TMI Blog2020 (1) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... rities whence import thereof can be regarded as complete. However, that would be no impediment for levy of sales tax by the State concerned in whose territory the goods had already landed/unloaded and kept in the bonded warehouse. Indubitably, the sale which is to be regarded as exempt from payment of sales tax, is a sale which causes the import to take place or is the immediate cause of the import of goods. The appellants having failed to establish that the stated goods would be actually imported within the territory of India and had not crossed the customs station, cannot contend that the sale was in the course of import as such within the meaning of Section 5 read with Section 2(ab) of the CST Act. Moreover, there is no direct linkage between the import of the goods and the sale in question to qualify as having been made in the process or progress of import. There are no hesitation in accepting the argument of the respondents that being a taxation statute, strict interpretation of these provisions is inevitable. Going by the definition of customs port or land customs station as applicable in the present cases, it is customs port or land customs station area appointed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warehouse within the landmass of the State of West Bengal and some of those articles were sold to the Master of a foreigngoing ship as ship stores, without payment of customs duty. Those goods were escorted to the stated ship under the supervision of the officials of the Customs authority. 3. These appeals take exception to the judgment and order of the High Court at Calcutta (for short, the High Court ), dated 16.8.2007 in W.P.T.T. Nos. 5/2007 and 6/2007 respectively, whereby it had upheld the decision of the West Bengal Taxation Tribunal (for short, the Tribunal ) that the stated sales were within the territory of the State of West Bengal and amenable to sales tax. 4. Civil Appeal No. 7863/2009 emanates from the assessment order passed by the Commercial Tax Officer, West Bengal, dated 13.3.1985 pertaining to assessment period 1.4.1980 to 31.3.1981. The assessing officer rejected the claim for exemption from payment of sales tax in respect of the stated sales of imported cigarettes from the stock, as the cigarettes were sold to outgoing vessels from the bonded warehouse within the landmass of the State of West Bengal following the decision of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Lordship Hon ble West Bengal Taxation Tribunal passed the judgment after considering all the grounds taken by the dealer including the one for the position of the law after introduction of the section 2(ab) in Central Sales Tax Act. His Lordship Honourable High Court of Kolkata did not express even a mite of doubt in the correctness of the impugned order of the Hon ble Tribunal. The order was remanded for quantification of sales in dispute. It was observed that, of the total goods imported and stored only a portion was taken out for sale to master of a particular ship. From the same warehouse goods for sales to local persons also were taken. So the sold goods could not have been ascertained and appropriate before those were taken out of the bonded warehouse. The risk in the goods was transferred at that time and at that place only. It might have so happened that the Customs authority took custody of the goods for preventing loss of its own revenue. No such sale could have been one in the course of import because the sale did not occasion the import. None of those was export because the goods were not supposed to enter into the territory of another country in the form those were d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, of customs area in Section 2(11) and of customs station in Section 2(13) of the Customs Act, 1962 (for short, the Customs Act ), it was urged that crossing the customs frontiers means crossing the limits of the customs station including crossing the area in which imported goods or exported goods are ordinarily kept before the clearance by the Customs authorities. Reliance was also placed on the decision in Minerals Metals Trading Corporation of India Ltd. vs. Sales Tax Officer Ors. (1998) 7 SCC 19, which has had occasion to construe Section 5 of the CST Act. It was then urged that the goods in question were kept for warehousing and a declaration was given by the appellants that the said goods would be exported to foreign-going vessels as ship stores in terms of Section 88 of the Customs Act. The appellants have adverted to Sections 69, 85 and 88 of the Customs Act to contend that the stated goods could be exported to a place outside India without payment of import duty and until import duty was paid, the import thereof cannot be said to be complete. Reliance was then placed on the decision in Indian Tourist Development Corporation Limited vs. Assistant Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce before it, justly concluded that the stated sales were neither in the course of import nor export and had taken place on the landmass of the State of West Bengal and thus, amenable to sales tax under the 1954 Act and the 1994 Act, as the case may be. It was urged that it is an admitted position that the goods were kept in bonded warehouses on the landmass of the State of West Bengal and were sold to the Master of a foreign going ship as ship stores thereat. It was urged that the expression crossing the customs frontiers of India has already been defined in the CST Act and limits its application to area of a customs station , as defined in the Customs Act to mean any customs port, customs airport or land customs station. In other words, the expression crossing the customs frontiers of India is exhaustive and would not include the bonded warehouses, where the stated goods were kept to be sold to the Master of a foreigngoing ship as ship stores. It was urged that being a taxation statute, strict interpretation should be offered to this definition as expounded in Commissioner of Customs (Import), Mumbai vs. Dileep Kumar and Company Ors. (2018) 9 SCC 1. It was further urged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in India or had entered the territorial Waters. The respondents would urge that the appeals are devoid of merits and be accordingly dismissed. 9. We have heard Mr. Siddharth Bhatnagar, learned senior counsel and Mr. Joydeep Mazumdar, learned counsel appearing for the appellants and Ms. Madhumita Bhattacharjee, learned counsel appearing for the respondents. 10. As noticed from the finding of fact recorded by the authorities, it is not in dispute that after importing the stated goods, the appellants stored the same in the bonded warehouse within the landmass of the State of West Bengal and some of the articles were then sold to the Master of a foreigngoing ship as ship stores, without payment of customs duty thereon. The question is: whether the sales in question would qualify the expression sale in the course of import ? The phrase sale in the course of import would constitute three essential features (i) that there must be a sale; (ii) that goods must actually be imported and (iii) that the sale must be part and parcel of the import. The factual matrix in the present case clearly depicts that the sales in question would not cause import of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of Tamil Nadu (1978) 41 STC 157 (Mad). The Court in paragraphs 19 to 21 and 25 to 28 observed as under: 19. The correct position, so far as the facts of the present case are concerned, in our opinion, has been laid in the decision of Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. C.T.O. This Court observed at page 781 as follows: While all exports involved 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 wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of consumption on board the ship. It was not as if only on delivery on board the vessel that the sale took place. The mere fact that shipping bill was prepared for sending it for custom formalities which were designed to effectively control smuggling activities could not determine the nature of the transaction for the purpose of sales tax nor does the circumstances that delivery was to the captain on board the ship within the territorial waters make it a sale outside the State of Tamil Nadu. xxx xxx xxx 25. In the case before the Andhra Pradesh High Court in Fairmacs Trading Company v. State of A.P., the petitioner imported shipstores from foreign countries, kept these in bonded warehouses of the customs department without the levy of customs duty and later on sold and delivered to ships' masters for consumption abroad the ship after crossing the port boundaries. On the question whether the sales were outside the State or in the course of export and therefore not liable to tax under the Andhra Pradesh General Sales Tax Act, 1957, it was observed by the Andhra Pradesh High Court that the goods were specific and ascertained and were wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contemplation of the contracting parties that the goods were to be moved from one State to another, it was held that it was not possible to take the view that the sales were interState sales; and (ii) that the assessee was not selling specific or ascertained goods, because the goods formed part of a larger stock within the bonded warehouse and had, therefore to be separated and appropriated to the contract as and when orders were placed by the officers of the ship by description. Therefore, the sales were local sales in view of the specific provision of Section 4(2)(b) of the Central Sales Tax Act, 1956, read with Section 2(n), Explanation 3 of the Act (Tamil Nadu General Sales Tax Act, 1959), and were accordingly taxable under the Act. The court did not find it necessary to consider the question whether the territory covered by the territorial waters formed part of the State of Tamil Nadu or not. 27. Attention of the Madras High Court was drawn to the decision of Andhra Pradesh High Court in Fairmacs Trading Co. v. State of A.P. The Madras High Court did not examine the question in detail in the view it took. 28. In so far as the High Courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, noted the submissions. That question, in the light of our aforesaid views, is not material for the present controversy. (emphasis supplied) 12. Applying the principle underlying the said decision, it is clear that the sale to be in the course of import, must be a sale of goods and as a consequence of such sale, the goods must actually be imported within the territory of India and further, the sale must be part and parcel of the import so as to occasion import thereof. Indeed, for the purposes of Customs Act, only upon payment of customs duty the goods are cleared by the Customs authorities whence import thereof can be regarded as complete. However, that would be no impediment for levy of sales tax by the State concerned in whose territory the goods had already landed/unloaded and kept in the bonded warehouse. For seeking exemption, it is necessary that the goods must be in the process of being imported when the sale occurs or the sale must occasion the import thereof within the territory of India. The word occasion is used to mean to cause or to be the immediate cause of . In the present case, the stated sales in no way occasioned impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equirement of Section 5(2) of the CST Act. The expression crossing the customs frontiers of India has been defined in Section 2(ab) of the CST Act, which reads thus: 2.Definitions.In this Act, unless the context otherwise requires, xxx xxx xxx (ab) crossing the customs frontiers of India means crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities. Explanation. For the purposes of this clause, customs station and customs authorities shall have the same meanings as in the Customs Act, 1962 (52 of 1962). This definition refers to the expression customs station , which in turn, refers to customs port , customs airport and land customs station , as defined in the Customs Act. We may usefully refer to Sections 2(10), 2(11), 2(12), 2(13) and 2(29) of the Customs Act, as applicable for the present cases, which read thus: 2.Definitions.In this Act, unless the context otherwise requires. ( 10) customs airport means any airport appointed under clause (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... customs station as applicable in the present cases, it is customs port or land customs station area appointed by the Central Government in terms of notification under Section 7. It is not the case of the appellants that the bonded warehouses, where the goods were kept and the stated sales took place by appropriation of the goods thereat, were within the area notified as customs port and/or land customs station under Section 7 of the Customs Act. As the stated goods had travelled beyond the customs port/land customs station at the relevant time, in law, it would mean that the goods had crossed the customs frontiers of India for the purposes of the CST Act. Resultantly, the legal fiction created in Section 5(2) of the CST Act will have no application. 15. Notably, the expressions warehouse and warehoused goods have been defined in the Customs Act in Sections 2(43) and 2(44) respectively. As per the applicable provisions at the relevant time, Warehouse means a public warehouse appointed under Section 57 or a private warehouse licensed under Section 58. Warehoused goods means goods deposited in a warehouse. As aforesaid, there is nothing to indicate that the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the territory of India. Thus understood, the reported decision under consideration is of no avail to the appellants. 17. Even the exposition of the Constitution Bench in J.V. Gokal (supra) that a sale by an importer of goods after the property of the goods passed to him, either after the receipt of the documents of title against payment or otherwise, to a third party by a similar process is also a sale in the course of import, would equally have no bearing on the present cases. Inasmuch as, the sale of goods must take place before the goods had crossed the customs frontiers of India, which means it was within the customs port/land customs station area. Nothing is shown by the appellants herein to substantiate that the subject bonded warehouse came within the customs port/land customs station area and moreso the stated sales occasioned import of the goods within the territory of India. If so, the finding of fact and conclusion recorded by the authorities below, which commended to the High Court, is unexceptionable. 18. This Court in K. Gopinathan Nair and Ors. vs. State of Kerala (1997) 10 SCC 1 has expounded the factors to be reckoned for deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere name lender through whom it is the local importer-cum-local user who masquerades. 19. It will also be useful to advert to paragraph 6 of Kiran Spinning Mills (supra), which reads thus: 6. Attractive, as the argument is, we are afraid that we do not find any merit in the same. It has now been held by this Court in Hyderabad Industries Ltd. v. Union of India that for the purpose of levy of additional duty Section 3 of the Tariff Act is a charging section. Section 3 sub-section (6) makes the provisions of the Customs Act applicable. This would bring into play the provisions of Section 15 of the Customs Act which, inter alia, provides that the rate of duty which will be payable would be (sic the rate in force) on the day when the goods are removed from the bonded warehouse. That apart, this Court has held in Sea Customs Act, SCR at p. 803 that in the case of duty of customs the taxable event is the import of goods within the customs barriers. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... postulates a connected relation. The relevant portion of the judgment is extracted as under: 18. .. A sale in the course of export predicates a connection between the sale and export. No single test can be laid as decisive for determining that question. Each case must depend upon its facts. But it does not mean that distinction between transactions which may be called sales for export and sales in the course of export is not real. Where the sale is effected by the seller and the seller is not connected with the export which actually takes place, it is a sale for export. Where the export is the result of sale, the export being inextricably linked up with sale so that the bond cannot be dissociated without a breach of the obligations arising by statute, contract, or mutual understanding between the parties arising from the nature of the transaction the sale is in the course of export. In the Nilgiri Plantations case (supra) this Court found that the sales by the appellants were intended to be complete without the export and as such it could not be said that the sales occasioned export. The sales were for export and not in the course of export. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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