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1994 Supreme(Mad) 437
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE JANARTHANAM
Fairmacs Trading Company - Appellant
Versus
Commercial Tax Officer, Harbour I Assessment Circle, Madras and Another - Respondents
Writ Petition No. 21220 of 1993 and W.M.P. No. 33218 of 1993
Decided On : 13 June 1994
The expression "dealt with" occurring in sub-item (a) of item 70 of the First Schedule to the TNGST Act is of wider import, taking in its fold both aspects of fiscal and regulatory measures.
Headnote:
SALES TAX - Levy of sales tax on imported ship-stores - Whether exigible to tax under sub-item (a) of item 70 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 (TNGST Act) - Interpretation of the expression "dealt with" - Held, the expression "dealt with" is of wider import, taking in its fold both aspects of fiscal and regulatory measures - Ship-stores imported from foreign countries, bonded in a private licensed warehouse, and subsequently put on board the ocean going vessel for consumption had been dealt with in strict compliance and due observance of the formalities, as had been prescribed by the Customs Act - Hence, exigible to duty at the point of first sale in the State at 50%.
Fact of the Case:
The petitioner, Fairmacs Trading Co., imported ship-stores like liquor, cigarettes, tapioca products, provisions, cosmetics, etc., from foreign countries, kept them in bonded warehouse, pursuant to the permission granted by the Reserve Bank of India, without the levy of customs duty and later on sold and delivered to master of ship for consumption aboard the ship after crossing boundaries of port.
Finding of the Court:
The court held that the expression "dealt with" is of wider import, taking in its fold both aspects of fiscal and regulatory measures. Ship-stores imported from foreign countries, bonded in a private licensed warehouse, and subsequently put on board the ocean going vessel for consumption had been dealt with in strict compliance and due observance of the formalities, as had been prescribed by the Customs Act. Hence, exigible to duty at the point of first sale in the State at 50%.
Issues: Whether the sale of imported ship-stores had been effected in the course of export to ocean going vessels before the import is complete; Whether such ship-stores cannot at all be construed to have been dealt with under the Indian Tariff Act, 1934 or under any law for the time being in force relating to the duties of customs on goods imported into India; Whether the sale of ship-stores, if at all, is exigible to tax at a reduced rate under item 1 of the Sixth Schedule.
Ratio Decidendi: The court interpreted the expression "dealt with" occurring in sub-item (a) of item 70 of the First Schedule to the TNGST Act and held that it is of wider import, taking in its fold both aspects of fiscal and regulatory measures. The court also referred to various provisions of the Customs Act, 1962 to support its interpretation.
Final Decision: The writ petition was dismissed at the admission stage. Consequently, the W.M.P. was also dismissed. There was no order as to costs.
JANARTHANAM, J.
Fairmacs Trading Co. (petitioner) imported ship-stores like liquor, cigarettes, tapioca products, provisions, cosmetics, etc., from foreign countries, kept them in bonded warehouse, pursuant to the permission granted by the Reserve Bank of India, without the levy of customs duty and later on sold and delivered to master of ship for consumption aboard the ship after crossing boundaries of port. The trasportation of the goods to the ship was, it is said, effected in such manner as to ensure that the bonded goods did not enter local market. Tax had been levied, treating them as local sales under the local sales tax laws by the authorities in the respective States of Andhra Pradesh and Tamil Nadu. Such levy of sales tax had been questioned before the competent authorities, which led to revisions before the respective High Courts.
2. The point urged before the Andhra Pradesh High Court (Fairmacs Trading Company v. State of Andhra Pradesh was.
"whether the sales were outside the State or in the course of export and therefore not exigible to tax under the Andhra Pradesh General Sales Tax Act, 1957 ?"*
The same was answered by holding (i) that the goods were specific or ascertained and were within the State when the contract of sale took place. Therefore, the requirements of section 4(2)(a) of the Central Sales Tax Act, 1956 (Act 74 of 1956) were fully satisfied and the sales must be said to have taken place inside the State; and (ii) that, as the goods were meant for consumption during voyage and they had no destination in any foreign country, where they could be received as imports, the sales were not sales in the course of export.
3. The point raised before this Court (Fairmacs Trading Company v. State of Tamil Nadu was,
"whether the sale took place within the State of Tamil Nadu and liable to be taxed under the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959 - for short 'the TNGST Act') ?"*
The ground so raised was answered by holding, (i) that there was nothing to show in the communications from the ship that the goods had necessarily to be supplied only in the ship. It was open to the officers working in the ship to come and take delivery of the goods, in which event the sale would be a local sale. Therefore, assuming that the territorial waters did not form part of the State of Tamil Nadu, as there was nothing in the contemplation of the contracting parties that the goods were to be moved from one State of another, it was not possible to take the view that the sales were inter-State sales; and (ii) that the assessee was not selling specific or ascertained goods, because the goods formed part of a larger stock within the bounded warehouse and had, therefore to be separated and appropriated to the contract as and when orders were placed by the officers in the ship by description. Therefore, the sales were local sales, in view of the specific provision of section 4(2)(b) of the Central Sales Tax Act, 1956, read with section 2(n), explanation (3) of the TNGST Act and were accordingly, taxable thereunder. While so doing, this Court did not find it necessary to consider the question whether the territory covered by the territorial waters formed part of the State of Tamil Nadu or not.
4. Such views had been given the seal of approval by the apex Court, by citing those decisions, in the case of Madras Marine and Co. v. State of Madras.
5. What is now contended is that the sale of imported ship-stores had been effected in the course of export to ocean going vessels before the import is complete; that even otherwise such ship-stores cannot at all be construed to have been dealt with under the Indian Tariff Act, 1934 (Central Act 32 of 1934 - for short "the Tariff Act") or under any law for the time being in force relating to the duties of customs on goods imported into India and therefore, they are not exigible to tax under sub-item (a) of item 70 of the First Schedule to the TNGST Act and that in a
