Bombay HC Upholds Maharashtra Govt’s Authority to Levy Stamp Duty on Delivery Orders

CA Sandeep Kanoi 02 Apr 2024 903 Views 0 comment Print Corporate Law | Judiciary

Case Law Details

Case Name : Saurer Textile Solutions Pvt Ltd Vs State of Maharashtra (Bombay High Court)

Appeal Number : Writ Petition No. 1494 of 2023

Date of Judgement/Order : 22/03/2024

Related Assessment Year :

Courts : All High Courts Bombay High Court

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Saurer Textile Solutions Pvt Ltd Vs State of Maharashtra (Bombay High Court)

The Bombay High Court, in the case of Saurer Textile Solutions Pvt Ltd vs State of Maharashtra, has ruled that the Maharashtra government’s action in levying stamp duty on delivery orders (DOs) falls within the state’s legislative competence. The Court bench, comprised of Justices G.S. Patel and Neela Gokhale, observed that the state has the authority to impose such duty.

Understanding Stamp Duty and Delivery Orders

Stamp duty is a tax levied by the government on certain documents. The Maharashtra Stamp Act, 1958, outlines the specific instruments subject to this tax. Delivery orders, which are documents authorizing the receipt of goods from a warehouse or other storage facility, were the subject of debate in this case.

Key Points of the Judgement

The Court held that the levy of stamp duty on DOs is within the constitutional framework. The power to legislate on stamp duty falls under Lists II and III of the Seventh Schedule of the Indian Constitution, which deal with state legislative powers.
The Court likely dismissed arguments that levying stamp duty on DOs might impinge on freedoms guaranteed under Article 19 (1) (a) of the Constitution, which protects freedom of speech and expression.

Significance of the Judgement

This judgement clarifies the Maharashtra government’s authority to levy stamp duty on DOs. It has implications for businesses operating in the state, as they need to factor in this cost when dealing with such documents.

RELEVANT EXTRACT OF THE JUDGMENT

In view of the foregoing discussion, we hold that the action of the State of Maharashtra in levying stamp duty on ‘DO’ as provided in Article 29 of Schedule I of the MSA is well within the legislative competence of the State and does not intrude upon the legislative domain of the Parliament as re-served in Entries 41 and 83 of List I of Schedule VII of the Constitution of India and is not ultra vires Article 246(1), 286(1)(b) and 286(2) of the Constitution of India.

42. The alternative prayer of the Petitioners to read down Article 29 of Schedule I of the Stamp Act of 1958 to not apply to a DO issued in respect of goods imported in Maharashtra is untenable. As held by the apex court in the matter of The Authorised officer, Central Bank of India vs Shanmugavelu,⁵³ the rule of reading down is to be used for a limited purpose of making a particular provision workable and to bring it in harmony with other provisions of the statute. It is to be used keeping in view the scheme of the statute and to fulfil its purpose. We have already held that the DO is not an extension of a BoL and both are mutually exclusive documents. Thus, there is no statutory conflict and the requirement of reading down the provision does not arise.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. These Petitions assail the imposition, levy and collection of Stamp Duty by the 1st Respondent-State of Maharashtra on Delivery Orders (DO) under Article 29 of the Maharashtra Stamp Act, 1958, (MSA) where the supply of goods takes place in the course of import of such goods into the territory of India as being ultra vires Articles 246(1), 286(1)(b) and 286(2), read with Entries 41 and 83 of List I of Schedule VII of the Constitution of India. The legislative competence of the State is questioned on the ground that the constitutional scheme confers exclusive legislative competence on the Union of India in respect of import and export across customs frontiers and the State has breached the said legislative field.

Background:

2. A short history of these proceedings is necessary for completeness. Initially, the challenge was to the levy of stamp duty on what is called a ‘Bill of Entry’ (BoE). Some Petitioners assailed the levy of stamp duty on a BoE, some on DOs and some on both. During the pendency of these Petitions, however, Dr Birendra Saraf, the learned Advocate General, informed us on behalf of the State that the Government is not levying stamp duty on the BoE but is doing so on a DO. Hence, by order dated 1st March 2023, we permitted an amendment to all Petitions to include a challenge to the levy of stamp on DOs. Petitions are duly amended. Since the State is not levying stamp duty on the BoE, the challenge before us now pertains only to the levy of stamp duty on DOs.

(i) The lead Petitioner, a company registered under the Companies Act, 1956, is engaged in the business of manufacturing, trading, service and distribution of textile machinery. The other Petitioners are also bodies corporate engaged in their respective and varied business activities, but all of them, during the course of their business, import goods from outside the territories of India and are required by the State to pay stamp duty on the DOs in order to receive delivery of the imported goods.

(ii) The 1st Respondent in all the Petitions is the State of Maharashtra through its Revenue Ministry and the other Respondents include the Inspector General of Registration and Controller of Stamps and the Chief Controlling Revenue Authority, Customs Authorities having jurisdiction over individual Petitioners in their respective customs areas and the Mumbai Port Authority-a body corporate registered under the Major Port Trusts Act, 1963 dealing with imports at the Mumbai Port. Some private Respondents are arrayed in few petitions, but no relief is sought against them, and none is granted hence their description is not detailed herein suffice the same appears in the array of parties in the cause title.

(iii) The process of supply of goods or services or both, in the course of import into or export out of, the territory of India passes through various stages. It usually commences with the foreign exporter/vendor/supplier engaging a shipper or a ship owner to be the carrier of goods to be exported. The carrier issues a document known as the ‘Bill of Lading’ (BoL) to the exporter that details the type, quantity and destination of the goods being carried. On arrival of the goods at the port of destination, the carrier files the Import General Manifest (IGM) before the customs authority on the basis of the Invoice and the BoL.

(iv) The containers are unloaded at the port and taken for customs clearance. Meanwhile, the Petitioners, i.e., the importers file a BoE with the customs authority, on the basis of which customs duty is computed. Once the customs duty is paid, the goods can be cleared out of the customs area, but not before the carrier issues a DO directing the custodian of the goods to deliver the same to the person named therein or his assign or holder thereof. The import-ers, i.e., the Petitioners in the present case are then required to pay stamp duty @ 0.10% of the total assessed value of the goods under the MSA. The Petitioners are not entitled to receive delivery of the goods till the requisite stamp duty is paid on the DO. It is this levy of stamp duty on the DO which is assailed in the present petitions.

(v) Admittedly, the immediate trigger to this challenge was a judgment delivered by the Gujarat High Court in various writ petitions filed before it challenging levy of stamp duty on a BoE submitted for clearing imported goods with the customs authorities treating the BoE as a DO. The question in those petitions was whether stamp duty was liable to be paid on a BoE and whether such BoE is a DO in respect of the goods imported. The learned Single Judge of that High Court by a common judgment of 24th February 2010 held that the BoE is only a document filed with the customs authorities to enable computation of customs duty and hence, not an instrument creating any right or liability and does not amount to a DO within the meaning of the Bombay Stamp Act, 1958. The High Court, thus, held that stamp duty cannot be levied on a BoE as firstly, it is not an instrument and secondly, it did not create any right or liability in any person in respect of the goods.

(vi) An appeal was carried to the Division Bench of the Gujarat High Court by the State of Gujarat. While upholding the decision of the learned Single Judge, the Division Bench, however, modified it to the limited extent of holding that it is not necessary that in all cases a DO requires instructions by the Bailor to the Bailee (meaning the carrier to the consignee) to deliver goods bailed to the person named in the DO. At times, a ‘Bill of Lading’ is also an order relating to delivery of goods as is evident from Regulation 16 of Gujarat Maritime Board (Lading and Wharf age) Regulations, 1956. Thus, the appeal of the State was rejected with the aforesaid limited modification. We are told that the State of Gujarat has carried a Special Leave Petition before the Supreme Court, against the judgment and Order of the Division Bench. Notice is issued on the SLP, and the petition is pending.

(vii) Encouraged by the decision of the Gujarat High Court, the Petitioners assail the levy of stamp duty on DOs in the State of Maharashtra on various grounds, one of them obviously alleging discrimination between importers in the State of Gujarat, who are exempted from payment of stamp duty and the Petitioners here, who bear the additional cost.

(viii) Needless to say, admittedly importers of Maharashtra have continued to pay stamp duty on the DOs since enactment of the MSA and only recently, apprised of the decision of the Gujarat High Court, some of them represented to the Respondents regarding the said discrimination and requested that they too be exempted from payment of stamp duty. Inaction by the State, however, compels the Petitioners to bear the injustice and discrimination of the arbitrary levy of stamp duty and thereby suffer financial loss. This impelled them to file the present Writ Peti-tions seeking reliefs as prayed.

3. There are as many as 132 Petitions and the collective challenge is identical. However, as an alter-native, the Petitioners urge a read down of Article 29 of Schedule I of the Stamp Act of 1958 to not apply to a DO issued in lieu of a BoL in respect of goods imported in Maharashtra. Some of the Peti-tioners also seek refund of amounts paid by them as stamp duty till date from the State along with interest thereon.

4. By order dated 24th April 2023, we decided to treat Writ Petition (L) No.35036 of 2022 (now numbered as Writ Petition No. 1494/2023) as the lead Petition in the entire group relating to this issue. By a separate order dated 1st March 2023, we also noted that having regard to the exigencies of time and the number of matters listed, it will not be possible to hear all the counsels for the Peti-tioners individually. The Petitioners thus, arranged to have one of them as lead counsel so as to avoid repetition of arguments. We did, however, permit a joint concise statement of written submissions to be tendered on behalf of all the Petitioners. Mr Seervai, learned Senior Advocate, appeared on behalf of the lead Petitioner in Writ Petition No. 1494 of 2023. Mr Vikram Nankani, learned Senior Advocate, Mr Nishit Dhruva, Mr JC Patel, Ms Ishista Pokale, Mr Damodar Vaidya, Mr Sandip Chillana, Mr Ashok Singh, Mr Santosh Mishra, Mr Raghavendra Mehrotra and Mr Pratyushprava Saha, learned Advocates appearing on behalf of the respective Petitioners adopted the arguments of Mr. Seervai with some additions.

5. Submissions on behalf of the Petitioners are summarized as under:

(i) It is contended that levy of stamp duty by the State Government on DOs issued in the course of imports is illegal and unconstitutional on the ground that under Article 246(1) read with Entry 41 and 83 of the List I of Schedule VII of the Constitution, the State Legislature lacks the legislative competence to levy such stamp duty on any document which is part of the course of import of such goods into the territory of India. The entire field of legislation in this regard is within the sole legislative competence of the Parliament.

(ii) According to the Petitioners, DOs are nothing but an adjunct/extension to the BoL, and hence, in essence, it is a levy of stamp duty on a BoL which does not fall within the purview of the definition of the term ‘instrument’ under the MSA.

(iii) It is further argued that it is the BoL and not a DO that transfers the title in the goods. The BoL constitutes evidence of receipt of goods by the carrier/shipper; it is a document of title to the goods; and it is evidence of the terms and conditions of the contract of carriage.

(iv) The BoL is expressly excluded from the definition of the term ‘instrument’ as defined in Section 2(l) of the MSA and hence, the State Government lacks the power to levy stamp duty on a BoL.

(v) A combined reading of Entry 63 of List II and Entry 91 of List
I of Schedule VII to the Constitution indicates that the State Legislature is not competent to prescribe the rate of stamp duty in respect of documents specified in Entry 91 of List I which includes a BoL.

(vi) The Petitioners contend that a DO itself only ‘certifies’ that there are no claims or dues regarding import dues, duties, freight, etc. In itself, it creates no rights. A DO is not an instrument under Section 2(l) of the MSA. It is issued by the carrier/shipper to the custodian in favour of the consignee (Petitioners herein) named in the BoL confirming that the dues/duties/freight are cleared. It does not confer, declare, record or state any right, title or interest in goods and hence, is not a negotiable instrument.

(vii) Mr Seervai along with other learned Counsel placed reliance on the decision of the Gujarat High Court which held BoE not chargeable to stamp duty. The BoE was held not to be a DO nor an ‘instrument’ as defined in Article 24 of the Gujarat Stamp Act, 1958 (“GSA”) and hence, not chargeable to stamp duty. Article 24 of the GSA is pani matenia to Article 29 of Schedule I of the MSA.

(viii) The DO does not carry any assessable value for the levy of stamp duty. It is the ‘Out of Charge Order’ and not the DO that vests a right to receive the imported goods.

(ix) A DO made by the carrier or the agent of the carrier is not a document of title under Article 29 of the MSA and hence, it is not an instrument. It does not satisfy the conditions enumerated in Article 29 of the MSA.

(x) It is submitted that when the goods are compulsorily unloaded for clearance in the customs area of the importing country, the custodian or the port is the ‘bailee’ and the consignee is the ‘bailor’ under Section 148 of the Indian Contract Act. Hence, the ‘bailee’- custodian is duty bound to return the goods to the ‘bailor’-consignee without any demand.

(xi) There is no mandate requiring a DO under the Major Port Trusts Act, 1963 or the Customs Act of 1962 or the Customs Cargo Handling Regulation of 2009 or any other law. The use of a DO is thus redundant and is required only for administrative convenience.

(xii) Section 2(25) of the Customs Act, 1962 defines ‘imported goods’ to mean goods which have not been cleared for home consumption. Under the Sale of Goods Act, 1930, goods are deemed to be in the ‘course of transit’ from the time they are delivered to the carrier, who, in turn, delivers them to the buyer. Hence, from the conjoint reading of these two pro-visions, goods are in the course of the import till they are delivered to the buyer.

(xiii) The nomenclature used to describe a document is not a decisive factor to determine the character of the document. Thus, the nomenclature of ‘Delivery Order’ as an entitlement to delivery is nothing but an endorsed BoL, which entitles the consignee to take delivery of the goods.

6. The Petitioners placed reliance on the following decisions of various courts to support their con-tentions:

1. C Govindarajulu Naidu & Co, v State of Madras & Anr¹

2. State of AP v National Thermal Power Corpn Ltd & Ors²

3. United States v Hvoslef³

4. Fairbank v United States⁴

5. Brown & Ors v The State of Mary-land⁵

6. Anglo Chilean Nitrate Sales Crop. V Ala-bama⁶

7. Ashok Tanwar & Anr v State of HP & Ors⁷

8. Indian Tourist Development Corporation ltd v Assistant Commissioner of Commercial Taxes & Anr⁸

9. Kiran Spinning Mills v Collector of Cus-toms⁹

10. AV Fernandez v State of Kera-la^‘°

11. State of Travancore-Cochin & Ors v Bombay Co Ltd Alleppey^”

12. State of Travancore-Cochin & Ors v Shanmugha Vilas Cashewnut Factory, Quilon^‘2

13. JV Gokal & Co Pvt Ltd v Assistant Collector of Sales-Tax (Inspection) & Ors^‘3

14. The State of Bihar & Anr v Tata Engineering and Locomotive Co Ltd^‘4

15. State of Kerala & Ors v Fr William Fernandez & Ors^‘5

16. KV Muthu v Angamuthu Am-mal^‘6

17. National Insurance Co Ltd & Anr v Kirpal Singh & connected Appeals^‘7

18. Satya Deo alias Bhoorey v State of Uttar Pra-desh^‘8

19. Tripta Kaushik v Sub Registrar VI-A, Delhi & Anr^‘9

20. The Trustees of the Port of Madras v KPV Sheik Mohamed Rowther & Co & Ors^2°

21. State of Gujarat & Ors v Reliance Industries Ltd²¹

22. State of Maharashtra & Ors v Messrs MS Builders (Private) Ltd & Anr²²

23. The Pioneer Contain-er²³

24. Morvi Mercantile Bank Ltd v Union of In-dia²⁴

25. State (NCT Delhi) v Union of India & Anr²⁵

26. Garden Silk Mills Ltd v Union of In-dia²⁶

27. M/s Ramratna Wires Ltd v State of Guja-rat²⁷

28. M/s Vedanta Ltd v State of Guja-rat²⁸

29. M/s Mangalore Ref & Petrochemicals Ltd v Commissioner of Customs, Mangalore²⁹

7. Submissions on behalf of the Respondent-State by the learned Advocate General, Dr Birendra Saraf are summarized as under:

(i) Dr Saraf outlined the distinct fields of legislation of the Union of India and the State Government as per List I and List II of the With Schedule to the Constitution of India and the relevant Entries. He contended that the scheme of the Constitution and the distribu-tion of the legislative power is that insofar as the inter-state sales and that in course of international trade of commerce is in the exclusive domain of the Union of India, while the power is vested in the State Legislature in respect of all other sales.

(ii) The marginal note to Article 286 of Constitution of India is “Restrictions as to imposition of tax on the sale or purchase of goods”. The very language of that Article clearly implies that the object is to place restrictions on the legislative power of the State with respect to imposition of taxes on sales and purchases of goods after the introduction of GST regime on the supply of goods.

(iii) List I contemplate a separate tax on sales and purchase of goods. List II acknowledges tax on sales and purchases being distinct and independent of stamp duty on ‘instrument’. Article 286 of the Constitution does not restrict the power of the State Government to impose taxes contemplated in List II and not covered in List I. Thus, he submits, the challenge to legislative competence of the State relying on Article 286 of the Constitution is completely misplaced and misconceived.

(iv) The MSA does not levy stamp duty on a transaction but always on an ‘instrument’. The mere fact of computation of stamp duty on the basis of value of property or otherwise does not make the tax on transaction.

(v) The definition of ‘instrument’ in Section 2(l) of the MSA is not exhaustive. Article 29 of Schedule I of the MSA defines ‘Delivery Order’ in respect of goods. It has been understood to be an ‘instrument’ since the enactment of the Act in 1958. All the importers have paid stamp duty on DO since 1958 and have understood the same to be as such. It is only upon the decision of Gujarat High Court in the case of Essar Steel Limited v. Superintendent of Stamps³⁰ and Reliance Industries (supra) declaring that a BoE is not chargeable to stamp duty that the Petitioners have been motivated to assail the legitimate act of the State to levy stamp duty on a DO. Dr Saraf was at pains to point out that the challenge before the Gujarat High Court was limited to levy of stamp duty on a BoE which held that a BoE is a document filed with the Customs Authorities to facilitate computation of customs duty and is not an ‘instrument’ creating any right or liability amounting to a DO within the meaning of the MSA.

8. Dr Saraf placed reliance on the following decisions of various High Court and the Supreme Court:

1. State of Bombay & Ors v Hospital Mazdoor Sabha & Ors³¹

2. State of Maharashtra & Ors v Messrs MS Build-ers (Private) Ltd & Anr³²

3. Ruby Sales & Services (P) Ltd & Anr v State of Maharashtra & Ors³³

4. State of Uttarakhand & Ors v Harpal Singh Rawat³⁴

5. K Sambasivaraju v MVSR Chandrayya Chetty & Ors³⁵

6. Puroshottam H Judye & Ors v VB Potdar³⁶

7. Shipping Corporation of India Ltd v CL Jain Woollen Mills & Ors³⁷

8. State of Madras v Davar & Co Etc³⁸

9. Bengal Immunity Co Ltd v State of Bihar & Ors³⁹

10. Hindustan Lever & Anr v State of Maharashtra & Anr⁴⁰

11. Greaves Cotton & Co Ltd & Anr v State of Maharashtra & Anr⁴¹

12. Essar Steel Ltd Anr v Superintendent of Stamps & Ors (Supra)

13. State of Gujarat & Ors v Reliance Industries Ltd (Supra)

14. JV Gokal & Co (Private) Ltd v Assistant Collec-tor of Sales-Tax (Inspection) & Ors (supra)

15. Triveni Shankar Saxena v State of UP & Ors⁴²

16. PGF Ltd & Ors v Union of India & Anr⁴³

17. Builders’ Association of India & Ors v Union of India & Ors⁴⁴

18. The Commissioner of Sales Tax Maharashtra State v M/s Radhasons International⁴⁵

19. S Rangarajan v P Jagjivan Ram & Ors⁴⁶

Analysis:

9. Having heard the learned counsel representing both sides and upon perusal of the record, the fol-lowing question arises for our consideration:

(i) Whether the State of Maharashtra has the legislative competence to levy, impose and collect stamp duty on a Delivery Order, an ‘instrument’ defined in Section 2(l) of the Maharashtra Stamp Act, 1958, chargeable with duty as mentioned in Article 29 of the First Schedule in the Maharashtra Stamp Act, 1958?

10. For easy and immediate reference, the relevant provisions of the Constitution of India are ex-tracted as under:

“246. Subject-matter of laws made by Parliament and by the Legislatures of States.—

(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the “Union List”).

(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the “Con-current List”).

(3) Subject to clauses (1) and (2), the Legislature of any State has ex-clusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the “State List”).

(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included [in a State] notwithstanding that such matter is a matter enumerated in the State List.

286. Restrictions as to imposition of tax on the sale or purchase of goods.-(1) No law of a State shall impose, or authorize the im-position of, a tax on the sale or purchase of goods where such sale or purchase takes place:

(a) outside the State; or

(b) in the course of the import of the goods into, or export of the goods out of, the territory of India.

(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).

11. The relevant provisions of the Maharashtra Stamp Act, 1958 read as under:

Article 29 of Schedule I

Description of Instrument	Proper Stamp Duty
(1)	(2)
29. DELIVERY ORDER IN RESPECT OF GOODS, that is to say, any instrument enti-tling any person therein named, or his assigns or the holder thereof, to the delivery of any goods ly-ing in any dock or port, in any warehouse in which goods are stored, or deposited, on rent or hire, or upon any wharf, when such goods exceed in 4[value hundred rupees, for every rupees 10,000 or part thereof.	Ten Rupees.

Section 2 (l) of the MSA says:

2(l) “instrument” includes every document by which any right or lia-bility is, or purports to be, created, transferred, limited, extended, extinguished or recorded, but does not include a bill of exchange, cheque, promissory note, bill of lading, letter of cred-it, policy of insurance, transfer of share, debenture, proxy and receipt;

Explanation.—The term “document” also includes any electronic rec-ord as defined in clause (t) of subsection (1) of section 2 of the Information Technology Act, 2000;”

(Emphasis added)

12. The relevant provisions of the Customs Act, 1962 read as under:

“45. Restrictions on custody and removal of imported goods.—

(1) Save as otherwise provided in any law for the time being in force, all imported goods unloaded in a customs area shall remain in the custody of such person as may be approved by the Principal Commissioner of Customs or Commissioner of Customs until they are cleared for home consumption or are warehoused or are transhipped in accordance with the provisions of Chapter VIII.

(2) The person having custody of any imported goods in a customs area, whether under the provisions of subsection (1) or under any law for the time being in force,—

(a) shall keep a record of such goods and send a copy thereof to the proper officer;

(b) shall not permit such goods to be removed from the customs area or otherwise dealt with, except under and in accordance with the permission in writing of the proper officer or in such manner as may be prescribed.

(3) Notwithstanding anything contained in any law for the time being in force, if any imported goods are pilfered after unloading thereof in a customs area while in the cus-tody of a person referred to in sub-section (1), that person shall be liable to pay duty on such goods at the rate prevailing on the date of delivery of an arrival manifest or import manifest or, as the case may be, an import report to the proper officer under section 30 for the arrival of the conveyance in which the said goods were carried.

46. Entry of goods on importation.—

(1) The importer of any goods, other than goods intended for transit or transhipment, shall make entry thereof by presenting electronically on the customs automated system to the proper officer a bill of entry for home consumption or warehousing in such form and manner as may be prescribed:

Provided that the Principal Commissioner of Customs or Commis-sioner of Customs may, in cases where it is not feasible to make entry by presenting electronically on the customs automated system, allow an entry to be presented in any other manner:

Provided further that if the importer makes and subscribes to a decla-ration before the proper officer, to the effect that he is unable for want of full information to furnish all the particulars of the goods required under this sub-section, the proper officer may, pending the production of such information, permit him, previous to the entry thereof

(a) to examine the goods in the presence of an officer of customs, or

(b) to deposit the goods in a public warehouse appointed under sec-tion 57 without warehousing the same.

(2) Save as otherwise permitted by the proper officer, a bill of entry shall include all the goods mentioned in the bill of lading or other receipt given by the carrier to the consignor.

(3) The importer shall present the bill of entry under sub-section (1) before the end of the next day following the day (excluding holidays) on which the aircraft or vessel or vehicle carrying the goods arrives at a customs station at which such goods are to be cleared for home consumption or warehousing:

Provided that a bill of entry may be presented at any time not ex-ceeding thirty days prior to the expected arrival of the aircraft or vessel or vehicle by which the goods have been shipped for importation into India:

Provided further that where the bill of entry is not presented within the time so specified and the proper officer is satisfied that there was no sufficient cause for such delay, the importer shall pay such charges for late presentation of the bill of entry as may be pre-scribed.

(4) The importer while presenting a bill of entry shall make and sub-scribe to a declaration as to the truth of the contents of such bill of entry and shall, in support of such declaration, produce to the proper officer the invoice, if any, and such other documents relating to the imported goods as may be prescribed.

(4A) The importer who presents a bill of entry shall ensure the follow-ing, namely:—

(a) the accuracy and completeness of the information given there-in;

(b) the authenticity and validity of any document supporting it; and

(c) compliance with the restriction or prohibition, if any, relating to the goods under this Act or under any other law for the time being in force.

(5) If the proper officer is satisfied that the interests of revenue are not prejudicially affected and that there was no fraudulent intention, he may permit substitution of a bill of entry for home consumption for a bill of entry for warehousing or vice versa.”

13. The relevant provisions of the Indian Contract Act 1872 read as under:

“148. “Bailment” “bailor” and “bailee” defined. — A “bailment” is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the “bailor”. The person to whom they are delivered is called, the “bailee”.

Explanation. — If a person already in possession of the goods of an-other contracts to hold them as a bailee, he thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not have been delivered by way of bailment.

160. Return of goods bailed, on expiration of time or ac-complishment of purpose. — It is the duty of the bailee to return, or deliver according to the bailor’s directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired, or the purpose for which they were bailed has been accomplished.”

14. The power to legislate under Article 246 of the Constitution must be read with the entries in the three Lists. These define the respective areas of legislative competence of the Union and State Legis-latures. The Apex Court very recently in the matter of State of Karnataka and others vs State of Meghalaya & Ors,⁴⁷ citing a catena of earlier decisions, has reiterated that it is the doctrine of pith and substance which has to be applied to ascertain the true nature of the legislation and the entry within which it would fall. It is settled law that while in-terpreting these entries, they should not be viewed in a narrow or myopic manner but by giving the widest scope to their meaning, particularly when the vires of a provision of a statute is assailed. In such circumstances, a liberal construction must be given to the entry by looking at the substance of the legislation and not its mere form. As held in the matter of Calcutta Gas Co Ltd. vs State of W.B,⁴⁸ while interpreting the entries in the case of an alleged conflict, every attempt must be made by the Court to harmonise or reconcile them. The doctrine of pith and substance, in short, means if an enactment substantially falls within the powers expressly conferred by the Constitution upon the Legislature which enacted it, it cannot be held to be invalid merely because it incidentally encroaches on matters assigned to another Legislature. Also, in a situation where there is overlapping, the doctrine has to be applied to determine to which entry a piece of legislation could be related. If one legislation trenches on the field reserved to another legislature, it would be of no consequence. To examine the true character of enactment or a provision thereof, due regard must be had to the enactment as a whole and to its scope and objects. It is said that the question of invasion into another legislative territory has to be determined by substance and not by degree. The Apex Court in the matter of State of Bombay vs FN Balsara⁴⁹ has held that according to the pith and sub-stance rule, if a law is in its pith and substance within the competence of the Legislature which has made it, it will not be invalid because it incidentally touches upon the subject lying within the compe-tence of another Legislature. While discussing the expression ‘with respect to’ in Article 246 of the Constitution, the Court has further explained that the expression indicates the ambit of the power of the respective Legislature to legislate as regards the subject matters comprised in the various Entries included in the legislative Lists. Hence, where the entry describes an object of tax, all taxable events pertaining to the object are within that field of legislation unless the event is specifically provided for elsewhere under a different legislative sphere. Thus, the Court has to discover the true character and nature of the legislation while deciding the validity of the legislation. While applying the doctrine of pith and substance to interpret the legislative lists, what requires to be seen is whether an enact-ment substantially falls within the powers expressly conferred by the Constitution upon the Legisla-ture which enacted it. If it does, it cannot be held to be invalid merely because it incidentally en-croaches on matters assigned to another Legislature. In Ujagar Prints vs Union of In-dia,⁵⁰ the Supreme Court observed that the entries in the legislative Lists must receive a liberal construction inspired by a broad and generous spirit and not in a narrow and pedantic manner. This is because the Entries are not sources of legislative power but are merely topics or fields of legislation. Wherever the question of legislative competence is raised, the test is whether the legislation, looked at as a whole, is substantially ‘with respect to’ the particular topic of legislation. In order to understand the particular topic of legislation, it is necessary to look at the purpose of levy of stamp duty in the MSA on one hand and imposition of customs duty provided in the Customs Act, on the other. The object of the MSA is to collect proper stamp duty on an instru-ment or conveyance on which such stamp duty is payable. It is simply a fiscal measure enacted to secure revenue for the State on certain types of instruments. This Court in its decision in the matter of CCRA vs Maharashtra Sugar Mills,⁵¹ has culled out some basic principles for the application of the Act. Firstly, for charging stamp duty the substance or real nature of the transaction recorded in the document is relevant, not its description, title or chosen name; Secondly, stamp duty is imposed on the instruments and not the transactions; Thirdly, instruments are to be read as they are worded or drafted; and Fourthly, the act is a fiscal measure enacted to secure revenue for the State from certain classes of instruments. Understood in this context, the MSA is simply a fiscal statute enabling the State to collect revenue on certain instruments. Under the Constitution of India, the power to levy stamp duty is divided between the Union and the State. The Parliament has the power to levy stamp duty on instruments specified in Article 246 read with Schedule VII, List I, Entry 91 and the State Governments have the power to levy stamp duty on instruments falling under Article 246 read with Schedule VII, List II and Entry 63.

15. The Customs Act, 1962 provides for levy of customs duty when goods are transported across borders between countries. Generally, customs duties are taxes that governments impose on export and import of goods. The objective behind customs duty is to safeguard each nation’s economy, jobs, environment, residents etc., by regulating the movement of goods in and out of any country. The primary purpose of customs duty is also to raise revenue. The provisions of the Act indicate its primary objectives which include restricting imports to conserve foreign exchange, protecting im-ports and exports of goods, achieving the policy objectives of the Governments, regulating export, to safeguard domestic trade, to protect revenue of resources, to protect the industries in India from unfair competition, to prevent smuggling of goods and activities of related nature and to prevent dumping of goods. Duties of customs including export duties fall within List I of Schedule VII of the Constitution.

16. In view of the objects of each enactment and applying the settled tests to the facts and circum-stances in the present case, what is to be seen is whether there is any impermissible encroachment by the State on the field occupied by Parliamentary legislation, or whether there is any overlapping.

17. A plain reading of the taxing provision of the MSA suggests that a DO mentioned in Article 29 is indeed an instrument. It is not excluded from the definition of instrument. It creates an entitlement in the consignee, i.e., the Petitioners herein or any person named by them in the DO, to take delivery of the goods lying in any dock or port, in any warehouse in which the goods are stored, or deposited on rent or hire or upon any wharf etc.

18. The definition of ‘instrument’ includes every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished, or recorded. Certain doc-uments have been specifically excluded from the definition. A DO is not one of them.

19. Parliament enjoys exclusive jurisdiction to levy customs duty. Sections 45 and 46 of the Customs Act provides for restrictions on custody and removal of imported goods and the entry of goods on importation, respectively. The provisions outline the movement of goods in the course of import. Even as per the submissions made by the Petitioners supported by a flow chart, the movement of goods in the course of import commences with the issuance of a BoL, a document issued by the shipper declaring the details of the goods entrusted to it for transport. Once the goods reach the destination port, they are unloaded and stored in a warehouse or storage as directed by trans-acting parties. In the meantime, the consignee or his agent presents a document called the BoE also containing a description of the goods matching that contained in the BoL and other details to the customs authorities. It is on the basis of the BoE that customs duty payable is computed and paid by the consignee. Upon evidence of payment of customs duty, and also its own charges, the shipper then issues the DO saying that the custodian of the goods may hand the goods over to the consign-ee (as there is no pending duty, claim or demand). Stamp duty is then paid on the DO and upon veri-fication of payment of the same, the custodian releases the custody of the goods.

20. Thus, what is to be ascertained is whether the DO is an integral part of the chain of events in the course of import of goods or is independent of the import albeit incidental thereto. If it is the latter, and not an integral part of the import, the State is well within its powers to levy stamp duty on it as per the pith and substance rule since the primary object and the essential purpose of Article 29 read with Section 2(l) of the MSA is then identified as distinct and not an integral part of an import but more as consequence of import.

21. The definition of ‘imported goods’ is relevant in this context.

Section 2(25) of the Customs Act reads thus:

“imported goods” means any goods brought into India from a place outside India but does not include goods which have been cleared for home consumption.

Section 2(11) reads as under:

“customs area” means the area of customs station or a warehouse and includes any area in which imported goods or export goods are ordinarily kept before clearance by customs authority.

22. These definitions demonstrate that the goods are cleared for home consumption only when cleared by customs authority. The customs authority clears the goods as soon as customs duty is paid. The BoE is presented for computation of the customs duty. Once the customs duty is paid, the import process so far as the customs authorities and the Customs Act is concerned ends. The DO is then issued by the shipper upon proof of payment of customs duty and its own charges. The DO does not form part of the chain of the import process and the taxing event occurs beyond the course of import. As Dr Saraf puts it, if a consignee can take delivery without a DO, there would be no question of a stamp duty impost. There is thus, no overlap in the legislative field and, the State and the Centre are both well within their own occupied area of Legislation.

23. To buttress his argument pertaining to the stamp duty on DO not being levied in the course of import, Dr Saraf placed reliance on a decision of the Supreme Court in the Davar & Co case (supra) in which the question that arose for determination was whether sales effected by transfer of documents of title to the respective buyers had crossed the territorial waters repre-senting sales in the course of imports thereby attracting sales tax. The Supreme Court while answer-ing the issue explained the meaning of ‘customs frontier’ or ‘customs area’ in the following words:

“14. The expression ‘customs frontiers of India’ in Section 5 of the Central Act, in our opinion, must be construed in accordance with the notification issued by the Cen-tral Government under Section 3-A of the Act, on August 6, 1955, read with the Proclamation of the President of India, dated March 22, 1956. So applying the definition of ‘customs frontiers’ it is clear that, in the instant case, the sales were effected by transfer of documents of title long after the goods had crossed the customs frontiers of India. We have already stated that the ships carrying the goods in question were all in the respective harbours within the State of Madras when the sales were effected by the assessees by transfer of documents of title to the buyers. If so, it follows that the claim made by the assessees that the sales in question were sales in the course of import, has been rightly rejected by the assessing authority. Unfortunately, though various aspects seem to have been pressed before the High Court by the State of Madras, this notification of August 6, 1955, is-sued by the Government of India, defining the ‘customs frontiers’ of India, was not brought to the notice of the High Court.”

24. In the case of Vellanki Frameworks v. Commercial Tax Officer, Visakhapat-nam,⁵² the expression ‘in the course of import’ has been discussed in the context of a sale or purchase of goods for the purpose of levy of tax under the Cen-tral Sales Tax Act. The Supreme Court held:

“24. The meaning, connotation, effect and operation of the said pro-visions related with “sale in the course of import” had come up for consideration in several decisions of this Court and had been the subject-matter of adjudication in variegated factual setups concern-ing the transactions and the dealings of the parties involved. Before entering into all the necessary niceties, we may usefully notice that the phrase “sale in the course of import” carries three essential features (1) that there must be a sale; (ii) that goods must actually be imported into the territory of India; and (iii) that the sale must be part and parcel of the import. A sale would become part and parcel of import if it either occasions such import or if it occurs by way of a transfer of document of title to the goods before the goods cross the customs frontiers of India.

25. Having taken note of the essential features of the phrase “sale in the course of import”, we may now refer to the cited decisions, to find the expositions therein and examine their applicability to the present case.

25.1. In the Constitution Bench decision of this Court in J.V. Gokal & Co., the petitioner company entered into two contracts on 24-3-1954 and 15-4-1954 with the Government of India for selling two consignments of sugar- One of 9500 long tons of Peruvian origin and the other of 25,000 metric tons of continental origin. The petitioner placed or-ders with dealers in foreign countries. Some weeks before the vessel carrying the goods in question arrived at the Bombay harbour i.e. when the vessels were on the high seas, the Government of India received 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 Assessment Year 1954-55, the petitioner was assessed to sales tax where the Sales Tax Officer de-ducted the price of the said two sales from the petitioner’s turnover. However, on 31-1-1958, the Assistant Collector of Sales Tax issued notice to the petitioner, proposing to review the said assess-ment. 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 the said two transac-tions. The petitioner questioned the demand notice consequently issued against it by way of the pe-tition 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 examined the questions as to what does the phrase “in the course of the import of the goods into the territory of India” convey and when could it be said that a sale has taken place in the course of import journey. This Court referred to various decisions including the opinions expressed in Shanmugha Vilas Cashewnut Factory and said as under: (J.V. Gokal & Co. case, AIR pp. 598-99, paras 910)

“9…. We respectfully agree with the aforesaid observations of the learned Judges. The course of the import of the goods may be said to begin when the goods enter their import journey i.e. when they cross the customs barrier of the foreign country and end when they cross the customs barrier of the importing country.

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25.1.1. The Court thereafter proceeded to summarise the legal posi-tion in respect of import sale in the following words: (J.V. Gokal & Co. case, AIR p. 599, para 11)

“11. The legal position vis-à-vis the import-sale can be summarised thus (1) The course of import of goods starts at a point when the goods cross the customs barrier of the foreign country and ends at a point in the importing country after the 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.”

25. In the matter of State of Travancore-Cochin & Ors (supra), relied upon by the Petitioners, the Constitution Bench of the Supreme Court was dealing with appeals from an order of the High Court of Travancore-Cochin quashing assessments severally made on the respondents therein under the Travancore-Cochin General Sales Tax Act. While considering the extent of protec-tion of Article 286(1)(b) of the Constitution of India available to the Respondents on cashew nut purchases, the Apex Court elaborated the meaning of the term ‘in the course of’ as under:

“14. As regards sales or purchases effected in the State by transfer of shipping documents while the goods are still in transit, we have already observed that the words “in the course of” imply a movement or progress and, therefore, a beginning and an end of such move-ment or progress. As clause (1)(b) is concerned only with exempting certain sales or purchases from taxation by the States in this country, it is sufficient to determine where the course of export begins and where the course of import ends. In this connection, it is useful to remember that the power to make laws with respect to duties of customs including export duties (entry 83 of List I) and also with respect to import and export across customs frontiers and the definition of customs frontiers (entry 41 of List 1) is vested exclusively in the Central Legislature, and detailed provisions have been made in the Indian Sea Customs Act, 1878, for the levy of customs duties by the officers of the Central Government who are stationed along customs frontiers as defined by the Central Government where, after appraising the goods exported or imported, the duties chargeable, if any, are computed and levied, and it is not until this process is completed that the goods can be shipped for transporta-tion or cleared by the consignee or his representatives as the case may be. It would seem, therefore, logical to hold that the course of the export out of, or of the import into, the territory of India does not commence or terminate until the goods cross the customs barrier. It is, however, to be noted that the question of imposing sales tax on transfer of goods in the course of export would not often arise in practice for, where the goods are transported pursuant to a contract of sale already conclud-ed with a foreign buyer and the shipping documents have been forwarded to him, any further sale of such goods by the Indian seller is impossible, and where the export trade is conducted through rep-resentatives or branch offices the sale by the latter of the exported goods usually takes place abroad and would not then be subjected to tax by the State in India. It is in relation to import of goods from abroad that the question of exemption assumes practical importance. It is well known that sales or purchases by transfer of shipping documents while the goods are in transit are a characteristic fea-ture of foreign trade and as they take place in the course of import as defined above, and are regard-ed commercially as incident to the import transaction, they fall within the terms of clause (1)(b) and would be entitled, in our view, to the protection of that clause, if the State is constitutionally compe-tent to tax such sales, as to which we express no opinion. Our conclusions may be summed up as follows:

(1) Sales by export and purchases by import fall within the exemption under article 286 (1)(b). This was held in the previous decision.

(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 frontier are not within the exemption.

(3) Sales in the State by the exporter or importer by transfer of ship-ping documents while the goods are beyond the customs frontier are within the exemption, assum-ing that the State power of taxation extends to such transactions.”

26. The ratio in the above decision does not aid the Petitioners. In fact, the process of transfer of title in the goods in the course of import is separate, independent and distinct from a DO entitling the person named therein or the holder to the delivery of goods. The transfer of title or ownership in the goods is independent of the entitlement of a person to receive delivery after discharging the dues of the carrier.

27. Both parties have relied upon the decision in the case of JV Gokal & Co (supra) which once again discusses the phrase ‘in the course of’. The relevant portion of the judgment reads as thus:

“9. What does the phrase “in the course of the import of the goods into the territory of India” convey? The crucial words of the phrase are “import” and “in the course of”. The term “import” signifies etymologically “to bring in”. To import goods into the territory of In-dia therefore means to bring into the territory of India goods from abroad. The words “course” means “progress from point to point”. The course of import, therefore, starts from one point and ends at another. It starts when the goods cross the customs barrier in foreign country and ends when they cross the customs barrier in the importing country. These words were subject of judicial scrutiny by this Court in State of Travancore-Cochin v. Shunmugha Vilas Cashew Nut Facto-ry. Construing these words, Patanjali Sastri C.J., observed at p. 62:

“The word ‘course’ etymologically denotes movement from one point to another, and the expression ‘in the course of’ not only implies a period of time during which the movement is in progress but postulates also a connected relation.”

As regards the limits of the course, the learned Chief Justice observed at p. 68:

“It would seem, therefore, logical to hold that the course or the ex-port out of, or of the import into the territory of India does not commence or terminate until the goods cross the customs barrier.”

Das, J., as he then was, in his dissenting judgment practically agreed with Patanjali Sastri, C. J., on the interpretation of the said words. The learned Judge expressed his view at p. 92 thus:

“The word ‘course’ conveys to my mind the idea of a gradual and continuous flow, an advance, a journey, a passage or progress from one place to another. Etymologi-cally it means and implies motion, a forward movement. The phrase ‘in the course of’ clearly has ref-erence to a period of time during which the movement is in progress. Therefore, the words “in the course of” the import of the goods into and the export of the goods out of the territory of India ob-viously cover the period of time during which the goods are on their import or export journey.”

We respectfully agree with the aforesaid observations of the learned Judges. The course of the import of the goods may be said to begin when the goods enter their im-port journey i.e. when they cross the customs barrier of the foreign country and end when they cross the customs barrier of the importing country.

12. The next question is whether the sales by the petitioner to the Government of India are sales in the course of import. From the facts narrated supra, it is seen that the petitioner, pursuant to the earlier contracts entered into with the Government of India, delivered the shipping documents, including the bill of lading to the Government against payment when the goods were on the high seas. In view of the foregoing discussion, it should be held that the sales fall under the fourth principle and therefore they were sales that took place in the course of import of the goods into India. A bill of lading is a writing, signed on behalf of the owner of the ship in which goods are embarked, acknowledging the receipt of the goods, and undertaking to deliver them at the end of the voyage subject to such conditions as may be mentioned in the bill of lading. It is well settled in commercial world that a bill of lading represents the goods and the transfer of it operates as a transfer of the goods. The legal effect of the transfer of a bill of lading has been enunciated by Bowen, L.J., in Sanders Brothers v. Maclean & Co. thus at p. 341:

“The law as to the endorsement of bills of lading is as clear as in my opinion the practice of all European merchants is thoroughly understood. A cargo at sea while in the hands of the carrier is necessarily incapable of physical delivery. During this period of transit and voyage, the bill of lading by the law merchant is universally recognised as its symbol, and the en-dorsement and delivery of the bill of lading operates as a symbolical delivery of cargo. Property in the goods passes by such endorsement and delivery of the bill of lading, whenever it is the intention of the parties that the property should pass just as under similar circumstances the property would pass by an actual delivery of the goods. And for the purpose of passing such property in the goods and completing the title of the endorsee to full possession thereof, the bill of lading, until complete delivery of the cargo has been made on shore to some one rightfully claiming under it, remains in force as a symbol, and carries with it not only the full ownership of the goods, but also all rights cre-ated by the contract of carriage between the shipper and the shipowner. It is a key which in the hands of a rightful owner is intended to unlock the door of the warehouse, floating or fixed, in which the goods may chance to be.”

We have quoted the passage in extenso as it clearly and fully states the law on the subject. It is not disputed that the law in India is also similar to that in England. The delivery of the bill of lading while the goods are afloat is equivalent to the delivery of the goods themselves. The learned counsel concedes that ordinarily that will be so, but contends that in the present case, the contract clearly indicates that the intention of the parties was that till actual deliv-ery was made the property in the goods would not pass to the buyer. Both the contracts are similar in terms and they follow the standard terms prescribed by the Government.”

28. Thus, the Court has found that the course of the import of
goods may be said to begin when the goods enter their import journey, i.e., when they cross the customs barrier of the foreign country and end when they cross the customs barrier of the importing country.

29. Petitioners have also placed reliance on the decision in the matter of State of Kera-la & Ors v. Fr. William Fernandez & Ors (supra). This judgment also per-tains to entry tax levied on goods imported from different countries and brought into the local area of a State. The legislative competence of the State Legislature to impose entry tax on the goods im-ported entering into local area of a State was questioned in this case.

“95. As noted above, the restriction in the legislative power of the State as contained in Article 286 is with regard to taxing on sale or purchase of goods which takes place outside the State or in the course of import of the goods or services or export of goods or ser-vices. The restriction of Article 286 does not ipso facto be placed while considering the legislative field of the State under Entry 52 and by virtue of Article 286 no restriction can be put on the legisla-tive competence of the State in the field as defined under Entry 52. However, the concept underlined in “the course of import of the goods” as in Article 286(1)(b) can very well be applied to find out as to when the import of goods come to an end.

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101. This Court had also occasion to consider the issue as to when import would be completed in Kiran Spg. Mills v. Collector of Customs, the following was held in para 6: (SCC p. 231)

“6…. The import would be completed only when the goods are to cross the customs barriers and that is the time when the import duty has to be paid and that is what has been termed by this Court in Sea Customs case (SCR at p. 823) as being the taxable event. The taxable event, therefore, being the day of crossing of customs barrier, and not on the date when the goods had landed in India or had entered the territorial waters, we find that on the date of the taxa-ble event the additional duty of excise was leviable under the said Ordinance and, therefore, addi-tional duty under Section 3 of the Tariff Act was rightly demanded from the appellants.”

102. Similar view was expressed in Garden Silk Mills Ltd. v. Un-ion of India in para 18, which is to the following effect: (SCC p. 752)

“18. It would appear to us that the import of goods into India would commence when the same cross into the territorial waters but continues and is completed when the goods become part of the mass of goods within the country; the taxable event being reached at the time when the goods reach the customs barriers and the bill of entry for home consumption is filed.”

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106. There cannot be any dispute to the proposition as laid down by this Court in the above case that the scope and ambit of the constitutional entries have to be given a wide meaning and scope. There is no inhibition on Parliament in exercising its legislative power under Entry 41 List I to define “customs frontiers” and further legislate with regard to duties of customs. Even if we do not confine to the definition of “imported goods” as given in the Customs Act, 1962, the generally accepted meaning and definition of “import” as has been laid down in cases as noted above is that import commences when the goods leave the customs frontiers of the country from where the goods are imported and continue when the goods enter into the customs frontiers of im-ported country and ends when goods are released for home consumption. Till the event of import is over, parliamentary legislation, the control of the Union continues for ensuring the realisation of the customs duties.

107. In view of the foregoing discussions, we are of the clear opinion that taxing event with regard to levy of customs duty by Parliament and levy of entry tax by the States under List II Entry 52 are entirely different and separate. The taxing event pertaining to levy of entry tax occurs only after the taxing event of levy of customs duty is over. Thus, the State legislation imposing entry tax in no manner encroaches upon the parliamentary legislation under Entry 41 and Entry 83. There is no invalidity in levy of entry tax by the States.”

30. Viewed from another perspective, the Petitioners appear to be equating the phrase ‘customs frontier’ with a geographical boundary. Correctly understood, and as clearly explained by the Su-preme Court in more than one decision, the ‘customs frontier’ is a concept in a time se-quence, viz., that point in the process where the taxing and jurisdictional remit of the customs ends. This has nothing at all to do with the physical or geographical borders. This is the point Dr Saraf makes when he says there is no prohibition on where a stamp duty tax may be applied — it is possible even at dockside, at the point of disembarkation. Therefore, and as a logical consequence, the minute the customs duty is paid and cleared (along with any other dues legitimately recoverable by customs), the customs ‘frontier’ ends. The DO in question in this group of cases only springs into being when that frontier has ended, i.e., after the process of assessment and recovery of customs duty is complete. The BoL, a document of title, originates when goods are laden on the vessel. It is the first in point of time. The BoE, as the Gujarat High Court judgments point out, is for the purposes of customs duty assessment. This is second in point of time. The DO comes into existence third in time sequence, after the customs duty, dues, freight, etc., are paid and the goods are lien-free, i.e., available for delivery. The ‘customs barrier’ is, therefore, not a physical ‘barrier’ per se, but speaks of a point in time after the role of customs has ended.

31. Thus, a parallel can be drawn between the taxing power of the State in respect of levy of entry tax in the aforesaid decision and levy of stamp duty on a DO in the present case. Article 286(1)(b) of the Constitution restricts the power of the State to impose tax on the supply of goods imported into the country. The imposition of stamp duty on a DO in no manner encroaches upon the parliamen-tary legislature in Entry 83 of List I of the With Schedule.

32. Another contention of the Respondent-State was in respect of the shipper’s lien on the goods. Dr Saraf drew our attention to Section 170 of the Contract Act, 1872 which engrafts the principle of a bailee’s lien on goods handed over to him for some purpose. Referring to the discussion in the C J Woollen Mills case (supra), he says that the relation-ship between the importer and the carrier of goods in whose favour the BoL has been consigned and who has stored the goods in his custody, is governed by the contract between the parties. Juxtapos-ing Section 170 of the Contract Act, if somebody has received the articles on being delivered to him and is required to store the same until cleared for which he might have borne the expenses, he has a right to detain them until his dues are paid. Thus, despite paying customs duty and getting the requi-site customs clearance, if the charges of the carrier remain unpaid, the shipper/carrier shall have a lien on the goods and till such time its dues remain outstanding, the shipper is not bound to direct release of the goods. Thus, there is a requirement of a DO issuing a release order by the shipper to the custodian/warehouse declaring that all its dues are settled and the lien it holds is extinguished. The DO in the present circumstances has nothing to do with the customs duty nor the clearance by the customs authority for domestic consumption. Dr Saraf candidly says that if the Petitioners are able to bye-pass the requirement of a DO, the State will not have any claim of stamp in such a situa-tion. But the moment there is a DO, the same will not be valid or accepted by the custodian without proof of payment of the stamp duty.

33. Another contention raised by the Petitioners is that a DO is not a document of title under Article 29 of the MSA and hence, it is not an ‘instrument’. Section 2(l) of the MSA itself defines an ‘instru-ment’ which includes every document which creates any right or liability but specifically does not include certain documents mentioned therein including a BoL. As discussed above, it is a DO which entitles the person named therein to take delivery of the goods after discharging the dues of a ship-per. It is only after the shipper’s charges are cleared that his lien on the goods is extinguished. A right to possession of the goods is distinct from ownership of the goods. Although title to goods includes ownership and possession, the former may exist without the latter. Ownership denotes de jure possession, but another person may be in de facto possession of the goods. The distinction between title and possession is self-evident. A BoL may, for instance, be transacted in a sale in the high sea. Title would pass. But the new/substituted consignee would not get physical pos-session of the goods sold, the high seas’ sale notwithstanding, until the goods were cleared through customs on arrival at the destination port. That possession may happen with or without a DO; and it is for each state government to decide whether or not to levy stamp duty on the DO. Consequently, the DO is not a BoL, nor a BoE, and it is not covered by any exclusion of the BoL or the BoE. As in the present case, even if we were to accept the contention of the Petitioners that the BoL constitutes title to the goods, without a DO, the owner or the consignee may not have possession of the goods without payment of the carrier’s charges. Only upon release of the shipper’s lien is the consignee entitled to delivery/possession of the goods. Thus, it is not necessary for the DO to be a document of title to fall within the purview of the definition of ‘instrument’.

34. Similarly, the contention of the Petitioners that a DO does not carry any assessable value for the levy of stamp duty is fallacious. Once we have held that the State has not encroached upon the legis-lative field of the Union, merely because the amount of stamp duty is computed on the valuation of the goods does not preclude a DO from being an ‘instrument’ chargeable to stamp duty by the State.

35. We agree with Dr Saraf’s contention that it is not the transaction which is liable to stamp duty but the ‘instrument’ and the mere fact that the computation is on the basis of value of the property or transaction recorded in the ‘instrument’, does not in any manner make the same a tax on the transaction. The Supreme Court in the case of Hindustan Lever (supra) has observed as under:

“22. The Court held that the thing which is made liable to stamp duty is the “instrument”. It is not a transaction of purchase and sale, which is struck at, it is the “instru-ment” whereby the purchase and sale are effected which is struck at. It is the “instrument” whereby any property upon the sale thereof is legally or equitably transferred and the taxation is confined only to the instrument whereby the property is transferred. If a contract of purchase or sale or a conveyance by way of purchase and sale, can be, or is, carried out without an instrument, the case would not fall within the section and no tax can be imposed. Taxation is confined to the instrument by which the property is transferred legally and equitably transferred.”

36. Finally, we come to the charge of discrimination between importers in the State of Gujarat and those in Maharashtra in view of the decision of the Gujarat High Court in the matter of State of Gujarat (supra) as well as Essar Steel Ltd (supra). This decision was on a bunch of petitions wherein several importers in the State of Gujarat challenged notices issued by the Authori-ties and relevant guidelines related to charging stamp duty on BoE. The question before the Court was whether stamp duty was liable to be paid on the basis of BoE and such BoE was a DO in respect of goods. The goods in that case, were directly transferred through pipeline or private jetty to their bonded storage tanks situated outside the premises of the port. They were never stored in a warehouse or deposited in wharf. A Single Judge of the Gujarat High Court while holding that deliveries are effected against BoL, further held that it is a document of title enabling the holder or transferee/endorsee thereof to take delivery of the goods. A BoE which is filed with the Customs Au-thorities so as to enable them to decide the question about necessity or otherwise of payment of customs duty is not an ‘instrument’ creating any right or liability and does not amount to a ‘DO’ within the meaning of Article 24 of the Bombay Stamp Act. The State of Gujarat challenged the said decision before the Division Bench. The Division Bench discussed decisions of various High Courts and the Supreme Court. After a detailed examination of the definition of ‘instrument’ contemplated in Entry 24 of the Bombay Stamp Act, the Division Bench held as follows:

“71. We have noticed Entry 24 of the Stamp Act; bare perusal of which would show that the instrument contemplated there as being a delivery order must be such as would entitle the person therein named or his assigns or the holder thereof, to the delivery of any goods. The words “person therein named or his assigns or the holder thereof” would show that the instrument contemplated must be such as is negotiable i.e. capable of endorse-ment/assignment/transfer and which would enable the assignee of the person named therein or the holder of the instrument to take delivery. No person other than the importer named in the Bill of En-try is entitled to seek clearance of the goods from Customs and an importer cannot endorse/assign the Bill of Entry and there is no provision under the Customs Act, 1962 which entitles an assignee of an importer or holder to seek customs clearance based on the Bill of Entry filed by the importer. This would clearly go to show that Bill of Entry is not an instrument contemplated by Entry 24.

75. The ‘bill of entry’ signifying itself is an order of assessment has also been held by the Supreme Court in the case of Escorts Limited v. Union of India [supra] and thus, it can be held that it is not an order of delivery, therefore, it cannot be held that authorities for clearance of goods for home consumption under Sec. 47 of the Customs Act. For the purpose of clearance, entry of goods of importation is required under Sec. 46 enabling the importer of goods to present to the proper officer a bill of entry for home consumption or warehousing. But it does not automatically become delivery order as distinct and different from the clearance of the goods.

76. We hereby hold that by presentation of ‘bill of entry’ merely on clearance of goods is given for home consumption or for warehousing, and is distinct and different from that of delivery of goods.

37. The Division Bench further went on to hold that BoL is a writing signed on behalf of the owner of the ship in which the goods are embarked acknowledging the receipt of goods and undertaking to deliver them at the end of the voyage subject to such conditions as may be mentioned in the BoL. Thus, the Court has held a BoL to be a ‘DO’ thereby modifying the decision of the Single Judge to this limited extent. The Division Bench, however, relied upon Regulation 16 of the Gujarat Maritime Board (Landing and Wharf age) Regulations, 1956. Regulation 16 reads as thus:

“16. Delivery and admittance of goods on production of delivery or-der and shipping order:

(1) The goods landed at a landing place shall be delivered by the Port Authority only on production of a bill of lading, duly endorsed by the agents in warding the vessel in customs or a delivery order in lieu of an endorsed bill of lading, or on production of full specifications and invoices showing the measurement or weight of the packages as required for the purpose of assessment and the duplicate bill of entry from the Customs Authority duly passed.

(2) xxxx”

38. The Petitioners have not shown us any such equivalent regulation issued by the State of Maha-rashtra. Even on the merits of the decision, the decision does not assist the Petitioners. Firstly, the decision itself clearly distinguishes the attributes of a BoE and a ‘DO’. The function of a BoE is only to facilitate computation of the customs duty by Customs Authorities. By itself, it does not create any right or liability entitling any person named therein or his assign to get delivery of any goods lying in the dock or port or warehouse. Hence, the Gujarat High Court has rightly held that it is not an ‘instrument’ nor an order of delivery. This finding itself establishes the existence of a separate document directing delivery of goods which is known as a ‘DO’. The Gujarat High Court has simply held the BoE to be distinct from a DO. Secondly, Regulation 16 of the Gujarat Maritime Board (Landing & Wharfage) Regulations, 1956 provides that a BoL apart from being a title document is also an order relating to delivery of goods. Based on this, the Gujarat High Court held a BoL to also be a ‘DO’. However, this finding based upon a provision of Gujarat Regulations does not justify the claim of the Petitioners that the ‘DO’ is an extension of a ‘BoL’ and since BoL is specifically excluded from the definition of ‘instrument’ as defined in Section 2(l) of the MSA, consequently, every DO also follows the exclusion.

39. Furthermore, the Petitioners’ arguments seek to impermissibly and unacceptably confuse dis-tinct concepts. First, the DO is sought to be swept in with the concept of a BoL and its exclusion from the definition of ‘instrument’ in Section 2(l) of the MSA. Second, the attempt is to include the DO with a BoE, which was the subject matter of the challenge in the Gujarat High Court cases. The DO is neither a BoL nor a BoE. It is therefore not covered by the exclusion of either of these.

40. We have no hesitation in holding that the law on this subject operating in the State of Gujarat has no application in the State of Maharashtra for the reasons mentioned above. The Petitioners’ attempt to question the legislative competence of the State of Maharashtra to levy stamp duty on a DO is spurred by judicial intervention by the Gujarat High Court in a related matter and thus, fails.

Conclusion:

41. In view of the foregoing discussion, we hold that the action of the State of Maharashtra in levying stamp duty on ‘DO’ as provided in Article 29 of Schedule I of the MSA is well within the legislative competence of the State and does not intrude upon the legislative domain of the Parliament as re-served in Entries 41 and 83 of List I of Schedule VII of the Constitution of India and is not ultra vires Article 246(1), 286(1)(b) and 286(2) of the Constitution of India.

43. Since we hold as such, the further question of granting refund of payments made by the Petitioners towards stamp duty is redundant.

44. Rule is discharged. There shall be no order as to costs.

45. All interim applications pending therein also stand disposed.

Notes:

¹ 1952 SCC OnLine Mad 229.

² (2002) 5 SCC 203.

³ 237 US 1 (1915).

⁴ 181 US 283 (1901)

⁵ 25 US 419 (1827)1

⁶ 288 US 218 (1933).

⁷ (2005) 2 SCC 104.

⁸ (2012) 3 SCC 204.