1998 (3) TMI 644 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of section 5(2) read with section 2(ab) of the CST Act.
2. Determination of the relevant point of time for the transfer of title deeds in the course of import.
3. Applicability of section 38 of the APGST Act.

Summary:

1. Interpretation of section 5(2) read with section 2(ab) of the CST Act:
The core issue is the interpretation of section 5(2) of the CST Act, which states that a sale or purchase of goods is deemed to take place in the course of import if it is effected by a transfer of documents of title before the goods have crossed the customs frontiers of India. Section 2(ab) defines "crossing the customs frontiers of India" as crossing the limits of the area of a customs station where goods are ordinarily kept before clearance by customs authorities. The court emphasized that crossing the customs frontiers means crossing the limits of the customs station, which includes ports, airports, and land customs stations as defined under the Customs Act.

2. Determination of the relevant point of time for the transfer of title deeds in the course of import:
The court examined the historical context and legislative intent behind section 2(ab) to address the difficulty in determining the exact point when goods cross the territorial waters of India. The court concluded that the relevant point of time for determining whether a sale is in the course of import is the transfer of title deeds before the clearance of goods by customs authorities, which occurs after filing the bill of entry and assessment of duty under section 28 of the Customs Act. The court clarified that the goods attain the character of local goods and cease to be foreign goods only after customs clearance, regardless of whether they are physically removed from the port.

3. Applicability of section 38 of the APGST Act:
Section 38 of the APGST Act exempts sales or purchases in the course of import from state taxation. The court held that if the transfer of title deeds occurs before the customs clearance, the sale is deemed to have taken place in the course of import, and thus, the provisions of the APGST Act do not apply. The court remanded the cases to the assessing authority to determine whether the transfer of title deeds was effected before or after the filing of the bill of entry and assessment of duty.

Conclusion:
The court directed the assessing authorities to hold an inquiry and decide in each case whether the transfer of title deeds occurred before or after the customs clearance. The court emphasized that the name on the bill of entry is irrelevant for determining the timing of the transfer. The TRCs were disposed of accordingly.