TaxTMI 
TaxTMI 
2021 (1) TMI 501
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....-State sales, liable to Central Sales Tax Act, 1956- Hereinafter referred to as 'the CST Act' while granting time to the appellant to produce the prescribed C-Forms to the assessing authority for availing the benefit of concessional rate of tax. 2. We may usefully observe at the outset that, in all, seven transactions of similar nature form the subject matter of these appeals; one relating to the assessment for the year 2005-06 and others relating to the assessment for the year 2006-07. The common salient features of all these transactions had been that they were for supply of timber from a foreign country and were allegedly executed in a similar fashion thus: The supplier (party number 1) sold the goods in question to the first buyer (party number 2) and delivered them at the port of shipment. Thereafter, while the goods were in transit on high seas, party number 2 transferred the goods to the appellant (who was invariably party number 3 in these transactions) by endorsing the bill of lading in favour of the appellant. Further to this and while the goods were on high seas, the appellant allegedly transferred them to the end-buyer (party number 4) by endorsing the bill of lading....
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.... had imported the goods; and that the sale by the appellant to the end-buyer could have only been effected after the goods were cleared for home consumption. The High Court also rejected the contention that high seas sale to end-buyer had occasioned the import of goods into the territory of India. The appellant has challenged the decision of the High Court by way of these appeals on a variety of grounds as shall be noticed hereafter. 5. As noticed, the transactions involved in the present matters had been of similar nature. For appropriate dealing with the issues involved, we may take note of the facts relating to the assessment order dated 20.01.2010 pertaining to the tax period 2005-06 and the assessment order dated 18.05.2010 pertaining to the tax period 2006-07 in necessary details. Assessment Order dated 20.01.2010: relevant facts and background 6. The appellant M/s. Vellanki Frame Works is said to be a sole proprietary concern, engaged in the business of sale and purchase of logs, timber and wooden batons; and in the course of its business, the appellant also imports timber from other countries. 7. For the tax period 2005-06, in respect of inter-State sales fallin....
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.... Pradesh)- The end-buyer, hereinafter also referred to as 'Radha' was its close business associate; that Radha desired to purchase the subject goods from M/s. World Best Trading Co. (L.L.C.), Dubai (U.A.E.)- The seller, hereinafter also referred to as 'WBT' but, for not having the requisite infrastructure with the Customs Department, approached the appellant for help; that though the appellant had the requisite infrastructure facilities at Visakhapatnam Customs, but was not having the letter of credit facilities for import; that in the given circumstances, the appellant and Radha entered into a quadripartite agreement with the seller and Indus Tropics Ltd.- The first buyer, hereinafter also referred to as 'Indus' whereby, it was agreed that Indus would purchase the goods and during the course of transit of the goods from the port of shipment, would sell them to the appellant; that the appellant would purchase the said goods from Indus as the agent of Radha and transfer the documents on high seas in favour of Radha for which, Radha would pay the appellant commission of 2% plus bank charges. 8.2. It was asserted by the appellant that pursuant to the said quadripartite agreement, I....
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....in its books of accounts; and the balance sheet for the year also supported this submission. Put in a nutshell, the appellant asserted that the transfer of imported goods by it to Radha did not partake the character of sale of goods and that, in any event, the transfer, having been effected over high seas before bonding with the customs authorities, cannot be treated as inter-State sale in the State of Andhra Pradesh. 9. The contentions of the appellant were examined by the CTO in the impugned assessment order dated 20.01.2010. For their relevance, the observations and findings in this assessment order could be usefully noticed as follows: 9.1. The CTO summed up the stand of the appellant that the documents of title to the goods were transferred to Radha on high seas by virtue of the High Seas Sale Agreement dated 12.12.2005; that the transaction did not attain the character of an inter-State sale; and that filing of the bill of entry had no relevance in determining the nature of the transaction. The CTO observed that it was not the case of the appellant that the sale or purchase had occasioned the import falling under the first limb of Section 5(2) of the CST Act and the que....
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.... 9.2. In regard to the main contention of the appellant that document of title was transferred before the goods had crossed the customs frontier of India and the transaction fell within Section 5(2) of the Act, the CTO examined the documentary evidence placed on record and found the facts that: (i) Indus had imported 324 PCS of Myanmar Hardwood Gurjan Round Logs from Yangon (Myanmar) to Vizag (India) and the bill of lading No. 01/YGN-VZG dated 09.12.2005 was endorsed by the importer in favour of the appellant; (ii) on the strength of such endorsed documents, Sri Sanjiv Kumar Agarwal (sole proprietor of the appellant) presented the bill of entry No. 804116 dated 12.12.2005 for warehousing and customs duty was assessed on the appellant alone on this bill of entry for warehousing; and (iii) subsequently, the appellant filed the bill of entry for home consumption No. 804353 dated 28.12.2005 and customs duty was assessed on the appellant alone on this bill of entry. The CTO also referred to the debit note dated 12.01.2006 raised by the appellant on Radha for a sum of Rs. 1,14,86,342/- and observed that though the intention of the parties in High Seas Sale Agreement dated 12.12.200....
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.... be observed that the sale has not taken place in the manner contemplated in the agreement. The sale in fact took place after - customs clearance only. Thus, there is no nexus to the said agreement." 9.4. In view of the above, the CTO disallowed the exemptions claimed by the appellant on the turnover of Rs. 1,14,86,342/- while treating the transactions as inter-State sales falling under Section 3(a) of the CST Act and carried out assessment accordingly, holding the appellant liable to pay balance tax to the tune of Rs. 14,35,793/-. Assessment Order dated 18.05.2010: relevant facts and background 10. Six other transactions of similar nature formed the subject matter of the assessment order dated 18.05.2010 relating to the tax period 2006-07. The CTO found that the appellant had claimed exemption from payment of tax, in respect of a turnover of Rs. 4,05,09,427/-, while contending that this turnover represented the sales effected by transfer of documents of title before the goods had crossed the customs frontiers of India but, had not filed any evidence to show that the said sales were effected in such a manner. Accordingly, a show-cause notice dated 26.11.2009 was issued. In....
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....er, New Delhi (end-buyer). These transactions involved two bills of lading, Nos. AMB1306/VIZ-01 and AMB1306/VIZ-02 dated 08.10.2006, which were similarly endorsed by the first buyer in favour of the appellant on 18.10.2006 and on the same date, the appellant endorsed the same in favour of the end-buyer. Thereafter, in a similar fashion, the appellant filed the bills of entry on 19.10.2006 for warehousing and then, on 31.10.2006 for home consumption. 10.4. Again, the fifth and sixth transactions in this assessment had also been of the same nature wherein two Master Agreements dated 11.12.2006 and 15.12.2006 for supply of timber were asserted involving the said Wood Craft International Pte Ltd. (seller), M/s. G.K. Ganeriwala & Sons (first buyer), Vellanki Frame Works (appellant) and M/s. Esskay Impex, New Delhi (end- buyer). These transactions involved two bills of lading, Nos. CON1206/VIZ-04 and CON1206/VIZ-05 dated 21.12.2006 which were similarly endorsed by the first buyer in favour of the appellant on 04.01.2007 and on the same date, the appellant endorsed the same in favour of the end-buyer. Thereafter, in the similar fashion, the appellant filed the bills of entry on 05.01.2....
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....to the instant case, as is ascertainable from the bills of entry for ware-house and the ex-bond of entry - transfer of title deeds has not taken place before filing the bills of entry and the assessment of duty. The sale took place after the assessment is made on the assessee and on filing of the bills of entry. Thus the said sales attained the character of sales of local goods. Therefore, in view of the above legal position and the facts of the case, it is to be treated that the goods had crossed customs frontiers of India when the bill of entry having been made, the goods were assessed to customs duty. Hence the sales effected by the assessee cant be said to be sales in the course of import or high sea sales in as much as the goods had crossed the customs frontiers. Further, when addressed the dealers at the other end requesting to confirm the purchase from the assessee - M/s Pine Exporters, New Delhi (sale reported at transaction No.3 Rs. 11057059/- and transaction No.4 Rs. 4124375/- total 15581434-00) the party replied that they do not know the referred party and have never received any Malaysian Round Logs from the said party which shows that the dealer's cla....
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....the authority of CTO to pass the assessment order in question, the High Court extensively examined the scope of the provisions contained in A.P. Value Added Tax Act, 2005, A.P. Value Added Tax Rules, 2005 and Section 9(2) of the CST Act and ultimately rejected the contentions urged on behalf of the appellant that the CTO was lacking authority to assess the appellant to tax under the CST Act. 14.2. As regards judicial review of assessment order in writ jurisdiction, the High Court took note of the extensive arguments on behalf of the appellant as regards nature of transaction with reference to quadripartite agreement and endorsement of bill of lading by the importer in favour of the appellant and subsequently by the appellant in favour of Radha (end-buyer) while the goods were on high seas as also the argument that there was no finding against genuineness of the endorsements on the bill of lading. The High Court observed that the appellant had invoked writ jurisdiction against the assessment order without availing the statutory remedy of appeal; and also pointed out that though certiorari was the appropriate remedy in challenge to a quasi-judicial order, the appellant had sought ....
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....note of the rival submission where, on one hand, it was contended on behalf of the appellant that there was no prohibition under the Customs Act or the Rules/Regulations made thereunder, for clearance of goods by the holder of an authorisation by the endorsee of the bill of lading; that even otherwise, an importer under the Customs Act includes any owner or any person holding himself out to be an importer and, as the bill of lading had been endorsed in his favour, the appellant was entitled to file the bill of entry as an importer; and that the department's contention, that payment of customs duty by the appellant was conclusive of the import having ended and any sale by the appellant thereafter could only be a domestic sale, was not flowing from the provisions of the Customs Act. On the other hand, it was contended on behalf of the department that the appellant alone was assessed to customs duty by virtue of his filing the bill of entry as the importer; that the system permitted only the appellant to file the bill of entry as his name alone was recorded in the Import General Manifest (IGM) as the importer; that the contents of the bill of entry made it clear that there was no high....
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....amounting to crossing the customs frontiers of India. 14.4.2. As regards connotation of the term "importer", the High Court examined the definition of "import" in Section 2(23) and of "imported goods" in Section 2(25) of the Customs Act and observed that the moment goods, brought into India from a foreign country, are cleared for home consumption, they get mixed with the local goods and cease to be imported goods thereafter. The High Court also examined the inclusive definition of "importer" in Section 2(26) of the Customs Act and observed that any person who imports goods from a foreign country to India would undoubtedly be an importer; and the owner of the goods and a person holding himself out be an importer would also be an importer, but only during the period between the importation of the goods and the time they are cleared for home consumption, and not prior thereto or thereafter. The High Court observed that the expanded definition of "importer" could not be used to usurp the identity of an importer from the person who has filed the bill of entry; and as the bill of entry showed the goods to have been cleared by the appellant for home consumption, the appellant was....
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.... entry is filed does not cease to be the importer. In other words, the person who has secured the release of the goods from the carrier, who has filed the bill of entry, and who has undertaken the work of clearance, continues to be an importer. The bill of entry shows the goods to have been cleared for home consumption by the petitioner who is, therefore, the importer of the goods. The person who holds himself out to be the importer of the goods must furnish proof of being the importer before the goods are cleared for home consumption. No doubt, Section 2(26) permits any one holding himself out to be the importer between the date of importation and clearance of the goods for home consumption. But here the petitioner, in whose name the goods have been manifested, has, by filing a Bill of Entry, already held himself out to be the importer. As shall be detailed hereinafter, the import manifest has not been amended, the petitioner has filed the Bill of Entry for clearance of the goods for home consumption, and has held himself out to be the importer. .... It is evident, therefore, that, before its importation, it is only the person who imported the goods who would be the impor....
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.... is evident, therefore, that the contention of high seas sales has been raised by the petitioner only to avoid the goods being subjected to tax as inter- state sales under the CST Act." 14.4.4. After having found that the appellant was rightly held to be the importer of goods and such a conclusion was fortified by the contents of IGM, the High Court proceeded to further examine the effect of filing of bill of entry for home consumption by the appellant. In this regard, the High Court examined the scope and requirements of the provisions contained in the Customs Act relating to entry of goods on importation; clearance of goods for home consumption as also the requirements of the Bill of Entry (Electronic Declaration) Regulations, 1995. The High Court further examined the contents of one of the bills of entry, as placed on the record of W.P. No. 6258 of 2013 where the second party (first buyer) was Purbanchal Lumbers Pvt. Ltd. and found that the said bill of entry made no reference to Radha and held that this omission made it clear that the goods were imported by the appellant on a high seas sale effected in its favour by the said first buyer. The High Court, accordingly, conclude....
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.... very fact that the name of the importer is shown as Sanjiv Kumar Agarwal, Vellanki Frameworks, and the Bill of Entry makes no reference to Radha Industries, shows that the goods were imported by the petitioner, on the goods being sold to them on high seas by Purbanchal Lumbers Private Limited. Sale of goods by them to Radha Industries could only have been effected after the goods had been cleared for home consumption. *** *** *** Transfer of title to the goods on high seas would make the person, who purchased the goods on high seas, the importer of the goods and it is he who would be liable to be assessed to customs duty. As the Bill of Entry records the petitioners name as the importer, and as it is not in dispute that it was he who was assessed to customs duty, and not Radha, it is evident that the sale of goods by the petitioner to Radha is not a high seas sale. Such a sale could only have been effected after the petitioner was assessed to customs duty, and he had cleared the goods for home consumption." 14.4.6. With reference to a Division Bench decision of Andhra Pradesh High Court in the case of Minerals and Metals Trading Corporation of India Ltd. v. St....
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....and law. This apart, the High Court also observed that even otherwise, such a submission was belied by the fact that the name of the appellant, and not Radha, was reflected in the bill of entry as the importer of the goods. 14.6. Another argument advanced on behalf of the appellant before the High Court had been that the principles enunciated in the said Division Bench decision of Andhra Pradesh High Court in the case of Minerals and Metals and another decision of Madras High Court got tacit approval in the decision of this Court in the case of Hotel Ashoka (Indian Tourist Development Corporation Ltd.). v. Assistant Commissioner of Commercial Taxes and Anr.: (2012) 3 SCC 204. The High Court distinguished the said decision of this Court while pointing out that it related to the goods sold at duty-free shops which are beyond the customs frontier of India; the goods sold thereat must be said to have been sold before having crossed the customs frontiers of India; and consequently, the sale of goods thereat is in the course of import. 14.7. Having thus held that the sale in question was an inter-State sale, the High Court took note of the alternative prayer made on behalf of the a....
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.... the parties. 16. Assailing the impugned judgment, learned counsel for the appellant has made elaborate reference to the quadripartite agreement dated 21.11.2005 involving four parties and stipulating that Indus would raise the purchase order on the foreign exporter i.e., WBT and thereafter, when the goods were on high seas, Indus would transfer the documents of title (bill of lading) in favour of the appellant; and the appellant would then transfer the documents of title to the goods in favour of Radha before the goods cross the customs frontiers of India. The learned counsel would submit that the intention behind entering into a quadripartite agreement was that Indus enjoyed a 180- day line of credit with WBT while the appellant had the requisite infrastructure to undertake importation of goods but the agreement specifically identified Radha as final buyer of the goods and stipulated that the goods would move only after inspection and selection by Radha and hence, there was always a privity of contract between WBT (the seller) and Radha (the end-buyer). The learned counsel has further submitted that as per Schedule I to the agreement, the appellant was to act as an agent of Ra....
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....er to the meaning of sale in the general law. While also relying on the decision of this Court in Tata Iron and Steel Co. Ltd., Bombay v. S.R. Sarkar and Ors.: AIR 1961 SC 65, the learned counsel has submitted that in both the situations where sale occasions movement of goods and sale occasions import of goods, the contract of sale or a covenant of a contract of sale triggers the movement from either one State to another or from outside India into India. 16.3. Learned counsel for the appellant has contended that to qualify under Section 5(2) of the CST Act, the essential ingredients of high sea sales would be of the transfer of document of title and transfer of goods to be made while the goods are on high seas. With reference to the definition of term "crossing the customs frontiers of India", as occurring in Section 2(ab) of the CST Act, learned counsel has pointed out that this term means crossing the limits of the area of customs station in which imported goods or exported goods are ordinarily kept before clearance by customs authorities. Then, with reference to Section 2(4) of the Sale of Goods Act, 1930- Hereinafter referred to as 'the Sale of Goods Act' and the decisions o....
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....ransaction of sale; that when a part of integrated import transaction involves movement of goods within India, the department cannot selectively question only one part of the transaction; and that the quadripartite agreement, clearly establishing the privity amongst the parties involved, could not have been ignored in part and the Indian leg of the transaction could not have been dissected in order to be taxed. 16.6. In another leg of principal submissions, learned counsel has contended that the High Court has fallen in error in using the bill of entry to determine the ownership of goods. Learned counsel would submit that the ownership of goods could only be determined under the Sale of Goods Act read with the Indian Contract Act; that the customs duty is collected from the person having possession of goods at the time of importation, who need not be the owner of good, as appearing from the definition of "importer" under the Customs Act, which includes "owner and any other person"; that in distinction to the customs duty, sales tax is a tax on the transaction of sales or purchase when ownership of goods is transferred and the questions as to when does the sale take place and who....
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.... nominal document, drawn only for the purpose of evasion of tax liability under the CST Act. The learned counsel would submit that the alleged agency agreement played no role at all in the import transaction and it was the appellant alone who was the real importer and was rightly treated so. The learned counsel would further submit that the documents presented by the appellant before the customs frontier at Visakhapatnam could not have shown Radha as the real importer since the high seas sale agreement designated appellant as the buyer; and the customs frontier at Visakhapatnam was not called upon to even consider the agency agreement as the basis for the bill of entry. 17.1. Learned counsel for the respondent has emphatically argued that in the given set of facts and circumstances, while reading the agreements in question and the real intent behind them, coupled with filing of bill of entry by the appellant, the conclusion drawn by the High Court that the appellant alone was the importer remains unexceptionable. Learned counsel would also submit that the import was complete only by and through the appellant and until completion of importation, Radha was nowhere in picture; and ....
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....e Customs Act are not the factors determinative of the ownership of goods because the importer could be the owner or even any other person and merely because the appellant filed the bills of entry, the legal consequences of transfer of bill of lading when the goods were on high seas cannot be ignored. 19.1. Therefore, the principal issue in these appeals is as to whether the sales in question took place in the course of the import of the goods into the territory of India and qualify for exemption under Section 5(2) of the CST Act? Sale in the course of import: Connotations 20. For determination of the principal issue and variety of questions arising in this matter, at the outset, a brief insight into the constitutional and statutory provisions relating to the "sale in the course of import" shall be apposite. 20.1. Under Article 286 of the Constitution of India, restrictions have been placed on the power of the State as to imposition of tax on the specified category of sales and purchases. At the relevant point of time, Clauses (1) and (2) of Article 286 read as under- This Article 286 has undergone a few amendments later which need not be referred herein.:- "28....
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....d in Section 5 of the CST Act. As per sub-section (1) of Section 5, a sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. Under sub-section (2), a sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. In the present case, we are only concerned with sub-section (2) of Section 5 relating to the course of import and hence, may extract the relevant part of Section 5 of the CST Act as under:- "5. When is a sale or purchase of goods said to take place in the course of import or export. - xxx. xxx xxx (2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase ....
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....ude a mortgage or hypothecation of or a charge or pledge on goods;" 20.5. The expression "crossing the customs frontiers of India" refers to "customs port" and "customs station", as defined in the Customs Act. Hence, we may usefully refer to the relevant definitions in Clauses (11), (12), (13) and (29) of Section 2 of the Customs Act, as applicable at the relevant time, as under:- "(11) "customs area" means the area of a customs station- The words "or a warehouse" inserted at this place by Act 18 of 2017 and includes any area in which imported goods or export goods are ordinarily kept before clearance by Customs Authorities; (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; (13) "customs station" means any customs port, customs airport- The words "customs airport, international courier terminal, foreign post office" substituted in place of "customs airport" at this place by Act 7 of 2017 or land customs station; (29) "land customs station" means any place appointed under clause (b) of section 7 to be a....
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....ed the documents of title, including bills of lading, pertaining to the sugar purchased by them and paid the price to the petitioner. After the goods reached the port, they were unloaded, taken delivery of, and cleared by the Government of India after paying the requisite customs duties. For the assessment year 1954-55, the petitioner was assessed to sales tax where the Sales Tax Officer deducted the price of the said two sales from the petitioner's turnover. However, on 31.01.1958, the Assistant Collector of Sales Tax issued notice to the petitioner, proposing to review the said assessment. The petitioner filed its objections contending, inter alia, that the sales had taken place in the course of import and therefore they were not liable to sales tax. The first respondent rejected the contentions of the petitioner and held that sales tax was payable in respect of said two transactions. The petitioner questioned the demand notice consequently issued against it by way of the petition in this Court. It was contented, inter alia, that the sales in question were not liable to sales tax inasmuch as they took place in course of import of the goods into the territory of India. This Court ....
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....g under the first group of imports, the commission agents acted merely as agents of the respondents therein and that the said purchases occasioned the import and therefore came within the exemption. That was not a case where the goods were sold by an importer in India to a third party when the goods were on the high seas. It was a case where a party in Cochin purchased goods which were on the high seas through his agent at Bombay and the agent paid the price through a bank against the shipping documents. But the learned Judge, Patanjali Sastri, C.J., expressing the majority view, considered the scope of the exemption in all its aspects and summarized the conclusions thus p. 69 : "Our conclusion may be summed up as follows: (1) Sales by export and purchases by import fall within the exemption under article 286(1)(b) ...... (2) Purchases in the State by the exporter for the purpose of export as well as sales in the State by the importer after the goods have crossed the customs barrier are not within the exemption. (3) Sales in the State by the exporter or importer by transfer of shipping documents while the goods are beyond the customs barrier are within the exemption, assum....
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....he goods cross the customs barrier; (2) the sale which occasions the import is a sale in the course of import; (3) a purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import, and (4) a sale by an importer of goods, after the property in the goods passed to him either after the receipt of the documents of title against payment or otherwise, to a third party by a similar process is also a sale in the course of import." 22.1.2. Having expounded on the legal position, the Court examined the facts of the case and held that the case fell under the fourth principle aforesaid when the petitioner, pursuant to the earlier contract with the Government, delivered the shipping documents including the bill of lading to the Government against payment when the goods were on high seas. Hence, it was held that the sales in question took place in the course of imports of goods into India. The Court also scrutinized the terms of contract to ascertain whether they disclosed any intention of the parties that notwithstanding the delivery of bills of lading against payment, the property in the goods should not pass ....
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....ernment. The fact that the licence was non-transferable has no relation to the property in the goods passing to the Government. .......... 15. For all the foregoing reasons we hold that the property in the goods passed to the Government of India when the shipping documents were delivered to them against payment. It follows that the sale of the goods by the petitioner to the Government of India took place when the goods were on the high seas. 16. That being so, the sales in question must be held to have taken place in the course of the import into India and therefore they would be exempted from sales tax under Art. 286(1)(b) of the Constitution." 22.2. It does not appear necessary to dilate further on the decision in the case of Shanmugha Vilas Cashew Nut Factory (supra) which had been, as noticed, considered in detail in the case of J.V. Gokal & Co. (supra). However, another decision cited on behalf of the appellant and relating to multiple transactions involving import, being the Orissa case of Minerals & Metals (supra), need to be noticed. The fact situation in that case had been that the appellant, a Government of India undertaking, was functioning as a cana....
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....ent states that it is well settled in the commercial world that a bill of lading represents the goods and the transfer of it operates as the transfer of goods. The delivery of the bill of lading while the goods are afloat is equivalent to the delivery of the goods themselves." 22.2.2. The Court examined the facts of the case and held the sales in question to be those in the course of import in the following words:- "9. The facts aforestated, based upon documents, show that the bill of lading had been endorsed in favour of SAIL while the consignment of the said coils was still upon the high seas. The sale, therefore, was a sale in the course of the import of the said coils into the territory of India; it was effected by transfer of the documents to the said coils before they had crossed the limits of the customs station at Paradeep Port. The position would be the same in respect of the goods sold to Paradeep Phosphates Ltd." 22.3. The appellants have cited the decision in the case of Embee Corporation (supra) to submit that the terms 'sale occasioning movement of goods' and 'sale occasioning import of goods' in Sections 3 and 5 of the CST Act carry the same meaning; a....
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....of goods is incident of the contract of sale. This matter may be examined from another angle. An agreement to transfer goods to the buyer for a price is an important element of sale and the same is also borne out from Section 4 of Sale of Goods Act. If Section 4 of the Sale of Goods Act is read along with Sections 3 and 4 of the Act, it would mean an agreement to sell would also be a sale within the meaning of sale provided such agreement of sale stipulates for transfer or movement of goods or movement of goods is incident of the contract of sale and in that case, such movement of goods would be deemed to be occasioned by the sale. It is immaterial that actual sale does not take place at that time of movement of goods and takes place later on. This interpretation of Section 3(a) of the Act if applied to sub-section (2) of Section 5 of the Act, would mean that if an agreement for sale stipulates import of goods or import of goods is incident of contract of sale and goods have entered the import stream, such import would fall within the expression "sale occasions import". In the present case, the import of Carbamite is direct result of the contract of sale and as such it can be safel....
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....ctory at Jamshedpur in the State of Bihar and Head Sales office at Calcutta in the State of West Bengal. The petitioner was registered as dealer under the Bihar Sales Tax Act as also under the Central Sales Tax Act in the State of West Bengal. For the period of assessment 01.07.1957 to 31.03.1958, the petitioner submitted its return of taxable sales to the Commercial Tax Officer, Lyons Range, Calcutta, disclosing the gross taxable turnover in respect of sales liable to Central Sales Tax in the State of West Bengal. The said Commercial Tax Officer directed the petitioner to submit a statement of sales from Jamshedpur for the period under assessment, "documents relating to which were transferred in West Bengal or of any other sales that may have taken place in West Bengal under Section 3(b) of the Central Sales Tax Act, 1956". The petitioner, by its letter dated 30.09.1959, informed the Tax Officer that the requisition for production of statement of sales made from Jamshedpur in the course of inter-State trade or commerce was without jurisdiction while contending that "all the sales from Jamshedpur were of the type mentioned in Section 3(a) of the Central Sales Tax Act and at the sam....
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....yment of tax under the Central Sales Tax Act, whether on the materials he was satisfied, (a) that the goods at the time of transfer of documents of title were in movement from the State of Bihar to the State of West Bengal, (b) that the place where the sale was effected was under Section 4, clause (2), within the State of West Bengal. The Commercial Tax Officer has, in our view, failed to apply the correct tests and has made assumptions which are not warranted and on a true interpretation of the provisions of the Central Sales Tax Act, the order of assessment discloses an error apparent on its face and a writ of certiorari must issue quashing the assessment. It will be for the Commercial Tax Officer of West Bengal to re-assess the company in respect of transactions of sale which are properly taxable within the State of West Bengal by the application of the test which we have already set out." 22.5. Learned counsel for the appellant has also attempted to rely upon the decision in the case of Hotel Ashoka (supra) which was rendered in the fact situation where the goods were kept in the bonded warehouse and were made available in the duty-free shops for sale. This Court opined that....
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....State of West Bengal. What was sought to be taxed in the State of West Bengal were the sales in which the documents of title were handed over in that State on the assumption that the sales effected in favour of West Bengal parties satisfied the conditions prescribed by Section 3(b) of CST Act; and that the place where the documents were delivered by the company to the purchaser was the place where the sale was effected. The enunciations in the said case as regards the operation of Section 3 of CST Act do not call for any debate but they hardly provide any guide for determination of the real questions involved in the present matter. Similarly, the observations in Embee Corporation (supra) to the effect that "sale occasioning movement of goods" and "sale occasioning import of goods" respectively in Section 3 and Section 5 of CST Act carry the same meaning are not of much dispute. The other observations, that for interpreting the expression "sale occasions import" occurring in Section 5(2) of the Act, it is not necessary that a completed sale should precede the import, shall have their implication only when the nature of dealings of the parties in the transactions in question and the ....
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....und no such intention being indicated. It was only after such finding on facts the Court held that the sale of goods by the petitioner to the Government took place when the goods were on the high seas and hence, the sales took place in the course of import into India. 23.2.3. Noteworthy common features in the decisions of this Court in J. V. Gokal & Co. and Orissa case of Minerals & Metals (supra) had been that pursuant to a previous contract with the end-buyer, the seller concerned arranged for importation of goods; and transferred the property in goods in favour of the end-buyer by endorsement of bill of lading when the goods were on high seas. Coupled with these, another common feature had been that in both those cases, the goods in question, upon reaching the port of destination, were taken delivery of, and cleared by the end-buyer after paying the requisite customs duties. Those had not been the cases like the present one where the seller purportedly acted as an intermediary and even after alleged transfer of bill of lading when the goods were on high seas, filed the bill of entry for home consumption at the port of destination and got the goods cleared from the customs. ....
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.... must be either a single sale which itself causes the import or is in the progress or process of import or though there may appear to be two sale transactions they are so integrally interconnected that they almost resemble one transaction so that the movement of goods from a foreign country to India can be ascribed to such a composite well-integrated transaction consisting of two transactions dovetailing into each other. (7) A sale or purchase can be treated to be in the course of import if there is a direct privity of contract between the Indian importer and the foreign exporter and the intermediary through which such import is effected merely acts as an agent or a contractor for and on behalf of the Indian importer. (8) The transaction in substance must be such that the canalizing agency or the intermediary agency through which the imports are effected into India so as to reach the ultimate local users appears only as a mere name lender through whom it is the local importer- cum-local user who masquerades." 25. The principles aforesaid would obviously apply to the present case; and if the factors so indicated are answered in favour of the appellant, it could ....
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....l of entry for warehousing and thereafter, filed another bill of entry for home consumption (ex-bond); and on the basis of such bills of entry, the appellant was duly assessed for customs duty. Admittedly, after the goods were cleared for home consumption, they moved from the State of Andhra Pradesh to different States where the respective end-buyers were situated; and the appellant raised debit notes on the end-buyers. In these transactions, the goods in question, upon reaching the port of destination, were not cleared by the end-buyers after paying the requisite customs duties, as had been the fact situation in the case of J. V. Gokal & Co. as also in Orissa case of Minerals & Metals (supra). While examining the question pertinent if the appellant acted merely as an intermediary or name-lender through whom the import was effected and merely acted as an agent for and on behalf of the Indian importer that is, the end-buyer, the significant facts of the present case cannot be overlooked that in relation to the goods in question, only the appellant filed the bill of entry for warehousing as also the bill of entry for home consumption and was assessed to customs duty and further that ....
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....ed the name of end-buyer as the importer/consignee or that the same was subsequently amended in terms of Section 30(3) of the Customs Act. These had been the pivotal reasons for which the High Court rejected the suggestion of second high seas sales in favour of the end-buyers and held that the only attempt of the appellant had been to avoid inter-State sales under the CST Act. In the given facts, the High Court specifically recorded the findings that the sale of goods by appellant to the end-buyers had not been high seas sales; and such sales could have been effected only after the appellant was assessed to customs duty and had cleared the goods for home consumption. 28. To get over the aforesaid findings of the High Court, learned counsel for the appellant has argued, with strong reliance on the decision of this Court in the case of Sampat Raj Dugar (supra), that the definition of importer in the Customs Act only indicates the person who is in possession of goods at the time of filing of bill of entry but does not indicate the title to the goods; and that the questions as to when does the sale take place and who is the owner of goods would be determined only under the Sal....
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....ot thereof make and subscribe to a declaration as to the truth of its contents. (3) If the proper officer is satisfied that the import manifest or import report is in any way incorrect or incomplete, and that there was no fraudulent intention, he may permit it to be amended or supplemented. This Section 30 has undergone several amendments over the course of time. In its present form, it reads as under:- "30. Delivery of arrival manifest or import manifest or import report.- (1) The person-in-charge of- (i) a vessel; or (ii) an aircraft; or (iii) a vehicle, carrying imported goods or export goods or any other person as may be specified by the Central Government, by notification in the Official Gazette, in this behalf shall, in the case of a vessel or an aircraft, deliver to the proper officer an arrival manifest or import manifest by presenting electronically prior to the arrival of the vessel or the aircraft, as the case may be, and in the case of a vehicle, an import report within twelve hours after its arrival in the customs station, in such form and manner as may be prescribed and if the arrival manifest or ....
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....expression "importer" is that while any person who imports goods into India would be an importer but, the owner of the goods or a person holding himself to be an importer would also be regarded as an importer during the period between importation of goods and their clearance for home consumption. This crucial period would generally be that period when the goods have been warehoused after importation and are cleared from warehouse by a person other than the person who actually imported the goods. That being the position, in our view, the High Court has rightly said that this definition of importer cannot be used to usurp the identity of an importer from the person who filed the bill of entry. In other words, the person in whose name the bill of entry is filed does not cease to be an importer and, if that person claims to be not the owner or importer, the ouns would be heavy on him to establish that someone else is the owner or importer of goods. 31. As noticed, on the connotation of the term "importer" for the purpose of the Customs Act, learned counsel for the appellant has placed reliance upon the decision in Sampat Raj Dugar (supra). We may examine the facts and the ratio of t....
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....alleged fraud practised by the second respondent in obtaining the advance import licence and prayed that he may be permitted to re-export the goods to Hong Kong. The Collector of Customs took the view that permission for re- export could not be granted for the reasons that the advance import licence having been cancelled, there was no valid licence for clearance of those goods; that for re-exporting the goods, a valid import licence was necessary which was not there; and also because the second respondent had abandoned the goods. On that basis, the Collector of Customs rejected the claims of the first respondent and imposed a penalty of Rs. 5 lakhs on him. 31.2. In the aforesaid background, the first respondent, who had sent the goods from Hong Kong, filed a writ petition before the High Court. The case of the Collector of Customs and the Union of India was that the second respondent must be deemed to be the owner of the consignments by virtue of the definition of "importer" in Section 2 (26) of the Customs Act read with Clause 5(3)(ii) of the Imports (Control) Order, 1955. Reliance was also placed upon Para 26(iv) of the Imports and Exports Policy issued for the year 1985-86 an....
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....nd consideration in paragraph 19 of the said decision could be usefully reproduced as under: - "19. We may first consider the question of title to the said goods. If we keep aside the provisions of law relied upon by the appellants viz., definition of 'importer' in Section 2(26) of the Customs Act, clause 5(3)(ii) of the Imports (Control) Order as well as para 26(iv) of the Import-Export Policy, the position is quite simple. Since respondent 2 did not pay for and receive the documents of the title she did not become the owner of the said goods, which means that respondent 1 continued to be the owner. How do the aforesaid provisions make any difference to this position? The definition of 'importer' in Section 2(26) of the Customs Act is not really relevant to the question of title. It only defines the expression 'importer'. Respondent 1 does not claim to be the importer. The provision upon which strong reliance is placed by the appellants in this behalf is the one contained in clause 5(3)(ii) of the Imports (Control) Order. Sub-clause (1) of clause 5 specifies conditions which can be attached to an import licence at the time of its grant. Sub-clause ....
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.... do not have a single universal meaning. Their content varies with the context. The aphorism that a word is not a crystal and that it takes its colour from the context is no less true in the case of these words. In our opinion the object underlying condition (ii) in clause 5(3) is to ensure a proper implementation of the Imports (Control) Order and the Imports and Exports (Control) Act, 1947. The idea is to hold the licensee responsible for anything and everything that happens from the time of import till they are cleared through customs. The exporter is outside the country, while the importer, i.e., the licensee is in India. It is at the instance of the licensee that the goods are imported into this country. Whether or not he is the owner of such goods in law, the Imports (Control) Order creates a fiction that he shall be deemed to be the owner of the such goods from the time of their import till they are cleared through customs. This fiction is created for the proper and effective implementation of the said order and the Imports and Exports (Control) Act. The fiction however cannot be carried beyond that. It cannot be employed to attribute ownership of the imported goods to the i....
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....cision in Sampat Raj Dugar does not advance the cause of the appellant in any manner. 32. As noticed, the definition of "importer" in Section 2(26) of the Customs Act, even if not directly decisive of the question of title, has its implications on the facts of the present case for the reason that the appellant alone filed the bills of entry for warehousing as also for home consumption. Yet further, the requirements of filing import manifest, as per Section 30 of the Customs Act, have their own bearing on the present case. It remains indisputable that the name of the appellant was reflected as importer in IGM. If, as asserted by the appellant, the goods had been sold on the high seas, the cargo declaration of IGM- As per the requirements of Regulation 3 (c) (iii) of Import Manifest (Vessels) Regulations, 1971, the import manifest has to consist, inter alia, of a 'cargo declaration' in Form No. III. Such 'cargo declaration' is required to carry, amongst others, particulars of 'bill of lading' and 'the name of consignee/importer, if different'. would have reflected the name of last high seas purchaser as importer and in other event, the IGM would have necessitated amendment b....
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....the importer; and this definition of importer is not really relevant to the question of title but, that does not mean that a person who holds out himself to be the importer; and who files the bill of entry for home consumption; and who is assessed for customs duty; and whose suggestion about transfer of title to a third person is not established by any reference to any official record, the transfer on high seas may be presumed on mere suggestion about the alleged endorsement of bill of lading. 34.1. When all other official documents as also dealings of the appellant clearly establish that the appellant had been the importer, the consequences are bound to follow. It gets perforce reiterated that when the bills of entry recorded the name of the appellant as importer and the appellant alone was assessed to customs duty, the so called second high seas sale agreements never came into operation. Whether sale in question occasioned import of goods: 35. As noticed, the CTO specifically observed that it had not been the case of the appellant that the sale in question occasioned the import of goods into the country. However, an attempt was made before the High Court to suggest that ....
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....of India (CCI). Consequently, the said appellants imported cashew nuts from African countries through CCI. The CCI used to collect the information regarding requirement of actual users but was thereafter importing cashew nuts on its own by entering into independent contracts with the foreign exporters and then, the goods were obtained by local users. In the appeal arising from the decision of Karnataka High Court, CCI itself was the appellant. The principal contention of the appellants before the taxing authorities had been that transaction of sale by CCI to actual users was in the course of import and, therefore, the State Sales Tax Act could not encompass such a transaction. The contentions were rejected by the respective Tax Tribunals as also by the respective High Courts. The common question for determination before this Court was as to whether the import of raw cashew nuts by CCI from African exporters was in the course of import and, therefore, eligible for exemption under Sections 5(2) of the CST Act. As noticed, the learned Judges of this Court differed in their views. In the majority decision, after delineating the determinative factors, the Court examined the facts ....
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....r. These two transactions cannot be said to be so integrally interconnected as to represent one composite transaction in the course of import of raw cashewnuts as tried to be submitted by the learned Senior Counsel for the appellants...." 36.2. For yet further clarity, we may refer to the relevant parts of the minority view, wherein the import of goods and sale to the local purchasers were taken to be inextricably linked hence, the contentions of the said appellants were proposed to be accepted with the following observations:- "48. This seldom happens in the case of imports whenever the local seller imports the goods as per the specifications of a specific local buyer and on the mutual understanding between the local buyer and the local seller that the goods so imported by the local seller will be purchased by the local buyer. There is in such cases, a direct link between the local sale and the import. In fact it is this mutual understanding between the local buyer and the local seller which occasions the import. That is why the cases dealing with imports have not resorted to differentiating between one sale or two sales. They have applied the test as prescribed by Sec....
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....on of Section 5(2) of the CST Act and has rightly been held liable for tax over inter-State sales. 38. After the appellant got the goods released by filing bill of entry for home consumption, indisputably, the goods were ultimately received by Radha at Lucknow in the State of Uttar Pradesh (and other end-buyers in different States) and appellant raised debit notes from the State of Andhra Pradesh. These facts are sufficient to establish that the movement of goods inside the country from one State to another had been on account of the sale by appellant to the end-buyers; and such sales took place only after the appellant obtained the goods from the bonded warehouse for home consumption. 39. In our view, the High Court was right in observing that once the appellant got released the goods after filing the bill of entry for home consumption, the import stream dried up and the goods got mixed in the local goods. Any movement of the goods thereafter was bound to be a sale under Section 3(a) of the CST Act; and such movement being from the State of Andhra Pradesh to other State, it had been a matter of inter-State sale. The principle that actual sale may not necessarily precede t....
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....on into disputed question of fact but, in effect, declined the relief claimed under those heads of the alleged post-manufacturing costs on the ground that sufficient material was not placed by the petitioner in support of the claims for deductions. In those circumstances, this Court extended liberty of appeal to the petitioner while observing as under:- "4. On a consideration of the matter, we are of the view that against the adjudication made by the Assistant Collector, the petitioner should have one effective opportunity of an appeal. The High Court could have declined to interfere with the matter under Article 226 if, in its view, the matter involved investigation of disputed facts and relegated the petitioner to the statutory records. But it rejected the claim on the ground of insufficiency of material-a situation which might be susceptible of an irreconcilability with its view that disputed questions of fact could not be investigated in these proceedings. 5. We, therefore, permit the petitioner to lodge an appeal against the order of the Assistant Collector dated 30-5-1988 with the CEGAT insofar as and confined to the three 'Heads' of the deductions f....