1998 (9) TMI 514 - SC - VAT and Sales Tax

Whether, at the time of the sale or purchase, the goods had entered or crossed the territorial waters? Held that - Appeal allowed. The aforesaid sales being covered by the provisions of the latter part of section 5(2) read with section 2(ab) of the Central Sales Tax Act, they are sales in the course of import and not liable to sales tax. It is now not necessary to consider the argument that, in any event, the provisions of the earlier part of section 5(2) apply.

Summary

Issues:
1. Correctness of judgment of High Court of Orissa dismissing writ petitions.
2. Interpretation of sales tax levy on high seas sales.
3. Application of Section 5(2) of the Central Sales Tax Act.
4. Definition of "crossing the customs frontiers of India."
5. Legal position of import sales.
6. Effect of bill of lading endorsement on high seas sales.
7. Prospective operation of statutory amendments.

Issue 1: Correctness of High Court Judgment
The Supreme Court considered the correctness of the High Court of Orissa's judgment dismissing the writ petitions filed by the appellant, a Government of India undertaking acting as a canalising agent for import and export of minerals and metals.

Issue 2: Interpretation of Sales Tax Levy
The Sales Tax Officer levied sales tax on high seas sales, rejecting the appellant's argument that no tax was payable as the sales occurred during import under Section 5(2) of the Central Sales Tax Act.

Issue 3: Application of Section 5(2) of the Central Sales Tax Act
Section 5(2) deems a sale to occur in the course of import if it occasions such import or if documents of title are transferred before goods cross customs frontiers. The Court analyzed whether the sales in question met these criteria.

Issue 4: Definition of "Crossing the Customs Frontiers of India"
The definition of "crossing the customs frontiers of India" under Section 2(ab) was crucial in determining the point at which sales were considered to take place in the course of import.

Issue 5: Legal Position of Import Sales
The legal position of import sales was outlined based on precedents, emphasizing that a sale in the course of import occurs when goods cross customs barriers and property passes to the importer.

Issue 6: Effect of Bill of Lading Endorsement
The Court highlighted that the endorsement of the bill of lading in favor of the buyer while goods were at sea constituted a sale in the course of import, as the transfer of documents represented the transfer of goods.

Issue 7: Prospective Operation of Statutory Amendments
The Court clarified that statutory amendments, such as the introduction of Section 2(ab), must be applied prospectively, and in this case, the sales were to be judged based on the provisions of the amended law.

In conclusion, the Supreme Court allowed the appeals, set aside the High Court judgment, and held that the sales in question were in the course of import and not liable to sales tax, based on the provisions of Section 5(2) and the definition of "crossing the customs frontiers of India."