KRISHNADOS KIKANI Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE assessees in this batch of cases are dealers in cloth, cotton yarn, dyes and chemicals carrying on business at Coimbatore. THEy are also exporters and importers of cotton, cotton yarn, dyes and chemicals. In the returns for the assessment years 1960-61 to 1965-66 in respect of a portion of turnover relating to sales of dyes and chemicals they contended that the sales are exempt as import sales. THEy contended that the sales were effected on forward or afloat basis, that the importation of those goods were made by the Radha Dyeing Factory, hereinafter called as the purchasers, by paying the value of the goods including customs duty and that the assessees acted only as the agents of the purchasers to whom the goods were sold. In this connection, they relied on a preliminary agreement between them and the purchasers as evidenced by their letter dated 15th March, 1960, and later a formal agreement dated 7th April, 1961. THE facts relating to these turnovers as evidenced by this letter and the agreement are as follows :

(2.) IN these petitions, the learned counsel for the assessees strenuously contended that there was only one transaction of sale, which was an import sale, and that the assessees were acting only as agents for their purchasers and there were no two transactions of sale. IN this connection, he also relied strongly on the decisions in Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes, Madras Division [ and Deputy Commissioner of Agricultural INcome-tax and Sales Tax, Central Zone, Ernakulam v. Kotak & Co. On the other hand, the learned Government Pleader contended that in view of the later decisions reported in Binani Bros. (P.) Ltd. v. Union of INdia and Mod. Serajuddin v. State of Orissa unless there is a direct contract between the purchasers and the foreign sellers, it could not be treated as an import sale and that in this case there were two sales, one by the foreign sellers to the assessees and another by the assessees to the purchasers. The learned Government Pleader also relied on a decision of this court reported in State of Tamil Nadu v. Visweswaradas Gokuldass the facts of which are very similar with the facts of this case. IN Khosla & Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes the relevant facts were these. The assessee entered into a contract with the Director-General of Supplies and Disposals, New Delhi, for the supply of axle-box bodies. The goods were to be manufactured in Belgium according to the specifications. IN order to fulfil the contract, the assessee entered into a contract with the manufacturer in Belgium. The goods were got manufactured and imported into INdia and cleared at the Madras Harbour and supplied to certain parties on the instructions of the Director-General of Supplies and Disposals. There was no privity of contract between the Belgium manufacturers and the Government departments, who ultimately received the supplies. The Supreme Court held that the movement of the goods from Belgium into INdia was incidental to the contract entered into by the assessee with the Director-General of Supplies and Disposals, that there was no possibility of the goods being diverted by the assessee for any other purpose and that, therefore, the sale took place in the course of import of goods within section 5(2) of the Central Sales Tax Act and exempt from taxation. IN Deputy Commissioner v. Kotak & Co. a textile mills, which had an import licence gave a letter of authority to a firm, which was the assessee in that case, to import the goods and deliver them to it. The mills specified in the contract entered into between them and the assessee the quantity of all the imported cotton to be supplied, its quality and the place from where it was to be imported. The payment was to be made by the mills against the documents. The letter of authority provided that the firm

(3.) THE State Trading Corporation thereafter entered into a f.o.b. contract with the assessee and with the foreign buyers on identical terms. This procedure was followed because the commodity could not be exported directly by the assessee in view of the restrictions imposed by law. In spite of all these facts, the Supreme Court held that the export was by the Stale Trading Corporation and that there were two transactions of sale and not one transaction of export sale alone. THEse two latter decisions are, therefore, authorities for holding that the mere fact that the sale was for export, or the import was for the purpose of fulfilling a prior contract will not make it by itself a sale in the course of export or import. A privity of contract between the foreign buyer and the exporter or the importer and a foreign seller is necessary in order to make that transaction one in the course of export or import. It is also immaterial that the local purchaser had helped the importer in the import of the goods by finding out the foreign seller or assisting him in the placing of orders or clearing the goods from the port. What is material is a privity of contract between the ultimate purchaser and the foreign seller in order to make that transaction a sale in the course of import. We have also taken the same view in our decision reported in State of Tamil Nadu v. Visweswaradas Gokuldass Now coming to the facts of this case, it may be seen that the import licence was in the name of the assessees and the licence could not be transferred. THE agreement between the assessees and the purchasers only made the purchasers obliged to help the assessees in importing the goods by paying the premium or part of the price in advance and taking all steps required for importing the goods within the time prescribed. In fact, the contract with the foreign seller was only by the assessees and the order is placed only in the name of the assessees and the import was also effected in the name of the assessees. If the purchasers were holding the import licence and the assessees had helped them in importing the goods as in the case of Deputy Commissioner of Agricultural Income-tax and Sales Tax v. Kotak & Co. the position would have been different.