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TMI Blog1963 (7) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... -67 was not taxable. The Tribunal upheld this contention and granted relief excluding the turnover from the assessment made by the department. This revision petition has therefore been preferred by the State. The State does not object to any of the findings recorded by the Tribunal in regard to the import of timber by the respondents and the sales effected by them. The respondents entered into contracts for the sales of timber to be imported from Burma with a firm of merchants called Messrs Velu and Brothers. The salient terms of the contract were that Messrs Velu and Brothers should pay the respondents a profit of 8 per cent. on the C.I.F. value of the timber sold and also pay the sales tax and other charges and expenses, that the necessary letter of credit should be opened by Messrs Velu and Brothers with their bankers, that the goods should be sold as "floating consignments" (shortage, damages, pilferage etc. in transit and clearance to be debited to Messrs Velu and Brothers) and that the latter should retire the shipping documents at least ten days before the expected arrival of the steamer carrying the timber cargo. In pursuance of this agreement the respondents imported two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued as sales in the course of import. Stress is laid on behalf of the State that the governing factor is not the "barrier" of the customs department which operates to prevent the goods being taken delivery of unless and until the customs charges and the import duty are paid, but only, what may be called, the "customs frontiers". It is pointed out that the Central Sales Tax Act which defines under section 5 of the Act what is an import sale or an export sale uses the expression "customs frontiers" of India. Sub-section (2) is the provision that relates to import and that reads: "A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India." Before the Central enactment, what prevailed was Article 286(1)(b) of the Constitution which, however, merely referred only to sales in the course of import without making any reference to sales effected by transfer of documents of title to the goods before they crossed the customs "barrier" or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sea along the coast of the State are within its jurisdiction and control. The sovereignty of the State having a sea coast is not conterminous with the shore but extends further and beyond up to a few miles of marginal belt generally prescribed by international conventions. The freedom of the sea exists only in the open sea lying beyond the territorial belt. This principle has found acceptance by this Court in A.M.S.S.V.M. Co. v. State of Madras(1953) 2 M.L.J. 587., where it was held that the State Legislature had power to enact laws relating to fisheries within the territorial waters. The President's proclamation set out above only prescribes the limits of the territorial waters of India. The controversy now is as regards the expression customs frontier. On the one hand the contention urged is that the words should receive the same meaning and be understood in the same sense which is attributed to them under the President's notification by virtue of the Sea Customs Act. What is argued per contra is that in the context of a fiscal enactment like the sales tax law the words have a different meaning and it would not be safe or sound to read them in the same way as the customs dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of export or import. We shall, however, deal with the course of import as the instant case is concerned with import; but we have no doubt that the course of export is precisely of the same pattern as that of import. One is the reverse of the other. The Supreme Court of the United States used the expression "export stream". We are having in mind the following passage in Empresa Siderurgica, S.A. v. Merced337 U.S. 154.: "It is the entrance of the articles into the export stream that marks the start of the process of exportation. Then there is certainty that the goods are headed for their foreign destination and will not be diverted to domestic use. Nothing less will suffice." If we can coin the expression "import stream" it would not be a mere metaphor, but it would serve to illustrate the true significance of the course of import. A stream has its starting point and the end and so has the import course. When does the import begin and when does it end? What is the interval between its commencement and termination? These are the vital questions the answer to which would solve the problem before us. The import taken as a whole from start to finish, or the course of import ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the exemption, assuming that the State-power of taxation extends to such transactions." The Supreme Court in a later decision in Gokal Co. (P.) Ltd. v. Assistant Collector of Sales Tax [1960] 11 S.T.C. 186. has approved of the above observations of Patanjali Sastri, C.J., and Das, J. This case is of special importance as it seems to us that it has got a good deal of bearing on the point raised in this case. We shall therefore refer to the facts of that case in detail. The assessee was a private company carrying on business at Bombay. It entered into contracts with the Government of India in 1954 for supplying and selling two consignments of sugar-one of 9,500 long tons of sugar of Peruvian origin and the other of 25,000 metric tons of sugar of continental origin. It placed orders with the dealers in foreign countries. Weeks before the vessels carrying the sugar arrived at the Bombay harbour, that is when the vessels were on the high seas, the Government of India received the documents of title including bills of lading pertaining to the sugar purchased by them and paid the price to the assessee. After the goods reached the port they were unloaded, taken delivery of and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the importing country after the goods cross the customs barrier; (2) the sale which occasions the import is a sale in the course of import; (3) a purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import, and (4) a sale by an importer of goods, after the property in the goods passed to him either after the receipt of the documents of title against payment or otherwise, to a third party by a similar process is also a sale in the course of import." We have to take note of the fact that the Supreme Court has used the expression "customs barrier". The learned Government Pleader strongly relies upon another decision of the Supreme Court in Wadeyar v. Daulatram Rameshwarlal[1960] 11 S.T.C. 757., and contends that the element which terminates the import or commences the export is the crossing of the customs frontier which extends up to the farthest end of the territorial waters of the State. In that case a firm of dealers claimed exemption from sales tax (Bombay State) in respect of sales of cotton and sales of castor oil on the ground that these sales were FOB contracts under which they co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning as in the Act. On that definition the time of the export is the time when the goods go out of the territorial limits of India. These territorial limits would include the territorial waters of India. Consequently the time of the export is when the ship with the goods goes beyond the territorial limits." Stress is laid on this passage on behalf of the State in support of its present contention. We need hardly point out that the above observation was made while repelling the contention based upon the provisions of the Export Control Order. We are not now concerned with the expression "time of export". Indeed another passage from the same judgment at page 762 would clearly indicate that so far as the assessment to tax is concerned what should be regarded is the crossing of the customs barrier. That passage reads: "Whichever view is taken there is nothing to indicate that the intention to comply with the requirements of clause 5(2) of the Exports (Control) Order carries with it an intention that the property should pass to the buyer at the time the goods cross the customs frontier. It is true that in the United Motors' case [1953] 4 S.T.C. 133. and in other cases it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... outer limit of the territorial sea abutting the shores of Vizagapatnam and entered the territorial water limits of India the goods must be regarded as having crossed the customs frontier and once the customs frontier was crossed the exemption under Article 286(1)(b) would vanish as the goods must be regarded as having ceased to be in the course of import. The correctness of this decision has been doubted by us in Deputy Commissioner of Commercial Taxes v. Caltex (India) Ltd.(1) In the Andhra case the learned Judge stated the position thus at page 537: "...........the customs frontier must be regarded as the same as the frontier of India and this frontier extends along the sea to a width of six miles, which, according to law, has been declared as the territorial water belt. So that, as soon as that frontier is crossed by the goods, the import within the meaning of the Supreme Court's decision must be regarded as complete." We have already referred to the decisions of the Supreme Court and we wish to point out, with great respect to the learned judge, that the conclusion reached by him does not follow or receive support from the said decisions. In Deputy Commissioner of Commerc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inclusion of the sea-belt of six nautical miles is fairly within the scope of the expression "customs frontier". But, quoting Maxwell, we may say that the meaning of words "is found not so much in a strictly grammatical or etymological propriety of languge nor even in its popular use, as in the subject or in the occasion on which they are used, and the object to be attained" (Maxwell, 11th edition, page 51). The acceptance of the view that the customs frontier is the water-line at the end of six nautical miles from the shore would necessitate the investigation of the exact minute when the ship crossed into the territorial waters and when the documents of title to goods were actually transferred. We doubt whether such matters can be satisfactorily determined by any court or tribunal. Though difficulties in the way of working an Act should not affect the plain meaning of the statutory language, they have a bearing when there is at least a doubt regarding its true meaning. In our opinion, it would be proper to construe the words "customs frontiers" as "customs barriers" in the Central Act. The contention urged by the State therefore fails. In the result, T.C. No. 29 of 1961 is dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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