IMPORTANT POINT
If any transaction of sale or purchase takes place when the goods are being imported in India or they are being exported from India, no State can impose any tax thereon.

Headnote:Karnataka Value Added Tax Act, 2003- Central Sales Tax Act, 1956-Section 5- Goods sold at the duty free shops at the Bengaluru International Airport by appellant–Imposition of sales tax on such goods by State –If justified-Appellant’s case that Constitution does not permit any State to impose tax on sale or purchase of goods where such sale or purchase takes place outside the State or in the course of the import of the goods into or export of goods out of the territory of India- Goods which had been brought from foreign countries by appellant had been kept in bonded warehouses and they were transferred to duty free shops situated at International Airport of Bengaluru - When the goods were kept in the bonded warehouses, it could not be said that said goods had crossed the customs frontiers-Hence before the goods were imported in the country, they had been sold at the duty free shops of appellant- No tax on sale or purchase of goods could be imposed by any State when the transaction of sale or purchase takes place in the course of import of goods into or export of the goods out of the territory of India-No dispute that the duty free shops of the appellant situated at the International Airport of Bengaluru were beyond the customs frontiers of India –Hence held that State of Karnataka had no right to tax any such transaction which took place at the duty free shops owned by appellant which were not within the customs frontiers of India-Appeal allowed (Paras 18 to 20, 23, 24, 32)
       Facts of the Case :
        A. The appellant, M/s Hotel Ashoka, is managed by India Tourism Development Corporation Limited . The Corporation is having its duty free shops at all major International Airports in India. At the said duty free shops, appellant sells several articles including liquor to foreigners and also to Indians, who are going abroad or coming to India by air. In the return filed under the Act as well as under the Central Act for the relevant period, appellant had stated that though liquor, cigarettes, perfumes and food articles were sold at the duty free shops at the Bengaluru International Airport, no tax was payable by the appellant as the goods which had been sold at the duty free shops were sold directly to the passengers and even the delivery of goods at the duty free shops was made before importing the goods or before the goods had crossed the customs frontiers of India.
        B. In spite of said stand of the appellant, Assistant Commissioner of Commercial Taxes, by an assessment order directed the appellant to pay a sum of Rs.4,20,70,900/- by way of sales tax.
        C. Being aggrieved by the assessment order passed by the Assistant Commissioner of Commercial Taxes appellant filed writ petition which was rejected on the ground that the appellant had not exhausted equally efficacious alternative remedy available to it under the provisions of the Act. Being aggrieved by the view expressed by Single Judge, appellant preferred Writ Appeal which was also dismissed.
        D. Present appeal has been filed against said order of High Court.
       Findings of the Court :
        A.Goods which had been brought from foreign countries by appellant had been kept in bonded warehouses and they were transferred to duty free shops situated at International Airport of Bengaluru. When the goods were kept in the bonded warehouses, it could not be said that said goods had crossed the customs frontiers. Hence before the goods were imported in the country, they had been sold at the duty free shops of appellant.
        B.No tax on sale or purchase of goods could be imposed by any State when the transaction of sale or purchase takes place in the course of import of goods into or export of the goods out of the territory of India. No dispute that the duty free shops of the appellant situated at the International Airport of Bengaluru were beyond the customs frontiers of India .Hence held that State of Karnataka had no right to tax any such transaction which took place at the duty free shops owned by appellant which were not within the customs frontiers of India. Appeal was allowed.

JUDGMENT

Anil R. Dave, J.

CIVIL APPEAL NO. 2560 OF 2010

1. In this appeal, an order dated 9th June, 2009 passed by the High Court of Karnataka, in Writ Appeal No. 881 of 2009 (T-CST) is challenged by the appellant, who is an assessee and registered as a dealer under the provisions of the Karnataka Value Added Tax Act, 2003 (hereinafter referred to as ‘the Act’). Facts giving rise to the present litigation in a nutshell are as under:

2. The appellant, M/s Hotel Ashoka, is managed by India Tourism Development Corporation Limited (hereinafter referred to as ‘the Corporation’). The Corporation is having its duty free shops at all major International Airports in India. At the said duty free shops, the appellant sells several articles including liquor to foreigners and also to Indians, who are going abroad or coming to India by air. We are concerned with a duty free shops situated at an International Airport at Bengaluru. The appellant is registered as a dealer under the Act as well as under the Central Sales Tax Act, 1956 (hereinafter referred to as ‘the Central Act’). In the return filed under the Act as well as under the Central Act for the relevant period, the appellant had stated that though liquor, cigarettes, perfumes and food articles were sold at the duty free shops at the Bengaluru International Airport, no tax was payable by the appellant as the goods which had been sold at the duty free shops were sold directly to the passengers and even the delivery of goods at the duty free shops was made before importing the goods or before the goods had crossed the customs frontiers of India.

3. According to the appellant, no tax can be levied under the Act or under the Central Act when the goods are sold in the course of import or before the goods have crossed the customs frontier of India as per the provisions of Section 5 of the Central Act and so far as the Act is concerned, no tax can be levied, if the sale takes place before the goods crosses the customs frontiers of India as no State can tax the sale or purchase of goods which are outside the concerned State i.e. the State of Karnataka in the instant case, as per the provisions of Article 286 of the Constitution of India. In spite of the above stand of the appellant, the Assistant Commissioner of Commercial Taxes (Transition -12) Bengaluru, by an assessment order dated 28th May, 2008 directed the appellant to pay a sum of Rs.4,20,70,900/- by way of sales tax.

4. Being aggrieved by the assessment order passed by the Assistant Commissioner of Commercial Taxes Bengaluru, the appellant filed W.P.(C) No. 10989 of 2008 in the High Court of Karnataka which was rejected on 11th February, 2009, on the ground that the appellant had not exhausted equally efficacious alternative remedy available to it under the provisions of the Act. The learned Single Judge did not consider merits of the case for the aforestated reason.

5. Being aggrieved by the view expressed by the learned Single Judge, the appellant preferred Writ Appeal No. 881 of 2009(T-CST) before the Division Bench of the High Court which was also dismissed on 9th June, 2009 as the Division Bench found substance in the observations made by the learned Single Judge, hence the appellant has filed this appeal before this Court.

6. Learned counsel appearing for the appellant drew our attention to the provisions of Article 286 of the Constitution and Section 5 of the Central Act. He submitted that the Constitution does not permit any State to impose tax on sale or purchase of goods where such sale or purchase takes place outside the State or in the course of the import of the goods into or export of the goods out of the territory of India.

7. He further submitted that in the instant case, all sales had taken place at the duty free shops of the appellant before the goods had crossed the customs frontiers of India. He stated that the goods, which are the subject matter of the present litigation were brought in India and had been kept at

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2012 Supreme(SC) 104

2012 (1) Supreme 725SUPREME COURT OF INDIAD.K. Jain and Anil R. Dave, JJ.M/s Hotel Ashoka (Indian Tour.Dev.Cor.Ltd.) — AppellantversusAssistant Commissioner of Commercial Taxes & Anr. — RespondentsCivil Appeal No. 2560 of 2010withCivil Appeal Nos. 10404-10412 of 2010Decided on : 3-2-2012

IMPORTANT POINT If any transaction of sale or purchase takes place when the goods are being imported in India or they are being exported from India, no State can impose any tax thereon.

Cases Referred (7)

IMPORTANT POINT
If any transaction of sale or purchase takes place when the goods are being imported in India or they are being exported from India, no State can impose any tax thereon.