1. Facts of the Case
- An importer ‘X’, located in Delhi, imported goods from ‘Y’, a supplier based in London.
- After obtaining customs clearance, the goods were sold to a buyer in India.
- The importer claimed that the sale was in the course of import and hence exempt under Section 5(2) of the Central Sales Tax Act, 1956.
- However, the Sales Tax Officer rejected the exemption, holding that the sale occurred after the import was completed and therefore levied CST.
- The issue is whether the sale qualifies as a sale in the course of import, or whether it is liable to Central Sales Tax.
2. Issues in the Case [Questions]
- Whether the sale of goods by the importer after clearance from customs qualifies as a sale in the course of import under Section 5(2) of the CST Act?
- Can the importer claim exemption from CST even though the sale was made after the goods had crossed Indian customs frontier?
- Is the Assessing Officer’s action legally valid, or is the importer entitled to exemption?
3. Legal Principles Covered
A. Section 5(1) and 5(2) of CST Act, 1956
- Section 5(1): A sale or purchase of goods is deemed to be in the course of import if:
- The sale occasions the import of the goods into the territory of India.
- Section 5(2): A sale is also deemed to be in the course of import if:
- It is a sale effected by transfer of documents of title to the goods before the goods cross the customs frontier of India.
B. Judicial Precedents
- K. G. Khosla & Co. v. Dy. Commissioner of Commercial Taxes (1966) 17 STC 473 (SC): A sale which is integrally connected with import and effects import can be considered a sale in the course of import.
- Binani Bros. Pvt. Ltd. v. Union of India (1974) 33 STC 254 (SC): If the title to the goods passes after customs clearance, then the sale is not in the course of import.
- State of Karnataka v. Azad Coach Pvt. Ltd. (2010) 36 VST 1 (SC): There must be a privity of contract between the foreign seller and the Indian buyer before import begins to claim exemption.
4. Possible Judgement
Position of the Sales Tax Officer:
- Since the sale was made after customs clearance, and not by way of transfer of title before import ends, the sale does not fall under Section 5(2).
- Therefore, the officer holds that it is a domestic sale, and CST is applicable.
Defense Argument for the Importer:
- If the importer had entered into a contract of sale with the Indian buyer before the goods were imported, and the import was carried out specifically to fulfill that contract, then Section 5(2) exemption could be invoked.
- However, if the sale was made after clearance, and no pre-existing contract or transfer of document of title during import exists, the transaction becomes intra-India sale post-import.
