J.GUPTA (Judicial Member) - (1.) THE applicant, a limited company having its registered office at New Delhi and a unit office at Durgapur Projects Limited, Durgapur (Burdwan), has challenged the validity of an assessment order and the corresponding appellate and revisional orders. In connection with erection of an ash handling plant (in short, AHP) at Farakka, global tenders were invited by the National Thermal Power Corporation Ltd. (NTPC). The applicant -company (hereinafter referred to as "the company") secured through such international competitive bidding two contracts from NTPC - -one for supply of the plant and the other for erection of the same for Rs. 11,81,00,000 and Rs. 1,13,00,000 respectively for Farakka Super Thermal Power Project Stage -II. As per the award letter the quoted prices were inclusive of all taxes and duties and other levies. The award letter, inter alia, specified the exchange rate for different foreign currencies, and required the company to specify within three months the list of equipments and materials to be imported from outside the country. It also laid down the condition that the ownership of the equipment supplied under the supply contract would vest with NTPC. To discharge such contractual obligations the company made an application to the Joint Controller of Imports and Exports for import licence under the Duty Exemption Scheme, stating that it was for the special imprest import licence for duty -free import of the materials list of which was given in Part III of the application, In Part IV of the application the company declared that the goods to be imported would be utilised exclusively for consumption as raw materials and components for the contract job and that no part of the same would be sold or used for any other purpose. The company claims that an actual user's import licence (No. 3275408 dated August 21, 1989) was issued by the Joint Controller of Imports and Exports, New Delhi, for importation of the goods specified in the list appended to the licence for supply of the same to NTPC. Daewoo Corporation of Seoul, Korea, as the consignor despatched the M.S. pipes (ERW) A.P. 95L GRADES, BARRELLED ENDS with shipping marks "NTPC -Farakka STG -II (2 x 500 MW) INDURE LIMITED (ASH HANDLING) SPEC/SIZE PCS/BDL No. 1 -UP". The company contends that since it was the buyer and the destination was Calcutta it had to obtain permit in form XXXA from the Commercial Tax Officer, Durgapur Charge, because the M.S. pipe was a commodity specified under Section 4A of the Bengal Finance (Sales Tax) Act, 1941 (in short, "the 1941 Act"). According to the company, the sale of M.S. pipes was in course of import into the territory of India and hence the sale to NTPC was not an intra -State sale. The entire gross turnover of Rs. 3,27,80,671.50 for the sale of M.S. pipe being connected to sale in course of import a claim under Section 5(2)(a)(v) was made by the company. The company filed one consolidated revised return accordingly. But the Commercial Tax Officer (C.T.O.), Durgapur Charge, did not entertain the claim but allowed deduction only in respect of Rs. 12,60,745 under Section 5(2)(b) of the 1941 Act, and he assessed tax, on the remaining part of the turnover, at Rs. 12,60,795. Being aggrieved, the company moved the appellate authority but without success. The company was unsuccessful even before the revisional authority, viz., West Bengal Commercial Taxes Appellate and Revisional Board (in short, "the Board"), because the Board took the view that import procedure ended with taking up of delivery at Calcutta Port. The company has, therefore, moved the instant application before us praying for an order quashing the impugned assessment order, the corresponding appellate order and the order of the Board.
(2.) IN disputing the validity of the company's claim, the respondents in their combined affidavit -in -opposition assert that essentials of "sale in course of import" are lacking in the sale by the company to NTPC. They point out that while in its application for import licence the resultant product has been described as "complete ash handling system (plants), equipments and components thereof on turn -key basis", the self -same application company has declared that the goods intended to be imported would be consumed as raw materials or components or accessories in its factory in its ultimate erection of the plant, and hence, there was no scope for delivery of the imported goods as such, i.e., in the original form to NTPC and accordingly the course of import was disrupted the moment the imported goods were taken delivery of at Calcutta port and were used in the factory for erection of ash handling plant. According to the respondents, the import of goods and use thereof in erection of the plant consisted of two sale transactions - -one between the exporter in the foreign land and the company and the other between the company and NTPC whereby imported goods were utilised as raw material or accessories for erecting the plant. They add that according to the company itself the materials were imported against the "actual users' import licence" which indicates that imported materials were to be utilised by the importer itself, i.e., the company, and not by NTPC ; consequently, the course of import was broken before the imported goods in different form were delivered to NTPC. They point out the futility of the company's plea of prohibition on use of the imported goods in breach of condition of the import, because according to them, the company admittedly used the goods in its factory without delivery of the same to NTPC in the form they were imported. According to the respondents, therefore, the import cannot be said to have been on account of NTPC, particularly when the terms of the contract did not make it obligatory to import goods of any particular make or country. The respondents do not admit that sales of goods to NTPC were inextricably connected in any manner with the import, particularly when there was no privity of contract between NTPC and the foreign supplier. They also contend that it is the purchase by the company that occasioned the import and not the sale to NTPC and that mention of NTPC's name in the import licence will not make the sale in course of import by the company because the licence in question was "the actual users' import licence", the company being the actual user. The question to be probed into is whether the impugned sale of M.S. pipe in the process of supply and erection of AHP at Farakka after import of the same from foreign country fulfils the conditions as are essential for a "sale in course of import" within the meaning of Article 286(1)(b) of the Constitution of India.
(3.) SUB -clause (b) of Clause (1) of Article 286 of the Constitution restricts imposition of tax by a State on a sale or purchase of goods where such sale or purchase takes place in the course of the import of the goods into, or export of the goods out of, the territory of India. In giving a meaning to the expression "sale in the course of import" the Parliament in Sub -section (2) of Section 5 of the Central Sales Tax Act, 1956 has declared that a sale or purchase 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 or purchase (1) either occasions such import or (2) is effected by transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.;