Case Note & Summary
The matter concerned two sales tax references made by the Maharashtra Sales Tax Tribunal under Section 61(1) of the Bombay Sales Tax Act, 1959, arising from appeals filed by the dealer M/s. Radhasons International against assessment orders for the periods 1995-96 and 1996-97. The dealer, a partnership firm trading in HR/CR sheets and other goods, had claimed exemption for certain sales as 'high sea sales' under the second limb of Section 5(2) of the Central Sales Tax Act, 1956, contending that these were sales in the course of import effected by transfer of documents of title while the goods were still in customs bonded warehouse, before crossing customs frontiers. The Sales Tax Officer and the first appellate authority rejected the claim, holding that once the goods were cleared from the customs area and warehoused, the customs frontiers had been crossed and the course of import ended. However, the Tribunal, departing from its earlier decisions in Sheventilal and Brothers and Indo Text Export, allowed the dealer's appeals. Relying on a Madras High Court decision in State Trading Corporation which followed the Supreme Court ruling in Kiran Spinning, the Tribunal held that the expression 'crossing the customs frontiers of India' in Section 2(ab) of the CST Act means clearance for home consumption on payment of duty. Therefore, sales made by transfer of documents while goods remained in bonded warehouse qualified as exempt sales in the course of import. The Tribunal also held that sales to inter-state parties, even if not exempt, could not be taxed under the Bombay Act. Aggrieved, the Revenue sought and obtained this reference, contending that the customs frontiers were crossed either when the goods were unloaded at the port or when the bill of entry for warehousing was filed and duty assessed. The main legal question referred was whether the Tribunal correctly interpreted the definition of 'crossing customs frontiers' and Section 5(2) in holding the bonded warehouse sales exempt. The High Court heard arguments on 9th October 2018 and pronounced the judgment on 8th February 2019, but the final decision is not contained in the provided excerpt.
Issue of Consideration
Whether on a true and correct interpretation of the definition of 'crossing of customs frontiers of India' in Section 2(ab) of the Central Sales Tax Act, 1956 and the provision in Section 5(2) of the said Act, the Tribunal was legally justified in holding that the impugned bonded sales effected to parties situate in Maharashtra are exempt from tax as sales in the course of import under the second limb of Section 5(2) of the Central Sales Tax Act, 1956 for the reasons of the said sales having been effected by transfer of the documents of title to the goods before crossing the customs frontiers of India
Law Points
- interpretation of 'crossing of customs frontiers of India' under Section 2(ab) of Central Sales Tax Act
- 1956
- sale in the course of import
- transfer of documents of title before crossing customs frontiers
- bonded warehouse sales
- high sea sales
- exemption under Section 5(2) second limb
- Supreme Court precedent in Kiran Spinning
- distinction between Customs Act and CST Act terminologies
Case Details
2019 LawText (BOM) (02) 74
Sales Tax Reference Nos. 52 and 60 of 2009 (arising from Reference Application Nos. 46 and 45 of 2008)
S. C. Dharmadhikari, B. P. Colabawalla
Mr. V. A. Sonpal (Special Counsel) with Ms. Jyoti Chavan (AGP) for applicant; Mr. N. V. Tapare for respondent
Commissioner of Sales Tax, Maharashtra State
M/s. Radhasons International
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Nature of Litigation
Reference under Section 61(1) of the Bombay Sales Tax Act, 1959 from the Maharashtra Sales Tax Tribunal to the High Court for opinion on the interpretation of Section 5(2) of the Central Sales Tax Act, 1956 regarding levy of sales tax on bonded warehouse sales claimed as high sea sales.
Remedy Sought
The Revenue sought to tax the bonded sales whereas the dealer claimed exemption under Section 5(2) second limb of the CST Act.
Filing Reason
The Revenue challenged the Tribunal's order holding that sales by transfer of documents while goods were in bonded warehouse qualify as exempt sales in the course of import, contending that customs frontiers had already been crossed.
Previous Decisions
Sales Tax Officer disallowed the high sea sales claim for 1995-96 and 1996-97 and raised demands. First Appellate Authority confirmed the disallowance on 25th April, 2003. Maharashtra Sales Tax Tribunal, in Second Appeals Nos. 1358 and 1359 of 2003, allowed the appeals on 19th October, 2007, holding the sales exempt and deleting the tax, departing from its earlier decisions in Sheventilal and Brothers and Indo Text Export.
Issues
Whether on a true interpretation of the definition of 'crossing of customs frontiers of India' in Section 2(ab) and the provision in Section 5(2) of the Central Sales Tax Act, 1956, the Tribunal was justified in holding that bonded sales made to parties in Maharashtra by transfer of documents of title before crossing customs frontiers are exempt as sales in the course of import under the second limb of Section 5(2).
Whether the expressions 'crossing the customs frontiers of India' under the CST Act and 'crossing the customs barriers' under the Customs Act, 1962 convey the same meaning in their respective statutory contexts.
Submissions/Arguments
Mr. Sonpal for the Revenue argued that once imported goods are unloaded at the port and a bill of entry for warehousing is filed and duty assessed, goods are removed to the bonded warehouse; thus the customs frontiers are crossed and the course of import ends, so subsequent sales are not exempt. He contended that transfer of documents occurs after removal from port area and assessment, hence the sale does not qualify as before crossing customs frontiers.
The dealer (respondent) relied on the Madras High Court judgment in State Trading Corporation and the Supreme Court in Kiran Spinning to argue that customs frontiers are crossed only when goods are cleared for home consumption on payment of duty; therefore, sales while goods remain in bonded warehouse are exempt under Section 5(2) second limb. Alternatively, sales to inter-state parties were contended to be inter-state sales not taxable under the Bombay Sales Tax Act.
Judgment Excerpts
The tribunal, while deciding the second appeals by its judgment dated 19th October, 2007, held that the sales made by transfer of documents while the goods are in bonded warehouse will qualify as a sale in the course of import exempt from tax under the second limb of section 5(2) of the CST Act.
After referring to the judgments rendered by the Madras High Court and the Andhra Pradesh High Court, the tribunal opined that both these judgments express contrary views... whether these two expressions, namely, 'crossing the customs frontiers of India' and 'crossing the customs barriers' would, in the context of two different taxing statutes, convey the same meaning, prompted the tribunal to refer the questions of law...
Procedural History
Sales Tax Officer disallowed high sea sales exemption and raised demands for 1995-96 and 1996-97. First Appellate Authority confirmed disallowance on 25th April, 2003. Dealer filed Second Appeals Nos. 1358 and 1359 of 2003 before Maharashtra Sales Tax Tribunal. Tribunal allowed appeals on 19th October, 2007, holding bonded sales exempt. Revenue filed Reference Applications Nos. 45 and 46 of 2008. Tribunal, by order dated 24th June, 2008, referred the question to High Court. High Court heard and reserved judgment on 9th October, 2018, pronounced on 8th February, 2019.
Acts & Sections
- Central Sales Tax Act, 1956: Section 2(ab), Section 5(2)
- Bombay Sales Tax Act, 1959: Schedule Entry B-6, Section 61(1)
- Customs Act, 1962:
