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1977 Supreme(Mad) 431
High Court of Judicature at Madras
THE HONOURABLE CHIEF JUSTICE MR. P. GOVINDAN NAIR & THE HONOURABLE MR. JUSTICE A. VARADARAJAN
State of Tamil Nadu - Appellant
Versus
Madras Motor Parts Dealers Association - Respondent
Case No : Tax Cases Nos. 264 and 265 of 1976
Decided On : 06 October 1977
There can be no sale by an association to its members if the association is strictly prohibited from effecting any such sales.
Headnote:
SALES TAX - Import of goods - Sales by association to its members - Whether taxable - Held, no sale by association to its members - Turnover not taxable.
Fact of the Case:
The Madras Motor Parts Dealers' Association imported certain motor parts on behalf of its members. The association contended that the sales to its members were not taxable as they were in the course of import. The revenue contended that the sales were local sales and were taxable.
Finding of the Court:
The court held that there were no sales by the association to its members and, therefore, there was no taxable turnover. The court found that the association had been strictly prohibited from effecting any such sales and that it had not violated the terms of the letter of authority and the agreement that had been entered into by the association with the State Trading Corporation.
Issues: Whether the sales by the association to its members were taxable.
Ratio Decidendi: The court held that the sales by the association to its members were not taxable because there were no sales by the association to its members. The court found that the association had been strictly prohibited from effecting any such sales and that it had not violated the terms of the letter of authority and the agreement that had been entered into by the association with the State Trading Corporation.
Final Decision: The court dismissed the revenue's revisions and held that the turnover was not taxable.
GOVINDAN NAIR, C.J.
These revisions are taken by the revenue against the order of the Tribunal holding that the turnover of Rs. 2, 07, 878.77 representing the alleged sales effected by the Madras Motor Parts Dealers' Association to its members are not taxable and they are really and in law sales in the course of import. The short question is whether the said turnover for the year 1971-72 is taxable under the Tamil Nadu General Sales Tax Act. While the revenue contends that the turnover represented local sales coming under that head, on behalf of the assessee it was contended that those sales were in the course of import and that if that contention is not accepted, it is clear from the facts that there were really no sales by the assessee to its members. We shall consider these aspects. Before doing so, we have to refer to certain facts and certain agreements.
The Madras Motor Parts Dealers' Association is an association of its constituents who are all dealers in motor parts. The members wanted to import certain parts which were in demand and which were importable pursuant to agreements entered into between India and other countries on making payments in rupees. They, therefore, approached the association and paid amounts to the association after specifying the nature of the motor parts required by them and the extent of the quantity wanted. The terms of the agreement have been embodies in writing and a copy of the agreement has been made available to us. It is clear from this agreement that the members wanted the association to act as interveners, in fact as the agents of the members, and get the goods imported on behalf of the members and then disburse them to the members for sale. We shall extract only one paragraph (paragraph 8) from this agreement, the relevant part of which is as follows :
"It is agreed that although the import contract shall be made in the name of the association as required by the State Trading Corporation of India Ltd., the association shall enter into such import contract on behalf of and at the sole risk of the members for whom the goods are imported or to whom the goods are to be allotted or distributed for sale by the association ...." *
Though the articles of agreement dated 24th September, 1964, between the association and its members contained terms which seem to indicate that the association has been authorised by the members to import on their behalf, it is not possible for the association to do so because the licence for import had been given only to the State Trading Corporation. We have been furnished with a copy of the licence, the conditions attached to it as well as the letter of authority that has been given to the State Trading Corporation authorising the State Trading Corporation to permit the association to import. It was made very clear that the permission was to be granted to the association to import on their behalf, i.e., on behalf of the State Trading Corporation. The letter of authority also stated that it shall be subject to the conditions stated in the letter of authority itself. Those conditions are the following :
"1. The person or concern in whose favour it has been issued will act purely as an agent of the licensee and the goods imported will be the property of the license-holder both at the time of clearance through the customs and subsequent thereto. The license-holder will have to ensure that the goods on importation will be delivered to him and shall not be disposed of otherwise. The licensee shall not cause or permit the holder of the letter of authority to dispose of the goods.
2. The holder of the letter of authority shall clearly indicate on all the relevant customs documents including the triplicate copy of the customs bill of entry that the goods have been imported by him on behalf of the licensee. The endorsement will be duly attested by the customs authority.
3. The holder of the letter of authority shall not under any circumstances be entitled to any q
