Judgment

TULZAPURKAR, J. :- The common question raised in these appeals is whether the sales effected by the respondent-assessee in the three concerned years of goods imported and supplied to customers on the strength of Actual Users Import. Licences of the customers were exempt from sales tax under the Kerala General Sales Tax Act, 1950, on the ground that these were sales "in the course of import of the goods into the territory of India"?

2. The respondent-assessee deals in chemicals, dyes, etc. The concerned assessment years are 1961-62, 1962-63 and 1963-64. The respondent-assessee was assessed to sales tax under the General Sales Tax Act, 1950 on the turnover of sales effected by them in those years of goods imported on the strength of the customers Actual Users Import Licences and supplied to them. Such turnover subjected to tax was to the tune of Rs. 3,15,526.10(?) in the year 1961-62. Rs. 13,40,949.98 in the year 1962-63 and Rs. 4,03,427.72 in the year 1963-64. The respondent-assessee contended that these sales were in the course of import of goods into India and hence not taxable by virtue of Art. 286(1)(b) of the Constitution. The contention was negatived by the assessing authority as also by the Appellate Assistant Commissioner but the Appellate Tribunal in second appeal accepted the contention and held that the disputed turnover in each year was not taxable. In the revisions preferred by the Deputy Commissioner, the High Court confirmed the Tribunals view. In doing so the High Court considered the several decisions that were cited before it and ultimately following the test laid down by this Court in Ben Gorm Nilgiri Plantations Company, Coonoor v. Sales Tax Officer, Special Circle Ernakulam, (1964) 7 SCR 706 and mainly relying upon another decision of this Court in K. G. Khosla & Co.s case, (1966) 3 SCR 352 it took the view that the sales covered by the disputed turnover in the facts and circumstances of the case were sales in the course of import. The Revenue has come up in appeal to this Court.

3. It was not disputed that goods were imported by the respondent-assessee on the strength of the Actual Users Import Licences that had been obtained by the customers and supplied to them for use by the latter in their factories. The sales in question were put through by the respondent-assessee as found both by the Tribunal and the High Court, in the following manner. The indigenous purchaser, for example M/s. Hindustan Insecticides Limited in Kerala, used to place orders with the respondent-assessee quoting its Import Licence Number, the quantity of goods, rate, etc. as agreed to by previous correspondence with the respondent-assessee; the respondent-assessee then placed orders with the foreign supplier for the supply of the goods and in such orders the name of the local purchaser who required the goods as also its licence numbers, were specified; the actual import was done on the strength of two documents like (a) the Actual Users Import Licence and (b) Letter of Authority issued by Chief Controller of Imports and Exports whereunder the local purchaser was authorised to permit the respondent-assessee on his behalf to import the goods, to open letters of credit and make remittance of foreign exchange against the said licence to the extent of value specified therein. The import licence expressly contained two conditions, (i) that the goods imported will be the property of the licence-holder at the time of clearance through the Customs and (ii) that the goods will be utilised only for consumption as raw material or accessories in the licence-holders factory and that no portion thereof will be sold to or be permitted to be utilised by any other party. Reading these two documents together it was clear that the import of the goods by the respondent-assessee was for and on behalf of the local purchaser and the respondent-assessee could not, without committing a breach of the contract, divert the goods so imported for any other pur