By C. B. Thakar Advocate G. G. Goyal Jana K Vaghani Chartered Accountants
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Sales Tax – Import of Goods by Bank – Under the Master Lease Agreement – Followed by Supplementary Lease Agreement-On Facts – Sale in The Course of Import – Not Taxable, section 5(2) of The Central Sales Tax Act, 1956 and section 3A(2)(a) of The Tamil Nadu General Sales Tax Act,1959
Facts
The assessee, a Bank entered into Master Lease Agreement with Hindustan Power Ltd., for importing and leasing of machinery on rental basis. The Bank accordingly ordered machinery as per the specification of the Company from the foreign manufacturers. While the goods were in transit, the Bank and the Company entered in to a Supplementary Lease Agreement which was stated to be a part of the Master Lease Agreement. Since, the Master Lease Agreement made no reference as to the purchase order placed with the foreign manufacturer, the revenue took the stand that the Supplementary Lease Agreement is un-connected with the Master Lease Agreement and rejected the claim of the assessee for exemption from payment of tax as sale in the course of import u/s. 5(2) of the CST Act, 1956. The first appellate authority as well as Tribunal allowed the claim and revenue filed revision petition before the Madras High Court.
Held
The bank had placed a purchase order on the manufacturer at the request of the lessee Company towards purchase of the specified equipment and in the event the lessee was unable to firm up with the manufacturer for the equipment to be leased within the stipulated time, it was open for the lessor bank to withhold for payment and canceled the same. Once the arrangement between the assessee and the lessee, as regards lease agreement, got finalised for the purpose of import of machinery, the subsequent documentation was merely a follow-up action and it is difficult to read each one of the documentation in isolation. When the first of the documents viz., the Master Lease Agreement got dovetailed into purchase order placed by the assessee with the foreign manufacturer, the subsequent documentation completes the balance of the transaction the assessee bank had with the lessee. On facts of the case, the High Court held that there was an inextricable link between the Master Lease Agreement and the Supplementary Lease Agreement on the one hand and the import of specific goods based on the purchase order on the other. Accordingly, the High Court rejected the revision petition filed by the revenue and allowed the claim of the assessee bank for exemption from payment of tax on the lease of the imported machinery to the Lessee company being sale in the course of import.
