2016 (10) TMI 1230 - AAR - VAT and Sales Tax

Imported Goods Sales from Bonded Warehouse Taxable under MVAT Act; Ex-bond Sales to Duty-Free Shops Also Taxable

In Re : M/s. Moet Hennessy India Pvt. Ltd.

The judgment concluded that sales of imported goods from a customs bonded warehouse are taxable under the MVAT Act. Ex-bond sales to duty-free shops are ... Liability of VAT - transaction of sale - section 55 of MVAT ACT, 2002. Whether the sale of imported goods by the Applicant to the license holders from a customs bonded warehouse (hereinafter referred to as warehouse)is a sale, liable to be taxed under the provisions of the Act? Whether ex-bond sales of imported goods effected to duty free shops is a 'sale in the course of imports' and hence exempt from the levy of tax under Act? Presently, dealer is not effecting this type of transactions? Whether the Applicant is liable to discharge tax in respect of the above mentioned sales transactions? Held that:- The sale from warehouse to duty free shop is neither export nor sale in the course of import. Hence, such sale is taxable in the state of Maharashtra at the schedule rate prescribed under MVAT ACT, 2002. The sale to duty free shop cannot be treated as export. It does not have destination where it can be said to be imported, and so long as it does not satisfy this test laid by Hon apex court in the case of Burmah Shell Oil Storage and Distributing Co. [1960 (9) TMI 70 - SUPREME COURT OF INDIA], it cannot be said that the sale was in the course of export. Ruling:- Sale of imported goods by the Applicant to the license holders from a customs bonded warehouse - Held that:- Sale liable to tax as per relevant schedule entry under MVAT Act. Whether ex-bond sales of imported goods to duty free shops is a 'sale in the course of imports' and hence exempt from the levy of tax under MVAT Act? - Held that:- The exbond sale to duty free shop is neither sale in the course of import nor it is export. Hence, sale to duty Free shop is liable to tax as per schedule entry D-3 appended to MVAT ACT, 2002. Whether the Applicant is liable to discharge tax in respect of the above mentioned sale transaction? - Held that:- The applicant is not holding any license under State Excise Act (Prohibition Act).Hence, liable to tax as per schedule entry D-3 appended to MVAT ACT, 2002. Issues Involved:1. Tax liability on the sale of imported goods from a customs bonded warehouse.2. Tax implications of ex-bond sales to duty-free shops.3. Applicant's liability to discharge tax on the aforementioned transactions.Issue-wise Detailed Analysis:1. Tax Liability on Sale of Imported Goods from a Customs Bonded Warehouse:The applicant queried whether the sale of imported goods from a customs bonded warehouse to license holders is liable to tax under the MVAT Act. The judgment concluded that such sales are indeed liable to tax as per the relevant schedule entry under the MVAT Act. The rationale is that the goods stored in a bonded warehouse, declared under section 9 of the Customs Act, 1962, do not qualify as being within a 'customs station' defined under section 7 of the same Act. Therefore, these goods are considered to have crossed the customs frontiers, making the sale taxable within the state of Maharashtra.2. Tax Implications of Ex-bond Sales to Duty-Free Shops:The applicant posed an academic question regarding whether ex-bond sales of imported goods to duty-free shops constitute a 'sale in the course of imports' and are thus exempt from MVAT. The judgment clarified that such sales are neither in the course of import nor export and are therefore taxable under the MVAT Act. The court emphasized that the bonded warehouse in question is not a customs station under section 7 of the Customs Act, 1962, and thus the goods are considered to have crossed the customs frontiers. Additionally, the sale to duty-free shops does not meet the criteria for export, as there is no foreign destination for the goods.3. Applicant's Liability to Discharge Tax:The applicant inquired about their liability to discharge tax on the aforementioned transactions. The judgment confirmed that the applicant is liable to tax as per the schedule entry D-3 appended to the MVAT Act, 2002. The applicant does not hold any license under the State Excise Act (Prohibition Act), which further solidifies their tax liability under the MVAT Act.Conclusion:The judgment concluded that:- Sales of imported goods from a customs bonded warehouse are taxable under the MVAT Act.- Ex-bond sales to duty-free shops are neither in the course of import nor export and are taxable under the MVAT Act.- The applicant is liable to discharge tax on these transactions as per the relevant schedule entry under the MVAT Act.The judgment emphasized that the specific provisions of the CST Act and the Customs Act should not be conflated, and the definitions provided in each act must be adhered to strictly. The judgment also referenced several Supreme Court rulings to support its conclusions, ensuring that the interpretation aligns with established legal precedents.