2018 (11) TMI 1354 - HC - VAT and Sales Tax

Exemption form sales tax - sales effected from the Customs Bonded Warehouses - sales in the course of import or not - Whether the Tribunal was justified in holding the assessee eligible for exemption under Section 5(2) of the Central Sales Tax Act, 1956? Held that - There is no doubt that in the instant case the furnace oil was imported in both the relevant years, sold to exempted units and the remaining sold to purchasers who filed Bills Of Entry for home consumption and cleared the goods through the customs frontiers. The Bill of Entry for home consumption was entertained by the Customs Authorities on the basis of the agreements and the invoices raised by the importer. The documents having evidenced the sale before the import was completed and the transfer of title to the goods; there cannot be any tax levied on the transaction as one carried out in the State. The Assessing Officer had granted exemption only to the sale effected by the assessee to the units in SEZ against Form 43 and the rest of the sale was not granted exemption under Section 5(2) of the Act, which according to us was not appropriate - revision dismissed - decided against Revenue.

Summary

Issues:
- Eligibility for exemption under Section 5(2) of the Central Sales Tax Act, 1956.

Analysis:
The case involved a dispute regarding the eligibility of an assessee for exemption under Section 5(2) of the Central Sales Tax Act, 1956. The assessee, engaged in the import of furnace oil, imported a quantity of oil and sold a portion as high sea sales and another portion to a unit in the Special Economic Zone. The controversy arose over the sales from the Customs Bonded Warehouses, which the Assessing Officer deemed as local sales subject to tax. The Tribunal allowed the appeals by the assessee, granting exemption under Section 5(2) based on various legal precedents. The Revenue challenged this exemption on grounds related to stamping of documents, interpretation of customs frontiers, and the timing of import completion.

The Revenue contended that the documents used for transfer were not properly stamped, thus inadmissible as evidence. However, the court noted that the stamping issue did not invalidate the agreements as they were not essential for the transfer of movable goods. The Tribunal's reliance on legal precedents to define import completion and customs frontiers supported the assessee's claim for exemption under Section 5(2) of the CST Act. The court emphasized that the sale was completed before goods crossed customs frontiers, making it a sale in the course of import and not subject to local tax.

The court referred to legal precedents to establish that the import of goods into India begins when they cross territorial waters and is completed when they become part of the mass of goods within the country after crossing customs barriers. The sale in the course of import does not require high sea sales, and the transfer of documents before crossing customs frontiers suffices for exemption under Section 5(2). The court upheld the Tribunal's decision, rejecting the Revenue's arguments and confirming the assessee's eligibility for exemption. The court held that the sale to the Special Economic Zone unit and subsequent sales cleared through customs frontiers were all eligible for exemption under Section 5(2) of the CST Act.

In conclusion, the court dismissed the Revenue's revisions, ruling in favor of the assessee and rejecting the claims for tax on the transactions. The court found no merit in the Revenue's arguments against the exemption granted by the Tribunal, affirming the eligibility of the assessee for exemption under Section 5(2) of the CST Act.