1963 (7) TMI 68 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Taxability of sales in the course of import under Article 286(1)(b) of the Constitution and Section 5 of the Central Sales Tax Act.
2. Interpretation of the terms "customs frontiers" and "customs barrier."
3. Determination of when the import process is considered complete.

Issue-wise Detailed Analysis:

1. Taxability of Sales in the Course of Import:

The respondents, timber dealers, were assessed under the Madras General Sales Tax Act for a turnover of Rs. 6,60,200-07 for the year 1957-58. They disputed the taxability of Rs. 1,95,490-67, claiming it represented sales in the course of import, protected by Article 286(1)(b) of the Constitution. The Appellate Assistant Commissioner overruled their objection, but the Sales Tax Appellate Tribunal upheld it, excluding the disputed turnover from assessment. The State contested this exclusion, arguing that the transfer of documents of title occurred after the ship crossed the "territorial waters," thus not qualifying as sales in the course of import.

2. Interpretation of "Customs Frontiers" and "Customs Barrier":

The State argued that "customs frontiers" should be interpreted as the territorial waters extending six nautical miles from the coast, based on the President's proclamation under the Sea Customs Act. The respondents contended that the term should align with the customs barrier concept, as supported by Supreme Court precedents. The court examined the definition of "customs frontiers" in Section 5 of the Central Sales Tax Act, which deems a sale in the course of import if it occurs before the goods cross the customs frontiers of India. The court noted that the term "customs frontiers" is used in a fiscal context and should not be strictly equated with territorial waters.

3. Determination of When the Import Process is Complete:

The court analyzed the import process, considering when it begins and ends. It referenced Supreme Court decisions, particularly Gokal & Co. (P.) Ltd. v. Assistant Collector of Sales Tax, which held that the course of import starts when goods cross the customs barrier of the exporting country and ends after crossing the customs barrier of the importing country. The court emphasized that the import stream ceases once customs duty is levied, regardless of the physical removal of goods from the harbor. The court rejected the State's argument that the import is complete upon crossing territorial waters, affirming that the customs barrier concept governs the determination of the import process's completion.

Conclusion:

The court concluded that the sales in question occurred in the course of import, as the transfer of documents of title happened before the goods crossed the customs barrier. The court dismissed the State's revision petitions, upholding the Tribunal's decision to exclude the disputed turnover from assessment. The interpretation of "customs frontiers" as "customs barriers" was affirmed, aligning with the Supreme Court's understanding in related cases. The court emphasized the need for a practical and consistent interpretation of fiscal terms within the context of sales tax law.

Separate Judgments:

The judgment was delivered collectively, with no separate judgments from individual judges. All related revision petitions were dismissed with costs, reinforcing the court's stance on the issues discussed.