indian importer and its customer in India for import of goods
to be supplied to the Indian buyer, the contract would come within the first limb of
Section 5(2) of the 1956 Act.
As against this argument, Shri Dholakia, learned counsel appearing for the
Department, submits, on the facts of the case, that in this case, the Indian buyer was
promised by TISCO, the assessee, to procure goods from USA. According to the
Department, two contracts, referred to above, were not inextricably interlinked.
According to the Department, TISCO was the only supplier of the goods to the
Indian buyer. The only obligation undertaken by TISCO was to arrange for
imports from abroad. Therefore, according to the Department, the sales effected by
TISCO to the Indian buyer did not fall within the first limb of Section 5(2) of 1956
Act.
In our view, the High Court had failed to consider various documents
which were placed on record before it, namely, the invoices, the bill of lading, the
modality of payment, the name of the consignee etc. We do not wish to express any
opinion on these documents at this stage. Suffice it to state that the above question
needs to be examined by the High Court de novo in accordance with law. The High
Court had erred in proceeding on the basis that no question of law arose on the
interpretation of the documents placed on record before it.
To simplify the matter, we re-frame the question as under:
“Whether on the facts and circumstances of the case, could
it be said that the contract between the Indian buyer and TISCO on
the one hand and the contract between TISCO and Tata
Incorporated, USA on the other are so inextricably interlinked so as
to attract the first limb of Section 5(2) of the 1956 Act?”
All contentions on both sides are expressly kept open. Parties are given
liberty to file additional documents, if so advised, before the High Court.
Before concluding, it may be mentioned that before the High Court one
additional question arose for determination from the decision of the Tribunal,
namely, whether the sales were in any event exempt under the second limb of
Section 5(2) of the 1956 Act. This question remained unanswered as the High Court
was of the opinion that since the assessee has succeeded in showing that the sales
stood covered under the first limb of Section 5(2), it was not necessary to examine
the question as to whether such sales stood exempted under the second limb of
Section 5(2). However, since we are of the view that an important question of law
arises in the facts and circumstances of the case, as indicated hereinabove, the High
Court shall also consider whether such sales were exempt in any event under the
second limb of Section 5(2) of the 1956 Act.
For the aforestated reasons, the Department's Appeal stands allowed. The
matter stands remitted to the High Court for its decision in accordance with law and
in accordance with the directions given hereinabove.
No order as to costs.
(B. SUDERSHAN REDDY) New Delhi, September 16, 2008.