DY CAIT Vs. KOTAK AND CO

JUDGEMENT

(1.) The common assessee in these cases is a firm, and the firm was assessed to sales tax for three different years. The firm is importing foreign cotton and supplying the same to several mills in India; and the assessments were on the sales effected by the firm to the several mills of the foreign cotton imported by it. The firm objected to the assessments contending that the transactions under which the foreign cotton was passed on to the mills were not sales but were only the result of agency agreements, so that those transactions were not assessable to sales tax; and that even if the transactions were sales, Art.286(1)(b) of the Constitution read with S.5(2) of the Central Sales Tax Act of 1956 saved such transactions from assessment to tax. Both these contentions were rejected by the assessing authority as well as the appellate authority; but the Appellate Tribunal accepted both the contentions. Hence, the State has filed these revision cases.

(2.) On the first question the Government Pleader has contended, on the strength of two decisions of the Madras High Court, that the transactions involved in these cases were really sales and not transfers under agency arrangements. We have seen those decisions; and we have also heard fairly elaborate arguments on the second question. We feel that the assessee firm is entitled to succeed on the second question even if the firm does not succeed on the first question. Therefore, we proceed to consider the second question straightaway; and we proceed as if the transactions were sales without deciding that question.

(3.) Art.286(1)(b) inter alia provides that no law of a State shall impose, or authorise the imposition of, a tax on the sale of goods, where such sale takes place in the course of the import of the goods into the territory of India. Clause(2) of the same Article provides, inter alia, that Parliament may by law formulate principles for determining when a sale of goods takes place in the manner mentioned in clause (1). S.5(2) of the Central Sales Tax Act of 1956 enacts, inter alia again, that a sale 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 either occasions such import, or, etc. We may incidentally mention that S.3 of the Central Sales Tax Act dealing with the sale or purchase of goods in inter state trade or commerce also uses similar language. The reasoning of the Appellate Tribunal is that the sales involved in these cases -- the sales by the assessee firm to the several mills -- are sales in the course of import of the cotton from foreign countries.