2000 (7) TMI 960 - AT - VAT and Sales Tax

Issues Involved:
1. Rejection of claim of exemption under section 5(2) of the Central Sales Tax Act, 1956.
2. Determination of whether the disputed turnovers represent high sea sales or local sales.
3. Applicability of tax at 8 percent on the disputed turnovers.
4. Interpretation of "crossing the customs frontiers of India" under section 2(ab) of CST Act.

Detailed Analysis:

1. Rejection of claim of exemption under section 5(2) of the Central Sales Tax Act, 1956:
The State Trading Corporation (STC) challenged the rejection of their claim for exemption under section 5(2) of the CST Act on turnovers of Rs. 2,62,93,033 and Rs. 3,71,00,211 for the assessment years 1986-87 and 1985-86 respectively. The lower authorities and the Appellate Tribunal found that the sales were not high sea sales but local sales, as the transfer of documents occurred after the goods were stored in bonded warehouses, post-arrival at the port.

2. Determination of whether the disputed turnovers represent high sea sales or local sales:
The Tribunal upheld the finding that the disputed turnovers did not represent high sea sales. The transfer of documents such as "bill of entry," "bill of lading," and "letter of authority" occurred only after the goods were unloaded at the customs port and stored in bonded warehouses. This indicated that the sales took place after the goods crossed the customs frontiers, classifying them as local sales. The Tribunal found no evidence to contradict this conclusion.

3. Applicability of tax at 8 percent on the disputed turnovers:
The Tribunal confirmed the levy of tax at 8 percent on the disputed turnovers. The finding was based on the fact that the transfer of documents of title occurred after the goods were assessed to customs duty and stored in bonded warehouses. This classification as local sales made them subject to tax under the Tamil Nadu General Sales Tax Act, 1959.

4. Interpretation of "crossing the customs frontiers of India" under section 2(ab) of CST Act:
The Tribunal referred to the definition of "crossing the customs frontiers of India" in section 2(ab) of the CST Act, which specifies that the sale of goods after they are assessed to customs duty is considered as having crossed the customs frontiers. The Tribunal cited relevant case law, including the Supreme Court decision in Madras Marine and Co. v. State of Madras, which supported the view that sales occurring after goods are assessed to customs duty are local sales. The Tribunal also referenced the Andhra Pradesh High Court judgment in Minerals and Metals Trading Corporation of India Ltd. v. State of Andhra Pradesh, which held that goods assessed to customs duty and stored in bonded warehouses are considered to have crossed the customs frontiers.

Conclusion:
The Tribunal dismissed the revisions filed by the State Trading Corporation, confirming the levy of tax at 8 percent on the disputed turnovers for the assessment years 1985-86 and 1986-87. The Tribunal found that the sales were local sales, not high sea sales, as the transfer of documents occurred after the goods were assessed to customs duty and stored in bonded warehouses. The orders of the Appellate Tribunal were upheld as valid in law.

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