2020 (1) TMI 800 - SC - VAT and Sales Tax

Levy of Sales Tax - sale of goods imported from foreign country - to foreign bound ships as ship stores - sale or not - whether the subject sales (of goods imported from foreign country and after unloading the same on the landmass of the State of West Bengal kept in the bonded warehouse without payment of customs duty) to foreign bound ships as ship stores can be regarded as sale within the territory of the State and amenable to sales tax under the West Bengal Sales Tax Act 1954 or the West Bengal Sales Tax Act 1994? HELD THAT - The sale to be in the course of import must be a sale of goods and as a consequence of such sale the goods must actually be imported within the territory of India and further the sale must be part and parcel of the import so as to occasion import thereof. Indeed for the purposes of Customs Act only upon payment of customs duty the goods are cleared by the Customs authorities whence import thereof can be regarded as complete. However that would be no impediment for levy of sales tax by the State concerned in whose territory the goods had already landed/unloaded and kept in the bonded warehouse. Indubitably the sale which is to be regarded as exempt from payment of sales tax is a sale which causes the import to take place or is the immediate cause of the import of goods. The appellants having failed to establish that the stated goods would be actually imported within the territory of India and had not crossed the customs station cannot contend that the sale was in the course of import as such within the meaning of Section 5 read with Section 2(ab) of the CST Act. Moreover there is no direct linkage between the import of the goods and the sale in question to qualify as having been made in the process or progress of import. There are no hesitation in accepting the argument of the respondents that being a taxation statute strict interpretation of these provisions is inevitable. Going by the definition of customs port or land customs station as applicable in the present cases it is customs port or land customs station area appointed by the Central Government in terms of notification under Section 7 - As the stated goods had travelled beyond the customs port/land customs station at the relevant time in law it would mean that the goods had crossed the customs frontiers of India for the purposes of the CST Act. Resultantly the legal fiction created in Section 5(2) of the CST Act will have no application. In the present case it is not the case of the appellant that the goods in question were being exported. Since the goods are to be consumed on the board of the foreign going ship and the same would be consumed before reaching a destination it does not fall under the definition of export . The sale cannot qualify as a sale occasioning export unless the goods reach a destination which is a place outside India. Further since the goods have been sold from the bonded warehouse and had crossed the customs port/land customs station prior to their sale it cannot qualify as a sale in course of export within the meaning of Section 5(1) read with Section 2(ab) of the CST Act. Appeal dismissed.

Issues Involved:

1. Whether the sales of imported goods stored in bonded warehouses and sold to foreign-bound ships as "ship stores" are amenable to sales tax under the West Bengal Sales Tax Act, 1954, and the West Bengal Sales Tax Act, 1994.
2. Whether the sales in question qualify as "sales in the course of import" and are thus exempt from state sales tax.
3. Whether the sales qualify as "sales in the course of export" and are thus exempt from state sales tax.
4. Interpretation of relevant statutory provisions, including Article 286 of the Constitution of India, Section 5 of the Central Sales Tax Act, 1956, and relevant provisions of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Amenability to Sales Tax under the West Bengal Sales Tax Acts:

The principal question was whether the sales of goods imported and stored in bonded warehouses, and subsequently sold to foreign-going ships as "ship stores," are subject to sales tax under the West Bengal Sales Tax Act, 1954, and the West Bengal Sales Tax Act, 1994. The court affirmed that the sales took place within the territory of West Bengal and were thus amenable to sales tax. The goods were appropriated and sold within the bonded warehouse, which is within the state's landmass, making them subject to state sales tax laws.

2. Sales in the Course of Import:

The appellants argued that the sales were in the course of import and thus exempt from sales tax. The court analyzed the definition of "sale in the course of import" under Section 5(2) of the CST Act, which requires that the sale must occasion the import or be effected by a transfer of documents of title to the goods before they cross the customs frontiers of India. The court concluded that the sales did not occasion the import of the goods into India. The goods were sold after being unloaded and stored in bonded warehouses within West Bengal, and the sale did not cause the import. The court emphasized that the sale must be part and parcel of the import process, which was not the case here.

3. Sales in the Course of Export:

The appellants did not pursue the argument that the sales were in the course of export. The court noted that for a sale to be considered in the course of export, it must occasion the export or be effected by a transfer of documents of title to the goods after they have crossed the customs frontiers of India. The court referred to previous judgments, including Madras Marine and Burmah Shell, to assert that the sales in question did not qualify as exports since the goods were intended for consumption on board the ship and did not have a foreign destination where they could be received as imports.

4. Interpretation of Relevant Statutory Provisions:

The court examined the definitions and provisions under the CST Act and the Customs Act. It clarified that "crossing the customs frontiers of India" means crossing the limits of the customs station area, which includes customs ports, airports, and land customs stations. The bonded warehouses where the sales occurred were not within the customs station area, and thus the goods had crossed the customs frontiers of India. The court also referred to Section 69, 85, and 88 of the Customs Act to support its conclusion that the import was complete once the goods were stored in the bonded warehouse.

The court distinguished the case from Indian Tourist Development Corporation, where goods sold at duty-free shops within an international airport were deemed not to have crossed the customs frontiers of India. In the present case, the goods had crossed the customs frontiers and were stored in bonded warehouses within the state's territory, making them subject to state sales tax.

Conclusion:

The court dismissed the appeals, holding that the sales of goods stored in bonded warehouses and sold to foreign-going ships as "ship stores" were subject to sales tax under the West Bengal Sales Tax Act, 1954, and the West Bengal Sales Tax Act, 1994. The sales did not qualify as "sales in the course of import" or "sales in the course of export" and were thus amenable to state sales tax. The court found no infirmity in the decisions of the authorities and the High Court, which upheld the imposition of sales tax on the transactions in question.

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