TMI Blog2003 (10) TMI 620X X X X Extracts X X X X X X X X Extracts X X X X ..... not sales made by them from Flight Kitchen were liable to local sales tax, filed an application under section 52(1)(c) of the BST Act to the Commissioner of Sales Tax, Maharashtra State, Bombay. 4.. It was the contention of the petitioners that the sales of goods to the foreign airlines by the Flight Kitchen were in the course of export within the meaning of section 5(1) of the CST Act. The said sales occasioned export of the goods out of the territory of India: by transfer of documents of title of the goods: after the goods crossed the customs frontiers of India, as such the sales effected by them to the foreign airlines were not exigible to the provisions of the BST Act. 5.. The learned Commissioner of Sales Tax after hearing the parties was pleased to hold that the said transactions effected by the petitioners, detailed hereinabove, were liable to be taxed under the BST Act, they being local sales. In the result, the contentions raised by the petitioners did not find favour with the Commissioner of Sales Tax. The application moved by the petitioners under section 52(1)(c) of the BST Act came to be rejected by order dated May 2, 1988. 6.. Being aggrieved by the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance of the seller of goods has no legal standing or foundation. 8.. The Tribunal also held that the sale having been effected for consumption on board during the period when the aircraft is a foreign going aircraft, the goods have no definite foreign destination, which is sine qua non for any transaction of export. The Tribunal thus held that neither such sales could be said to be in the course of export nor it occasioned such export or effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India, as such they are local sales exigible to the BST Act. Thus the appeal filed by the petitioners came to be dismissed with the aforesaid findings. 9.. Not being satisfied with the aforesaid order of the Tribunal, the petitioners have preferred present writ petition under article 226 of the Constitution of India to challenge the above order of the Tribunal. Constitutional scheme and legislative structure: 10.. Before embarking upon the rival contentions of the parties, we may proceed to notice the relevant provisions of the Constitution and other statutory provisions which have a bearing on the issue. 11.. Under article 286 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erce if the sale or purchase,- (a) occasions the movement of goods from one State to another; or (b) is effected by a transfer of documents of title to the goods during their movement from one State to another." Section 4 lays down when is a sale or purchase of goods said to take place outside a State. Sub-section (2) of section 4 is extracted as follows: "A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State,- (a) in the case of specific or ascertained goods, at the time the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation." Section 5 provides: When is a sale or purchase of goods said to take place in the course of import or export. Sub-section (1) of section 5 is extracted below: "(1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing with the contentions raised by the rival parties. 14.. On the canvas of the aforesaid provisions of the CST Act read with the Sale of Goods Act, 1930, especially, in the backdrop of the constitutional scheme engrafted under article 286(1) of the Constitution referred to above, the questions that arise for consideration herein are: firstly, when the sale shall be deemed to take place in the course of the export of goods out of territory of India; secondly, what meaning should be given to the expression "sale occasions such export" occurring in section 5(1) of the CST Act and, thirdly, what do you mean by "crossing the customs frontiers of India". In order to answer third question posed herein: two incidental questions would require consideration, namely, (i) what are the limits of the area of the customs station? and (ii) what is a customs port? 15.. In order to answer the above questions, Mr. Kapil Sibal and Mr. Aspi Chinoy, learned Senior Counsel appearing with Mr. B.C. Joshi for the petitioners and Mr. E.P. Bharucha, learned Senior Counsel with Mr. B. Patel appearing for the respondent-State of Maharashtra in their well searched submissions addressed us and referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, first contends that the Burmah-Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer [1960] 11 STC 764 (SC); AIR 1961 SC 315, was a decision at the time when the Customs Act and the CST Act both were not enacted. The case related to the transactions of 1953 as such it cannot be regarded as a precedent while interpreting section 5(1) of the CST Act which also contemplates deemed export. Burmah-Shell [1960] 11 STC 764 (SC); AIR 1961 SC 315 related to consumption of stores on board a ship or aircraft. Such consumption cannot possibly be a deemed export. Such sales or stores to the aircraft cannot possibly occasion the export of such goods because such goods are not meant for export but are meant for consumption as stores on the aircraft itself for use of the aircraft. In his submission, the case of Burmah-Shell [1960] 11 STC 764; AIR 1961 SC 315 involved the consumption of aviation spirit by a foreign bound aircraft which cannot ever be considered as a sale occasioning the export of aviation spirit. Consequently, the fact and situation in Burmah-Shell [1960] 11 STC 764 (SC); AIR 1961 SC 315 and the observations made in the context of the said fact-situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aviation spirit, coal, for the crew and other items meant for use by the vessel itself in the normal course of its running cannot possibly fall within the first limb of section 5 and the assessee cannot claim such transactions to be in the course of export in the sense that the sale in such transactions occasioned the export, because there is no destination for such items meant for consumption as stores by the aircraft itself. 21.. Mr. Sibal submits that the conceptual term "stores" is different from goods like food supplied on board an airline for the consumption of passengers. Section 2(38) of the Customs Act defines "stores". " 'Stores' means goods for use in a vessel or aircraft and includes fuel and spare parts and other articles of equipment whether or not for immediate fitting". In his submission, it is clear from this inclusive definition that the stores meant for use in a vessel or aircraft are essential equipment for the functioning of the aircraft or vessel itself and, consequently, cannot possibly have a destination in the context of the expression of export under section 5(1) of the CST Act. 22.. Mr. Sibal again taking exception to the judgment of the Tribunal con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the transaction of sale in question satisfy the definition of the word "export" under the Customs Act is the submission advanced by Mr. Sibal to bring home his point. 24.. With the aforesaid submission, Mr. Sibal switched over to the second part of section 5(1) of the CST Act to establish that the sales in question have fulfilled both conditions so as to attract second limb which contemplates sale by transfer of document of title after the goods had crossed the Indian customs frontiers. He submits that section 5(1) considers certain transactions of goods to be deemed to take place in the course of export only if either such sale occasions such export or is effected by a transfer of a document of title to the goods after the goods have crossed the customs frontiers of India. According to him, as to why the concept of destination may be relevant in the case of sale occasioning such export is because the expression "occasioning such export" implies a destination. Once that destination is proved then such export shall be deemed to take place in the course of export. This concept of export is alien to the second limb of section 5(1) which requires only two ingredients to be sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld pass upon transfer of the delivery order and that the liability of the consignor in respect of the goods comes to an end upon transfer of the delivery order. 27.. According to Mr. Sibal, the contract and understanding between the parties is also reflected in the document of April 1, 1987, (para 1) which clearly stipulates that the goods remain the property of the petitioners till the transfer of title by issuance of necessary delivery order and that the goods remain at the risk of the petitioners till delivery of documents of title. This is reiterated in para 5; wherein it is stipulated that the goods vest in the airlines only upon delivery of documents and after delivery of documents, the goods are exclusively at the risk of the airlines. This service contract stipulates the intention of the parties. The conduct of the parties does not suggest to the contrary. Consequently, in his submission, reliance on section 23 of the Sale of Goods Act by the Tribunal is both illegal and inappropriate. Mr. Sibal relied upon the following judgments in Hoe Kim Seing v. Maung Ba Chit AIR 1935 PC 182, Arcot Mills Limited v. State of Tamil Nadu [1984] 55 STC 356 (Mad.) and Agricultural Market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never relied upon by the revenue. He submits that another reason given by the Tribunal in upholding the revenues contention, that the goods were appropriated at the Flight Kitchen, is based on observations to the effect that the difference between the original order of the airlines on the basis of which the food was prepared and put in trays, and the final determination of the quantity of the food trays ultimately delivered to the airline was negligible, and that the numerical difference of a few items will not have any impact on the concept of "appropriation" at Flight Kitchen. He submits that it is a settled law that only goods which are identified and ascertained can be appropriated to the contract. There is nothing on record to substantiate the contention of the counsel for the Revenue that the difference in the quantity of items of food prepared at the Flight Kitchen as per the airlines original order and the quantity of food delivered to the airlines at the tarmac is only a slight difference. In fact, such differences can be slight or substantial depending on the requirements of a particular flight. In any event, any variation in the quantity of food prepared at the Flight Ki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of the present case, Mr. Bharucha submits that all the ingredients of sale within a State are satisfied, as such the sale is liable to sales tax in the State of Maharashtra. He placed reliance on the judgments of the apex Court in Burmah-Shell Oil Storage and Distributing Co. of India v. Commercial Tax Officer [1960] 11 STC 764 (SC); AIR 1961 SC 315, Madras Marine and Co. v. State of Madras [1986] 63 STC 169 (SC); (1986) 3 SCC 552, State of Madras v. Davar Co. [1969] 24 STC 481 (SC); AIR 1970 SC 165, State of Kerala v. Cochin Coal Company Ltd. [1961] 12 STC 1 (SC); AIR 1961 SC 408, Fairmacs Trading Company v. State of Andhra Pradesh [1975] 36 STC 260 (AP); 75 TLR 1486. 33.. Mr. Bharucha urged that the apex Court in the aforesaid three judgments referred to hereinabove, while construing article 286(1)(b) of the Constitution of India held that the term "in the course of exports" implies that the goods must have a foreign destination because two notions of import and export go in pairs. He submits that the apex Court has rejected the wide definition of export as merely taking goods out of the country. Mr. Bharucha while elaborating his submission, submitted that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarifies that ship stores include foodstuffs, alcoholic and other beverages on board of a ship. He submits that this circular was issued on the basis of the opinion by the World Customs Organisation. Thus it was clear that universally, foodstuffs and drinks consumed on board a vessel are regarded as ship stores. In order to buttress his submission, he brought to our notice the judgment of the CEGAT in the case of Commissioner of Customs and Central Excise, Rajkot v. Saibaba Ship Breaking Corporation (2002) 140 ELT 135 (Bom); wherein the above circular has been interpreted and followed. Adopting the reasons given in the said judgment by the Tribunal Mr. Bharucha submits that "stores" would include foodstuffs and the judgments of the apex Court in Burmah-Shell [1960] 11 STC 764 (SC); AIR 1961 SC 315 and Madras Marine [1986] 63 STC 169, would apply with full rigour to the facts of the present case. 36.. Mr. Bharucha submits that as per the petitioners the airlines intimate their approximate requirement of meals for the flight to the petitioners. The petitioners then prepare the meals and take it to the tarmac. The airlines then intimate the actual quantity required and thereafter t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id definition has been rejected by the apex Court in Madras Marine [1986] 63 STC 169 while dealing with the issue of export under sales tax. 38.. So far as submission advanced by Mr. Sibal with respect to delivery order is concerned, Mr. Bharucha submits that the delivery order is normally not a document of title of goods unlike a bill of lading or railway receipt or a lorry receipt. According to him, the delivery order has been referred to as a document of title to goods only by an inclusive definition under section 2(4) of the Sale of Goods Act. This inclusive definition cannot be imported in a taxing statute like the CST Act. He submits that the Sale of Goods Act governs the relationship of contracting parties with respect to contracts for sale of goods. In fact, many of the provisions of the Sale of Goods Act can be excluded by the contract. The CST Act is a fiscal legislation. These two statutes are not in pari materia, as such, relying on the provisions of the Sale of Goods Act, the delivery order cannot be projected as a document of title to the goods. Mr. Bharucha submits that no evidence whatsoever was led by the petitioners to show that catering industry regards the del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms authorities. According to him, all goods for export have to be first brought to a customs area where customs formalities are completed before they are loaded on a vessel or an aircraft for transportation. Similarly, all imported goods have to be unloaded in a customs area where all customs formalities are completed before being allowed to leave or cross the customs area into India. 42.. Relying on explanation to section 2(ab) of the CST Act, Mr. Bharucha submits that the said sub-section defines a "customs area" to be the limits of customs station and the term "customs station" has to have the same meaning as in the Customs Act. He submits that as per the provision of section 2(13) of the Customs Act, customs area means any customs port, customs airport or land customs station. According to him, customs airport has been defined in section 2(10) to mean any airport appointed under section 7(a) to be a customs airport. He pressed into service Notification No. 62/94Cus dated November 21, 1994 issued under section 7 and as amended from time to time which includes Sahar Airport to be a customs airport. According to him, under section 8 of the Customs Act, the Commissioner has po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby vessel or aircraft must leave customs area towards its onward journey to a foreign destination. He submits that the judgment referred to by the petitioners in the case of Minerals Metals Trading Corpn. v. Sales Tax Officer [1998] 111 STC 434 (SC); (1998) 7 SCC 19 is clearly distinguishable. The sale referred to therein was on high seas, whilst the sale in the present case is by appropriation of goods on tarmac within the territorial limits of the State of Maharashtra and before the goods had crossed the customs frontiers of India. 45.. Mr. Bharucha turning to the prayer clauses of the petition and relief claimed therein submits that since the petitioners did not challenge the orders prior to 1985, consequently, those orders have become final and conclusive, as such it is not open for the petitioners to challenge the same and claim refund in this petition. In support of his submission, he relied upon the judgment of this Court in the case of Jayant Dyes Chemical Co. v. Deputy Commissioner of Sales Tax (Adm. III) (2003) 27 MTJ 1 (Bom.). Mr. Bharucha, while concluding his submissions, submits that the sale of goods by the petitioners to the foreign airlines for consumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated by the apex Court in Ferro Alloys Corporation Ltd. v. Union of India [1999] 112 STC 570. 47.. Mr. Sibal submits that the next ingredient required to be proved by the petitioners was that the sale was effected by the transfer of documents of title, being the delivery order, after the goods had crossed the customs frontiers of India. The revenue in this respect has contended that the customs frontiers of India in terms of section 2(ab) of the CST Act means crossing the limits of the area of a customs station. The term "customs station" in turn is defined in the Customs Act in section 2(13) which means any customs port, customs airport or land custom station. The boundaries of a "customs airport" in the context of Bombay representing the limits of the Sahar International Airport is proved through a notification placed on record. Mr. Sibal submits that this entire submission of the Revenue proceeds on a misreading of section 2(ab). Section 2(ab) of the Act of 1956 defines the crossing of customs frontiers of India to mean crossing the limits of the area of a customs station in which imported or exported goods are ordinarily kept before clearance. The expression "before cle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p because without this the ship could not have sailed and reached the ship braking yard and, therefore, Modvat credit was claimed. Revenue contended that Modvat credit could only be restricted to the extent of the input contained in goods and material falling under item 15 of the Tariff. The CEGAT rejected the arguments relied upon in defense of stores in the Customs Act and, therefore, found that such goods are not classifiable under heading 89.08 and, therefore, not entitled for Modvat credit. Mr. Sibal thus submits that the judgment of the CEGAT has absolutely no bearing to the issues before this Court. Neither the circular nor the order of the CEGAT has any bearing to the facts of the present case. 49.. Mr. Sibal also reacted to another argument raised by Mr. Bharucha, learned counsel for the Revenue and not raised at the time when the matter was argued before the Tribunal, that the sales in question are exigible to tax by virtue of section 4 of the CST Act since all the sales which are the subject-matter of dispute in this petition were completed within the State of Maharashtra and that sections 3, 4 and 5 of the CST Act are part of a scheme of which section 4 is subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions. Authorities on issue: 52.. The provisions of law referred to hereinabove in their interpretation have been attending attention of the Supreme Court as well as High Courts. We briefly make a reference to some of such decisions. 53.. The principal decisions of the apex Court on interpretation of article 286(1)(b) of the Constitution of India are: State of Travancore Cochin v. Bombay Company Ltd. [1952] 3 STC 434 (SC); AIR 1952 SC 366, State of Travancore-Cochin v. Shanmugha Vilas Cashew-nut Factory [1953] 4 STC 205 (SC), Burmah-Shell Oil Storage and Distributing Co. of India Ltd. v. Commercial Tax Officer [1960] 11 STC 764 (SC); AIR 1961 SC 315 and State of Kerala v. Cochin Coal Company Ltd. [1961] 12 STC 1 (SC). 54.. In the first Travancore-Cochin case [1952] 3 STC 434 (SC); AIR 1952 SC 366, the respondents claimed exemption from assessment in respect of sales effected by them to foreign buyers of CIF or FOB terms on the ground that such sales took place in the course of the export of the goods out of the territory of India within the meaning of article 286(1)(b) of the Constitution. It is noticeable in this case that the contracts were directly between the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hell [1960] 11 STC 764 (SC); AIR 1961 SC 315, the apex Court observed: "While all exports involve a taking out of the country, all goods taken out of the country cannot be said to be exported. The test is that the goods must have a foreign destination where they can be said to be imported. It matters not that there is no valuable consideration from the receiver at the destination end. If the goods are exported and there is sale or purchase in the course of that export and the sale or purchase occasions the export to a foreign destination, the exemption is earned. Purchases made by philanthropists of goods in the course of export to foreign countries to alleviate distress there, may still be exempted, even though the sending of the goods was not a commercial venture but a charitable one. The crucial fact is the sending of the goods to a foreign destination where they would be received as imports." 58.. In the case of State of Kerala v. Cochin Coal Company Ltd. [1961] 12 STC 1 (SC), the apex Court held that the concept of export in article 286(1)(b) of the Constitution postulates the existence of two termini as those between which the goods are intended to move or between which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this case, the apex Court discussed all its earlier decisions, some of which were on the meaning of phrase "in the course of export" occurring in article 286(1)(b). In this case it is said that the same meaning must obviously be given to the phrase "in the course of export" or to the phrase "occasions the export". 62.. In the case of Mod. Serajuddin v. State of Orissa [1975] 36 STC 136, the apex Court was concerned with the interpretation of words "in the course of export" as found in section 5(1) of the CST Act. While interpreting the said phraseology the Constitution Bench also construed identical phraseology found in section 5(2) dealing with "in the course of import". The majority of the Constitution Bench speaking through Ray, C.J. upheld the decision of the High Court against the assessee and held that section 5(1) of the CST Act a legislative meaning to the expressions "in the course of export" and "in the course of import". The expression "in the course" implies not only a period of time during which the movement is in progress but postulates a connected relation. Sale in the course of export out of the territory of India means sale taking place not only during the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the interpretation of article 286(1)(b) cannot be regarded as a precedent while interpreting section 5 of the CST Act. Let us now turn to article 286 of the Constitution. 65.. As originally enacted, article 286 fell into three parts: Article 286(1) prohibited the imposition of tax by a State on the sale or purchase of goods (a) outside the State, (b) in the course of import or export of the goods into or out of a territory of India and (c) sale as per fiction created by the explanation. Article 286(1)(a) originally contained the explanation, the reproduction of which is not necessary at this stage. 66.. The original explanation to article 286(1) was deleted by the Constitution (Sixth Amendment) Act after the judgment in the Bengal Immunity Co. Ltd. v. State of Bihar [1955] 6 STC 446 (SC); (1955) 2 SCR 603, and sub-articles (2) and (3) were inserted permitting the Parliament by law to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in sub-clause (1). The Parliament enacted Central Sales Tax Act, 1956 and formulated the principles for determining when a sale or purchase of goods takes place in any of the ways ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and cannot,.....be regarded as an act done 'in the course of the export of the goods out of the territory of India'......" 68.. In Burmah-Shell case [1960] 11 STC 764 (SC); AIR 1961 SC 315, the Supreme Court said that the crucial test for determining "export" was the sending of the goods to a foreign destination where they would be received as "import" even though there was no valuable consideration from the receiver at the destination. The words "export" and "import" are corelative terms, that is, each implied the other. Consequently, aviation spirit loaded on board an aircraft for consumption, though taken out of the country was not exported, since it had no destination where it could be said to be imported and was, therefore, not a sale in the course of export. Secondly, the consumption of the spirit was for the use of the aircraft and the sale was not integrally connected with the taking out of the aviation spirit, the sale was not for purposes of export, and article 286(1)(b) was not attracted. Applying this decision, the Supreme Court in the case State of Kerala v. Cochin Coal Company Ltd. [1961] 12 STC 1 (SC), held that the sale of bunker coal to be supplied from the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice, as already referred to hereinabove, the simple transactions involved in Wadeyar's case [1960] 11 STC 757 (SC); AIR 1961 SC 311 where the course of export is quite clear and it is easy to see that the sale is integrally connected with export. In K.G. Khosla and Co. (P.) Ltd. v. Deputy Commissioner of Commercial Taxes [1966] 17 STC 473 (SC), the phrase "in the course of import" was considered. It was held that in section 3 of the CST Act the phrases "occasions the movement of goods from one State to another" and "occasions the import" means the same thing. The movement, it was pointed out must be the result of an agreement or an incident of contract of sale, although it was not necessary that the sale should precede the import. Applying the said concept to a converse transaction of export the movement of goods must be the result of an agreement or an incidence of contract of sale, although it is not necessary that the sale should precede the export. 73.. A more direct authority is in Ben Gorm Nilgiri Plantations Co. [1964] 15 STC 753 (SC). In that case, sales of the tea chests at auctions held at Port Cochin were claimed to be exempt from the levy of sales tax by virtue of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, if the goods, namely, the eatables are spoiled the consignors will have to pay without taking the goods/eatables on board an aircraft. In such event there cannot be export. If this was so, such sale cannot be said to be a sale in the course of export. To constitute sale in the course of export, the sale must be a part and parcel of the export. The only sale which can give rise to export is the sale which by itself results in movement of the goods from the exporter to the importer. When the sale itself causes the export to take place that is to say when the exporter and the importer negotiate and complete the sale which without anything more would result in the export of the goods. No other sale can qualify for the exemption under section 5(1) of the CST Act read with article 286(1)(b) of the Constitution. The transaction of sale involved in the case in hand cannot be said to be a sale in the course of export. One of the indicia of sale in the course of export is the compulsion to export because the sale which is protected under section 5(1) must itself be inextricably bound up with the export. This is not the situation in the case in question. Any buyer who himself is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case in hand. 80.. In Burmah-Shell case [1960] 11 STC 764 (SC); AIR 1961 SC 315 it was pointed out that the word "export" did not mean a merely "taking out of the country" but that the goods must be sent to a destination at which they could be said to be imported. The same meaning must obviously be given to the phrase "occasions the export". We have thus to see whether the sale is one which is connected with the export of the goods from this country to an importer in another country. The course of export can only begin if there is movement from an exporter to an importer as the result of the sale, and then only the sale can be said to occasion the export. It is not enough that the sale is followed by an export or is made for the purpose or with a view to export; the sale must be integrally connected with the export. 81.. In B.K. Wadeyer's case [1960] 11 STC 757 (SC); AIR 1961 SC 311 it was held that if the property in the goods passed to the buyer after crossing the customs frontiers for export out of India, the sale was in the course of export. This is because the course of export had already begun and therefore the sale followed the commencement of the export operation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents claim for drawback on the ground that the goods could not have been deemed to be exported. The Tribunal accepted the claim. On appeal the apex Court held affirming the view of the Tribunal, that when ship got clearance and moved out of the Indian territorial waters, the export was complete and the title in the goods had passed to the purchasers. When goods were taken beyond the territorial waters of India, in such situation goods can be said to have been, "taken to a place outside India" within the meaning of section 2(18) of the Customs Act, 1962. The fact that the ship was brought back to India did not affect the position. The export was complete and the respondent was entitled to the benefit of drawback. This decision relied upon by the petitioners is not of any assistance to it. In the above case admittedly, the destination of goods was Colombo, a place outside India. Such a destination is conspicuously absent in the present case. Apart from this, the case of Sun Industries [1988] 71 STC 149 (SC) came to be decided in the peculiar facts of that case. The claim of the petitioners that the destination of passengers or the destination of the aircraft should be the destina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake the sale one outside the State of Tamil Nadu. This was not a case of export as there was no destination for the goods in a foreign country. A sale therefore, beyond the customs barrier may still be a sale within the State. 87.. From the above, it is clear though petitioners claim that the sales made by them were effected in the course of exports there was no place of destination outside India to treat the sales effected by the petitioners as sales in the course of export. The sales were effected to the customer who is a foreign airlines for consumption on board an aircraft during the course of foreign going journey which may have incidentally taken the goods beyond the territory of India for consumption of their foreign going passengers, that by itself could not be considered that the sales were effected in the course of exports. When a place of destination outside India is absent, mere transportation of goods beyond the Indian Territory does not amounts to sale in the course of export. Sale by transfer of documents of title to the goods after the goods have crossed the customs frontiers of India: 88.. Sales effected within the State by the exporter by transfer of doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toms port is not in dispute) and includes a place appointed under clause (ab) of that section to be an inland container report. Customs airport means any airport appointed under clause (a) of section 7. Land customs station means any place appointed under section 7(b). A reading of section 2(ab) makes it clear that if the goods cross the area of the customs station, viz., the customs port which is notified under section 7 of the Act, and if the transfer of title in goods is effected by transfer of documents of title then it amounts to sale in the course of import. 91.. In the light of the above, it is necessary to understand the concept of crossing the customs frontiers of India as defined under section 2(ab). The customs area has been defined in section 2(11) of the Customs Act as the area of customs station including the area where the export goods or import goods are ordinarily kept before clearance by the customs authorities. There is no definition of customs frontiers in the Customs Act. Section 2(ab) of the CST Act defines "crossing the customs frontiers of India" as crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... til the duty is paid and the goods are brought out of the limits of the customs station. In the case of Kiran Spinning Mills v. Collector of Customs (1999) 113 ELT 753 (SC), the apex Court has observed thus: "In other words, the taxable event occurs when the customs barrier is crossed. In the case of goods which are in the warehouse, the customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country." Based on the above judgment Mr. Bharucha contended and, in our opinion, rightly that in case of import the customs frontiers of India are not crossed until the goods find their free access into the country by crossing the outer limits of the area of customs station which is possible only at the time of clearance by the customs authorities. According to him, under section 5(2) read with section 2(ab) of the CST Act and the relevant definitions in the Customs Act, the expression "before goods have crossed the customs frontiers of India" means before the goods have crossed the limits of customs station, namely, a customs port, or in other words, before the goods have crossed entire area of customs station includin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is question shall not change any complexion of the findings recorded or view taken by us on the substantive issue. We, therefore, do not propose to dwell further on this issue. 96.. Having held that the sales are complete before the goods have crossed the customs station or before crossing the customs frontiers of India, let us find out as to when or at what point of time the sale is complete in the facts of the present case. 97.. Let us first examine the meaning of sale as defined in the Act. Section 2(g) of the CST Act defines, "sale" thus: "'Sale' with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or for deferred payment or for any other valuable consideration, and includes a transfer of goods on the hire-purchase or other system of payment by instalments, but does not include a mortgage or hypothecation of or a charge or pledge on goods." The above definition of sale in the Act shows that the word sale has been given a very wide meaning so as to include not only the sale of goods but also the transactions, namely, a transfer of goods on hire-purchase system. Further, the use of words, "sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in question shall be exigible to local sales tax under the BST Act. 99.. Let us now switch over to another shed of the same issue. The submissions advanced by Mr. Bharucha, learned counsel for the respondents on second aspect of the same issue is that section 4 of the CST Act is a deeming provision. It provides that in the case of unascertained goods, if the goods are within the State (i.e., in the present case State of Maharashtra) at the time of appropriation to the contract, the sale would be deemed to be a sale inside the State. In his submission, in the facts of the present case, admittedly, even according to the petitioners appropriation takes place at tarmac at Sahar Airport which is within the territorial limits of the State of Maharashtra. According to him, customs barrier or customs frontier does not affect the territorial limits of the State for sales tax purposes. Once the appropriation takes place within a State, it is a sale within that State and cannot be regarded as sale in the course of export. 100.. Mr. Bharucha submits that all the ingredients of sale within the State, in so far as relevant to the facts of the present case are concerned, are satisfied, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passes to the buyer at such time as the parties intend it to be transferred. Section 19(3) provides that sections 20 to 24 contain the rules for ascertaining the intention of the parties as to the time at which the property in the goods shall be treated to have passed to the buyer. Both sections 19 and 20 apply to the sale of "specific" or "ascertained" goods. 104.. In Roe Kim Seing v. Maung Ba Chit AIR 1935 PC 182, it was held that intention of the parties was the decisive factor as to when the property in goods passes to the purchaser. If the contract is silent, intention has to be gathered from the conduct and circumstances of the case. 105.. To understand the rules as to passing of property, goods can be divided into three categories. In other words, for the purpose of transfer the property as between seller and buyer, goods can be divided into three classes, viz., (i) specific or ascertained goods; (ii) generic or unascertained goods; and (iii) goods sent for approval or "on sale or return" basis. 106.. The rules governing passing or transfer of property in the case of generic or unascertained goods are to be found in sections 18 and 23 of the Sale of Goods Act. 107.. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by "B", the property in sugar passes to "B" (see Rodhe v. Thwaites, 1827 6 B C 388). 109.. The petitioners, in the present case relied upon the affidavit of Mr. Sanjay Narang dated April 19, 1988 to spell out the terms of contract which, in our opinion, cannot be proved in such a manner. But for the time being let us presume that they are the terms of contract. From the affidavit, it is clear that the foreign airlines place an order with the petitioners for future goods. They are first class lunch/dinner which includes vegetarian and non-vegetarian food with super class breakfast including fresh juices, bread rolls, ice cubes, tea bags, fresh lime, jerry cans, etc. At the time of receipt of the order, the goods are not ready, they are unascertained goods. They are made ready in the Flight Kitchen. The flight kitchen transfers the same to the supply unit to be parked inside the International airport after completing customs, quarantine and other legal formalities and keep ready for being delivered to a foreign going aircraft. The final requirement of the quantity is notified to the supply unit just a few minutes before the flight takes off with slight modification or change in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and quarantine formalities but before delivery of delivery order or goods in question. Such a sale being in the State of Maharashtra the same shall have to be treated within the net of the BST Act. 110. Having said so, let us turn to another condition, namely, condition No. 5, which reads as under: "5. Notwithstanding the goods referred to herein being damaged and/or destroyed the consignee shall be liable to make payment for the same to the consignor and shall be entitled to receive any insurance claim receivable for such goods." This condition also clearly reiterates that the title of the goods stands transferred to the foreign airlines when their orders are accepted by the flight kitchen and goods are prepared and/or procured by them. 111.. The cumulative reading of the above condition Nos. 4 and 5 would clearly spell out that these are the terms and conditions of the contract between the parties. That the seller is not liable for future loss due to deterioration in quality of the goods and that the goods are being dispatched at the risk of the petitioners may be through supply unit. Reading of condition 5 further compels us to logically infer that the consignee, name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere may not be a written contract between the parties specifying the terms and conditions of the contract. It appears that subsequently, tailor-made terms and conditions of the contract were prepared and got printed on the back of the delivery order so as to bring the transactions of sale within the purview of section 5(1) of the CST Act. As a matter of fact, condition Nos. 4 and 5 do suggest existence of written contract between the parties other than the contract sought to be projected in the shape or form of delivery order. The terms of contract could not have been proved by filing affidavit of Mr. Sanjay Narang. Since the petitioners have invoked jurisdiction under section 52 of the BST Act, it was obligatory on their part to produce terms of contract on record if they wanted fair adjudication of the issue in their favour. Since both the authorities below relied upon the affidavit of Mr. Narang, we have also relied upon the same but with some reservation. The petitioners could not be heard of saying that burden of proof was on the authority collecting tax to show how are they entitled to claim the same and not on the petitioners. The apex Court in Hiralal v. Badkulal AIR 1953 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g airlines to take the goods on board. He also relied upon the Circular No. 37/96-Cus dated July 3, 1996 and judgment of the CEGAT in the case of Commissioner of Customs v. Saibaba Ship Breaking Corporation (2002) 140 ELT 135 (Tri-Mum) in support of his submission. It is true that the petitioners have not produced any documents in this behalf. In the circumstances of the case, Mr. Bharucha tried to contend that if the goods are treated as ship stores then, in that event, possibility of export of the goods to any other country has to be excluded. In his submission, the case of Burmah-Shell [1960] 11 STC 764 (SC); AIR 1961 SC 315 will apply with full force if this contention is accepted. In our view, the submission advanced by Mr. Bharucha, no doubt is a potent contention but for want of documents and clear evidence with facts on record with respect to the procedure adopted by the customs no positive finding in this behalf can be recorded so as to reach to the finding that the goods supplied by the petitioners were ship stores. 117. In the result, in view of the aforesaid conclusions reached by us and in view of our finding that this transaction is not covered by the provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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