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2012 Supreme(SC) 105
Supreme Court of India
D.K. JAIN & ANIL R. DAVE
M/s. Hotel Ashoka (Indian Tour.Dev.Cor.Ltd.)
Versus
Assistant Commissioner of Commercial Taxes & Another
CIVIL APPEAL NO. 2560 OF 2010 WITH CIVIL APPEAL NOs. 10404-10412 OF 2010
Decided on: 03-02-2012
For the Appellant :Joseph Vellapally, Senior Advocate, (Randhir Chawla, Ms. Renu Sehgal, Kumar Rajesh Singh and Praveen Kumar, Advocates. For the Respondents:K.N. Bhat and K.K. Sharma, Senior Advocates (Anantnarayana M.G., V.N. Raghupathy, S. Wasim A. Qadri, Ms. Gargi Khanna, Ms. Shuchismita, Zaid Ali and Ms. Anil Katiyar), Advocates.
IMPORTANT POINT
Goods kept in bonded warehouses and sold directly at duty free shops are not taxable.
Headnote:(a) Central Sales Tax Act, 1956 – Section 5 and Article 286, Constitution of India – Goods brought from foreign countries kept in bonded warehouses – Transferred to duty free shops at International Airport as and when stock of goods exhausted – Goods kept in bonded warehouses cannot be said to have crossed customs frontiers – Goods lying in bonded warehouses are deemed to be kept outside customs frontiers –Thus, the goods sold before they were imported in the country – No tax on the sale or purchase of such goods can be imposed by any State. (Para 18, 19, 23, 24)
AIR 1952 SC 366; AIR 1953 SC 333; AIR 1960 SC 595; AIR 2000 SC 3448; (1997) 10 SCC 1; (1974) 1 SCC 459; (1975) 2 SCC 47 – Referred
(b) Constitution of India – Article 226 – Alternative remedy – Rushing to High Court without exhausting efficacious statutory remedy of appeal – Not proper. (Para 28)
(c) Central Sales Tax Act, 1956 – Section 2(11) and Article 286, Constitution of India – Customs frontier and geographical territory – Are different – Though the transaction might take place within India but technically, transactions at duty free shops would be said to have taken place outside India – Delivery need not always be through transfer of documents – Physical delivery is transfers the title of the goods – Not exigible to tax. (Para 30, 31)
Facts of the case:
The appellant, M/s Hotel Ashoka, is managed by India Tourism Development Corporation Limited. The appellant is registered as a dealer under Karnataka Value Added Tax Act, 2003 as well as under the Central Sales Tax Act, 1956. 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.
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 directed the appellant to pay a sum of Rs.4,20,70,900/- by way of sales tax.
Being aggrieved, the appellant filed writ petition in the High Court of Karnataka 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.
Finding of the Court:
Goods kept in bonded warehouses and sold directly at duty free shops are not taxable.
Result: Appeals 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
