1960 (1) TMI 1 - SC - VAT and Sales Tax

Whether the sales by the petitioner to the Government of India are sales in the course of import? Held that - The property in the goods passed to the Government of India when the shipping documents were delivered to them against payment. It follows that the sale of the goods by the petitioner to the Government of India took place when the goods were on the high seas. That being so the sales in question must be held to have taken place in the course of the import into India and therefore they would be exempted from sales tax under Article 286(1)(b) of the Constitution.

Issues Involved:
1. Interpretation of Article 286(1)(b) of the Constitution regarding sales tax exemption for sales in the course of import.
2. Applicability of Section 31 of the Bombay Sales Tax Act, 1953 for reassessment.
3. Determination of the point at which property in goods passes from seller to buyer.
4. Validity of the notice issued under Section 31 instead of Section 15 of the Act.

Issue-wise Detailed Analysis:

1. Interpretation of Article 286(1)(b) of the Constitution regarding sales tax exemption for sales in the course of import:

The primary issue was whether the sales in question were exempt from sales tax under Article 286(1)(b) of the Constitution, which states that no State law shall impose a tax on sales or purchases that occur "in the course of the import of goods into, or export of goods out of, the territory of India." The Court interpreted the phrase "in the course of the import of the goods into the territory of India," emphasizing that the term "import" means to bring goods into the territory of India from abroad, and "in the course of" implies a period during which the movement of goods is in progress. The Court concluded that the course of import starts when goods cross the customs barrier in the foreign country and ends when they cross the customs barrier in India. The Court cited previous judgments to support this interpretation, noting that sales which occasion the import are exempt from sales tax.

2. Applicability of Section 31 of the Bombay Sales Tax Act, 1953 for reassessment:

The petitioner argued that the reassessment notice should have been issued under Section 15 of the Act, which has a three-year limitation period, rather than under Section 31. The Court did not need to delve deeply into this issue because it resolved the case primarily on the basis of Article 286(1)(b). However, it was noted that the Assistant Collector of Sales Tax had issued the notice under Section 31, which the petitioner contended was incorrect.

3. Determination of the point at which property in goods passes from seller to buyer:

The Court examined the terms of the contracts and the delivery of shipping documents to determine when the property in the goods passed to the Government of India. The Court found that the petitioner delivered the shipping documents, including the bill of lading, to the Government against payment while the goods were on the high seas. The Court held that this transfer of documents constituted a transfer of property in the goods, making the sales occur in the course of import. The Court cited commercial practices and legal principles, noting that the delivery of a bill of lading while goods are afloat is equivalent to the delivery of the goods themselves.

4. Validity of the notice issued under Section 31 instead of Section 15 of the Act:

Although the petitioner raised the issue of the validity of the notice issued under Section 31 instead of Section 15, the Court's decision on the primary issue of sales tax exemption under Article 286(1)(b) rendered this point moot. The Court concluded that since the sales were in the course of import, they were exempt from sales tax, and thus the reassessment notice was invalid.

Conclusion:

The Supreme Court concluded that the sales in question took place in the course of import and were therefore exempt from sales tax under Article 286(1)(b) of the Constitution. The Court set aside the order of the Assistant Collector of Sales Tax and restored the original assessment by the Sales Tax Officer, directing the respondents to pay the costs of the petitioner.

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