TMI Blog1986 (7) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... in that State in terms of clause (b) of sub-section (2) of Section 4 of the Central Sales Tax Act, 1956. There is no question of sale taking place in course of export or import under Section 5 in this case. From that point of view the amendment introduced by Act 103 of 1976 by incorporating in clause (ab) of Section 2 of the Central Sales tax Act, 1956 does not affect the position. Appeal dismissed. - Civil Appeal No. 642 of 1974, W.P. No. 196 of 1974, S.L.P. (Civil) Nos. 12943, 12944 of 1985, - - - Dated:- 16-7-1986 - R.S. Pathak and Sabyasachi Mukharji, JJ. S.T. Desai, Senior Advocate (A.T.M. Sampath, Advocate, with him), for the appellant/petitioner. M.M. Abdul Khadar, Senior Advocate (A.V. Rangam, Advocate, with him), for the respondent. [Judgment per : Sabyasachi Mukharji, J.]. - We are concerned with Civil Appeal No. 642 (NT) of 1974, Civil Appeal Nos. 1798-1800 of 1981 and the Writ Petition No. 196 of 1974 along with Special Leave Petition Nos. 12943-44 of 1985. All these will have to be disposed of on the main question stated hereinafter and these raise a common question, facts in all these matters are more or less identical except that certain assumptions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt provisions. The warehouse was under dual control of the Customs Department and the importers like the appellants/petitioners so that it could not be opened by one without the presence of the other. On receipt of order from the captain of the ship requiring ship stores the petitioners supplied the goods on board after observing certain formalities imposed by the Customs Act, the rules and regulations made thereunder. These were the broad features of the way the appellants/petitioners operated. We will, however, deal with the facts as found in Civil Appeal No. 642 of 1974. 6.The case of the appellants/petitioners was that all these goods were intended for re-export only and were at all relevant time in a bonded warehouse. The delivery was on board the ship to foreign going ship. The goods were consumed only on the high seas. The property in the goods had passed only after the goods had crossed the customs frontiers. The contention was that the property in the goods did not pass in the territory of Tamil Nadu. The sales were therefore (i) in the course of export because goods were to be on board the ship and were exported outside the country and could not be consumed before they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vessels was not correct. It was further urged that it was not correct to contend that the appellants/petitioners should be treated as actual exporters. The place of delivery would not alter appropriation which had already taken place. 10.In support of this contention, reliance was placed on the decision of this Court in the case of Burmah Shell Oil Storage and Distributing Co. of India Ltd. and Another v. Commercial Tax Officer and Others - (1960) 11 STC 764 (SC). 11.It is necessary in this background, to examine the facts involved in Civil Appeal No. 642 of 1974. There, the main question involved was whether Rs. 3,51,438.08 which was the taxable turnover determined by the assessing authority was subject to the tax under the said Act. The Appellant objected to the assessment on such turnover on the ground that the goods relating to such turnover were imported from abroad, stored in the customs warehouse and were not brought to the country across the customs frontiers. The lower appellate authority allowed some deduction in the determination of the taxable turnover in respect of sales to local diplomatic corps and determined the figure at Rs. 3,51,045.68. The Appellate Assista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rritories of the State as specified in Item No. 7 of the First S.C.hedule to the Constitution. That legislative competence did not extend to any territorial waters simply because these were abutting the land mass of the State of Tamil Nadu. It was further urged that the Sovereignty over the limits of territorial waters extended and always extended to the entire territorial waters of India. The limits and extent of the said territorial waters had not been altered by any notification of the Central Government. The territorial waters extended to a distance of 12 nautical miles from the sea shore adjacent to the land mass of the State. See in this connection the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976. 16.It was further urged that there was no definition at all of "customs frontiers" in the Central Sales Tax Act, 1956. The definition inserted in the Act in Section 2(ab) by the Amending Act 103 of 1976 must be read as declaratory or explanatory and no questions of prospective operations would arise according to counsel for the appellants/petitioners. He submitted that that definition would also be applicable to sales prior to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be applicable. 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. and Another v. Commercial Tax Officer and Others - (1960) 11 STC 764 (SC) (supra). This court observed at page 765 as follows : "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." 20.The appellant i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vessel that the sale took place. The mere fact that shipping bill was prepared for sending it for customs 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. 22.In the case of The State of Kerala and Others v. The Cochin Coal Company Ltd.- (1961) 12 STC 1 it was held that concept of export in Article 286(1)(b) of the Constitution postulated the existence of two termini as those between which the goods were intended to move or between which they were intended to be transported and not a mere movement of goods out of the country without any intention of their being landed in specie in some foreign port. Goods might be consumed within the meaning of the explanation to Article 286(1)(a) either by destruction or by way of use depending on the nature of the goods . In that case the respondent-company dealers in coal had their office at Port Cochin which was formerly within the State of Madras. The company had imported and kept st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs on behalf of the assessee. The second consignment reached Madras by ship on 17th December, 1957 and the assessee obtained on 23rd December, 1957, from the buyers the value of the consignment after handing over to the buyers the necessary shipping documents. The assessee claimed that these sales were in the course of import and these were not liable to tax under the Madras General Sales Tax Act, 1959, as these were covered by Article 286(1)(b) of the Constitution. It was held that the expression "customs frontiers" in Section 5(2) of the Central Sales Tax Act, 1956, did not mean "customs barrier". It had to be construed in accordance with Notification No. S.R.O. 1683 dated 6th August, 1955, issued by the Central Government under Section 3A of the Sea Customs Act, 1878 read with the Proclamation of the President of India dated 22nd March, 1956. "Customs frontiers" meant the boundaries of the territory, including territorial waters of India. The sales in this case were effected by transfer of documents of title long after the goods had crossed the customs frontiers of India; the ships carrying the goods in question were all in the respective harbours within the State of Madras when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and they had no destination in any foreign country where they could be received as imports, the sales were not sales in the course of exports. It was further held that mere movement of goods out of the country following a sale would not render the sale, one in the course of export within Article 286(1)(b) of the Constitution of India. Before a sale can be said to be a sale in the course of export, the existence of two termini between which the goods are intended to move or to be transported is necessary. 26.The Madras High Court in the case of Fairmacs Trading Company v. The State of Tamil Nadu (1978) 41 STC 157 (supra) was dealing with an assessee, who was a dealer in ship's stores and was also doing business as ship chandlers and who imported goods from abroad for the purpose of supplying them either to foreign going vessels or to diplomatic personnel. These goods were received and kept in the customs bonded warehouse and were cleared under the supervision of the customs authorities whenever these were sold by the assessee. In respect of supplies of specific goods made to certain ships located in the Madras Harbour, pursuant to orders placed by the Master of the ship or other o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that sales took place within State of Tamil Nadu where appropriation took place it is not necessary to rest our decision in these matters on this question. 29.Mr. Desai drew our attention to the observations of Chief Justice Lord Parker in the case of R. v. Kent Justices, Ex Parte LYE and Others -1967(1) All E.R. 560 at 564-65. But in this case it is not necessary to consider that aspect in the view we have taken. 30.In any event, the sale took place when appropriation was made and appropriation was made within the State of Tamil Nadu even if the goods were not delivered. See in this connection the observations of Lord Goddard, C.J. in Furby v. Hoey - 1947 (1) All E.R. 236. There the respondent, an excise officer, filled in and sent to the appellant at his licensed premises a form of order purporting to order a variety of liquor, stating that delivery instructions would follow. Subsequently, after licensing hours and at an unlicensed club, the respondent filled up a form of delivery for one bottle of gin, which was taken by a messenger to the appellant's premises, and the gin was brought back to and paid for by the respondent at the club. The appellant was convicted at quarter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Chanan Singh Another v. Jai Kaur - (1970) 1 S.C.R 803 at 804-807. But that amendment is not relevant in the view we have taken. 35.The short question, therefore, that arises in all these matters is whether sale of the goods in question took place within the territory of Tamil Nadu. in these cases sale took place by appropriation of goods. Such appropriation took place in the bonded warehouse. Such bonded warehouses were within the territory of State of Tamil Nadu. Therefore, under sub-section (2), sub-clauses (a) and (b) of Section 4 of the Central Sales Tax Act, 1956, the sale of goods in question shall be deemed to have taken place inside the State because the contract of sale of ascertained goods was made within the territory of Tamil Nadu and furthermore in case of unascertained goods appropriation had taken place in that State in terms of clause (b) of sub-section (2) of Section 4 of the Central Sales Tax Act, 1956. There is no question of sale taking place in course of export or import under Section 5 in this case. From that point of view the amendment introduced by Act 103 of 1976 by incorporating in clause (ab) of Section 2 of the Central Sales tax Act, 1956 does n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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