Case: NIRMAL KUMAR PARSAN Vs. COMMR. COMMERCIAL TAX . AND ORS

2. The admitted factual position in the present cases is that after importing foreign made cigarettes, the appellants stored the same in the customs bonded warehouse within the land-mass of the State of West Bengal and some of those articles were sold to the Master of a foreign-going ship as ship stores, without payment of customs duty. Those goods were escorted to the stated ship under the supervision of the officials of the Customs authority3. These appeals take exception to the judgment and order of the High Court at Calcutta (for short, the High Court), dated 16.8.2007 in W.P.T.T. Nos. 5/2007 and 6/2007 respectively, whereby it had upheld the decision of the West Bengal Taxation Tribunal (for short, the Tribunal) that the stated sales were within the territory of the State of West Bengal and amenable to sales tax4. Civil Appeal No. 7863/2009 emanates from the assessment order passed by the Commercial Tax Officer, West Bengal, dated 13.3.1985 pertaining to assessment period – 1.4.1980 to 31.3.1981. The assessing officer rejected the claim for exemption from payment of sales tax in respect of the stated sales of imported cigarettes from the stock, as the cigarettes were sold to outgoing vessels from the bonded warehouse within the land-mass of the State of West Bengal following the decision of the High Court in M/s. Ranjit Shipping Pvt. Ltd. & Anr. vs. State of West Bengal & Ors. (1980 SCC Online Cal 141 : (1980) 2 CHN 192). The authority found that it was not a sale in the course of import as claimed by the assessees (appellants). The appellants unsuccessfully carried the matter in appeal and finally in revision before the Tribunal, which came to be rejected on 30.3.2007. Before the revisional authority, the only contention pursued was that there was no sale within the State of West Bengal or even in India because the buyer had no right to consume the goods before the ship crossed the territorial Waters of India. It was urged by the appellants before the revisional authority that the process of import was not complete at the time of sale to the foreign-going ship and the transaction was a sale in the course of import. Resultantly, the sold goods were not taxable under the concerned West Bengal Sales Tax laws because the goods never entered the local area of the State of West Bengal, crossing the customs frontiers of India as defined in Section 2(ab) of the Central Sales Tax Act, 1956 (for short, the CST Act). The Tribunal, however, held that the sale had taken place on the land-mass of the State of West Bengal and the sale was neither for import nor for export. The Tribunal essentially relied upon the exposition in Madras Marine and Co. vs. State of Madras (1986) 3 SCC 552   to reject the revision filed by the appellants being devoid of merits. Feeling aggrieved, the appellants carried the matter to the High Court by way of a writ petition being W.P.T.T. No. 5/2007, which came to be rejected by the Division Bench of the High Court whilst upholding the view taken by the Tribunal as just and properAll the judicial edicts relevant and referred to were perused and the documents produced by the dealer were examined. His Lordship Honble West Bengal Taxation Tribunal passed the judgment after considering all the grounds taken by the dealer including the one for the position of the law after introduction of the section 2(ab) in Central Sales Tax Act. His Lordship Honourable High Court of Kolkata did not express even a mite of doubt in the correctness of the impugned order of the Honble Tribunal. The order was remanded for quantification of sales in dispute. It was observed that, of the total goods imported and stored only a portion was taken out for sale to master of a particular ship. From the same warehouse goods for sales to local persons also were taken. So the sold goods could not have been ascertained and appropriate before those were taken out of the bonded warehouse. The risk in the goods was transferred at that time and at that place only. It might have so happened that the Customs authority took custody of the goods for preventing loss of its own revenue. No such sale could have been one in the course of import because the sale did not occasion the import. None of those was export because the goods were not supposed to enter into the territory of another country in the form those were dispatched. The analogy of sales from duty-free shops was irrelevant. For, it always remains on the other side customs frontier and so the risk is transferred before crossing of the frontier6. Feeling aggrieved, the appellants resorted to revision before the Tribunal, which came to be rejected following the decision of the Tribunal passed on the same date i.e. 30.3.2007 in case of the companion appeal. The appellant carried the matter by way of a writ petition being W.P.T.T. No. 6/2007 before the High Court, which came to be dismissed by the High Court, upholding the decision of the authority, which had held that the sales in question would be amenable to sales tax under the 1994 Act.

Court's reasoning:
10. As noticed from the finding of fact recorded by the authorities, it is not in dispute that after importing the stated goods, the appellants stored the same in the bonded warehouse within the land-mass of the State of West Bengal and some of the articles were then sold to the Master of a foreign-going ship as ship stores, without payment of customs duty thereonThe phrase sale in the course of import would constitute three essential features – (i) that there must be a sale; (ii) that goods must actually be imported and (iii) that the sale must be part and parcel of the import. The factual matrix in the present case clearly depicts that the sales in question would not cause import of the stated goods. Instead, it would result in taking away the goods (after being unloaded on the land-mass of the State of West Bengal) on the ongoing ship as ship stores outside the territory of Indian Waters for being consumed on the ship and not for export to another destination as such. The appellants have advisedly not pursued the argument that the stated sales would result in an export or would be in the course of export. For, such argument has been rejected by this Court in Madras Marine (supra)12. Applying the principle underlying the said decision, it is clear that the sale to be in the course of import, must be a sale of goods and as a consequence of such sale, the goods must actually be imported within the territory of India and further, the sale must be part and parcel of the import so as to occasion import thereof. Indeed, for the purposes of Customs Act, only upon payment of customs duty the goods are cleared by the Customs authorities whence import thereof can be regarded as complete. However, that would be no impediment for levy of sales tax by the State concerned in whose territory the goods had already landed/unloaded and kept in the bonded warehouse. For seeking exemption, it is necessary that the goods must be in the process of being imported when the sale occurs or the sale must occasion the import thereof within the territory of India. The word occasion is used to mean to cause or to be the immediate cause of. In the present case, the stated sales in no way occasioned import of the goods into the territory of India. For, the goods were taken away by the foreign-going ship as ship stores for being consumed after the goods had crossed the customs frontiers/Indian Waters13. Indubitably, the sale which is to be regarded as exempt from payment of sales tax, is a sale which causes the import to take place or is the immediate cause of the import of goods. The appellants having failed to establish that the stated goods would be actually imported within the territory of India and had not crossed the customs station, cannot contend that the sale was in the course of import as such within the meaning of Section 5 read with Section 2(ab) of the CST Act. Moreover, there is no direct linkage between the import of the goods and the sale in question to qualify as having been made in the process or progress of importWe have no hesitation in accepting the argument of the respondents that being a taxation statute, strict interpretation of these provisions is inevitable. Going by the definition of customs port or land customs station as applicable in the present cases, it is customs port or land customs station area appointed by the Central Government in terms of notification under Section 7. It is not the case of the appellants that the bonded warehouses, where the goods were kept and the stated sales took place by appropriation of the goods thereat, were within the area notified as customs port and/or land customs station under Section 7 of the Customs Act. As the stated goods had travelled beyond the customs port/land customs station at the relevant time, in law, it would mean that the goods had crossed the customs frontiers of India for the purposes of the CST Act. Resultantly, the legal fiction created in Section 5(2) of the CST Act will have no application15. Notably, the expressions warehouse and warehoused goods have been defined in the Customs Act in Sections 2(43) and 2(44) respectively. As per the applicable provisions at the relevant time, Warehouse means a public warehouse appointed under Section 57 or a private warehouse licensed under Section 58. Warehoused goods means goods deposited in a warehouse. As aforesaid, there is nothing to indicate that the bonded warehouse, where the stated goods were kept by the appellants and eventually sold, formed part of the customs port/land customs station. If so, the legal fiction of sale being deemed to have taken place in the course of import of the goods into the territory of India would have no bearing and applicability to the present cases16. To get over this position, emphasis was placed by the appellant on the exposition in the Indian Tourist Development Corporation (supra), which had considered the 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 since the goods were supplied to the duty-free shops situated at the International Airport, Bengaluru for sale, it cannot be said that the said goods had crossed the customs frontiers of India. We fail to understand as to how this decision will be of any avail to the appellants. For, the Court was not dealing with a situation as in the present cases, in which the goods had crossed the customs port/land customs station area and kept in the bonded warehouse, where the sale by appropriation of the goods was effected. Indeed, in paragraph 17 of the reported decision, the Court in the facts of that case, has observed that when the goods are kept in the bonded warehouse, it cannot be said that the said goods had crossed customs frontiers of India. However, the Court finally answered the claim of the appellants therein on the finding that the liquor, cigarettes, perfumes and food articles were sold at the duty- free shops at the International Airport, Bengaluru, for which no tax was payable by the appellants as the goods sold at the duty-free shops were sold directly to the passengers and even the delivery of goods took place at the duty-free shops before importing the goods or before the goods had crossed the customs frontiers of India. The issue considered in the said decision, therefore, was whether the sale at the duty-free shops situated at the Bengaluru International Airport would attract levy of sales tax. As noticed earlier, the definition of customs station clearly refers to customs airport as defined in Section 2(10) of the Customs Act. As the duty-free shop is situated in airport area, it would mean that the sale of goods at the duty-free shops was deemed to have taken place in the course of import of the goods into the territory of India. Thus understood, the reported decision under consideration is of no avail to the appellants17. Even the exposition of the Constitution Bench in J.V. Gokal (supra) that a sale by an importer of goods after the property of 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, would equally have no bearing on the present cases. Inasmuch as, the sale of goods must take place before the goods had crossed the customs frontiers of India, which means it was within the customs port/land customs station area. Nothing is shown by the appellants herein to substantiate that the subject bonded warehouse came within the customs port/land customs station area and moreso the stated sales occasioned import of the goods within the territory of India. If so, the finding of fact and conclusion recorded by the authorities below, which commended to the High Court, is unexceptionable20. A priori, for a sale or purchase to qualify as a sale or purchase in course of import, the essential conditions are that such sale shall occur before the goods had crossed the customs frontiers of India and the import of the goods must be effected or the import is occasioned due to such sale or purchase. In the present case, the sales in question did not occasion import21. Arguendo, for sale or purchase of goods to be regarded as sale or purchase in course of export, Section 5(1) of the CST Act provides for the following conditions: (i) the sale or purchase shall occasion such export or (ii) the sale or purchase shall be effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India24. In the present case, it is not the case of the appellant that the goods in question were being exported. Since the goods are to be consumed on the board of the foreign going ship and the same would be consumed before reaching a destination, it does not fall under the definition of export. The sale cannot qualify as a sale occasioning export unless the goods reach a destination which is a place outside India. Further, since the goods have been sold from the bonded warehouse and had crossed the customs port/land customs station prior to their sale, it cannot qualify as a sale in course of export within the meaning of Section 5(1) read with Section 2(ab) of the CST Act25. In regard to the contention that declaration under Section 69 of the Customs Act was made by the appellant, there is nothing on record to show that such declaration was made in respect of the goods pertaining to subject sale(s). Even otherwise, the benefit extended under the Customs Act of waiver of customs duty cannot be taken as waiver of sales tax under the relevant state and central laws. Similarly, insertion of sub-Section (3) in Section 5 of the CST Act in 1976 does not affect these cases because the bonded warehouse where the stated sales or appropriation of the goods occurred is within the land-mass of the State of West Bengal and not shown to be within the customs station area26. A priori, it must be held that the stated sales or appropriation of goods kept in bonded warehouse within the land-mass/territory of the State of West Bengal are neither in the course of import or export and more so, were effected beyond the customs port/land customs station area. Therefore, in law, it was a sale amenable to levy of sales tax under the 1954 Act and the 1994 Act, as the case may be, read with Section 4 of the CST Act. As a result, these appeals must fail, as we find no infirmity in the view taken by the authorities below and which had justly commended to the High Court.