Case Note & Summary
The dispute arose from the levy of sales tax on sales made by a government undertaking, the appellant, to SAIL and Paradeep Phosphates Ltd. The appellant, acting as a canalising agent for the import and export of minerals and metals, had issued guidelines for the import of iron and steel items. In March 1991, SAIL requested the appellant to register the import of 15,000 MT of tin mill black plate coils, which were to be used in their production processes. A letter of credit was opened by SAIL in July 1991, and the appellant placed a purchase order with the exporter. The coils were imported and sold to SAIL on a high seas basis. The Sales Tax Officer later levied sales tax on these transactions, arguing that there were two sales: one between the exporter and the appellant, and another between the appellant and SAIL, with the latter not occasioning the import. The appellant challenged this in the High Court of Orissa, which upheld the tax levy based on a precedent from the Karnataka High Court. The Supreme Court analyzed the provisions of the Central Sales Tax Act, particularly Section 5(2), which defines when a sale is considered to take place in the course of import. The court noted that the sales were made before the goods crossed the customs frontiers, thus qualifying for exemption from sales tax. The court also referenced a Constitution Bench judgment that clarified the legal position regarding import sales. Ultimately, the Supreme Court allowed the appeal, set aside the High Court's judgment, and made the writ petitions absolute, ruling that the sales were not liable to sales tax.
Headnote
A) Sales Tax - Import Sales - Sales in the course of import are not liable to sales tax - Central Sales Tax Act, 1956, Section 5(2) - The court held that the sales made by the appellant to SAIL and Paradeep Phosphates Ltd. were in the course of import as they were effected by transfer of documents before the goods crossed the customs frontiers of India, thus exempting them from sales tax. (Paras 1-4)
Issue of Consideration
Whether the sales made by the appellant to SAIL and Paradeep Phosphates Ltd. were in the course of import and thus exempt from sales tax under the Central Sales Tax Act, 1956.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's judgment, and made the writ petitions filed by the appellant absolute, ruling that the sales were not liable to sales tax.
Law Points
- Sales tax
- import sales
- Central Sales Tax Act
- 1956
- customs frontier
- high seas sale
