IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.5693 OF 2008 (Arising out of S.L.P.(C) No.7650/2007)

Commissioner of Sales Tax ...Appellant(s)

Versus

M/s. Tata Iron & Steel Co. Ltd. ...Respondent(s)

O R D E R

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:

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“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

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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,

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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.

                         ...................J.               (S.H. KAPADIA)                                                                                                                                                 

                  ...................J.                                         (B. SUDERSHAN REDDY) New Delhi, September 16, 2008.

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