TMI Blog2016 (10) TMI 1230X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Distributing Co. [1960 (9) TMI 70 - SUPREME COURT OF INDIA], it cannot be said that the sale was in the course of export. Ruling:- Sale of imported goods by the Applicant to the license holders from a customs bonded warehouse - Held that:- Sale liable to tax as per relevant schedule entry under MVAT Act. Whether ex-bond sales of imported goods to duty free shops is a 'sale in the course of imports' and hence exempt from the levy of tax under MVAT Act? - Held that:- The exbond sale to duty free shop is neither sale in the course of import nor it is export. Hence, sale to duty Free shop is liable to tax as per schedule entry D-3 appended to MVAT ACT, 2002. Whether the Applicant is liable to discharge tax in respect of the above mentioned sale transaction? - Held that:- The applicant is not holding any license under State Excise Act (Prohibition Act).Hence, liable to tax as per schedule entry D-3 appended to MVAT ACT, 2002. - ARA MUMBAI /04/2016-17/Disp.No. 05 - - - Dated:- 14-10-2016 - SHRI. RATHOD A. H. (CHAIRMAN) AND SANGLE S.G. (MEMBER) AND CHAHURE A.A. (MEMBER) Mr. Sanjeev Suchdeva, (Adv.), Mr. N. Ambre, (Finance Manager), for the Applicant. ORDER Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms duty, clears the goods for home consumption from private warehouse. The applicant is not holding any license under State Excise (Prohibition) Act. 2.3 Presently, the applicant has been collecting the Value Added Tax on said transaction (bond to bond transfer) and issuing the tax invoices to the buyers. On the strength of these tax paid invoices, the subsequent buyers are claiming the benefit of notification issued under section 41(5) of MVAT ACT, 2002. Under these circumstances, the applicant has filed letter dated 06/09/2016 and informed the Authority that This is to state and confirm that the Advance Ruling sought would be applicable only to the transactions carried out after the date of Advance Ruling. 2.4 Since, the applicant had partially submitted the documents, letter dated 21.09.2016 was issued to the applicant to seek the following information and relevant documents to decide the issues. a) The documentary proof to decide the event of sale and their charging sections for attraction of custom duty and excise duty. The Applicant was also requested to produce details of these duties. 1. The relevant Bills of ladings and their endorsement to prove the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e concern department with the conditions and obligations. g) Whether Duty free shops are either declared as custom station under section 7 of Custom Act, 1962 or declared as inland container depot (ICD)? If Yes, then the copy of order. h) The details of custom duty and excise duty (under State Prohibition Law) paid by applicant or customer. i) The details of labeling of bottles along with samples of labeling. These documents are scrutinized to decide the factual position of transaction pertaining to the issues raised in application. On verification of these documents and factual position submitted by the applicants the facts emerged out of the case can be summarized as under. 2.5 The applicant has filed sample copies of bills of lading and bills of entry . The imported goods are assessed to duty at time of filing bill of entry in the name of applicant. Instead of paying the duty the applicant has preferred to put the goods in warehouse by filing into bill of entry for warehousing and defer the custom duty. This warehouse (Veritas Global Pvt Ltd. Plot No.104, jawahar Co-operative Industrial Estate, Kamothe, Panvel-421209, Maharashtra) is declared as a private war ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court judgment of Kiran Spinning Mills v. Collector of Customs; (1999) 113 ELT 753 and argued that the taxable event occurs when the customs barrier is crossed. He further stated that 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 custom area and brought to the mass of goods in the country. 3.5 Subsequent to these facts and circumstances of the case, the question that arises for consideration is the interpretation of Section 5(2), read with Section 2(ab) of CST ACT, 1956. In order to consider the above question it is necessary to refer to Section 5(2), Section 2 (ab), the history of the legislation for incorporating Section 2 (ab) of CST and provision of Section 6 of MVAT ACT, 2002. 4. The legal position, Analysis and discussion:- The section 6 of MVAT ACT, 2002 is charging section. It reads as under. 4.1 Section- 6: Levy of sales tax on the goods specified in the Schedules:- (1) There shall be levied a sales tax on the turnover of sales of goods specified in column (2) in Schedule B, C, D or, as the case may be, E, at the rates set out against each of them in colum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... custom station for the purpose of CST ACT. c) The term clearance of goods by custom authorities for the purpose of CST ACT is related to clearance of goods from area of custom station only . The interpretation of the term clearance of goods by custom authority cannot be made as per provision of Custom Act as it will lead to absurd meaning of Custom station . If interpreted otherwise, then the custom area will become custom station and it would make the term custom station superfluous and would lose its significance. Thus, the specific purposive definition under CST Act would be redundant. The reference can be made to the judgment of the Supreme Court in the case of Shri Keshavji Ravji Co. v. CIT (1990) 183 ITR 1 (SC) wherein it has been held, As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. We may refer to the Supreme Court judgment in the case of Rao Shiv Bahadur Singh v. State of UP. AIR 1953 SC 394 wherein it has been held It is incumbent on the court to avoid a construction, if reasonably permissible on the language, which would render a part of the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be termed as custom area, but the all custom areas are not custom stations . If, otherwise interpreted than specific definitions provided in Act would be superfluous/redundant. It is settled principle that such type of interpretation is not to be adopt which makes the provisions in the Act redundant. From the bare perusal of the above definitions, it is clear that Customs area is a wider area as compared to the area of the Customs station . Customs Area includes Customs Port, Customs Airport, Customs Land Station and areas such as Warehousing stations and Duty free shops whereas Customs stations includes only Customs Port, Customs Airport, and Customs Land Station. Thus, it can be said that The custom station comes under area of custom, but all custom area could not be recognized as custom station and the both terms are different and cannot be substituted with each other. It is always held by Courts that the words used in a statute cannot be presumed to be superfluous or used loosely. Ascribing any other meaning to the words than what is intended as per the words used in the statute would amount to freshly legislating. Hence, in the present context, we have to examine w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of Objects and Reasons (SOR) to the above definition is very important to analyze the issue. The SOR read as under: The phrase (Customs frontier) had been interpreted to mean, coterminous with the extent of the territorial waters . This had given rise to practical difficulties as it was difficult to determine whether, at the time of the sale or purchase, the goods had entered or crossed the territorial waters. The actual checking of the goods took place in the customs station and not at the edge of the territorial waters. It was, therefore, necessary to so define the expression . Thus, the expression is provided to remove the difficulties. The further extension would defeat the purpose, recommendation of Law commission and observation of Hon. Apex Court in case of Davar and Company (24 STC 481).In conseguence, the definition in the CST Act is crystallized. The term Customs Frontier is to be eguated and limiting it to the area of the Customs station and not any further for the purposes of the CST Act. 4.8. The Section 5(2) states that if the sale is effected by a transfer of documents of the goods before the goods have crossed the customs frontiers of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales in the course of import and, as such, not liable to tax under the Madras Act. According to the assessee, 'customs frontier' in s. 5(2) of the Central Act, must be treated as analogous to 'customs barrier' and, so read, the position would be that a sale effected by transfer of documents of title before the goods cross the 'customs barrier' would not be liable to tax under the Madras Act. The State of Madras claimed that in all these cases the sale had been effected by a transfer of documents of title to the respective buyers after the ships had crossed the territorial waters and hence they were liable to tax under the Madras Act . On the question, whether the sales took place before the goods crossed the customs frontiers of India and therefore were in the course of import of the goods into the territory of India and were thus not liable to sales-tax tinder Art. 286(1) of the Constitution. On the said factual position and provision of CST ACT, the constitution Bench of Hon. Supreme court held that We are of the view that the judgment of the Madras High Court cannot be sustained and the, expression 'customs frontiers' in s. 5 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y customs port, customs airport or land customs station . A customs port is any port appointed under Clause (a) of Section 7 of the Customs Act to be a customs port. (That Paradeep Port is a customs port is not in dispute.) The facts afforested, based upon documents, show that the bill of lading had been endorsed in favor of SAIL while the consignment of the said coils was still upon the high seas. The sale, therefore, was a sale in the course of the import of the said coils into the territory of India; it was effected by transfer of the documents to the said coils before they had crossed the limits of the customs station at Paradeep Port.The aforesaid sales being covered by the provisions of the latter part of Section 5(2) read with Section 2(ab) of Central Sales Tax Act, they are sales in the course of import and not liable to sales tax . 5.3 The Hon. Andhra High Court in the case of Minerals And Metals Trading Corp. ... v/s State Of A.P. ,1999 (106) ELT 23 AP also observed that---- 11. In order to get over the judgment of the Supreme Court the amendment in Section 2(ab) is made. On the basis of the report submitted by the Law Commission recommending amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of title deeds is effected before the clearance of goods by filing the bill of entry under the Customs Act and after making the assessment of the import duty payable under Section 28 of the Customs Act, 1962 . 14. In view of the above, the TRCs are remanded to the assessing authority for the purpose of determining as to when the transfer of goods by title deeds is effected, whether it is before filing of the bill of entry and assessing the duty or after filing the bill of entry and assessment of duty under the Customs Act. We also point out that the name on the bill of entry is irrelevant because the name of the importer alone will be recorded in it even if the transfer by title deeds is effected before filing the bill of entry and assessment of duty under Section 28. We have to make this clear because the taxing authorities tend to raise such doubts though the amendment was specifically made to have a clear cut off time to determine when the import ends. Therefore, let it be declared that if the transfer of title deeds is effected before filing the bill of entry and making the assessment then the sale is deemed to have been effected in the course of import, otherwise not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On 3rd of October, 1978 the Additional Duty of Excise (Textiles and Textile Articles) Ordinance, 1978 was promulgated which came into force w.e.f. 19th October, 1978. It is not in dispute the correspondingly under Section 3 of the Customs Tariff Act, 1975 additional duty on such articles which were imported became payable equivalent to the additional excise duty levied under the said Ordinance. The contention was that at the time when the goods had landed in India additional duty of excise was not payable on a similarly manufactured goods in India even if they were placed in a bonded warehouse in India and, therefore, no additional duty could be charged under the Excise Act similarly under Section 3 of the Tariff Act no additional duty should be charged. On the said facts the provisions for levy of duty under Custom Act, 1962 were important. The provisions are---- SECTION 15 of Custom Act, 1962. Date for determination of rate of duty and tariff valuation of imported goods .- (1) The rate of duty and tariff valuation, if any, applicable to any imported goods, shall be the rate and valuation in force, - (a) in the case of goods entered for home consumption under section 46, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of section 2(ab) of CST Act, 1956, only the crossing of custom station is relevant which is a narrow term compared to custom area/custom barrier. Therefore, for section 2(ab), the crossing of custom station will amount to crossing Customs Frontiers and hence claim of sale in course of import cannot be allowed from said warehouse. Factually, the said warehouse is being outside of custom station and not declared as custom station under the section 7 of Custom Act, 1962. It is declared as a private warehouse station under section 9 of Custom Act, 1962. Under these factual differences and different legal position, we are in view that the ratio of Kiran spinning mill is not applicable. 5.6. The case of Hotel Ashoka versus ACCT and Anr.2012 (2) TMI 62 The issue of crossing custom frontier of India in connection with specific provision amended in section 2 (ab) of CST ACT is not discussed for the purpose of interpretation section 5 (2) of CST ACT. The issue involved in the case is that when the liquor, cigarettes, perfumes and food articles were sold at the duty free shops at the Bengaluru International Airport, no tax was payable by the appellant as the goods which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that the said warehouse is declared as private warehouse and declared under section 9 of Custom Act, 1962 and not within the custom station under section 7 of Custom Act, 1962. The specific provision as per recommendation of Law commission, carried out to remove confusion of crossing the area of 6 NM in the CSTACT, 1956 cannot be overlooked until the definition under CST ACT is not declared ultra-virus to the constitution by the competent court authority. If otherwise interpreted, then the inserted definition would be redundant. Such type of interpretation, which makes the provision superfluous, is neither desirable nor possible to adopt. Hence, the ratio of the case of Hotel Ashoka (SC) is not squarely applicable as the decision can be distinguished on facts.Thus, the transactions as put forward in this Advance Ruling Proceedings not sale in the course of import. . The Hon. Apex court has held in several cases that the terms and provisions of referential Acts should not be considered to interpret the specific terms provided in other Acts, in which we are dealing. 5.7 On said background, we would like to refer to observations of Hon. Supreme Court in the case of Hin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the other statutes would not therefore apply. There is no justification in importing the terms for the purpose of interpretation. 6. We would like to make it clear that the other provisions of the Custom Act are not relevant to interpret the specific term of crossing custom frontier under CST Act. However, to deal with controversies arose, it will be appropriate to see the provision regarding warehousing of goods under custom bond. 7. Warehousing of goods:- The concept of warehousing of goods under Custom Act is only relevant to payment of Custom duty and not meant for the cessation of import for the purpose of interpretation of section 5(2) read with section 2(ab) of CST ACT, 1956. We would like to refer to the relevant provision regarding warehousing of imported goods. When the vessel arrives the goods are unloaded and first checked at custom station. The transfer of bill of lading in area of custom station would amount to sale in the course of import. Therefore it will be incorrect to take the entire customs area, which is broader area as compaired to custom station to be the area for the purpose of section 2(ab) of CST ACT. Section 8(a) of the customs Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of custom duty. The provisions made under different scheme for payment of custom duty is not applicable to interpret the section 2(ab) of CST ACT. These provisions are meant for the Custom Act only. a.) Section 57 of the Customs Act provides that Assistant Collector of customs may appoint public warehouse at any warehousing station. b.) Section 58 of the Customs Act provides that Assistant Collector of Customs may license private warehouses at any warehousing station. c.) Section 59 (1) of the Customs Act provides that the importer of any dutiable goods which have been entered for warehousing and assessed to duty under section 17 or 18 shall execute a bond binding himself in a sum equal to twice the amount of the duty assessed on such goods. (d.) Section 60 - Permission for removal of goods for deposit in warehouse. 60. (1) When the provisions of section 59 have been complied with in respect of any goods, the proper officer may make an order permitting removal of the goods from a customs station for the purpose of deposit in a warehouse. (2) where an order is made under sub-section (1); the goods shall be deposited in a warehouse in such manner as m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce exempt from the levy of tax under MVAT Act? Presently, dealer is not effecting this type of transaction. This issue is dealt at length by us hereinabove. The dealer has not submitted the details of warehouse from which he want to sell the goods to duty shop. Since it is academic question the present warehouse is considered for determination of issue. The goods were stored in the warehouse (namely, Veritas Global Pvt Ltd. Plot No. 104, Jawahar Co-operative Industrial Estate Kamothe, Panvel, 421209, Maharashtra) which is declared as a private warehouse under section 9 of Custom Act, 1962. This warehouse is not declared as a custom station under section 7 of the Custom Act, 1962. Thus, the Bonded warehouses may be part of the Customs area but is not a part of Customs station for the purpose of section 2(ab) of CST ACT, 1956.Hence, the sale to duty free shop is not allowable in the course of import. Whether sale to duty free shop from such warehouse is to be considered as export is to be seen to levy of tax under MVAT ACT, 2002. The sale to duty free shop is sale within the state of Maharashtra. As the foreign destination for export is not known in such case. The apex court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The term crossing the customs frontier of India was inserted in CST Act to remove the difficulty which was observed by constitution bench of Hon. Supreme court while interpreting crossing the territorial waters of India in Davar's case (cited supra).The definition is inserted in section 2 (ab) of CST ACT, wherein the custom frontier is equated with custom station and not with custom barrier or custom area. b) The date for determination of duty in Customs Act is after Crossing the Customs Barrier which is nothing but crossing the Customs Area whereas the point of levy of Local Sales tax is after Crossing the Customs Frontier which is nothing but crossing the Customs Station as specified in section 7 of Custom Act, 1962. Hence, lawmakers intentionally chose the phrase Customs station instead of the phrase Customs area / warehouse station / custom barrier while defining the term Crossing the customs frontier in the Central Sales tax Act. When one distinct term is adopted in the CST Act from Custom Act, to expand its scope, by adopting other term in the Custom Act, is unwarranted. c) The Section 2(ab) of CST Act provides Crossing the Customs Fron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared custom station under section 7 of the Custom Act, 1962.Thus, the Bonded warehouses may be part of the Customs area but it is not a part of Customs station for the purpose of section 2(ab) of CST ACT, 1956. e) Crossing the customs frontier for the purposes of the CST Act is coterminous with the date of assessment of Bill of entry for home consumption or date of provisional assessment of Bill of entry for Bonded warehouse in case of imported goods. There can not be two points for crossing of custom frontier, i.e. firstly, when goods are cleared after filling of bill of entry at custom station and secondly when goods are cleared from fr custom area i.e. custom bonded warehouse. f) Since, we have referred to the Hon. Apex court judgment directly related to the issue at hand and are more relevant and has more precedential value and thus has binding effect. The res judicata in the Kiran Spinning Mills cannot be taken as pari materia for the purposes of interpreting the term of crossing the customs frontier under sales tax Act simply because the date for determination of duty in Customs Act is crossing-over the Customs area (Customs barrier) whereas the taxable ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the issues are decided and are enclosed in tabular format as under. Hence, the order- Sr. No. The questions posed by applicant Held as 1 Whether the sale of imported goods by the Applicant to the license holders from a customs bonded warehouse is a sale, liable to be taxed under the provisions of the MVAT Act? Sale liable to tax as per relevant schedule entry under MVAT Act. 2 The dealer has posed academic question Whether ex-bond sales of imported goods to duty free shops is a 'sale in the course of imports' and hence exempt from the levy of tax under MVAT Act? Presently, dealer is not effecting this type of transaction. The exbond sale to duty free shop is neither sale in the course of import nor it is export. Hence, sale to duty Free shop is liable to tax as per schedule entry D-3 appended to MVAT ACT, 2002. 3 Whether the Applicant is liable to discharge tax in respect of the above mentioned sale transaction? The applicant is not holding any license under State ..... X X X X Extracts X X X X X X X X Extracts X X X X
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