1983 (10) TMI 229 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the turnover representing sales of liquor imported by the assessee, and kept in the warehouse without payment of customs duty to foreign vessels for consumption during voyage after the vessel crosses the Indian border is exigible to tax under the Andhra Pradesh General Sales Tax Act.

Analysis:
The judgment delivered by the High Court of Andhra Pradesh pertains to four revisions concerning the assessment years 1969-70 to 1972-73, all preferred by the same assessee. The central issue in question is whether the turnover from the sales of liquor imported by the assessee, stored in a bonded warehouse without payment of customs duty, and supplied to foreign vessels for consumption after crossing the Indian border, is subject to tax under the Andhra Pradesh General Sales Tax Act.

The assessee, a dealer in bonded stores and ship chandlers, imports liquor from outside India and supplies it to foreign vessels. The goods are stored in a bonded warehouse under customs supervision, and upon receiving orders from the ship's Master, the goods are released for consumption after the vessel crosses the Indian border. The contention raised was that the sales did not occur within the state and were in the course of export, thus not liable to tax. However, this argument was rejected by all three authorities, including the Sales Tax Appellate Tribunal.

The primary contention put forth by the petitioner's counsel was that the term "export" should have a broader interpretation, suggesting that sending goods outside the country for use after crossing territorial barriers constitutes export. The counsel relied on definitions from Black's Law Dictionary to support this claim. However, the court emphasized that in the context of tax law, the intention behind exempting sales tax on exports is to facilitate trade between countries, requiring goods to be received at a foreign destination to qualify as exports. This interpretation aligns with the Supreme Court's decision in Burmah Shell Co. Ltd. v. Commercial Tax Officer [1960] 11 STC 764 (SC) and was upheld in Fairmacs Trading Co. v. State of Andhra Pradesh [1975] 36 STC 260.

Regarding the application of Article 286 of the Constitution and Section 5 of the Central Sales Tax Act, the court clarified that no significant changes were brought about by the amendments. It was emphasized that for a sale to be considered in the course of export, it must either occasion the export or involve the transfer of title documents after crossing customs frontiers. The court dismissed the argument that goods sold to foreign ships are not subject to sales tax, emphasizing that the concept of floating islands does not exempt foreign merchant ships within territorial waters from taxation.

In conclusion, the court dismissed the tax revision cases and granted leave to appeal to the Supreme Court based on similar matters involving the same assessee where special leave was previously granted.