Assessee had to pay Central Sales Tax as Sale wasn’t a High Seas Sale since bill of entry included his name as Importer instead of buyer’s name
Vellanki Frame Works (Petitioner) was carrying on business in the State of Andhra Pradesh.The Petitioner vide a quadri-partite Agreement between Indus Tropics Ltd. (Indus), the Petitioner, M/s. Radha Industries, Lucknow, U.P. (the Purchaser or Radha) and M/s. World Best Trading Co. (L.L.C.), Dubai (U.A.E) (the WBT), sold the goods to Radha (impugned sale). Pursuant to the quadri-partite Agreement dated January 21,2005 and another High Sea Agreement dated December 12,2005, Indus purchased the goods and sold them to the Petitioner, who purchased the same from Indus as the agent of Radha, and transferred the documents on high seas sale basis in favour of Radha. In turn,Radha agreed to pay the Petitioner, commission of 2% plus bank charges while the Petitioner paid the entire amount to Indus without retaining a penny as commission.
The Petitioner claimed that impugned sale was effected by transfer of documents of title before the goods had crossed the Customs frontiers of India and hence declared impugned saleas a sale in the course of import/ high sea sales and claimed exemption under Section 5(2) of the Central Sales Tax Act, 1956 (the CST Act) on the turnover of Rs.1,14,86,342/- and Rs.4,05,09,427/- respectively.
The Departmentvide assessment orders dated January 20,2010 and May 18,2010 for the assessment years 2005-06 and 2006-07, denied the benefit of aforesaid exemption, treating the transaction as an inter-state sale falling under Section 3(a) of the CST Act.Being aggrieved, the Petitioner filed twoWrit Petitions before the Hon’ble High Court of Andhra Pradesh.
The Hon’ble High Court of Andhra Pradesh held the following:
- 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 affected by a transfer of documents of title to the goods before the goods have crossed the Customs frontiers of India;
- Crossing the Customs frontiers means crossing the limits of the area of the Customs station in which the imported goods or exported goods are ordinarily kept before clearance by Customs Authorities in terms of Section 2(ab) of the CST Act read with Section 2(12) and (13) of the Customs Act, 1962 (“the Customs Act”);
- In terms of Section 2(23) of the Customs Act, import means bringing into India from a place outside India. Further, in terms of Section 2(26) of the Customs Act, importer also include any owner or any person who holds himself out to be the importer;
- The person who holds himself out to be the importer of the goods must furnish proof of being the importer before the goods are cleared for home consumption. Since, the name of the Petitioner has been reflected in the bill of entry for ex-bond (home consumption) and not that of Radha, so the Petitioner is an importer in the instant case;
- Further, in terms of Section 2(25) of the Customs Act, 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.In the instance case, impugned sale was made after the goods were cleared for home consumption, hence liable to Central Sales tax;
- Furthermore, to regulate and control on imports, the Customs Act enjoins certain liabilities on the carriers as they are required to bring in the imported cargo into the country for unloadingonly after furnishing detailed information to Customs in Import General Manifest (IGM).IGM interalia reflect the name of the importer. Hence, impugned sale is not a high seas sale;
- Either the clearing house agent or the importer can clear the imported goods for home consumption. As evident from the bill of entry, the goods were imported in the name of the Petitioner and cleared with the assistance of the customs house agent.Hence, the goods were not cleared by Radha imply that the goods were imported by the Petitioner on high seas sale but subsequent impugned sale to Radha could only have been effected after the goods had been cleared for home consumption.
- As the bill of entry records the Petitioner’s name as the importer and it was he who was assessed to Customs duty and not Radha, make it ample clear that impugned sale is not a high seas sale. Impugned sale could only have been effected after the Petitioner was assessed to Customs duty and he had cleared the goods for home consumption.
Thus, the Hon’ble High Court rejected the contention of the Petitioner and held that the sale made by the Petitioner to Radha was not in course of import/high sea sales but was an inter-state sale, liable to Central Sales tax.