2011 (9) TMI 519 - HC - VAT and Sales Tax

Assessee a pharmaceutical dealer claimed exemption on the turnover as representing High Sea Sales effected - revenue denied claim of exemption as Bill of entry with custom were at variance when compared with custom authorities regarding name of assessee - Held That - Bill of Lading is the document of title and admittedly it carried the name of the ultimate buyer and that there was no denial of the fact that the Assessee had transferred the goods before it crossed the Customs Station, Tribunal was correct in granting relief.

Summary

Issues:
1. Whether the order of the Tribunal upholding the claim of exemption as High Sea Sales under Section 5(2) of the CST Act is legally sustainable.
2. Whether the finding of the Tribunal that the sale was effected by transfer of documents of title before crossing the customs frontier is legally sustainable.

Analysis:
1. The case involved an assessment year 1992-93 where the Assessee, a dealer in pharmaceuticals and chemicals, claimed exemption on a turnover under Section 5(2) of the Central Sales Tax Act as High Sea Sales. The Assessee provided Bill of Lading and High Seas Agreement to support the claim, stating that the goods were cleared by the purchaser through a clearing agent, and the Assessee was not involved in the clearance process. However, the officer rejected the claim, citing discrepancies between the original Bill of Entry and the copy provided by the Assessee.

2. The Appellate Assistant Commissioner reviewed import documents, High Sea Sales agreements, and payment of Customs Duty by buyers, concluding that High Sea Sales were indeed conducted at the Chennai Port. Relying on precedent cases, the Appellate Authority allowed the appeal, emphasizing that the goods were sold on a High Sea Sale basis, and the clearance was handled by agents on behalf of the buyers. The Sales Tax Appellate Tribunal upheld this decision, leading the Revenue to appeal before the High Court.

3. The High Court noted that the Assessee endorsed the Bill of Lading to the ultimate buyers before the goods crossed the customs frontier. The Court emphasized that the Bill of Lading, being a document of title, carried the name of the ultimate buyer, and the Assessee had transferred the goods before crossing the Customs Station. The Court highlighted that the Bill of Entry discrepancies were not substantial grounds to deny the claim, as the Bill of Lading held more significance as a document of title.

4. The Court referenced the Customs Act, particularly Section 46 regarding the entry of goods on importation, emphasizing that the Bill of Entry is not considered a document of title under the Act. The definition of "Importer" under Section 2(26) was discussed to support the argument that the Revenue's case based on Bill of Entry entries was not strong. Without clarity on whether the entries related to Bill of Entry for home consumption or warehousing, the Court dismissed the Revenue's revision, concluding that the claim of the Assessee for exemption on High Sea Sales was valid.

In conclusion, the High Court dismissed the Tax Case (Revision) based on the strong legal foundation that the Assessee conducted High Sea Sales by transferring the document of title to the goods before crossing the customs frontier, emphasizing the significance of the Bill of Lading over the Bill of Entry in such transactions.