How to sell goods on HSS from Custom Bounded warehouse

[Guest]

Is it possible that on arrival of the cargo we can file the In bound bill of entry and move the cargo to custom bonded ware house and later sell this cargo on HSS to various customers?

[Mahir S]

Sir,

If the relevant provisions of the CST Act and Customs Act are referred , it would be seen that once goods are cleared by the customs authorities, upon the filing of the relevant documentation by the importer of a Bill of Entry of whatever nature, and the goods physically leave the area of the port/airport, they would be deemed to have crossed the customs frontiers of India. Typically, customs bonded warehouses are situated in areas which are evidently beyond any customs port/airport and goods are stored in such warehouses consequent to the filing of the appropriate Bill of Entry, based on which they are allowed to be cleared from the customs station and transported to such warehouses. Of course, if such a bonded warehouse were to be located within a customs port/airport, goods stored in such a warehouse could be argued to have not crossed the customs frontiers of India.

In M/s Hotel Ashoka Vs. Assistant Commissioner of Commercial Taxes [(2012) 03 VIL (SC)], the Court held that since duty free shops were located in the customs airports of the country, and hence such sales were exempt from tax under the CST Act.

However, Circular No. 11 issued vide F. No. 465/6/2010-Cus.V dated 03/06/2010 has clarified as under :-

6. The facts and circumstances of a sale of warehoused goods are not similar to the case of “high-seas-sales” since the sale/transfer of imported goods after warehousing cannot be considered to have been made in the course of international trade.

AI Summary

Sale of warehoused goods not treated as high-seas sales, affecting international trade characterisation and tax treatment. Movement of imported goods to a customs bonded warehouse after filing the appropriate Bill of Entry is generally treated as having crossed the customs frontiers unless the warehouse is within a customs port/airport; sales of goods after warehousing are not considered to be made in the course of international trade and therefore cannot be treated as high seas sales for tax characterisation.