Case: Hotel Ashoka Vs. Assistant Commissioner of Commercial Taxes and Anr

2. The appellant, M/s Hotel Ashoka, is managed by India Tourism Development Corporation Limited (hereinafter referred to as `the Corporation). The Corporation is having its duty free shops at all major International Airports in India. At the said duty free shops, the appellant sells several articles including liquor to foreigners and also to Indians, who are going abroad or coming to India by air. We are concerned with a duty free shops situated at an International Airport at Bengaluru. The appellant is registered as a dealer under the Act as well as under the Central Sales Tax Act, 1956 (hereinafter referred to as `the Central Act). In the return filed under the Act as well as under the Central Act for the relevant period, the appellant had stated that though liquor, cigarettes, perfumes and food articles were sold at the duty free shops at the Bengaluru International Airport, no tax was payable by the appellant as the goods which had been sold at the duty free shops were sold directly to the passengers and even the delivery of goods at the duty free shops was made before importing the goods or before the goods had crossed the customs frontiers of India.3. According to the appellant, no tax can be levied under the Act or under the Central Act when the goods are sold in the course of import or before the goods have crossed the customs frontier of India as per the provisions of Section 5 of the Central Act and so far as the Act is concerned, no tax can be levied, if the sale takes place before the goods crosses the customs frontiers of India as no State can tax the sale or purchase of goods which are outside the concerned State i.e. the State of Karnataka in the instant case, as per the provisions of Article 286 of the Constitution of India. In spite of the above stand of the appellant, the Assistant Commissioner of Commercial Taxes (Transition -12) Bengaluru, by an assessment order dated 28th May, 2008 directed the appellant to pay a sum of Rs.4,20,70,900/- by way of sales tax.4. Being aggrieved by the assessment order passed by the Assistant Commissioner of Commercial Taxes Bengaluru, the appellant filed W.P.(C) No. 10989 of 2008 in the High Court of Karnataka which was rejected on 11th February, 2009, on the ground that the appellant had not exhausted equally efficacious alternative remedy available to it under the provisions of the Act. The learned Single Judge did not consider merits of the case for the aforestated reason.5. Being aggrieved by the view expressed by the learned Single Judge, the appellant preferred Writ Appeal No. 881 of 2009(T-CST) before the Division Bench of the High Court which was also dismissed on 9th June, 2009 as the Division Bench found substance in the observations made by the learned Single Judge, hence the appellant has filed this appeal before this

Reasoning:
22. Upon perusal of the aforestated provision of Section 5 of the Central Act, it is clear that a sale or purchase of goods shall be deemed to take place in the course of import of the goods into the territory of India only if sale or purchase takes place before the goods have crossed the customs frontiers of India.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.24. If this is the factual and legal position, in our opinion, looking to the provisions of Article 286 of the Constitution, the State of Karnataka has no right to tax any such transaction which takes place at the duty free shops owned by the appellant which are not within the customs frontiers of India.25. Looking to the aforestated simple and factual legal position, in our opinion, it would not be much useful to discuss the judgments which have been referred to by the learned counsel appearing for the appellant. In our opinion, the legal position is so clear that it was not necessary for the learned counsel to refer to any judgment and merely by showing the aforestated factual aspects and legal provisions to the concerned authority, the appellant could have convinced the concerned authority that the sale effected at the duty free shops of the appellant could not have been taxed by the State of Karnataka.It is true that the appellant had rushed to the High Court without exhausting equally efficacious alternative statutory remedy. In our opinion, the learned Single Judge of the High Court was also right when he directed the appellant to move the statutory appellate authority. In normal circumstances, even we would have expressed the same opinion but looking to the fact that the special leave petition has already been admitted and the matter pertains to the assessment year 2004-2005, it would not be in the interest of the justice to relegate the appellant to the statutory authorities especially when the legal position is very clear and the law is also in favour of the appellant.y again submitted that `in the course of import means `the transaction ought to have taken place beyond the territories of India and not within the geographical territory of India.We do not agree with the said submission. When any transaction takes place outside the customs frontiers of India, the transaction would be said to have taken place outside India. Though the transaction might take place within India but technically, looking to the provisions of Section 2(11) of the Customs Act and Article 286 of the Constitution, the said transaction would be said to have taken place outside India. In other words, it cannot be said that the goods are imported into the territory of India till the goods or the documents of title to the goods are brought into India. Admittedly, in the instant case, the goods had not been brought into the customs frontiers of India before the transaction of sales had taken place and, therefore, in our opinion, the transactions had taken place beyond or outside the custom frontiers of India.31. In our opinion, submissions with regard to sale not taking effect by transfer of documents of title to the goods are absolutely irrelevant. Transfer of documents of title to the goods is one of the methods whereby delivery of the goods is effected. Delivery may be physical also. In the instant case, at the duty free shops, which are admittedly outside the customs frontiers of our country, the goods had been sold to the customers by giving physical delivery. It is not disputed that the goods were sold by giving physical possession at the duty free shops to the customers. Simply because the sales had not been effected by transfer of documents of title to the goods and the sales were effected by giving physical possession of the goods to the customers, it would not mean that the sales were taxable under the Act. Thus, we do not agree with the aforestated submissions made by the learned counsel appearing for the Revenue.