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TMI Blog2020 (1) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... within the territory of the State and amenable to sales tax under the West Bengal Sales Tax Act, 1954 (for short, 'the 1954 Act') or the West Bengal Sales Tax Act, 1994 (for short, 'the 1994 Act'). 2. The admitted factual position in the present cases is that after importing foreign made cigarettes, the appellants stored the same in the customs bonded warehouse within the landmass of the State of West Bengal and some of those articles were sold to the Master of a foreigngoing ship as ship stores, without payment of customs duty. Those goods were escorted to the stated ship under the supervision of the officials of the Customs authority. 3. These appeals take exception to the judgment and order of the High Court at Calcutta (for short, 'the High Court'), dated 16.8.2007 in W.P.T.T. Nos. 5/2007 and 6/2007 respectively, whereby it had upheld the decision of the West Bengal Taxation Tribunal (for short, 'the Tribunal') that the stated sales were within the territory of the State of West Bengal and amenable to sales tax. 4. Civil Appeal No. 7863/2009 emanates from the assessment order passed by the Commercial Tax Officer, West Bengal, dated 13.3.1985 pertaining to assessment peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question were in the course of import on high seas and no sales tax was payable thereon came to be rejected. The authority answered the claim as follows: "..... All the judicial edicts relevant and referred to were perused and the documents produced by the dealer were examined. His Lordship Hon'ble West Bengal Taxation Tribunal passed the judgment after considering all the grounds taken by the dealer including the one for the position of the law after introduction of the section 2(ab) in Central Sales Tax Act. His Lordship Honourable High Court of Kolkata did not express even a mite of doubt in the correctness of the impugned order of the Hon'ble Tribunal. The order was remanded for quantification of sales in dispute. It was observed that, of the total goods imported and stored only a portion was taken out for sale to master of a particular ship. From the same warehouse goods for sales to local persons also were taken. So the sold goods could not have been ascertained and appropriate before those were taken out of the bonded warehouse. The risk in the goods was transferred at that time and at that place only. It might have so happened that the Customs authority took custody ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n State of TravancoreCochin & Ors. vs. Shanmugha Vilas Cashew Nut Factory, Quilon & Ors. (1954) SCR 53 : AIR 1953 SC 333. Relying on the definition of expression "crossing the customs frontiers of India" in Section 2(ab) of the CST Act, of "customs area" in Section 2(11) and of "customs station" in Section 2(13) of the Customs Act, 1962 (for short, 'the Customs Act'), it was urged that crossing the customs frontiers means crossing the limits of the customs station including crossing the area in which imported goods or exported goods are ordinarily kept before the clearance by the Customs authorities. Reliance was also placed on the decision in Minerals & Metals Trading Corporation of India Ltd. vs. Sales Tax Officer & Ors. (1998) 7 SCC 19, which has had occasion to construe Section 5 of the CST Act. It was then urged that the goods in question were kept for warehousing and a declaration was given by the appellants that the said goods would be exported to foreign-going vessels as ship stores in terms of Section 88 of the Customs Act. The appellants have adverted to Sections 69, 85 and 88 of the Customs Act to contend that the stated goods could be exported to a place outside India w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subjected to levy of sales tax by the State under the State legislation. 8. Per contra, the respondents would urge that the authorities had considered all aspects of the matter and after due evaluation of the evidence before it, justly concluded that the stated sales were neither in the course of import nor export and had taken place on the landmass of the State of West Bengal and thus, amenable to sales tax under the 1954 Act and the 1994 Act, as the case may be. It was urged that it is an admitted position that the goods were kept in bonded warehouses on the landmass of the State of West Bengal and were sold to the Master of a foreign going ship as ship stores thereat. It was urged that the expression "crossing the customs frontiers of India" has already been defined in the CST Act and limits its application to area of a "customs station", as defined in the Customs Act to mean any customs port, customs airport or land customs station. In other words, the expression "crossing the customs frontiers of India" is exhaustive and would not include the bonded warehouses, where the stated goods were kept to be sold to the Master of a foreigngoing ship as ship stores. It was urged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance was placed on Kiran Spinning Mills vs. Collector of Customs (2000) 10 SCC 228, wherein it has been held that the taxable event would be the day of crossing of customs barrier and not the date when the goods landed in India or had entered the territorial Waters. The respondents would urge that the appeals are devoid of merits and be accordingly dismissed. 9. We have heard Mr. Siddharth Bhatnagar, learned senior counsel and Mr. Joydeep Mazumdar, learned counsel appearing for the appellants and Ms. Madhumita Bhattacharjee, learned counsel appearing for the respondents. 10. As noticed from the finding of fact recorded by the authorities, it is not in dispute that after importing the stated goods, the appellants stored the same in the bonded warehouse within the landmass of the State of West Bengal and some of the articles were then sold to the Master of a foreigngoing ship as ship stores, without payment of customs duty thereon. The question is: whether the sales in question would qualify the expression "sale in the course of import"? The phrase "sale in the course of import" would constitute three essential features - (i) that there must be a sale; (ii) that goods must actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 260 (AP) and approved the same dealing with the similar argument. The Court also noted and approved the decision of the Madras High Court in Fairmacs Trading Co. vs. The State of Tamil Nadu (1978) 41 STC 157 (Mad). The Court in paragraphs 19 to 21 and 25 to 28 observed as under: " 19. The correct position, so far as the facts of the present case are concerned, in our opinion, has been laid in the decision of Burmah Shell Oil Storage and Distributing Co. of India Ltd. v. C.T.O. This Court observed at page 781 as follows: "While all exports involved a taking out of the country, all goods taken out of the country cannot be said to be exported. The test is that the goods must have a foreign destination where they can be said to be imported. It matters not that there is no valuable consideration from the receiver at the destination end. If the goods are exported and there is sale or purchase in the course of that export and the sale or purchase occasions the export to a foreign destination, the exemption is earned. Purchases made by philanthropists of goods in the course of export to foreign countries to alleviate distress there, may still be exempted, even though the sending of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It was not a case of export as there was no destination for the goods to a foreign country. The sale was for the purpose of consumption on board the ship. It was not as if only on delivery on board the vessel that the sale took place. The mere fact that shipping bill was prepared for sending it for custom formalities which were designed to effectively control smuggling activities could not determine the nature of the transaction for the purpose of sales tax nor does the circumstances that delivery was to the captain on board the ship within the territorial waters make it a sale outside the State of Tamil Nadu. xxx xxx xxx 25. In the case before the Andhra Pradesh High Court in Fairmacs Trading Company v. State of A.P., the petitioner imported shipstores from foreign countries, kept these in bonded warehouses of the customs department without the levy of customs duty and later on sold and delivered to ships' masters for consumption abroad the ship after crossing the port boundaries. On the question whether the sales were outside the State or in the course of export and therefore not liable to tax under the Andhra Pradesh General Sales Tax Act, 1957, it was observed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not form part of the State of Tamil Nadu, as there was nothing in the contemplation of the contracting parties that the goods were to be moved from one State to another, it was held that it was not possible to take the view that the sales were interState sales; and (ii) that the assessee was not selling specific or ascertained goods, because the goods formed part of a larger stock within the bonded warehouse and had, therefore to be separated and appropriated to the contract as and when orders were placed by the officers of the ship by description. Therefore, the sales were local sales in view of the specific provision of Section 4(2)(b) of the Central Sales Tax Act, 1956, read with Section 2(n), Explanation 3 of the Act (Tamil Nadu General Sales Tax Act, 1959), and were accordingly taxable under the Act. The court did not find it necessary to consider the question whether the territory covered by the territorial waters formed part of the State of Tamil Nadu or not. 27. Attention of the Madras High Court was drawn to the decision of Andhra Pradesh High Court in Fairmacs Trading Co. v. State of A.P. The Madras High Court did not examine the question in detail in the view it t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions. That question, in the light of our aforesaid views, is not material for the present controversy." (emphasis supplied) 12. Applying the principle underlying the said decision, it is clear 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. For seeking exemption, it is necessary that the goods must be in the process of being imported when the sale occurs or the sale must occasion the import thereof within the territory of India. The word "occasion" is used to mean "to cause" or "to be the immediate cause of". In the present case, the stated sales in no way occasioned import of the goods into the territory of India. For, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CST Act, which reads thus: " 2.Definitions.In this Act, unless the context otherwise requires, xxx xxx xxx (ab) "crossing the customs frontiers of India" means crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities. Explanation. For the purposes of this clause, "customs station" and "customs authorities" shall have the same meanings as in the Customs Act, 1962 (52 of 1962)." This definition refers to the expression "customs station", which in turn, refers to "customs port", "customs airport" and "land customs station", as defined in the Customs Act. We may usefully refer to Sections 2(10), 2(11), 2(12), 2(13) and 2(29) of the Customs Act, as applicable for the present cases, which read thus: " 2.Definitions.In this Act, unless the context otherwise requires. ( 10) "customs airport" means any airport appointed under clause (a) of section 7 to be a customs airport; (11) "customs area" means the area of a customs station and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities; (12) "customs po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Customs Act. 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. 15. Notably, the expressions "warehouse" and "warehoused goods" have been defined in the Customs Act in Sections 2(43) and 2(44) respectively. As per the applicable provisions at the relevant time, "Warehouse" means a public warehouse appointed under Section 57 or a private warehouse licensed under Section 58. "Warehoused goods" means goods deposited in a warehouse. As aforesaid, there is nothing to indicate that the bonded warehouse, where the stated goods were kept by the appellants and eventually sold, formed part of the customs port/land customs station. If so, the legal fiction of sale being deemed to have taken place in the course of import of the goods into the territory of India would have no bearing and applicability to the present cases. 16. To get over this position, emphasis was placed by the appellant on the exposition in the Indian Tourist Dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring on the present cases. Inasmuch as, the sale of goods must take place before the goods had crossed the customs frontiers of India, which means it was within the customs port/land customs station area. Nothing is shown by the appellants herein to substantiate that the subject bonded warehouse came within the customs port/land customs station area and moreso the stated sales occasioned import of the goods within the territory of India. If so, the finding of fact and conclusion recorded by the authorities below, which commended to the High Court, is unexceptionable. 18. This Court in K. Gopinathan Nair and Ors. vs. State of Kerala (1997) 10 SCC 1 has expounded the factors to be reckoned for determining whether the concerned sale or purchase of goods can be deemed to have taken place in the course of import. The relevant portion of the aforesaid judgment reads thus: "14. In the light of the aforesaid settled legal position emerging from the Constitution Bench decisions of this Court the following propositions clearly get projected for deciding whether the concerned sale or purchase of goods can be deemed to take place in the course of import as laid down by Section 5(2) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, inter alia, provides that the rate of duty which will be payable would be (sic the rate in force) on the day when the goods are removed from the bonded warehouse. That apart, this Court has held in Sea Customs Act, SCR at p. 803 that in the case of duty of customs the taxable event is the import of goods within the customs barriers. In other words, the taxable event occurs when the customs barrier is crossed. In the case of goods which are in the warehouse the customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country. Admittedly this was done after 4101978. As on that day when the goods were so removed additional duty of excise under the said Ordinance was payable on goods manufactured after 4101978. We are unable to accept the contention of Mr Ramachandran that what has to be seen is whether additional duty of excise was payable at the time when the goods landed in India or, as he strenuously contended, they had crossed into the territorial waters. Import being complete when the goods entered the territorial waters is the contention which has already been rejected by this Court in Union of India v. Apa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d without a breach of the obligations arising by statute, contract, or mutual understanding between the parties arising from the nature of the transaction the sale is in the course of export. In the Nilgiri Plantations case (supra) this Court found that the sales by the appellants were intended to be complete without the export and as such it could not be said that the sales occasioned export. The sales were for export and not in the course of export." (emphasis supplied) 23. It is relevant to advert to the definition of export here. Section 2(18) of the Customs Act defines export as follows: "2. Definitions. In this Act, unless the context otherwise requires, xxx xxx xxx (18) " export", with its grammatical variations and cognate expressions, means taking out of India to a place outside India." (emphasis supplied) 24. 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 unles ..... X X X X Extracts X X X X X X X X Extracts X X X X
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