TaxTMI 
TaxTMI 
2016 (10) TMI 1230
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....erred to as warehouse)is a sale, liable to be taxed under the provisions of the Act? (b) 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. (c) Whether the Applicant is liable to discharge tax in respect of the above mentioned sales transactions? 2. The fact of case:- 2.1 M/s. Moet Hennessy India Pvt. Ltd. (hereinafter referred as "Applicant" or "MHI"), is a subsidiary of Moet Hennessy, LVMH Group. MHI is engaged in the import, sales and marketing of liquor including wines and spirits. 2.2 The applicant informed that the imported goods are assessed to duty at the time of filing bill of entry for warehousing in the name of applicant. The applicant has declared assessable value, rate of custom duty and amount of custom duty payable. The applicant has executed the bond to defer the payable custom duty under section 59 of the Custom Act, 1962. The payable duty is recoverable in the manner laid down in the sub section (1) of section 142 of Custom Act, 1962. The Bill of lading has never been endorsed in....
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....ransfer of document of title of goods in relation with sale in the course of imports. 9. To explain each transaction party wise in written format along with evidences, only submission of document will not serve the purpose. 10. Who has filed the bill of entries and put the goods in bonded ware house, and in whose name custom duty is assessed? 11. What is procedure to keep the goods in bonded warehouse? 12. What effect is given to billof lading when goods are kept in bonded warehouse? 13. Whether bonded warehouse is part of custom station or custom area. PI produce the evidences 14. The details of correspondence made to custom authorities in relation to goods. 15. The copy of notification issued by the Board under section 7 of Custom Act related to duty free shop and bonded ware house. Whether, the related bonded warehouse is declared as Inland container Depot (ICD), if yes, then its order. 16. Whether the custom bonded warehouses in which goods are stored at the time of bond sales are declared as custom station under section 7 of Custom Act, 1962? Whether the criteria laid dawn under section 2 (ab) of CST ACT are fulfilled regarding your sale from bonded war....
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.... a bonded warehouse. The buyers (distributers/hoteliers)' files ex-bond bills of entry and clears the goods on payment of customs duties from private warehouse for home consumption. 3. The contention of applicant: On the background of the aforesaid facts and circumstances, 3.1 The applicant has stated that sale of imported goods from a customs bonded warehouse to third party buyers' constitutes sales in the course of imports and not as local sales within State of Maharashtra, and hence not liable to sales tax. 3.2 Mr. Suchdeva, learned Advocate has tried to explain that the license holders are the importers and liability to discharge VAT accrues on such license holders, in view of Section 41(5) of the MVAT ACT read with the said Notifications. He has tried to convince that the change in the incidence of tax from the Applicant to the license holders under Section 41(5) read with the said Notifications is a revenue neutral exercise and no loss will occur to the State exchequer. The issue is related to amendment carried in MVAT ACT by issuing the Notification. The Notification issued is conditional and provides exemption to subsequent buyers. The said Notification is ....
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....as follows: "Crossing the Customs Frontier" means the crossing the limits of the area of the "customs station" in which the imported goods or export goods are ordinarily kept before clearance by the customs authorities". Explanation added to the above definition states that "for the purposes of this clause, "Customs station" and "Customs authorities" shall have the same meanings as in the Customs Act, 1962".On perusal of definition it is seen that- a) The term "custom station" is only relevant term and associated with the section 2 (ab) of CST ACT. The term custom station is used. It is to be noted that the terms custom area or custom barrier are not used as benchmark to determine the limit of custom frontier. The Custom Act may formulate different special scheme or exclusive scheme for importer and may allow them to keep the goods in any area like warehouse without payment of Custom duty. That does not mean the crossing the custom frontier will change as per the special scheme of Custom Act. b) The word "in which" is very significant and it is used for the goods which are ordinarily kept in custom stations only. These goods are to be considered within the limit of custom ....
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....een used in Section 2(ab) of CST ACT, 1956, and it has been equated with term used in Custom Act, 1962, for its interpretation,only the said defined term in Customs Act is significant. 4.4 On the said backdrop, we will see the meaning of "custom station" as defined in section 2(13) of Custom Act, 1962. 2(13)"customs station" means any customs port, customs airport or land customs station; Thus, the custom station, as defined in Customs Act, includes three terms: custom port, customs airport or land customs station. These terms are further defined under the Custom Act, 1962. Section 2(10) "customs airport" means any airport appointed under clause (a) of section 7 to be a customs airport, 2[and includes a place appointed under clause (aa) of that section to be an air freight station]; Section 2(12) "customs port" means any port appointed under clause (a) of section 7 to be a customs port and includes a place appointed under clause (aa) of that section to be an inland container depot; Section 2(29) "land customs station" means any place appointed under clause (b) of section 7 to be a land customs station; Section 2(11) "customs area" means the area of a customs st....
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....n the conditions under which a sale or purchase of goods can be said to take place in the course of import or export. It is held that the, expression 'customs frontiers' in Section 5 of the Central Act cannot be construed to mean 'customs barriers'. The court pleased to examine that "The expression "Customs frontier of India" in section 5 of the Central Act, in our opinion, must be construed in accordance with the notification by the Central government under section 3-A of the Sea Customs Act (which defined customs frontier of India as the boundaries of the territory including territorial waters of India) read with the proclamation of the President of India." However, Hon. Supreme Court invited practical difficulties, as the actual point of time when a ship crosses the territorial waters of India could not be ascertained. In the meantime, Customs Act of 1962 came into existence after consolidation of the then Sea Customs Act, Land Customs Act and Air Customs Act. The Customs Act of 1962 provided for various distinct areas such as Customs Area, Customs station and Warehousing Station In view of the complexity involved in the determination of term Customs ....
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....lause (a) of Section 7.The Land customs station means any place appointed under. Section 7(b). A reading of Section 2(ab) makes it clear that if the goods cross the area of the customs station viz., the customs port which is notified under Section 7 of the Act, where the goods are kept before clearance and if the transfer is effected by transfer of documents of title then it does not amounts to sale in the course of import. In other words, if the goods are kept in the port before clearance of crossing the limits of that port, then only the transfer of document of title of goods amounts to sale in the course of import. These views are fortified with the observation of various court authorities. With this background, we would like to refer opinion of court authorities who have directly dealt the said issue. 5. The various court authorities have directly dealt with the same issue on the basis of relevant legal provisions and similar interpretation is very significant to decide the issue. 5.1 The constitution bench of Hon. Supreme court, has interpreted the term crossing the custom frontier for the CST Act, 1956 in the case of State Of Madras vs Davar And Company 1970 AIR 165. ....
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....laim made by the assessee that the sales in question were sales in the course of import, has been rightly rejected by the assessing authority. 5.2 The Hon. Apex court has dealt with this issue directly in case of Minerals and Metals Trading Corporation of India [1998] INSC 488 (25 September 1998) and interpreted the term custom station and discussed the meaning of term crossing the custom frontiers in view of conjoint reading of section 2(ab) and section 5(2) of CST ACT. Since the issue is directly dealt with and discussed at length by Hon Apex court, it has more precedential value and is binding on us under Article 141 of constitution. The Apex court observed that---- "Crossing the customs frontiers of India means crossing the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities." It was inserted by an amendment in 1976. The Objects and reasons of the amendment were that the phrase had been interpreted to mean, coterminous with the extent of the territorial waters. This had given rise to practical difficulties as it was difficult to determine whether, at the time of the sale or purchase, the goods had e....
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....ustoms authorities on making the assessment of goods would amount to a sale in the course of import, as after the assessment is made and on filing of the bill of entry the goods get mingled with the general mass of goods and merchandize of the country, The goods get the eligibility to be declared as local goods after clearance, even though they are not physically removed from the harbour premises. They attain the character of local goods and cease to be foreign goods. Therefore, the relevant point of time for determining as to whether the sale of goods is in the course of import by a transfer of title deeds is the transfer by title deeds before filing the bill of entry and the assessment of duty irrespective of the fact whether the goods are physically cleared from the harbour or not and whether duty is paid or not. As pointed out in the earlier paras after the filing of the bill of entry the assessment of the duty the import stream dries up and ceases to flow after the customs department levies the duty declaring the eligibility of the goods to be cleared and mingles with the general mass of goods and merchandise in the country. Once the duty is levied the import is at an end and ....
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....tier. The clearance by the Customs Authorities will be after filling the bill of entry and after the assessment of duty under section 28 of the Customs Act, 1962. Before the assessment of the duty, the goods kept in the customs port cannot cross the limits of Customs Port. Hence, irrespective of the fact whether duty is paid or not; once the bill of entry is filed and the imported duty is assessed, the goods cross the limits of customs port. It is so held in the case of Mineral & Metals Trading Corp. of India Ltd. Vs. State of Andhra Pradesh 110 STC 394 (AP). However the learned Advocate mainly relied on the Supreme Court judgments, which did not deal with the said subject directly to interpret the inserted provision under section 2(ab) of CST ACT 1956. The observation of Supreme Court can be enumerated as under. 5.5. The Hon. Apex court in the case of Kiran spinning mill came across with payment of Custom duty which deals with provisions of Custom Act, 1962.The facts of case and provision of levy of Custom duty is important to decide the issue under Custom Act, 1962. The facts and decision of Hon Apex court is reproduced as under. "The short question that arises for consi....
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.... different provisions for different contingencies/conditions. The clause (b) of Section 15 clearly states that rate of duty applicable in the case of goods cleared from a warehouse under section 68, on the date on which a bill of entry for home consumption in respect of such goods is presented under that section. The Hon. Apex court has considered the said provision and held that------ The taxable event, therefore, being the day of crossing of customs barrier, and not on the date when the goods had landed in India or had entered the territorial waters. We find that on the date of the taxable event the additional duty of excise was leviable under the said Ordinance and, therefore, additional duty under Section 3 of the Tariff Act was rightly demanded from the appellants." The issue involved was regarding the determination of date for rate of duty. The Hon. Supreme Court held that the duty is payable at prevailing rate when goods are cleared from bonded warehouse. The said judgment is based on the specific provision of Custom Act related to custom duty. The judgment is related to charging section of Custom Act and payment of duty under the said Act. In our opinion the above ....
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....ot be said that the said goods had crossed the customs frontiers. The goods are not cleared from the customs till they are brought in India by crossing the customs frontiers. When the goods are lying in the bonded warehouses, they are deemed to have been kept outside the customs frontiers of the country and as stated by the learned senior counsel appearing for the appellant, the appellant was selling the goods from the duty free shops owned by it at Bengaluru International Airport before the said goods had crossed the customs frontiers. 23. Looking to the aforestated legal position, it cannot be disputed that the goods sold at the duty free shops, owned by the appellant, would be said to have been sold before the goods crossed the customs frontiers of India, as it is not in dispute that the duty free shops of the appellant situated at the International Airport of Bengaluru are beyond the customs frontiers of India i.e. they are not within the customs frontiers of India. On the said factual position and admitted fact, the Apex court has held that the duty free shop is located beyond the custom frontier and hence the sale in the course of import was allowed, (pl. refer Para 23,....
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.... been turned down by the High Court of Karnataka in the Nestle case. 5.8 The Hon. Apex court in the case of Falcon Tyres Ltd. Versus State of Karnataka and others 2006 (7) TMI 316 has come across the meanings employed in other acts would be relevant or otherwise. It is held that- The learned counsel for the appellant relied upon Karnataka Forest Development Corporation Ltd. v. Cantreads Pvt. Ltd. [1994] 4 SCC 455, to contend that rubber is agricultural produce. This was a case under the Karnataka Forest Act, 1963 for the purposes of levy of the forest development tax. The meaning assigned to the agricultural produce in the present Act is different from what was assigned to it in the Karnataka Forest Act, 1963. The same is not relevant. Similarly, he cited two other judgments which are not germane to the point and need not even be noticed. The Legislature has deliberately excluded certain items from being agricultural produce and therefore while interpreting the provisions of the present Act, the legislative intention will have to be given effect to in consonance with the definition as contained in the statute. Thus, the meaning assigned to the agricultural produce in the p....
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....stoms port or customs airport or coastal port for the unloading and loading of goods or for any class of goods; b) Specify the limits of any custom area; f.) Section 9 of Customs Act, which is empowering - The Central Board of Excise and Customs may, by notification, declare places to be warehousing stations; From the perusal of provision of the Customs Act, it is clear that any vessel carrying goods being imported, must report only at customs port (Section 29). The imported goods are unloaded only at a customs station as appointed by the Central Government vide section 7. Then the importer of the goods has to make entry of the goods by presenting a bill of entry (1) for home consumption, or (2) warehousing. The provisions under Custom Act, 1962 for warehousing of goods are dealt as under. 8. The provisions of warehousing of goods under Custom Act,1962. Firstly, we want to clarify that these provisions are meant for the administration of Custom Act. The provisions of warehousing of goods are not relevant to interpret the term custom station for section 2 (ab) of CST ACT, 1956.These provisions are meant for warehousing of goods after they crosses the limit of custo....
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.... This again demonstrates that there are two modes of removal of goods from the customs station. Firstly, it can be said to be clearance of the goods for home consumption, and the other can be said to be clearance or removal for being deposited in a warehouse under a bond without payment of duty. Assessment of duty is made (though not paid) even in case of clearance of goods for warehousing, as the bond binds the importer with an amount twice the amount of duty. Entry of the goods by presenting a distinct bill of entry has to be made in either case. Section 47 specifically speaks of "clearance of goods for home consumption" and the regulations provide for separate forms of Bill of Entry. Section 57 says that the Assistant Commissioner of Customs may appoint public warehouse wherein dutiable goods may be deposited. Section 58 speaks of warehousing facility without payment of duty, and section 59 provides for execution of bond. The goods are cleared from custom station after the order of custom officer issued under section 60 of Custom Act, 1962 and thus goods crosses the custom station limit for the purpose of section 2(ab) of CST ACT, 1956. 9. Sale to duty free shop from bonded w....
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....ing of the goods was not a commercial venture but a charitable one. The crucial fact is the sending of the goods to a foreign destination where they would be received as imports. The two notions of export and import, thus, go in pairs. Applying these several tests to the cases on hand, it is guite plain that aviation spirit loaded on board an aircraft for consumption, though taken out of the country, is not exported since it has no destination where it can be said to be imported, and so long as it does not satisfy this test, it cannot be said that the sale was in the course of export-Further. as has already been pointed out, the sales can hardly be said to "occasion" the export. The seller sells aviation spirit for the use of the aircraft, and the sale is not integrally connected with the taking out of aviationspirit. The sale is not even for the purpose of export, as explained above. It does not come within the course of export, which requires an even deeper relation. The sales, thus, do not come within Article 286(1 )(b). Hence, the academic question asked by appellant, the sale effected from warehouse to duty free shop is neither being export nor being sale in the course of i....
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....idered beyond the limit of custom frontier and have not crossed the custom frontier. However, the goods though ordinarily kept outside of custom station or stored out of custom stations for Custom Act will not come under the purview of beyond the custom frontier for the purpose of CST ACT. The goods stored outside of custom station as per any scheme of Custom Act will not bestow the status as lies beyond custom station for the purpose of CST ACT. The term clearance of goods by custom authorities for the purpose of CST ACT is to be considered as soon as goods are cleared from area of custom station due to any reasons. The interpretation of the term "clearance of goods by custom authority" cannot be made as per provision of Custom Act as it will lead to absurd meaning being given to "Custom station". If interpreted otherwise, then the custom area will become custom station and it would make the term "custom station" illogical and will be contrary to the intent and objects of amendment in CST Act. The specific purposive definition under CST Act would be redundant in that case. d) The goods were stored in the warehouse (namely, Veritas Global Pvt. Ltd. Plot No. 104, Jawahar Co-opera....
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....e terms for the purpose of interpretation. The specific provision made for the special purpose is most important for interpretation of statute. i) Thus, the expression "crossing the customs frontier of India" is provided to remove the difficulties. It's further extension would defeat the purpose, recommendation of Law Commission and observation of Hon Supreme Court in case of Daver and will shepherd to absurd meaning. In consequence, the definition in the CST Act having thus crystallized, the term "Customs Frontier" is to be equated and limited to the area of the "Customs station" and not any further for the purposes of the CST Act. j) In view of above conclusions, the answer to the academic question asked by appellant about sales to duty free shop, is 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 ....