Important Point
Where bill of lading had been endorsed by importer in favour party on behalf of whom purchase order was placed with exporter while consignment was still upon the high seas, sale was sales in course of import within meaning of Section 5 of the Central Sales Tax Act.

Judgment

The appeal impugns the correctness of a judgment of a Division Bench of the High Court of Orissa dismissing the writ petitions filed by the appellant.

2. The appellant is a Government of India undertaking. It functions as a canalising agent for the purpose of import and export of minerals and metals. It had, for this purpose, issued guidelines to actual users in the matter of applications for the import of iron and steel items to be cenalised through it. Thereby the actual user was informed that the formal purchase order on the foreign exporter would be re­leased by the appellant after the actual user had made financial arrangements to cover the purchase. The actual user had the option to open either a domestic letter of credit in favour of the appellant or a direct letter of credit in favour of the exporter, but the facility of opening a direct letter of credit was to be given only on the merits of the case and provided an undertaking in the stated proforma was given. In other cases a back-to-back letter of credit favouring the appellant had to be established. On 31st March, 1991, the Steel Authority of India Limited (hereinafter referred to as ‘SAIL’) requested the appellant to register the import of 15,000 MT of tin mill black plate (TMBP) coils. An application was enclosed. The applicants stated that the said coils were required for production by them of electrolytic tin plates. The said coils would be utilised in their factory for their purposes and no portion thereof would be sold to or be permitted to be used by any other party or for any other purpose. On 14th July, 1991, SAIL opened a letter of credit directly in favour of the exporter, M/s. Samsung Co. Ltd., Seoul, South Korea, in the sum of US $ 1,895,475.00. The consignee therein was shown as SAIL. On 2nd August, 1991, the appellant placed a purchase order with the exporter for on behalf of SAIL. On 16th August, 1991, the appel­lant wrote to SAIL enclosing a copy of its purchase order. The letter stated :

“We shall arrange delivery of the material to you on `high-seas’ basis by endorsement and transfer of shipping documents in your favour after the documents have been paid for by your banker against L/C estab­lished by you.”

SAIL was requested to make arrangements for clearing the cargo, including arrangements for clearance thereof from customs. The letter stated that the responsibility for “payment of Import duties, Port charges and other expenses subsequent to sale on `high seas’ also will be to your account.” On 23rd October, 1991, the appellant sent to SAIL its invoice, adjusting the amount that had already been paid by SAIL through its ban­kers. On 28th October, 1991, the appellant wrote to SAIL stating that it had decided to make a high seas sale of the said coils to SAIL. Accordingly, documents with due endorsement thereon were sent to SAIL to get the said coils cleared. The documents that were enclosed included the original bill of lading dated 30th September, 1991, for the said coils, duly endorsed in favour of SAIL. On the same day the appellant wrote to Assistant Collector of Customs, Paradeep Port, Cuttack, where the consignment of the said coils would arrive on the vessel M.V. State of Tripura. The letter stated 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 pay the customs duty. The vessel arrived at Paradeep Port on 11th November, 1991 and berthed on 30th November, 1991. On 18th November, 1991, the bill of entry in respect of the said coils was submitted and processed by SAIL.

3. On 31st December, 1994, the Sales Tax Officer levied sales tax on the aforesaid sale. He rejected the appellants’ case 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 Act, 1956. He held that there had been two sales, one between the exporter and the appellant and the other between the appellant and SAI