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Judgment
R. Jayasimha Babu, J.—The assesses here sold goods which it had imported and which goods had been assessed to duty after a bill of entry
has been filed in respect of those goods, but, on which the duty had not been paid, the same having been warehoused in the customs port the port
being chennai. The sale was effected by transferring the documents of title while the goods were in the customs warehouse which were located
within the customs station. Duty was paid on these goods by the buyer, who cleared the goods u/s 47 of the Customs Act, 1962 and removed the
goods out of the Customs station.
The goods in question is news print, which the petitioner State Trading Corporation of India as the canalising agent, imported for the users of
newsprint. The sales, which were the subject-matter of the assessment for the years 1986-87 and 1985-86, were effected to the publishers of
newspapers in the State of Tamil Nadu, the newspapers being, The Hindu, The Dinakaran and The Daily Thanthi. No sales tax was collected by
the assessee on those sales, the dealer having always regarded the sale as one having been effected in the course of import.
The dealers claim for exempting that part of it''s turnover from assessment to the tax under the Tamil Nadu General Sales Tax Act, 1959 was
negatived by all the authorities under the Act as also by the Special Taxation Tribunal See page 287 supra (State Trading Corporation of India
Limited v. State of Tamil Nadu) whose order is the subject-matter of challenge before us.
The law which governs the matter is the Central Sales Tax Act, 1956 (""the Act""), Section 5(2) of which deals with sales in the course of import.
That Sub-section (2) of Section 5 reads as under : ""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"".
For a sale to be one in the course of import it has to be either one which has occasioned the import or has been effected by a transfer of
documents of title to the goods before the goods have crossed the customs frontiers of India. Admittedly, in this case, the sale effected by the
dealer is not one which occasioned the import. The only question required to be considered is as to whether the sale effected by transfer of
documents of title to the goods was made before or after the goods had crossed the customs frontiers of India.
The words ""crossing the customs frontiers of India"" have been defined in Section 2(ab) of the Act. That definition reads as under : "" ''Crossing
customs frontiers of India'' means crossing the limits of the area of a customs station in which imported goods or exported goods are ordinarily
kept before clearance by customs authorities.
Explanation.--For the purposes of this clause, ''customs station'' and ''customs authorities'' shall have the same meanings as in the Customs Act,
1962.
The customs frontier for the purpose of this Act is thus equated to the limits of the area of the customs station in which the goods are stored,
crossing of such station being regarded as amounting to crossing the customs frontiers of India. The ""customs station"" referred to in this definition is
the one which is defined as such u/s 2(13) of the Customs Act : "" ''Customs station'' means any customs port, customs airport or land customs
station"". Customs port is defined in that Act in 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 7(a) of the Customs Act
enables the Central Government, by notification in the Official Gazette, to appoint :
(a) the ports and airports which alone shall be customs ports or customs airports for the unloading of imported goods and the loading of export
goods or any class of such goods ;.
It is admitted here that the port at Chennai is a port which has been notified u/s 7(a). That the imported newsprint was stored in that customs
port which is also the customs station before clearance by the customs authorities is also not in dispute.
The crucial event for the purpose of Section 2(ab) of the Act and consequently for Section 5(2) of the Act is the crossing the limits of the area of
the customs station.
It was submitted by the learned counsel for the State, by placing reliance on the decision of the High Court at Andhra Pradesh, in the case of
Minerals and Metals Trading Corporation of India Ltd. v. State of Andhra Pradesh [1998] 110 STC 394, that when goods are assessed to duty
by the customs authorities after the bill of entry is filed the importation is completed even if the duty is not paid and the goods remain within the
customs station. In that case the view taken was that irrespective of the fact whether duty is paid or not, as it is only after the bill of entry is filed
and the import duty is assessed the goods can cross the limits of the customs station, transfer of documents of title before the clearance of the
goods by the customs authorities, but after the assessment of goods, would not amount to a sale in the course of import. It was held that after the
assessment to duty is made after filing the bill of entry, the goods get mingled with the general mass of goods and merchandise in the country, and
physical movement of goods out of the customs station, and the time at which the duty was paid would not be relevant.
With respect, we are unable to subscribe to the interpretation set out in that judgment, having regard to the plain language of Section 5(2) and
Section 2(ab) of the Central Sales Tax Act.
As held by the Supreme Court in the case of Kiran Spinning Mills Vs. Collector of Customs, , which arose under the Additional duty of Excise
(Textiles and Textile Articles) Ordinance, 1978 the taxable event is the crossing of the customs barrier, and not the date when the goods had
landed in India, or had entered the territorial waters. When goods are imported into India even after the goods are unloaded from the ship, and
even after the goods are assessed to duty subsequent to the filing of a bill of entry, the goods cannot be regarded as having crossed the customs
barrier until the duty is paid and the goods are brought out of the limits of the customs station. In the case of Kiran Spinning Mills Vs. Collector of
Customs, the apex Court has observed thus : ""In other words, the taxable event occurs when the customs barrier is crossed. In the case of goods
which are in the warehouse, the Customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass
of goods in the country.
Until such time as the duty payable on those goods is not paid, the amount of duty payable being determined with reference to the rate at which
the duty was levied as on the date of the removal of the goods from the warehouse, the goods cannot be regarded as having crossed the customs
barrier of India.
Section 47 of the Customs Act refers to clearance of goods for home consumption, while Section 68 of the Act deals with clearance of
warehoused goods for home consumption. In this case, the goods had been warehoused and the clearance for home consumption was made u/s
68, after the title to the goods had been transferred to the buyers. The duty was paid by the buyers.
The Tribunal has in its order, placed reliance on the decision of the Supreme Court in the case of Madras Marine and Co. Vs. State of
Madras, : The Tribunal has omitted to notice the caution set out in that judgment that the amendment introduced in Section 2 by the Act 103 of
1976 would have been relevant only if they were considering the case of sale by the transfer of documents of title to the goods as contemplated by
Section 5 of the Central Sales Tax Act, but, that facts of the case before it did not involve a transfer of document of title to the goods, and
therefore, the fact that the customs station itself was within the State of Tamil Nadu would not, on that score alone render all sale of goods which
are in the course of import and awaiting clearance from that station, local sales.
The ""clearance"" referred to in Section 2(ab) of the C.S.T. Act, in the absence of any other compelling factor has to be regarded as having
reference to the clearance of goods for home consumption u/s 47 or the clearance of warehoused goods u/s 68 of the Customs Act. The clearance
in this case, clearly was after the transfer of document of title and was not earlier. The crossing of the limits of the customs station took place after
the clearance of the goods from the warehouse for home consumption.
The title having passed on to the buyer before such clearance and crossing, the sale effected by the assessee/dealer was clearly one which was
in the course of import. The impugned order of the Tribunal upholding the denial of exemption to the dealer in respect of these sales is, therefore,
unsustainable and is set aside. The writ petitions are allowed.