M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX OFFICER, VISAKHAPATNAM

A constituted an inter-State sale and hence, the appellant has rightly been held liable to tax for this inter-State sale. 17.2. While distinguishing the decisions cited on behalf of the appellant, learned counsel for the respondent has argued that the relied upon decisions, essentially relating to the questions as to what triggered B an import and when did the title pass on to an importer, are not relevant for the purpose of deciding as to who has been the importer in the present case. This question, according to the learned counsel, has rightly been examined by the Assessing Officer with reference to the nature of dealings of the parties and such conclusions have rightly been endorsed by the High Court. C

18Copy pinpoint18. We have heard learned counsel for the parties at length and have scanned the record with reference to the law applicable.

19Copy pinpoint19. In summation of what has been noticed hereinabove, it is apparent that while asserting that the sales in question took place “in the course of the import” and do qualify for exemption under Section 5(2) of the CST Act, the main plank of the case of the appellant is that in accordance with the quadripartite agreements, the appellant had transferred the goods on high seas (before goods had crossed the customs frontiers of India) by endorsing the bills of lading in favour of the respective end-buyers and that had completed the sale. On the other hand, the mainstay of the department is that the appellant alone cleared the goods from the customs area after filing the respective bills of entry and thereafter raised debit notes showing sales to the end-buyers; and such sales having taken place only after the goods crossing the customs frontiers of India and the end-buyers being situated outside the State of F Andhra Pradesh to whom the goods were dispatched, the sales in question had only been inter-State sales. The appellant’s counter to such a stand of the department is that filing of bill of entry and assessment to customs duty in accordance with the Customs Act are not the factors determinative of the ownership of goods because the importer could be the owner or even any other person and merely becausethe appellant filed the bills of entry, the legal consequences of transfer of bill of lading when the goods were on high seas cannot be ignored. 19.1. Therefore, the principal issue in these appeals is as to whether the sales in question took place in the course of the import of the goods into the territory of India and qualify for exemption under Section 5(2) of the CST Act?

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 943 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

Sale in the course of import: Connotations A

20Copy pinpoint20. For determination of the principal issue and variety of questions arising in this matter, at the outset, a brief insight into the constitutional and statutory provisions relating to the “sale in the course of import” shall be apposite. 20.1. Under Article 286 of the Constitution of India, restrictions have been placed on the power of the State as to imposition of tax on the specified category of sales and purchases. At the relevant point of time, Clauses (1) and (2) of Article 286 read as under11:- “286.Restrictions as to imposition of tax on the sale or purchase of goods.-(1) No law of a State shall impose, or authorize the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place— (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).” 20.2. In exercise of its powers under Clause (2) of Article 286, E the Parliament has enacted the Central Sales Tax Act, 1956. In Section 3, thereof, it is laid down that a sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase-(a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the F goods during their movement from one State to another. Section 3 with its Explanation 1 and Explanation 2 could also be usefully extracted as under12:- “3.When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce. — G

11 This Article 286 has undergone a few amendments later which need not be referred herein. 12 Explanation 3 inserted to this Section 3 by Act 28 of 2016 is not relevant for the present purpose. H

p. 944 Copy page pinpoint

A A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase— (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another. Explanation 1. — Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee. Explanation 2. — Where the movement of goods commences and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State.” 20.3. The basic principles for determining as to when a sale or purchase of goods takes place in the course of import or export are contained in Section 5 of the CST Act. As per sub-section (1) of Section 5, a sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. Under sub-section (2), 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 either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.In the present case, we are only concerned with sub-section (2) of Section 5 relating to the course of import and hence, may extract the relevant part of Section 5 of the CST Act as under:- G “5. When is a sale or purchase of goods said to take place in the course of import or export. — xxx. xxx xxx (2) 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

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 945 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. xxx xxx xxx” 20.4. The definition/meaning of the expressions “crossing the customs frontiers of India” and “sale”, as occurring at the relevant time in Clauses (ab) and (g) of Section 2 of the CST Actmay also be usefully noticed as under13:- “(ab) “crossing the customs frontiers of India” means crossing in the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities. Explanation.- For the purposes of this clause, “customs station” and “customs authorities” shall have the same meanings as in the Customs Act, 1962 (52 of 1962); D (g) “sale”, with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes,— (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) a delivery of goods on hire-purchase or any system of payment by instalments; (iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; G 13 At the relevant time, the expression goods was defined in the CST Act in Section 2(d) as under:- “(d) “goods” includes all materials, articles, commodities and all other kinds of movable property, but does not include newspapers actionable claims, stocks, shares and securities.” Indisputably, the goods in question were covered in the said definition. H

p. 946 Copy page pinpoint

A (v) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service, is for B cash, deferred payment or other valuable consideration, but does not include a mortgage or hypothecation of or a charge or pledge on goods;” 20.5. The expression “crossing the customs frontiers of India” refers to “customs port” and “customs station”, as defined in the Customs C Act. Hence, we may usefully refer to the relevant definitions in Clauses (11), (12), (13) and (29) of Section 2 of the Customs Act, as applicable at the relevant time, asunder:- “(11) “customs area” means the area of a customs station14 and includes any area in which imported goods or export goods are D ordinarily kept before clearance by Customs Authorities; (12) “customs port” means any port appointed under clause (a) of section 7 to be a customs port and includes a place appointed under clause (aa) of that section to be an inland container depot;

E (13) “customs station” means any customs port, customs airport 15 or land customs station; (29) “land customs station” means any place appointed under clause (b) of section 7 to be aland customs station;” 20.6. Having regard to the submissions made and the questions raised, we may also take note of the definition of the expression “document of title to goods” in Section 2(4) ofthe Sale of Goods Actas under:- “(4) “document of title to goods” includes a bill of lading, dock- warrant, warehouse keeper’s certificate, wharfingers’ certificate, railway receipt, multimodal transport document, warrant or order for the delivery of goods and any other document used in the ordinary course of business as proof of the possession or control 14 The words “or a warehouse” inserted at this place by Act 18 of 2017 15 The words “customs airport, international courier terminal, foreign post office” H substituted in place of “customs airport” at this place by Act 7 of 2017

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 947 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

of goods, or authorizing or purporting to authorise, either by endorsement or by delivery, the possessor of the document to transfer or receive goods thereby represented;”

21Copy pinpoint21. The meaning, connotation, effect and operation of the said provisions related with ‘sale in the course of import’ had come up for consideration in several decisions of this Court and had been the subject matter of adjudication in variegated factual setups concerning the transactions and the dealings of the parties involved. Before entering into all the necessary niceties, we may usefully notice that the phrase ‘sale in the course of import’carries three essential features - (i) that there must be a sale; (ii) that goods must actually be imported into the territory of India; and (iii) that the sale must be part and parcel of the import. A sale would become part and parcel of import if it either occasions such import or if it occursby way of a transfer of document of title to the goods before the goods cross the customs frontiers of India.

22Copy pinpoint22. Having taken note of the essential features of the phrase ‘sale in the course of import’, we may now refer to the cited decisions, to find the expositions therein and examine their applicability to the present case. 22.1. In the Constitution Bench decision of this Court in the case of J. V. Gokal & Co. (supra), the petitioner company entered into two contracts on 24.03.1954 and 15.04.1954 with Government of India for selling two consignments of sugar - One of 9,500 long tons of Peruvian E origin and the other of 25,000 metric tons of continental origin. The petitioner placed orders with dealers in foreign countries. Some weeks before the vessel carrying the goods in question arrived at the Bombay harbour i.e., when the vessels were on the high seas, the Government of India received the documents of title, including bills of lading, pertaining F to the sugar purchased by them and paid the price to the petitioner. After the goods reached the port, they were unloaded, taken delivery of, and cleared by the Government of India after paying the requisite customs duties.For the assessment year 1954-55, the petitioner was assessed to sales tax wherethe Sales Tax Officer deducted the price of the said two sales from the petitioner’s turnover. However, on 31.01.1958, the G Assistant Collector of Sales Tax issued notice to the petitioner, proposing to review the said assessment. The petitioner filed its objections contending, inter alia, that the sales had taken place in the course of import and therefore they were not liable to sales tax. The first respondent rejected the contentions of the petitioner and held that sales tax was H

p. 948 Copy page pinpoint

A payable in respect of said two transactions. The petitioner questioned the demand notice consequently issued against it by way of the petition in this Court. It was contented, inter alia, that the sales in question were not liable to sales tax inasmuch as they took place in course of import of the goods into the territory of India. This Court examined the questions as to what does the phrase “in the course of the import of the goods into the territory of India” convey and when could it be said that a sale has taken place in the course of import journey. This Court referred to various decisions including the opinions expressed in the case of Shanmugha Vilas Cashew Nut Factory (supra) and said as under:- “9……We respectfully agree with the aforesaid observations of the learned Judges. The course of the import of the goods may be said to begin when the goods enter their import journey i.e. when they cross the customs barrier of the foreign country and end when they cross the customs barrier of the importing country.

10. The next question is, when can it be said that a sale takes place in the course of import journey? This Court in State of Travancore-Cochinv. The Bombay Co. Ltd., held that a sale which occasioned the export was a sale that took place in the course of export of the goods. If A, a merchant in India, sells his goods to a merchant in London and puts through the transaction by transporting the goods by a ship to London, the said sale which occasioned the export is exempted under Art. 286(1)(b) of the Constitution from the levy of sales-tax. The same principle applies to a converse case of goods which occasioned the import of the goods into India. This Court again inState of Travancore-Cochhin and Ors. v. Shanmugha Vilas Cashewnut Factory extended the doctrine to a case of sale or a purchase of goods effected within the State by transfer of shipping documents while the goods were in the course of transit. The decision dealt with three types of purchases viz. (i) purchases made in the local marker; (ii) purchases made in the neighbouring districts of an adjacent State; G and (iii) imports from Africa. The imports from Africa consisted of two groups - one group consisted of goods that were purchased when they were on the high seas and shipped from the African ports to Cochin or Quilon: we are not concerned with the other group. In the said case some commission agents at Bombay arranged for the purchase on behalf of the assessee, got delivery H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 949 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

of the shipping documents at Bombay through a bank which advanced money against the shipping documents and collected the same from the assesses at destination. This Court, by a majority, held that, in respect of the purchases falling under the first group of imports, the commission agents acted merely as agents of the respondents therein and that the said purchases occasioned the import and therefore came within the exemption. That was not a case where the goods were sold by an importer in India to a third party when the goods were on the high seas. It was a case where a party in Cochin purchased goods which were on the high seas through his agent at Bombay and the agent paid the price through a bank against the shipping documents. But the learned Judge, C Patanjali Sastri, C.J., expressing the majority view, considered the scope of the exemption in all its aspects and summarized the conclusions thus p. 69 : “Our conclusion may be summed up as follows:(1) Sales by export and purchases by import fall within the exemption under article 286(1)(b) ...... (2) Purchases in the State by the exporter for the purpose of export as well as sales in the State by the importer after the goods have crossed the customs barrier are not within the exemption. (3) Sales in the State by the exporter or importer by transfer of shipping documents while the goods are beyond the customs barrier are within the exemption, assuming that the State power of taxation extends to such transactions.” Das, J., as he then was, in his dissenting judgment, agreed with Patanjali Sastri, C.J., on the third conclusion with which we are now concerned. The learned Judge put forward his view at p. 94 F thus: “Such sales or purchases, by delivery of shipping documents while the goods are on the high seas on their import journey were and are well recognised species of transactions done every day on a large scale in big commercial towns like Bombay G and Calcutta and are indeed the necessary and concomitant incidents of foreign trade. To hold that these sales or purchases do not take place ‘in the course of’ import or export but are to be regarded as purely ordinary local or home transactions distinct from foreign trade, is to ignore the realities of the H

p. 950 Copy page pinpoint

A situation. Such a construction will permit the imposition of tax by a State over and above the customs duty or export duty levied by Parliament. Such double taxation on the same lot of goods will increase the price of the goods and, in the case of export, may prevent the exporters from competing in the world market and, in the case of import, will put a greater burden on the consumers. This will eventually hamper and prejudicially affect our foreign trade and will bring about precisely that calamity which it is the intention and purpose of our Constitution to prevent.” The learned Judge also in his judgment elaborately considered the great hardship that would be caused to an Indian importer if he was not permitted to sell the goods which were on the high seas by delivery of shipping documents against payment. Though that case dealt with a different situation, we agree with the learned Judge’s observations that an importer can, if he receives the shipping documents, transfer the property in the goods when they are on the high seas to a third party by delivering to him shipping documents against payment and such a sale is one made in the course of import.” 22.1.1. The Court thereafter proceeded to summarize the legal position in respect of import sale in the following words:- “11. The legal position vis-a-vis the import-sale can be summarized thus; (1) The course of import of goods starts at a point when the goods cross the customs barrier of the foreign country and ends at a point in the importing country after the goods cross the customs barrier; (2) the sale which occasions the import is a sale in the course of import; (3) a purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import, and (4) a sale by an importer of goods, after the property in the goods passed to him either after the receipt of the documents of title against payment or otherwise, to a third party by a similar process is also a sale in the course of import.” 22.1.2. Having expounded on the legal position, the Court examined the facts of the case and held that the case fell under the fourth principle aforesaid when the petitioner, pursuant to the earlier H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 951 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

contract with the Government, delivered the shipping documents including the bill of lading to the Government against payment when the goods were on high seas. Hence, it was held that the sales in question took place in the course of imports of goods into India. The Court also scrutinized the terms of contract to ascertain whether they disclosed any intention of the parties that notwithstanding the delivery of bills of lading against payment, the property in the goods should not pass to the Government and held, after scrutiny of all the terms of contract that they did not indicate any such intention. Though the scrutiny and analysis of the terms of contract relates to the facts of that case only but worthwhile it would be to reproduce the same to indicate that ultimately, on the facts, the Court found that the sale took place in the course of import. The Court analysed and held as follows:- “13. Let us now scrutinize the terms of the contract to ascertain whether they disclose any intention of the parties that notwithstanding the delivery of the bill of lading against payment the property in the goods should not pass to the Government. The D circumstances under which the contracts were entered into between the parties indicate that both the parties were interested to see that property in the goods passed in the ordinary way when the shipping documents were handed over to the Government against payment. The sellers had to meet their liability to the foreign companies with whom they opened letters of credit and the E Government must have been anxious to get the title to the goods so that the sellers might not divert the goods towards their other commitments or to other buyers for more tempting prices. Under the contract every safeguard for securing the goods of agreed specifications was provided for in the earlier clauses and therefore there was no reason for postponing the passing of the property in the goods to the buyer till the goods were actually delivered in the port. The sellers on their side would have been anxious that the property should pass when the goods were on the high seas, for otherwise they would be compelled to pay sales-tax. Nor are the clauses of the contracts relied upon by the respondents inconsistent with the property in the goods passing in accordance with the mercantile usage. ……….

14. Apart from the terms of the contract, reliance is also placed by the learned counsel for the respondents on the following H

p. 952 Copy page pinpoint

A circumstances: (i) the seller himself chartered the ship; and (ii) the licence issued by the Government was made non-transferable. We do not see how these two facts indicate the contrary intention. If the seller himself chartered a steamer, when the goods he purchased were loaded in the ship, the property in the goods passed to him and therefore he was in a position to sell the same to the B Government. The fact that the licence was non-transferable has no relation to the property in the goods passing to the Government. ……….

15. For all the foregoing reasons we hold that the property in the goods passed to the Government of India when the shipping documents were delivered to them against payment. It follows that the sale of the goods by the petitioner to the Government of India took place when the goods were on the high seas.

16. That being so, the sales in question must be held to have taken place in the course of the import into India and therefore they would be exempted from sales tax under Art. 286(1)(b) of the Constitution.” 22.2. It does not appear necessary to dilate further on the decision in the case of Shanmugha Vilas Cashew Nut Factory (supra) which had been, as noticed, considered in detail in the case of J.V. Gokal & E Co. (supra). However, another decision cited on behalf of the appellant and relating to multiple transactions involving import, being the Orissa case of Minerals & Metals (supra), need to be noticed. The fact situation in that case had been that the appellant, a Government of India undertaking,was functioning as a canalising agent for import and export F of minerals and metals. On 31.03.1991, Steel Authority of India Limited (SAIL) requested appellant to register import of 15,000MT of tin mill black plate coils. On 14.07.1991, SAIL opened a letter of credit directly in favour of the exporter, M/s. Samsung Co. Ltd., Seoul, South Korea. The consignee therein was shown as SAIL. On 02.08.1991, the appellant placed a purchase order with the exporter for and on behalf of SAIL. G On 16.08.1991, the appellant wrote to SAIL enclosing a copy of its purchase order and stating that they shall arrange delivery on high seas by endorsement and transfer of shipping documents after the documents have been paid by the banker. On 23.10.1991, the appellant sent to SAIL its invoice, adjusting the amount that had already been paid by SAIL H through its bankers. On 28.10.1991, the appellant wrote to SAIL that it

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 953 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

had decided to make a high seas sale of the said coils to SAIL. Accordingly, A the documents, including the original bill of lading, with due endorsement, were sent to SAIL to get the said coils cleared. On the same day, the appellant wrote to Assistant Collector of Customs, Paradeep Port, Cuttack that the said coils had been imported by the appellant and had been sold to SAIL on high seas basis and SAIL would process the bill of entry and B pay the customs duty. The vessel arrived at Paradeep Port on 11.11.1991. Then, on 18.11.1991, the bill of entry in respect of the said coils was submitted and processed by SAIL. However, on 31.12.1994, the Sales Tax Officer levied sales tax on the aforesaid sale while rejecting the case of the appellant that no sales tax was payable, this being a sale in the course of import covered by Section 5(2) of the Central Sales Tax C Act, 1956. The Sales Tax Officer held that there had been two sales, one between the exporter and the appellant and the other between the appellant and SAIL; and that the sale to SAIL had not occasioned the import. There had been another sale made by the appellant to Paradeep Phosphates Ltd., the facts whereof were similar. The appellant’s D challenge to the levy of sales tax on the aforesaid sales failed in the High Court and hence, the matter was before this Court. 22.2.1. After taking note of the relevant constitutional and statutory provisions as also the decision in J.V. Gokal & Co. (supra), this Court said thus:- E “The judgment states that it is well settled in the commercial world that a bill of lading represents the goods and the transfer of it operates as the transfer of goods. The delivery of the bill of lading while the goods are afloat is equivalent to the delivery of the goods themselves.” F 22.2.2. The Court examined the facts of the case and held the sales in question to be those in the course of import in the following words:- “9. The facts aforestated, based upon documents, show that the bill of lading had been endorsed in favour of SAIL while G the consignment of the said coils was still upon the high seas. The sale, therefore, was a sale in the course of the import of the said coils into the territory of India; it was effected by transfer of the documents to the said coils before they had crossed the limits of the customs station at Paradeep Port. The position would be the same in respect of the goods sold to Paradeep Phosphates Ltd.” H

p. 954 Copy page pinpoint

A 22.3. The appellants have cited the decision in the case of Embee Corporation (supra) to submit that the terms ‘sale occasioning movement of goods’ and ‘sale occasioning import of goods’ in Sections 3 and 5 of the CST Act carry the same meaning; and that the use of words “sale of goods” in Section 3 of the CST Act and the words “contract of sale” in Section 4(2) of the Sales Tax Act were assigned the same meaning, which is much wider than the meaning of sale in general law. In the said case, this Court examined the definition of sale as existing at the relevant time in Section 2(g) of the CST Act and held as under:- “6. On perusal of the aforesaid provisions of the Act, the question that arises for consideration herein is, what meaning should be given to the expression “sale occasions import”. It is almost settled by numerous decisions of the Supreme Court that the expression “sale occasions import” is to be interpreted in the same manner in which the expression “occasions the movement of goods” occurring in Section 3(a) of the Act has received interpretation. In other words, the expression “sale occasions import” has to be given the same meaning which the expression “occasions the movement of goods” has received by the Courts. In the light of aforesaid settled legal position emerging from the Constitution Bench decisions, we will now examine the meaning of “sale” as defined in the Act. Section 2(g) of the Act defines E “sale” thus: 2(g) ‘sale’, with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by installments, but does not include a mortgage or hypothecation of or a charge or pledge on goods;

7. The above definition of “sale” in the Act shows that the word “sale” has been given a very wide meaning so as to include not only the sale of goods, but also the transactions, namely, a transfer of goods on hire-purchase system. Further, the use of words “sale of goods” in Section 3 of the Act and the words “contract of sale” occurring in Section 4(2) of the Act have been assigned the same meaning which is wider than the meaning of sale in the general law. In such a situation the word “sale” defined

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 955 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

in Section 2(g) of the Act and employed in Section 3 and other sections of the Act would embrace not only completed contract, but also the contract of sale or agreement of sale if such contract of sale or agreement of sale provides for movement of goods or movement of goods is incident of the contract of sale. This matter may be examined from another angle. An agreement to transfer goods to the buyer for a price is an important element of sale and the same is also borne out from Section 4 of Sale of Goods Act. If Section 4 of the Sale of Goods Act is read along with Sections 3 and 4 of the Act, it would mean an agreement to sell would also be a sale within the meaning of sale provided such agreement of sale stipulates for transfer or movement of goods or movement of goods is incident of the contract of sale and in that case, such movement of goods would be deemed to be occasioned by the sale. It is immaterial that actual sale does not take place at that time of movement of goods and takes place later on. This interpretation of Section 3(a) of the Act if applied to sub-section(2) D of Section 5 of the Act, would mean that if an agreement for sale stipulates import of goods or import of goods is incident of contract of sale and goods have entered the import stream, such import would fall within the expression “sale occasions import”.In the present case, the import of Carbamite is direct result of the contract of sale and as such it can be safely held in the present case that sale has occasioned the import.” 22.3.1. In the said case of Embee Corporation, the respondent/ assessee, who was engaged in the business of buying and selling chemical, replied to the invitation of tender of Director General of Supplies and Disposal (DGS&D) for the supply of Carbamite. The tender of the respondent was accepted by DGS&D with a few conditions including the one that the contracted material shall be inspected by the Chief Inspector, C.I.M.E., Kirkee, Pune at Bombay Port and the General Manager, Cordite Factory, Aruvankadu was mentioned as the indentor. The respondent mentioned the name of the supplier from Germany from whom the materials were to be imported and for which, import recommendation certificate was required. The required import recommendation certificate was issued whereupon the authority concerned issued the requisite licence with the condition, inter alia, that the goods imported shall be utilised in the manner stipulated in DGS&D’s letter and the imported materials shall not be utilised or disposed of in H

p. 956 Copy page pinpoint

A any other manner. The DGS&D also furnished the necessary end-use certificate. In the bill of lading, the name of respondent was shown as a party to be notified and the General Manager, Cordite Factory Aruvankadu was described as the consignee of Carbamite. After the consignment arrived, the same was forwarded to the consignee so named in the contract.Once the goods were supplied to DGS&D, the respondent claimed exemption from levy of sales tax on the ground that the supply under the contract was a sale in the course of import of goods into India. The plea of the respondent was rejected by the department and the Tribunal. The High Court, however, held that there were two sales: One between the respondent and DGS&D and the other between the foreign supplier and the respondent; and that the sale had occasioned the import of material, liable for exemption from sales tax under the CST Act. In the appeal, this Court while dismissing the appeal of the State, was of the view that while interpreting the expression “sale occasions import” occurring in Section 5(2) of the Act, it was not necessary that a completed sale should precede the import. D 22.4. In the case of Tata Iron and Steel Co. (supra), the petitioner was engaged in the business of manufacturing and selling iron and steel goods and had its factory at Jamshedpur in the State of Bihar and Head Sales office at Calcutta in the State of West Bengal. The petitioner was registered as dealer under the Bihar Sales Tax Act as also under the E Central Sales Tax Act in the State of West Bengal. For the period of assessment 01.07.1957 to 31.03.1958, the petitioner submitted its return of taxable sales to the Commercial Tax Officer, Lyons Range, Calcutta, disclosing the gross taxable turnover in respect of sales liable to Central Sales Tax in the State of West Bengal. The said Commercial Tax Officer F directed the petitioner to submit a statement of sales from Jamshedpur for the period under assessment, “documents relating to which were transferred in West Bengal or of any other sales that may have taken place in West Bengal under Section3(b) of the Central Sales Tax Act, 1956”. The petitioner, by its letter dated 30.09.1959, informed the Tax Officer that the requisition for production of statement of sales made from Jamshedpur in the course of inter-State trade or commerce was without jurisdiction while contending that “all the sales from Jamshedpur were of the type mentioned in Section 3(a) of the Central Sales Tax Act and at the same time, some of them also fell within the category mentioned in Section 3(b) of the Act”; that even if the sales were “of the type mentioned in Section 3(b) of the Act, the appropriate State of the place

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 957 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

where the sales take place or are effected alone had jurisdiction to assess such sales to Central sales tax”; and that in respect of inter-State sales from Jamshedpur, the situs of the sale was always the State of Bihar as the goods were in Bihar either at the time of the contract of sale or at the time of appropriation to the contract. However, the Tax Officer proceeded to make ‘best judgment assessment’ on a gross turnover while including the disputed sales too which were accounted for in the return filed with the Sales Tax Officer, Jamshedpur. Hence, in the said case, the petitioner Company felt aggrieved of the proposition of the Tax Officer at Calcutta to recover Central Sales Tax in respect of the sales which were included in the assessment proceedings before the Bihar Sales Tax Authorities. In the given backdrop, this Court expounded on the scope of Section 3 of the CST Act, inter alia, in the following:- “18. In our view, therefore, within clause (b) of section 3 are included sales in which property in the goods passes during the movement of the goods from one State to another by transfer of documents of title thereto: clause (a) of Section 3 covers sales, other than those included in clause (b), in which the movement of goods from one State to another is the result of a covenant or incident of the contract of sale, and property in the goods passes in either State” This Court pointed out the error on the part of the Tax Officer at E Calcutta and held as under:- “30. The Commercial Tax Officer has taxed all the sales effected by the company under Section 3, clause (b), on the view that sales in which the documents of title were handed over in Calcutta were taxable in the State of West Bengal. The assessment is made on two assumptions, (1) that all the sales effected in favour of West Bengal parties satisfied the conditions prescribed by Section 3(b), and (2) that the place where the documents are delivered by the company through its Head Sales Office to the purchaser is the place where the sale is effected. Neither of these assumptions is correct. The Commercial Tax Officer had, in our judgment, to ascertain before he could order payment of tax under the Central Sales Tax Act, whether on the materials he was satisfied, (a) that the goods at the time of transfer of documents of title were in movement from the State of Bihar to the State of West Bengal, (b) that the place where the sale was effected was H

p. 958 Copy page pinpoint

A under Section 4, clause (2), within the State of West Bengal. The Commercial Tax Officer has, in our view, failed to apply the correct tests and has made assumptions which are not warranted and on a true interpretation of the provisions of the Central Sales Tax Act, the order of assessment discloses an error apparent on its face and a writ of certiorari must issue quashing the assessment. B It will be for the Commercial Tax Officer of West Bengal to re- assess the company in respect of transactions of sale which are properly taxable within the State of West Bengal by the application of the test which we have already set out.” 22.5. Learned counsel for the appellant has also attempted to rely upon the decision in the case of Hotel Ashoka (supra) which was rendered in the fact situation where the goods were kept in the bonded warehouse and were made available in the duty-free shops for sale. This Court opined that since the goods were supplied to the duty-free shops situated at the International Airport, Bengaluru for sale, it cannot be said that the said goods had crossed the customs frontiers of India. The Court finally answered the claim of the appellants therein on the finding that the liquor, cigarettes, perfumes and food articles were sold “at the duty-free shops” at the International Airport, Bengaluru, for which no tax was payable by the appellants as the goods sold at the duty-free shops were sold directly to the passengers and even the delivery of goods took place at the duty-free shops before importing the goods or before the goods had crossed the customs frontiers of India. The issue considered in the said decision, therefore, was as to whether the sale at the duty-free shops situated at the Bengaluru International Airport would attract levy of sales tax.

23Copy pinpoint23. Before proceeding further, we may cull out the relevant attributes of the decisions aforesaid vis-à-vis the questions involved in the present case. 23.1. The basic question in the case of Hotel Ashoka (supra) was as to whether the sales at duty-free shops would attract levy of sales tax. As noticed earlier, the definition of “customs station” clearly refers to customs airport as defined in Section 2(10) of the Customs Act. As the duty-free shop is situated in airport area, the sale of goods at the duty-free shop was deemed to have taken place in the course of import of the goods into the territory of India and before the goods crossing customs frontiers of India. In the present case, the appellant alleges that

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 959 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

the sale took place on high seas before goods had crossed customs frontiers of India, whereas the department contends that the sale in question took place after the appellant had filed the bill of entry for home consumption and the goods were taken out of the bonded warehouse. It is but apparent that the decision in Hotel Ashoka (supra), relating to the sale of goods at duty-free shops, has no relevance whatsoever to the present case. The decision in Tata Iron and Steel Co. (supra) also related to an entirely different factual set up and the question involved therein was also different. The said case related to the movement of goods from one State to another on the sale made by the petitioner- company having its works in the State of Bihar and having sales office at Calcutta in the State of West Bengal. What was sought to be taxed in the State of West Bengal were the sales in which the documents of title were handed over in that State on the assumption that the sales effected in favour of West Bengal parties satisfied the conditions prescribed by Section 3(b) of CST Act; and that the place where the documents were delivered by the company to the purchaser was the place where the sale was effected. The enunciations in the said case as regards the operation of Section 3 of CST Act do not call for any debate but they hardly provide any guide for determination of the real questions involved in the present matter. Similarly, the observations in Embee Corporation (supra) to the effect that “sale occasioning movement of goods” and “sale occasioning import of goods” respectively in Section 3 and Section 5 of E CST Act carry the same meaning are not of much dispute. The other observations, that for interpreting the expression “sale occasions import” occurring in Section 5(2) of the Act, it is not necessary that a completed sale should precede the import, shall have their implication only when the nature of dealings of the parties in the transactions in question and the effect of movement of goodsare examined. 23.2. This takes us to the decisions of this Court in Minerals & Metals (Orissa case) and in J. V. Gokal & Co. (supra). 23.2.1. As noticed, in the case of Minerals & Metals (Orissa case), the appellant, a Government of India undertaking, had been functioning as canalising agent for import and export of minerals. It was in such a capacity that the appellant was requested by SAIL to ensure import of the goods in question and the appellant took up the proceedings accordingly. The dealings of the parties made it clear that the appellant had sold the goods to SAIL on high seas by endorsement on the bill of H

p. 960 Copy page pinpoint

A lading. The fact was duly communicated to the port authorities too. Significantly, when the vessel arrived at the port of destination, the bill of entry in respect of the goods was submitted and processed by SAIL, the end-buyer. This Court specifically found that bill of lading had been endorsed in favour of SAIL while the consignment of goods was still upon the high seas. It had been, on such findings of fact, that the sale in question was held to be a sale in the course of import and having been effected by transfer of goods (bill of lading) before they had crossed the limits of customs frontiers of India. 23.2.2.The law declared in J. V. Gokal & Co. (supra) that bill of lading represents the goods and its transfer operates as transfer of goods; and delivery of bill of lading while the goods are afloat is equivalent to the delivery of goods (as duly applied by this Court in Minerals & Metals) is neither of any doubt nor could be a matter of debate. However, in the said case of J. V. Gokal & Co. too, on facts, it was found by the Court that the petitioner, pursuant to the earlier contract with the Government, D delivered the shipping documents including the bill of lading to the Government against payment when the goods were on high seas. It was also noticed that after the goods reached the port, they were unloaded, taken delivery of, and cleared by the Government (the end-buyer) after paying the requisite customs duties. Significantly, in J. V.Gokal & Co., the Constitution Bench went on to scrutinize the terms of contract to ascertain whether they disclosed any intention of the parties that notwithstanding delivery of bill of lading against payment, the property in goods should not pass and then, the Court found no such intention being indicated. It was only after such finding on facts the Court held that the sale of goods by the petitioner to the Government took place when the goods were on the high seas and hence, the sales took place in the course of import into India. 23.2.3. Noteworthy common features in the decisions of this Court in J. V. Gokal & Co. and Orissa case of Minerals & Metals (supra) had been that pursuant to a previous contract with the end-buyer, the seller concerned arranged for importation of goods; and transferred the property in goods in favour of the end-buyer by endorsement of bill of lading when the goods were on high seas. Coupled with these, another common feature had been that in both those cases, the goods in question, upon reaching the port of destination, were taken delivery of, and cleared by the end-buyer after paying the requisite customs duties. Those had H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 961 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

not been the cases like the present one where the seller purportedly acted as an intermediary and even after alleged transfer of bill of lading when the goods were on high seas, filed the bill of entry for home consumption at the port of destination and got the goods cleared from the customs.

24Copy pinpoint24. Apart from the decisions so cited, for taking into comprehension the nuances of ‘sale in the course of import’ with involvement of an intermediary, we may take note of the case of K. Gopinathan Nair and Ors. v. State of Kerala: (1997) 10 SSC 1 wherein, after a detailed reference to various Constitution Bench decisions, this Court has expounded on the factors to be reckoned for determining as to whether a particular sale or purchase could be deemed to have taken place in the course of import. We may point out that the decision in this case of K. Gopinathan Nair had been by a 3-Judge Bench of this Court where the learned Judges differed in their views on the question as to whether the transactions in question were in the course of import and, therefore, immune under Section 5(2) of the CST Act. We shall refer to this decision and implication of different views therein over the factual setup of the present case in the later part of this judgment. At present, we may reproduce the relevant part of the decision of majority, delineating the basic factors which are germane to determination of the question as to whether a particular sale had been in the course of import or not, as under:- E

“14. In the light of the aforesaid settled legal position emerging from the Constitution Bench decisions of this Court the following propositions clearly get projected for deciding whether the concerned sale or purchase of goods can be deemed to take place in the course of import as laid down by Section 5(2) of the Central F Sales Tax Act: (1) The sale or the purchase, as the case may be, must actually take place. (2) Such sale or purchase in India must itself occasion such import, G and not vice versa i.e. import should not occasion such sale. (3) The goods must have entered the import stream when they are subjected to sale or purchase. (4) The import of the goods concerned must be effected as a direct result of the sale or purchase transaction concerned. H

p. 962 Copy page pinpoint

A (5) The course of import can be taken to have continued till the imported goods reach the local users only if the import has commenced through the agreement between foreign exporter and an intermediary who does not act on his own in the transaction with the foreign exporter and who in his turn does not sell as principal the imported goods to the local users. B (6) There must be either a single sale which itself causes the import or is in the progress or process of import or though there may appear to be two sale transactions they are so integrally interconnected that they almost resemble one transaction so that the movement of goods from a foreign country to India can be ascribed to such a composite well-integrated transaction consisting of two transactions dovetailing into each other. (7) A sale or purchase can be treated to be in the course of import if there is a direct privity of contract between the Indian importer and the foreign exporter and the intermediary through which such import is effected merely acts as an agent or a contractor for and on behalf of the Indian importer. (8) The transaction in substance must be such that the canalizing agency or the intermediary agency through which the imports are effected into India so as to reach the ultimate local users appears only as a mere name lender through whom it is the local importer- cum-local user who masquerades.”

25Copy pinpoint25. The principles aforesaid would obviously apply to the present case; and if the factors so indicated are answered in favour of the appellant, it could be treated to be a matter of sale in the course of import.

26Copy pinpoint26. In order to bring the case within the four-corners of the factors aforesaid, the appellant has suggested existence of quadripartite agreement whereby and whereunder,the supplier (party number 1) sold the goods in question to the first-buyer (party number 2) and delivered them at the port of shipment. Thereafter, while the goods were on high seas, party number 2 transferred them to the appellant (invariably party number 3 in these transactions), by endorsing the bill of lading in favour of the appellant. Further to this and while the goods were yet on high seas, the appellant allegedly transferred them to the end-buyer (party number 4) by endorsing the bill of lading in favour of the end-buyer. The H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 963 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

appellant has also suggested that though the goods were being purchased by the end-buyer and were to move only after inspection and selection by the end-buyer but the methodology of such quadripartite agreement was adopted because of the reasons that the end-buyer was not having ‘the requisite infrastructure’ to undertake importation of goods whereas the appellant was having the requisite infrastructure for importation and the first-buyer was having the credit facility with the seller. It has, therefore, been suggested that there was always a privity of contract between the seller and the end-buyer; and that the appellant was to act as an agent of the end-buyer and to clear the goods from customs authorities. The appellant has also suggested that in each of the transactions, the process was carried out as envisaged in the quadripartite agreement and in the manner that the first-buyer endorsed the bill of lading in favour of the appellant when the goods were on high seas; and while the goods continued to be on high seas and had not crossed the customs frontiers of India, the appellant endorsed the bill of lading in favour of the end-buyer. According to these suggestions, the appellant only acted as an agent of the end-buyer while getting the goods cleared from the customs port at Visakhapatnam. 26.1. However, the suggestions by the appellant do not remain as innocuous and over-simplified as projected, for the reason that in each of these transactions, when the goods in question reached the port at Visakhapatnam, the appellant carried out the proceedings envisaged by the Customs Act and filed a bill of entry for warehousing and thereafter, filed another bill of entry for home consumption (ex-bond); and on the basis of such bills of entry, the appellant was duly assessed for customs duty. Admittedly, after the goods were cleared for home consumption, they moved from the State of Andhra Pradesh to different States where the respective end-buyers were situated; and the appellant raised debit notes on the end-buyers.In these transactions, the goods in question, upon reaching the port of destination, were not cleared by the end-buyers after paying the requisite customs duties, as had been the fact situation in the case of J. V. Gokal & Co. as also in Orissa case of Minerals & Metals (supra). While examining the question pertinent if the appellant acted merely as an intermediary or name-lender through whom the import was effected and merely acted as an agent for and on behalf of the Indian importer that is, the end-buyer, the significant facts of the present case cannot be overlooked that in relation to the goods in question, only the appellant filed the bill of entry for warehousing as also the bill of H

p. 964 Copy page pinpoint

A entry for home consumption and was assessed to customs duty and further that before the customs authorities, there was no suggestion that the goods in question had already been transferred, on high seas, to the alleged real importer. Obviously, on the facts of the present case, the effect of dealings of the appellant before the customs authorities at Visakhapatnamwith filing the bill of entry for home consumption need to be examined. Filing of bill of entry for home consumption by the appellant: Implication

27Copy pinpoint27. As noticed, the High Court examined the contention of the appellant that while filing the bills of entry, the appellant had acted merely as an agent of the end-buyers and rejected the same, with reference to the contents of the bills of entry where the name of appellant was shown as the importer and there was no reference to the end-buyers; as also with reference to the facts that the appellant alone was the importer who filed the bills of entry for home consumption and was assessed to the customs duty and that the IGM did not contain the name of end- buyers. 27.1. The High Court has observed that the inclusive definition of “importer” in Section 2(26) of the Customs Act cannot be used to usurp the identity of an importer from the person who filed the bill of entry; and the person in whose name the bill of entry is filed, does not cease to be an importer.In this case, the name of the appellant was reflected as importer in the Import General Manifest of the vessel/s that brought the goods in question to the port at Visakhapatnam.The High Court has meticulously examined the entire process relating to the arrival of goods as cargo in a vessel; and filing of IGM as also the contents of the bill of entry and has pointed out that the cargo declaration form,an essential part of IGM, was required to carry, amongst others, the particulars of bill of lading and the name of consignee/importer. After finding that the name of the appellant was reflected as importer in IGM, the High Court has observed that if the alleged second high seas sale had taken place, the IGM would have reflected the name of the last high seas sale purchaser as the importer and if there was any bonafide omission, the IGM would have necessitated amendment because only the last purchaser of the goods on high seas could have been the importer/ consignee. The High Court has also observed that there was no material H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 965 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

on record to show that either the IGM contained the name of end-buyer A as the importer/consignee or that the same was subsequently amended in terms of Section 30(3) of the Customs Act. These had been the pivotal reasons for which the High Court rejected the suggestion of second high seas sales in favour of the end-buyers and held that the only attempt of the appellant had been to avoid inter-State sales under the CST Act. In B the given facts, the High Court specifically recorded the findings that the sale of goods by appellant to the end-buyers had not been high seas sales; and such sales could have been effected only after the appellant was assessed to customs duty and had cleared the goods for home consumption.

28Copy pinpoint28. To get over the aforesaid findings of the High Court, learned counsel for the appellant has argued, with strong reliance on the decision of this Court in the case of Sampat Raj Dugar (supra), that the definition of importer in the Customs Act only indicates the person who is in possession of goods at the time of filing of bill of entry but does not indicate the title to the goods; and that the questions as to when does the sale take place and who is the owner of goods would be determined only under the Sale of Goods Act and not under the Customs Act.

29Copy pinpoint29. For dealing with this part of submissions, we may usefully take note of the relevant definitions in Clauses (23), (24), (25) and (26) of Section 2 as also the other provisions in Sections 30 and 47 (1) of the E Customs Act,as applicable and effective at the relevant point of time,as follows: - “(23) “import”, with its grammatical variations and cognate expressions, means bringing into India from a place outside India; (24) “import manifest”16 or “import report” means the manifest F or reportrequired to be delivered under section 30; (25) “imported goods” means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption; G (26) “importer”, in relation to any goods at any time between their importation and the time when they are cleared for home

16 The words “arrival manifest or import manifest” were substituted in place of the words “import manifest” by Act 13 of 2018. H

p. 966 Copy page pinpoint

A consumption, includes any owner17 or any person holding himself out to be the importer;

30Copy pinpoint30. Delivery of import manifest or import report.- (1) The person-in-charge of- B (i) a vessel; or (ii) an aircraft; or (iii) a vehicle, carrying imported goods or any other person as may be specified by the Central Government, by notification in the Official Gazette, C in this behalf shall, in the case of a vessel or an aircraft, deliver to the proper officer an import manifest prior to arrival of the vessel or the aircraft, as the case may be, and in the case of a vehicle, an import report within twelve hours after its arrival in the customs station, in the prescribed form and if the import manifest or the D import report or any part thereof, is not delivered to the proper officer within the time specified in this sub-section and if the proper officer is satisfied that there was no sufficient cause for such delay, the person-in-charge or any other person referred to in this sub-section, who caused such delay, shall be liable to a penalty not exceeding fifty thousand rupees. E (2) The person delivering the import manifest or import report shall at the foot thereof make and subscribe to a declaration as to the truth of its contents. (3) If the proper officer is satisfied that the import manifest or import report is in any way incorrect or incomplete, and that there was no fraudulent intention, he may permit it to be amended or supplemented.18

47. Clearance of goods for home consumption.- (1) Where the proper officer is satisfied that any goods entered for home consumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable

17 The words “any owner, beneficial owner” were substituted in place of the words “any owner” by Act 7 of 2017. 18 This Section 30 has undergone several amendments over the course of time. In its present form, it reads as under:-

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 967 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

under this Act in respect of the same, the proper officer may make an order permitting clearance of the goods for home consumption: xxx xxx xxx”19

30. It is but apparent that that while bringing anything into India from a place outside India is generally regarded as “import” and the imported goods are those goods which are brought into India from a place outside but, when the goods are cleared for home consumption, they are no longer imported goods for the purpose of the Customs Act. Significantly, in the process of importation, the importer, in relation to any goods, includes any owner or any other person holding himself to be the importer but, only between the time of their importation and their clearance for home consumption. In other words, the net result of the “30. Delivery of arrival manifest or import manifest or import report.- (1) The person-in-charge of- (i) a vessel; or (ii) an aircraft; or D (iii) a vehicle, carrying imported goods or export goods or any other person as may be specified by the Central Government, by notification in the Official Gazette, in this behalf shall, in the case of a vessel or an aircraft, deliver to the proper officer an arrival manifest or import manifest by presenting electronically prior to the arrival of the vessel or the aircraft, as the case may be, and in the case of a E vehicle, an import report within twelve hours after its arrival in the customs station, in such form and manner as may be prescribed and if the arrival manifest or import manifest or the import report or any part thereof, is not delivered to the proper officer within the time specified in this sub-section and if the proper officer is satisfied that there was no sufficient cause for such delay, the person- in-charge or any other person referred to in this sub-section, who caused such delay, shall be liable to a penalty not exceeding fifty thousand rupees: F Provided that the Principal Commissioner of Customs or Commissioner of Customs may, in cases where it is not feasible to deliver arrival manifest or import manifest by presenting electronically, allow the same to be delivered in any other manner. (2) The person delivering the arrival manifest or import manifest or import report shall at the foot thereof make and subscribe to a declaration as to the truth of its contents. G (3) If the proper officer is satisfied that the arrival manifest or import manifest or import report is in any way incorrect or incomplete, and that there was no fraudulent intention, he may permit it to be amended or supplemented.’’ 19 The provisos to sub-section (1) which came to be inserted and amended later on as also sub section (2) and its proviso, which were also amended several times are not reproduced for being not directly relevant for the purpose of the present case. H

p. 968 Copy page pinpoint

A expanded definition of the expression “importer” is that while any person who imports goods into India would be an importer but, the owner of the goods or a person holding himself to be an importer would also be regarded as an importer during the period between importation of goods and their clearance for home consumption. This crucial period would generally be that period when the goods have been warehoused after importation and are cleared from warehouse by a person other than the person who actually imported the goods. That being the position, in our view, the High Court has rightly said that this definition of importer cannot be used to usurp the identity of an importer from the person who filed the bill of entry. In other words, the person in whose name the bill of entry is filed does not cease to be an importer and, if that person claims to be not the owner or importer, the ouns would be heavy on him to establish that someone else is the owner or importer of goods.

31Copy pinpoint31. As noticed, on the connotation of the term “importer” for the purpose of the Customs Act, learned counsel for the appellant has placed reliance upon the decision in Sampat Raj Dugar (supra). We may examine the facts and the ratio of the case of Sampat Raj Dugar, to appreciate the implication, if any, of the observations occurring therein on the questions involved in the present case. 31.1. In the case of Sampat Raj Dugar (supra), the relevant factual aspects had been that the second respondent Ms. Renu Pahilaj was doing business at Delhi in the name and style of “Acquarius.” whereas the first respondent, an Indian national resident abroad, was doing business at Hong Kong in the name and style of UNISILK. The second respondent obtained an advance import licence on 20.05.1985 for importing raw silk that was valid for 18 months. The import licence was granted subject to the condition that raw silk imported should be utilised for manufacturing garments which ought to be exported. Sometime prior to the month of October, 1985, the second respondent received three consignments sent by the first respondent from Hong Kong but did not fulfil the said condition of import licence. Then, during the months of G October-November, 1985 the first respondent sent to India certain quantities of raw silk in four lots, to be delivered to the second respondent. The requisite documents were sent to the banker of the second respondent with instructions to deliver the same on receiving the payment. However, by the time the consignments arrived at Bombay, the customs authorities had come to know about the non-compliance of the aforesaid condition H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 969 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

of licence with respect to the three earlier consignments and also of the A alleged misrepresentation while obtaining the advance import licence. Accordingly, the proceedings were initiated against the second respondent by the Collector of Customs. On the other hand, the second respondent failed to make the payment and receive the documents of title and did not clear the goods. While the proceedings were pending before the B Collector of Customs, the said advance import licence was cancelled but no orders were passed with respect to the said goods. The first respondent, who appeared in the proceedings of his own, contended before the Collector that title to the goods had not passed to second respondent; that he was still the owner of the goods; and that therefore, the said goods could not be confiscated or proceeded against for the violations, if any, by the second respondent. He submitted that he was not a party to the misuse of the earlier imports nor was he aware of the alleged fraud practised by the second respondent in obtaining the advance import licence and prayed that he may be permitted to re-export the goods to Hong Kong. The Collector of Customs took the view that permission for re-export could not be granted for the reasons that the advance import licence having been cancelled, there was no valid licence for clearance of those goods; that for re-exporting the goods, a valid import licence was necessary which was not there; and also because the second respondent had abandoned the goods. On that basis, the Collector of Customs rejected the claims of the first respondent and imposed a penalty of Rs. 5 lakhs on him. 31.2. In the aforesaid background, the first respondent, who had sent the goods from Hong Kong, filed a writ petition before the High Court. The case of the Collector of Customs and the Union of India was that the second respondent must be deemed to be the owner of the consignments by virtue of the definition of “importer” in Section 2 (26) of the Customs Act read with Clause 5(3)(ii) of the Imports (Control) Order, 1955. Reliance was also placed upon Para 26(iv) of the Imports and Exports Policy issued for the year 1985-86 and it was submitted that the goods were liable to be confiscated for the acts and defaults of respondent. It was also submitted that in view of non-compliance with the condition relating to export of garments manufactured out of the imported raw silk yarn, the second respondent had rendered all the goods covered by the import licence liable to confiscation. The High Court, however, allowed the writ petition and directed re-export of the goods to first respondent. Hence, the matter was in appeal before this Court. H

p. 970 Copy page pinpoint

A 31.3. A bare look at the relevant background aspects of the said case makes it clear that essentially, the effect of the conditions in the import licence and non-compliance thereof had been the subject matter of consideration therein; and particularly Clause 5(3)(ii) of the import licence, deeming the imported goods as being the property of licensee, was under consideration in view of the facts that the imported goods were abandoned by the importer and were not cleared from customs by making payments and receiving documents of title sent by the seller. While examining such a condition of licence and its impact, this Court observed that the definition of “importer” in Section 2(26) of the Customs Act was not really relevant to the question of title. The Court also examined the object of the said Clause 5(3)(ii) of the import licence and observed that the idea had been to hold the licensee responsible for anything and everything that would happen from the time of import till the goods were cleared through customs. The Court found that when the goods were imported into the country at the instance of the licensee, the Imports (Control) Order created a fiction that such licensee shall be deemed to be the owner of such goods from the time of their import till they were cleared through customs; and observed that this fiction, meant for proper and effective implementation of Imports and Exports (Control) Act, could not be carried beyond that; and it could not have been employed to attribute ownership of the imported goods to the importer even in a E case where he abandons them. This Court also indicated that holding otherwise would be putting the exporter in a position of losing goods without receiving payment with only remedy to sue the importer for price and damages which would not be conducive to international trade. The relevant parts of observations and consideration in paragraph 19 of the said decision could be usefully reproduced as under: – F “19. We may first consider the question of title to the said goods. If we keep aside the provisions of law relied upon by the appellants viz., definition of ‘importer’ in Section 2(26) of the Customs Act, clause 5(3)(ii) of the Imports (Control) Order as well as para 26(iv) of the Import-Export Policy, the position is G quite simple. Since respondent 2 did not pay for and receive the documents of the title she did not become the owner of the said goods, which means that respondent 1 continued to be the owner. How do the aforesaid provisions make any difference to this position? The definition of ‘importer’ in Section 2(26) of the H Customs Act is not really relevant to the question of title. It only

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 971 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

defines the expression ‘importer’. Respondent 1 does not claim to be the importer. The provision upon which strong reliance is placed by the appellants in this behalf is the one contained in clause 5(3)(ii) of the Imports (Control) Order. Sub-clause (1) of clause 5 specifies conditions which can be attached to an import licence at the time of its grant. Sub-clause (2) says that a licence granted under the Order shall be subject to the conditions specified in Fifth Schedule to the Order. Sub-clause (3) sets out three other conditions mentioned as (i), (ii), and (iii) which shall attach to every import licence granted under the Order. First of these conditions says that the import licence shall be non-transferable except under the written permission of the licensing authority or other competent authority. Condition (ii)-which is the provision relevant herein-says that the goods for the import of which a licence is granted “shall be the property of the licensee at the time of import and thereafter upto the time of clearance through customs.” This condition, however, does not apply to STC, MMTC and other similar institutions entrusted with canalisation of imports. It also does not apply to certain eligible export houses, trading houses and public sector agencies mentioned in the second proviso. Condition (iii) says that the goods for which the import licence is granted shall be new goods unless otherwise mentioned in the licence. Now coming back to condition (ii), the question is what does it mean and what is the object underlying it when it says that the imported goods shall be the property of the licensee from the time of import till they are cleared through customs. It is necessary to notice the language of the sub-clause. It says “it shall be deemed to be a condition of every such licence that-the goods for the import of which a licence is granted shall be the property of the licensee at the time of import and thereafter upto the time of clearance through customs.” The rule-making authority (Central Government), which issued the order, must be presumed to be aware of the fact that in many cases, the importer is not the owner of the goods imported at the time of their import and that he becomes their owner only at a later stage, i.e., when he pays for and obtains the relevant documents. Why did the Central Government declare that such goods shall be the property of the licensee from the time of import? For appreciating this, one has to ascertain the object underlying the said provision. The interpretation H

p. 972 Copy page pinpoint

A to be placed upon the provision should be consistent with and should be designed to achieve such object. In this context, it should also be remembered that expressions like ‘property of’ and ‘vest’ do not have a single universal meaning. Their content varies with the context. The aphorism that a word is not a crystal and that it takes its colour from the context is no less true in the case of these words. In our opinion the object underlying condition (ii) in clause 5(3) is to ensure a proper implementation of the Imports (Control) Order and the Imports and Exports (Control) Act, 1947. The idea is to hold the licensee responsible for anything and everything that happens from the time of import till they are cleared through customs. The exporter is outside the country, while the importer, i.e., the licensee is in India. It is at the instance of the licensee that the goods are imported into this country. Whether or not he is the owner of such goods in law, the Imports (Control) Order creates a fiction that he shall be deemed to be the owner of the such goods from the time of their import till they are cleared through customs. This fiction is created for the proper and effective implementation of the said order and the Imports and Exports (Control) Act. The fiction however cannot be carried beyond that. It cannot be employed to attribute ownership of the imported goods to the importer even in a case where he abandons them, that is, in E a situation where he does not pay for and receive the documents of title. It may be that for such act of abandonment, action may be taken against him for suspension/cancellation of licence. May be, some other proceedings can also be taken against him. But certainly he cannot be treated as the owner of the goods even in such a case. Holding otherwise would place the exporter in a F very difficult position; he loses the goods without receiving the payment and his only remedy is to sue the importer for the price of goods and for such damage as he may have suffered. This would not be conducive to international trade. We can well imagine situations where for one or other reason, an importer chooses or fails to pay for and take delivery of the imported goods. He just abandons them. (We may reiterate that we are speaking of a case where the import is not contrary to law). It is only with such a situation that we are concerned in this case and our decision is also confined only to such a situation. Condition (ii) in sub-clause (3) of clause 5, in our opinion, does not operate to deprive the exporter of his title to said goods in such a situation.”

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 973 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

31.4. A close look at the discussion and observations above- A quoted makes it clear that basically, the fiction created under the Imports (Control) Order, to the effect that the licensee shall be deemed to be the owner of goods from the time of their import till they were cleared through customs, was under consideration in that case; and having examined the object behind such a fiction, this Court observed that the same was meant for proper and effective implementation of Imports and Exports (Control) Act and could not be carried beyond that, so as to attribute ownership of the imported goods to the importer even when the importer abandons them. The observations of this Court, when read and understood in their context, make it clear that they are of no bearing on the facts of the present case as also the questions involved herein. It has not been laid down that in Sampat Raj Dugar (supra) that a person who is shown to be the importer by virtue of his filing bills of entry for warehousing and for home consumption, as also for his having been assessed to customs duty, would yet fall outside the definition of “importer” in Section 2 (26) of the Customs Act. The said decision in Sampat Raj Dugar does not advance the cause of the appellant in any manner.

32Copy pinpoint32. As noticed, the definition of “importer” in Section 2(26) of the Customs Act, even if not directly decisive of the question of title, has its implications on the facts of the present case for the reason that the appellant alone filed the bills of entry for warehousing as also for home consumption. Yet further, the requirements of filing import manifest, as per Section 30 of the Customs Act, have their own bearing on the present case. It remains indisputable that the name of the appellant was reflected as importer in IGM. If, as asserted by the appellant, the goods had been sold on the high seas, the cargo declaration of IGM20 would have reflected the name of last high seas purchaser as importer and in other event, the IGM would have necessitated amendment because only the last purchaser of the goods on high seas would have been declared as consignee/importer in IGM. The fact that the name of Radha (and other end-buyers) was not mentioned in IGM as the importer/consignee nor the relevant IGM was amended, the suggestion about second high seas sale in favour of Radha (and other end-buyers) turns out to be only a G self-serving suggestion of the appellant, which has no corroboration on 20 As per the requirements of Regulation 3 (c) (iii) of Import Manifest (Vessels) Regulations, 1971, the import manifest has to consist, inter alia, of a ‘cargo declaration’ in Form No. III. Such ‘cargo declaration’ is required to carry, amongst others, particulars of ‘bill of lading’ and ‘the name of consignee/importer, if different’. H

p. 974 Copy page pinpoint

A the record; rather the official records totally belie the suggestion of the appellant. 32.1. The fact of the matter remains that even though the appellant has suggested that the bills of lading were endorsed in favour of Radha (and other end-buyers) when goods were on high seas but this bald assertionis not corroborated by any of the official documents which form the part of the process of importation, warehousing and clearance of goods. On the contrary, the High Court has pointed out as illustration the details of one of the bills of entry, which distinctively gave out all the particulars of IGM, the invoice, the value of cargo, etc. and the High Court has found that in the bill of entry, the name of appellant alone was shown as the importer who cleared the goods from customs with the assistance of the Customs House Agent.In the given set of facts, if the goods were at all sold to Radha (and other end-buyers)on high seas, the name of such end-buyer would have appeared as importer and not that of the appellant.

33Copy pinpoint33. The same considerations operate against the assertion that the appellant was only acting as an agent of the end-buyers. The High Court has rightly pointed out that the Customs House Agent is an entirely different person who acts only to present papers for clearance of the imported goods under a bill of entry. Of course, under Section 147 of the E Customs Act, a person could act on behalf of importer or owner but such a person cannot be treated as owner of the goods nor could be made liable for customs duty. If the appellant was merely acting as an agent, then bill of entry would have reflected the name of end-buyer as the importer and the appellant as an agent of the importer; and further to that, the said end-buyer would have been assessed for customs duty. It F were not so.

34Copy pinpoint34. The discussion foregoing leads to the position that though the definition of importer includes owner or any person holding out himself as the importer; and this definition of importer is not really relevant to the question of title but, that does not mean that a person who holds out himself to be the importer; and who files the bill of entry for home consumption; and who is assessed for customs duty; and whose suggestion about transfer of title to a third person is not established by any reference to any official record, the transfer on high seas may be presumed on mere suggestion about the alleged endorsement of bill of lading.

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 975 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

34.1. When all other official documents as also dealings of the appellant clearly establish that the appellant had been the importer, the consequences are bound to follow. It gets perforce reiterated that when the bills of entry recorded the name of the appellant as importer and the appellant alone was assessed to customs duty, the so called second high seas sale agreementsnever came into operation. B Whether sale in question occasioned import of goods:

35Copy pinpoint35. As noticed, the CTO specifically observed that it had not been the case of the appellant that the sale in question occasioned the import of goods into the country. However, an attempt was made before the High Court to suggest that the entire import was occasioned by ultimate sale in favour of Radha and, therefore, the matter would also be covered in the first part of sub-section (2) of Section 5 of the CST Act. The High Court noticed that such a plea could not have been raised for the first time in the writ petition for being a mixed question of facts and law. The High Court also observed that even such suggestion was belied by the fact that only the name of the appellant was reflected in the bill of entry as importer and not of Radha. It has been argued before us too that the quadripartite agreement triggered the movement of goods from foreign country to India and not merely from Andhra Pradesh to other States; that, in fact, the sales in question had not been inter-State sales but these sales had occasioned the movement of goods from outside India into E India; and that the Indian leg of the integrated transaction cannot be segregated so as to be taxed as inter-State sale under the CST Act. These suggestions also remain totally baseless as noticed infra.

36Copy pinpoint36. We had indicated in the earlier part of the judgment that the decision in the case of K.Gopinathan Nair (supra) shall be referred at F a later stage. We are impelled to refer to the said decision now to deal with the aforesaid suggestions of the appellant. We may, however, observe that this suggestion, that the sales in question had occasioned import of goods into the country, is incompatible with the other assertion that the sales were effected by transfer of documents of title when the goods were on high seas. The two alternative parts of sub-section (2) of Section G 5 cannot ordinarily go together. 36.1. Be that as it may, the submissions made by the appellant about the inter-linked nature of transactions under the quadripartite agreements and the suggestion about the sales in question occasioning H

p. 976 Copy page pinpoint

A import stand effectively repelled by the decision of this Court in K.Gopinathan Nair (supra). In the said case, this Court dealt with the set of appeals arising from the decisions of Kerala High Court and Karnataka High Court. The background aspects had been that the appellants before Kerala High Court were the persons importing cashew nuts from African countries directly but after issuance of a Import Trade B (Control) Order on 31.08.1970, cashew nuts could be imported only through a canalising agency namely, the Cashew Corporation of India (CCI). Consequently, the said appellants imported cashew nuts from African countries through CCI. The CCI used to collect the information regarding requirement of actual users but was thereafter importing C cashew nuts on its own by entering into independent contracts with the foreign exporters and then, the goods were obtained by local users. In the appeal arising from the decision of Karnataka High Court, CCI itself was the appellant. The principal contention of the appellants before the taxing authorities had been that transaction of sale by CCI to actual users was in the course of import and, therefore, the State Sales Tax D Act could not encompass such a transaction. The contentions were rejected by the respective Tax Tribunals as also by the respective High Courts. The common question for determination before this Court was as to whether the import of raw cashew nuts by CCI from African exporters was in the course of import and, therefore, eligible for exemption under Sections 5(2) of the CST Act. As noticed, the learned Judges of this Court differed in their views. In the majority decision, after delineating the determinative factors, the Court examined the facts of the case and the nature of transactions and dealings of the parties andobserved that clearly, there were two transactions: one being of the import of raw cashew by CCI from foreign exporters; and the second being back-to-back sale by the canalising agency like CCI in favour of the local users for whom the goods were indented. The Court held that independent sale which may be based even on a prior agreement of sale by CCI to local users would remain an independent transaction between the importer CCI and the local purchaser but there was noprivity of contract between the local users and the foreign exporter. Hence, this Court rejected the contention of the appellants that transaction of sale by CCI to actual users was in the course of import in the following passage:- “19…..All the aforesaid features which are well established on record leave no room for doubt that it is on account of the sale

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 977 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

to CCI by foreign exporter that the raw cashew get imported in A India and the importer is CCI and not the local user. It is the demand of the local users which prompted the canalising agency like CCI to place orders for import of the quantities concerned. But CCI deals with foreign exporter on its own and gets bulk imports of cashewnuts. It is the sale to the CCI by the foreign exporter or conversely the purchase by the CCI of the raw cashew from the foreign exporter that occasions the movement of raw cashew from African countries to India. The imported cashew remains of the ownership of the importer CCI and only on retirement of documents on payment of value of the allotted cashew by the local users and on their getting the goods cleared from customs that the property in the imported goods concerned would pass from CCI to the local users. Thus there are two clear transactions. One transaction is the import of raw cashew by CCI from foreign exporters. The second transaction which is a back-to-back transaction is of sale by the canalising agency like D CCI which is the wholesale importer in favour of the local users for whom the goods are indented. That independent sale which may be based even on a prior agreement of sale by CCI to local users would remain an independent transaction between importer CCI and the local purchaser, namely, the local user. There is no privity of contract between the local users on the one hand and E the foreign exporter on the other. These two transactions cannot be said to be so integrally interconnected as to represent one composite transaction in the course of import of raw cashewnuts as tried to be submitted by the learned Senior Counsel for the appellants….” F 36.2. For yet further clarity, we may refer to the relevant parts of the minority view, wherein the import of goods and sale to the local purchasers were taken to be inextricably linked hence, the contentions of the said appellants were proposed to be accepted with the following observations:- G “48. This seldom happens in the case of imports whenever the local seller imports the goods as per the specifications of a specific local buyer and on the mutual understanding between the local buyer and the local seller that the goods so imported by the local seller will be purchased by the local buyer. There is in such cases, H

p. 978 Copy page pinpoint

A a direct link between the local sale and the import. In fact it is this mutual understanding between the local buyer and the local seller which occasions the import. That is why the cases dealing with imports have not resorted to differentiating between one sale or two sales. They have applied the test as prescribed by Section 5: Whether the import is a result of understanding/contract between B the local buyer and local seller? If it is, the local sale falls under Section 5. If it is not — as may well happen if the importer sells his goods after they arrive to the best available offeror in the market, then the sale is not covered by Section 5. That is why there has been no need to amend Section 5 to expressly cover a C local sale following import.

49. Now, if we apply this test of inseverable link between the local sale and import to the transaction in the present case, it is clear that the local sale which is between the assessees and the Cashew Corporation of India is inextricably linked with the import of cashewnuts by the Cashew Corporation of India…. … … …

56. However, since there is a direct and inseverable link between the transaction of sale and the import of goods on account of the nature of the understanding between the parties as also by reason of the canalising scheme pertaining to the import of cashewnuts, the sales in question cannot be taxed under the Kerala General Sales Tax Act or the Karnataka General Sales Tax Act, as the case may be….” 36.3. The case of the present appellant, as regards the effect of quadripartite agreement and the suggestion about the sale having occasioned import is, at best, the one as would appear in the minority view in the case of K.Gopinathan Nair (supra). The said minority view being not the dictum of this Court and rather, the contra view being the law declared, the contentions of the appellant must fail. G These had been inter-State sales

37Copy pinpoint37. The effect of raising of debit notes by the appellant on the end-buyers has its own bearing in the present case. The appellant had admittedly raised such debit notes on the end-buyers but only after having cleared the goods by filing the bill of entry for home consumption. Once H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 979 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

the suggestion about the second high seas sales is not accepted and it is A found that the appellant had been the importer of goods and had cleared them for home consumption, the natural consequence of raising of such debit notes on the end-buyers situated in different States and movement of goods to such end-buyers would be to take these transactions in the category of inter-State sales in terms of Section 3(a) of the CST Act. B The appellant was not entitled to the exemption of Section 5(2) of the CST Actand has rightly been held liable for tax over inter-State sales.

38Copy pinpoint38. After the appellant got the goods released by filing bill of entry for home consumption, indisputably, the goods were ultimately received by Radha at Lucknow in the State of Uttar Pradesh (and other end- buyers in different States) and appellant raised debit notes from the C State of Andhra Pradesh. These facts are sufficient to establish that the movement of goods inside the country from one State to another had been on account of the sale by appellant to the end-buyers; and such sales took place only after the appellant obtained the goods from the bonded warehouse for home consumption. D

39Copy pinpoint39. In our view, the High Court was right in observing that once the appellant got released the goods after filing the bill of entry for home consumption, the import stream dried up and the goods got mixed in the local goods. Any movement of the goods thereafter was bound to be a sale under Section 3(a) of the CST Act; and such movement being from E the State of Andhra Pradesh to other State, it had been a matter of inter- State sale. The principle that actual sale may not necessarily precede the movement of goods, in its true effect, operates rather against the appellant in relation to the sale to end-buyers after the goods were cleared for home consumption. F If any case for relegating the appellant to the remedy of appeal made out

40Copy pinpoint40. This takes us to the alternative submission on behalf of the appellant that in view of the disputed questions of fact involved, the appellant may be relegated to the remedy of appeal. These submissions G fail to impress even a bit. 40.1. The appellant, despite being aware of the availability of remedy of statutory appeal, consciously chose to file writ petitions against the assessment orders aforesaid and consciously contested theentire matter in the High Court. The High Court, even after noticing the H

p. 980 Copy page pinpoint

A framework of certiorari jurisdiction, examined the merits of the case thoroughly and even examined the submission made for the first time in writ petitions that the import of goods was occasioned by the sales in question. Of course, in that regard, the High Court pointed out that it was not a pure question of law but in any case, such submission was belied by the fact that the name of the appellant was reflected in the bill of entry as the importer and not that of the end-buyer. We are unable to find any error or fault in the approach of High Court in this case. 40.2. The prayer that the appellant may now be allowed to contest the matter in statutory appeal has only been noted to be rejected. After having consciously invoked the writ jurisdiction of the High Court and having contested the matter on merits, the appellant cannot now be allowed to re-open the matter in appeal. Reference to the decision of this Court in the case of Star Paper Mills Ltd. (supra) is entirely inapposite. In that case, by a format order dated 23.11.1987, the High Court of Delhi remitted the matter pending before it in a writ petition to the Assistant Collector who, accordingly, made an adjudication on 30.05.1988. This order of the Assistant Collector was permitted to be brought on record in the pending writ petition and the petition was ultimately disposed of on 05.07.1993. The contentions in the writ petition by the petitioner related to the deductions as post-manufacturing expenses towards freight subsidies, additional trade discounts and cost of special packing.Though the High Court observed that the claims involved investigation into disputed question of fact but, in effect, declined the relief claimed under those heads of the alleged post-manufacturing costs on the ground that sufficient material was not placed by the petitioner in support of the claims for deductions. In those circumstances, this Court F extended liberty of appeal to the petitionerwhile observing as under:- “4. On a consideration of the matter, we are of the view that against the adjudication made by the Assistant Collector, the petitioner should have one effective opportunity of an appeal. The High Court could have declined to interfere with the matter under G Article 226 if, in its view, the matter involved investigation of disputed facts and relegated the petitioner to the statutory records. But it rejected the claim on the ground of insufficiency of material- a situation which might be susceptible of an irreconcilability with its view that disputed questions of fact could not be investigated in these proceedings. H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 981 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

5. We, therefore, permit the petitioner to lodge an appeal A against the order of the Assistant Collector dated 30-5-1988 with the CEGAT insofar as and confined to the three ‘Heads’ of the deductions for the alleged post-manufacturing expenses, namely: (a) freight subsidy; (b) additional trade discount; and (c) cost of special packing.” B 40.3. The observations aforesaid and the course permitted in the given set of facts of the case of Star Paper Mills Ltd. (supra) cannot be employed in the present case because the findings against the appellant are not on the ground of insufficiency of material but are essentially the result of analysis of the material placed on record with reference to the law applicable. In our view, the extraordinary writ jurisdiction cannot be C utilised by a litigant only to take chance and then to seek recourse to the other remedy after failing in its attempt on the basic merits of the case before the High Court. A litigation cannot be allowed to be unendinglykept alive at the choice of a litigant. Another feature of the case D

41Copy pinpoint41. Before parting, we may also point out that suggestions of the appellant about such transactions with involvement of multiple parties had undergone thorough scrutiny by the concerned CTO and significantly, the suggestions about such quadripartite agreements and arrangements were found to be rather false in relation to at least two of the alleged end-buyers, where one of the end-buyer firm21 denied having received the goods in question or even knowing the appellant; and the other end- buyer firm22 was not even found at the given address. As noticed hereinbefore, the overall dealings indicate that the attempt on the part of the appellant had only been to distort the facts and by alleging multiple transactions, to somehow avoid the operation of law relating to Central Sales Tax. Such attempt has rightly met with its disapproval at the hands of the CTO and the High Court. We have no hesitation in endorsing their views.

21 M/s. Pine Exporters, New Delhi, the alleged end-buyer in third and fourth transactions in the assessment order dated 18.05.2010 (vide paragraphs 10.3, 11.1 and 11.2 supra) 22 M/s. Esskay Impex, New Delhi, the alleged end-buyer in fifth and sixth transactions in the assessment order dated 18.05.2010 (vide paragraphs 10.4, 11.1 and 11.2 supra) H