IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 235 of 2011 For Approval and Signature:
HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
========================================================= FAG BEARING INDIA LTD - Appellant(s) Versus STATE OF GUJARAT - Opponent(s) ========================================================= Appearance :
MR. TANVISH BHATT FOR M/S WADIA GHANDY &CO for Appellant(s) : 1, MR KABIR A HATHI AGP for Opponent(s) : 1, =========================================================
CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI
and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 29/06/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) It was for consideration of following two substantial questions of law formulated by this court, that the present appeal under section 78 of the Gujarat Value Added Tax Act, 2003, was admitted:
“[1] Whether on the facts and circumstances of the case, the Tribunal committed substantial error of law in holding that there was no privity of contract between the purchaser and parent company and hence the appellant was not liable to exemption under Section 87 of the Gujarat Sales Tax Act, 1969 in context of the order passed on the application for rectification dated December, 9, 2010.
[2] Whether on the facts and circumstances of the case, the sale made by the appellant to the customers occasioned the import of goods as required under Section5[2] of Central Act so as to be termed as “sale in course of import” and be liable to exemption from tax under the provisions of Section 87 of the Local Act in the context of the order dated December 9, 2010 passed on the application for rectification.”
2. We heard learned advocate Mr. Tanvish Bhatt for M/s. Wadia Ghandy & Company for the appellant and Mr. Kabir A. Hathi, learned A.G.P. for the respondent-State.
3. Noticing the relevant facts involved in the appeal, the appellant- assessee, a company incorporated under the Companies Act, 1956, was a subsidiary of a German company and was engaged in manufacture and resale of bearings. The assessee was a registered dealer under the provisions of the Gujarat Sales Tax Act, 1969. It was the case of the appellant that the customers desirous of purchasing the goods manufactured by the German company used to place purchase orders with specifications asking the appellant to import the goods. On receipt of such purchase orders, after making inquiry from the company in Germany about the possibility of supply of the demanded goods and upon receiving the acceptance from the parent company, it would receive confirmation orders from the customers. The goods were thereupon imported from Germany and were delivered to such customers. The transactions performed in such manner were treated by the assessee as sale in course of import. According to assessee, therefore, it was not liable to tax under section 87 of the Gujarat Sales Tax Act, 1969 read with section 5(2) of the Central Act.
3.1. The Assessing Officer by its order dated 31.01.2004 did not accept the claim of the appellant taking a view that there was no link in the transactions between the parent company abroad and the customer. He charged sales tax treating the transactions to be a sale in the State of Gujarat. The Joint Commissioner of Sales Tax dismissed the appeal of the assessee by his order dated 22.03.2008. The assessee thereafter approached the Gujarat Value Added Tax Tribunal, Ahmedabad by preferring the second appeal under section 78 of the Gujarat Value added Tax Act, 2003.
3.2. The Tribunal dismissed the appeal of the assessee by order dated 16.06.2009, taking the view that the transaction between the assessee and the customers on one hand, and the transactions of import of goods from the company in Germany on the other hand were different transactions. The Tribunal observed in paragraph No.9 of its order as under:
“9. Therefore, from the facts as stated above, it can be said that the customers have demanded special quality of the goods. The customers have demanded specific quality of the goods. The customers specifically demanded that the goods should be supplied to them after importing from Germany which would be of specific quality. After receiving the special demand from various customers, the appellant imported the goods.
However, it is not the say of the appellant that in each and every individual case, they have imported the goods from Germany and then supplied to the customers. On the contrary, it is specifically admitted by the appellant in para-5 of the statement of facts that the appellant has imported goods in anticipation of special demand for specific quality by the various customers. In short, it cannot be said that this is import of the goods by the customers directly from the parent company at Germany. The customer was not in picture till the goods were imported and received in India. There is no privity of contract between the parent company at Germany and customer. There is no obligation on the part of the parent company at Germany to supply goods to the customer directly. In fact, the appellant has imported the goods from Germany and thereafter supplied to the customer.”
3.3. The assessee thereafter filed an application for rectification under section 79 of the Act seeking clarification that on facts two different sets of transactions were effected by the assessee and the controversy was only in respect of those transactions where there was a link between the import of goods and their ultimate sale. The said rectification application was allowed by the Tribunal by order dated 09.12.2010 and it deleted paragraph No.9 of the judgment. It was further observed that the facts observed in the order including the deletion of paragraph No.9 may be part of the original order of the Tribunal. On basis of the facts produced by the assessee, the Tribunal could be convinced that a link between the import of goods and the ultimate sale was established and thus the transactions were in the nature of sales in course of import within the meaning of section 5(2) of the Central Sales Act.
4. As the order of the Tribunal dismissing the appeal was based on reasoning supplied in paragraph No.9 of the judgment and once it came to be deleted as stated above, the whole basis of the judgment of the Tribunal in the main appeal did not survive. The Tribunal's order dated 09.12.2010 passed in the rectification application would govern the field. The transactions in question entered into by the assessee are accepted as sale in course of import for the purpose of applicability of section 5(2) of the Central Sales Act.
5. Learned advocate for the appellant would rightly submit that in view of above, the order dated 16.06.2009 cannot stand and it stands only technically. As a sequetor of order dated 09.12.2010 in the rectification application, the order dated 16.06.2009 of the Tribunal in the main appeal does not sustain and it is hereby formally set aside.
6. In light of the above, both the questions formulated above are answered in affirmative against the Revenue and in favour of the assessee.
7. The Appeal is accordingly allowed.
(V.M. SAHAI, J.) (N.V. ANJARIA, J.) (SN DEVU PPS)