2004 (9) TMI 601 - HC - VAT and Sales Tax

Held, allowing the writ petition, that the fact that the goods were imported by the petitioner and the goods have been warehoused and yet to be cleared under section 68 of the Customs Act, 1962 for home consumption at the time of passing the detention order is not disputed. Hence, the reason given that even if the goods are warehoused, that would amount to entry into local area is nothing but illegal, arbitrary and total non-application of mind to the relevant provisions. Also the claim that mere storing in the warehouse would create liability under the Tamil Nadu General Sales Tax Act, 1959 is without any statutory backing as in order to attract levy of tax under the Tamil Nadu General Sales Tax Act, 1959 there must exist a saleable event.

Summary

Issues:
1. Detention of goods and refusal of Taxation Special Tribunal to interfere with the detention orders.
2. Jurisdiction of the first respondent to levy tax and compounding fee on imported goods.
3. Compliance with Central Sales Tax Act and Tamil Nadu General Sales Tax Act.
4. Interpretation of customs laws and determination of the point of import completion.

Analysis:

Issue 1: Detention of Goods and Tribunal's Decision
The judgment addresses the detention of goods by the first respondent and the Taxation Special Tribunal's refusal to interfere with the detention orders. The petitioner, a company trading plastic granules, imported goods from Saudi Arabia. Despite providing details to the first respondent, a detention order was issued, followed by a demand for tax and compounding fee. The Tribunal upheld the tax and fee imposition, leading to the writ petitions challenging these decisions.

Issue 2: Jurisdiction to Levy Tax and Fee
The petitioner argued that the tax and fee imposition lacked jurisdiction as no taxable sale occurred during import, and the State Legislature cannot levy tax on goods in the course of import under constitutional provisions. The judgment highlighted the arbitrary nature of the first respondent's actions, emphasizing the absence of a taxable event before customs clearance. The imposition of tax and fee without assessment was deemed unreasonable and violative of constitutional principles.

Issue 3: Compliance with Tax Acts
The judgment scrutinized the application of the Central Sales Tax Act and Tamil Nadu General Sales Tax Act. It rejected the first respondent's reasoning that warehousing triggered local tax liability, emphasizing that goods must cross customs barriers for tax obligations to arise. The order's reliance on high-sea sales lacked factual basis, indicating non-compliance with tax laws. The judgment concluded that the tax and fee imposition did not align with statutory provisions.

Issue 4: Interpretation of Customs Laws
The judgment delved into customs laws, emphasizing that goods must clear customs for import completion. It referenced legal definitions to determine when goods cross customs frontiers, highlighting that warehousing alone does not trigger tax liability. Citing precedents, the judgment clarified that until goods are cleared for home consumption, they have not crossed customs frontiers. The first respondent's reasoning regarding warehousing and local tax liability was deemed illegal and arbitrary.

In conclusion, the High Court allowed the writ petitions, setting aside the tax and compounding fee orders. The judgment emphasized adherence to statutory provisions, constitutional principles, and customs laws in determining tax liabilities on imported goods.