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2019 (2) TMI 551 - HC - VAT and Sales TaxLocal sale or sale in the course of import - High Seas Sale - sales of the goods while being in customs bonded warehouse - interpretation of the definition of the term 'crossing of customs frontiers of India' - sales in the course of import or not - transfer of the documents of title to the goods before crossing the customs frontiers of India - import under the second limb of section 5(2) of the Central Sales Tax Act, 1956. - Exemption from sales tax / VAT Held that - a combined reading of the definitions of the terms customs airport , customs area , customs port and customs station would indicate that these are the notified places where the goods on import, until they are cleared, have to be placed. Their custody is with the person referred by us in the aforereferred provisions. Thus, once the imported goods are unloaded in the customs area, then, there has to be entry made, save and except such goods which are intended for transit or transhipment and there is a provision for clearance of goods for home consumption. When we see this scheme in the light of the provisions contained in Chapter VI and particularly section 46 falling therein, it is evident that the filing of bill of entry means the importer of any goods, on importation, presenting this bill to the proper officer for home consumption or warehousing. If they have to be cleared for home consumption, then, the procedure under section 47 of the Customs Act, 1962 has to be followed and when they have to be warehoused after unloading, then, section 48 is the provision which has to be abided by the concerned persons. In case of warehoused goods, by section 71, it is categorically stated that goods not to be taken out of warehouse except as provided by this Act. - Thus, the import is complete on compliance of the above noted provisions of the Customs Act, 1962 and therefore, that expression for the purposes of the BST and the CST Act has to be understood accordingly. The clearance of goods for home consumption is dealt with by section 47 of the Customs Act, 1962, but storage of imported goods in warehouse only because they are not cleared after unloading having been dealt with by the Customs Act, 1962 and particularly section 48 thereof, does not mean that for the purposes of the CST Act the goods have not crossed the customs frontiers of India. This is not a case where the deeming fiction in sub-section (2) of section 5 of the CST Act operates. Admittedly, this is not a case of a sale of goods occasioning the import, but what is claimed is that the sale is effected by transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. This later part is also belied by the fact and as claimed by Mr.Sonpal that in this case, the bill of lading was issued on 15th September, 1995 and the bill of entry for the period 1995-96 for warehousing was filed on 13th November, 1995 and the agreement for sale has been executed thereafter. Once these are the admitted dates and events, then, this is not a case where the documents of title to the goods have been transferred before the goods have crossed the customs frontiers of India. This is, therefore, a local sale. Once on the factual position, the dealer claims the transaction to be effected by transfer of document of title to the goods before clearance from customs authorities, then, it is evident that in the light of the discussion in the forgoing paragraphs about the legal provisions, particularly of the Customs Act, 1962 and the BST Act, the second limb of sub-section (2) of section 5 of the CST Act is not attracted. This argument is not acceptable, that the customs frontiers of India are not crossed until the goods find their free access into the country by crossing the outer limits of the area of customs station and it is possible only at the time of clearance by the customs authorities by making the payment of customs duty. This argument is not sound on facts and in law. Once we are of the firm opinion that the CST Act touches the concept of crossing the customs frontiers of India, which is distinct from customs barriers of India, then all the more we cannot agree with the counsel of the assessee. The question forwarded for our opinion is answered in favour of the applicant/Department and against the respondent/dealer - reference disposed off.
Issues Involved:
1. Interpretation of "crossing of customs frontiers of India" under Section 2(ab) of the Central Sales Tax Act, 1956. 2. Determination of whether bonded sales qualify as sales in the course of import under Section 5(2) of the Central Sales Tax Act, 1956. 3. Applicability of local tax under the Bombay Sales Tax Act, 1959 to the impugned sales. 4. Relevance of previous judgments and their applicability to the present case. Detailed Analysis: 1. Interpretation of "Crossing of Customs Frontiers of India": The court examined the definition of "crossing the customs frontiers of India" as provided in Section 2(ab) of the Central Sales Tax Act, 1956. This term means crossing the limits of the area of a customs station where imported goods are ordinarily kept before clearance by customs authorities. The court emphasized the significance of this definition in determining the point at which goods are considered to have crossed the customs frontiers. 2. Determination of Whether Bonded Sales Qualify as Sales in the Course of Import: The court analyzed whether the sales made by the appellant, which occurred while the goods were in a customs bonded warehouse, qualify as sales in the course of import under Section 5(2) of the Central Sales Tax Act, 1956. The appellant claimed that these sales should be exempt from tax as they were made by transferring documents of title before the goods crossed the customs frontiers of India. The court referred to the Madras High Court's interpretation, which held that bonded sales qualify as high sea sales, and contrasted this with the tribunal's previous interpretation. 3. Applicability of Local Tax under the Bombay Sales Tax Act, 1959: The court considered whether the impugned sales should be subject to local tax under the Bombay Sales Tax Act, 1959. The Sales Tax Officer had assessed the appellant's sales as local sales, disallowing the claim of high sea sales. The court noted that the tribunal had allowed the appellant's claim, treating the sales as exempt under the second limb of Section 5(2) of the Central Sales Tax Act, 1956. The court examined the relevant statutory provisions and previous judgments to determine the correct application of tax laws. 4. Relevance of Previous Judgments and Their Applicability: The court reviewed various judgments cited by both parties to understand their relevance and applicability to the present case. The judgments included those from the Supreme Court, Madras High Court, and Andhra Pradesh High Court, which provided differing interpretations of the term "crossing the customs frontiers of India" and its implications for bonded sales. The court analyzed these judgments in detail to arrive at a consistent interpretation of the law. Conclusion: The court concluded that the sales made by the appellant while the goods were in a customs bonded warehouse do not qualify as sales in the course of import under Section 5(2) of the Central Sales Tax Act, 1956. The court held that the goods had crossed the customs frontiers of India when they were removed from the port area for warehousing by filing a bill of entry for warehousing and assessment of duty. Consequently, the sales were subject to local tax under the Bombay Sales Tax Act, 1959. The court answered the question of law referred to it in favor of the Revenue/Department and against the dealer. The references were disposed of accordingly.
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