Sales in the course of import continue until customs clearance, so transfer of title before clearance is not locally taxable.

A sale by transfer of documents of title after a ship entered territorial waters, but before customs clearance, remained a sale in the course of import and fell outside State taxing power. The Court held that the decisive test under Article 286(1)(b) of the Constitution and section 5(2) of the Central Sales Tax Act was whether the goods had crossed the customs barrier or customs frontiers, not merely whether the ship had entered territorial waters. Because the import movement continues until clearance for home consumption, transfer of title during that period does not end the import stream.

---

---

Issues: Whether a sale effected by transfer of documents of title after the ship carrying imported goods had entered the territorial waters, but before clearance through customs, was a sale in the course of import and therefore outside the State's taxing power.

Analysis: The decisive question was the meaning of the expression "in the course of import" in Article 286(1)(b) of the Constitution and in section 5(2) of the Central Sales Tax Act. The relevant test was not the mere entry of the ship into territorial waters, but whether the goods had crossed the customs barrier or, in the language of the Central enactment, the customs frontiers. The reasoning drew support from the constitutional understanding of the "course" of import as a continuous movement ending only when the goods are cleared for home consumption and cease to form part of the import stream. The Court held that "customs frontiers" in section 5 should be understood as the customs barrier, not as the outer limit of territorial waters, and that the transfer of documents of title after entry into territorial waters did not terminate the import.

Conclusion: Such sales remained sales in the course of import and were not taxable as local sales.

---