The sale of goods by the assessee to ships located in the Madras Harbour were local sales and not inter-state sales, and therefore, were taxable under the Tamil Nadu General Sales Tax Act, 1959.

SETHURAMAN, J.

These Tax Revision cases arises out of an order of the Tribunal dt. 7th February, 1974 in four appeals relating to the asst. yr. 1968-69 to 1971-72. The assessee is a dealer in ship's stores and is also doing business as ship chandlers. The assessee imports goods from abroad for the purpose of supplying the said goods either to foreign going vessels or to Diplomatic Personnel. The said goods, which are imported, are received in a customs bonded warehouse and at the time of placing the indent and also in the subsequent bills of lading and invoice, there was a declaration by the assessee that the goods were intended either for "re-export" as ship's stores and or for supply to Diplomatic Corps. The goods were cleared under the supervision of the Customs authorities whenever they were sold by the assessee. In the present case we are concerned with supplis made to certain ships located at that time in the Madras Harbour. The orders for supplies of the goods required by the said ships were usually received by the Captain or the Master or the Chief Steaward of the ship. The orders listed out the required supplies mentioning the description of the goods and the quantity required and stated "Please arrange to supply as the following Local-bonded Stores". There were supplies of goods like whisky, vegetables etc. In respect of the bonded goods, the assessee prepared a bill and the Customs authority checked the bill with the written order. The bill was, after verification, passed to the Asstt. Collector of Customs (Bonds) permitting the supply. The bill was then filed in the Export Department of the Customs authorities and the goods got released from the bonded warehouse. The Preventive Officer of the Customs authority, who realised the goods, escorted the transportation of the goods and the goods were then placed by the ship's Officer in a special locker provided in the ship. This was obviously to ensure that the bounded goods which had not paid any duty, did not enter into the local market. Along with the goods, the assessee sent a delivery receipt, which was got signed by an Officer of the ship in taken of receipt in goods condition.

2. The assessee claimed that the property in the goods passed only after the goods passed the Customs frontier and that the property did not pass in the territory of Tamil Nadu. It was further contended that the sales were in the course of export because they were to be one the board of the ship, which ultimately moved out of the Madras harbour. The ST Authorities did not accept the assessee's submission and held that the goods were taxable by the said authorities under the Tamil Nadu General ST Act, 1959. The appeals of the assessee to the AAC were unsuccessful. On further appeals, the Tribunal dismissed the appeals. The order of the Tribunal is the subject of the present revision proceeding.

3. The learned counsel for the revision petitioners submitted that the sales took place outside the State of were interstate sales and, therefore, are not liable to the taxed, under the Tamil Nadu General ST Act. He contended that the territorial waters do not form part of the State and for this purpose relied on certain cases decided by this Court. The learned Addl. Government Pleader submitted that the present case came squarely within the scope of the Tamil Nadu General ST Act, as the sales took place within the State. For this purpose, he relied on the provisions of S. 4(2)(b) of the Central ST Act and also the charging provision r/w S. 2(n) Explanation (3) of the Tamil Nadu General ST Act.

4. The point to be considered is whether the sale took place within the State of Madras so as to be taxable under the Tamil Nadu General ST Act. We have first to see whether the sales comes within the scope of S. 3 of the Central ST Act. If so, the State law cannot tax them. Sec. 3 of the said Act, in so far as it is material, runs as follows :

"3. A sale or purchase of goods shall be deemed to take place