THE HONBLE SRI JUSTICE RAMESH RANGANATHAN AND THE HONBLE SRI JUSTICE M.M.SATYANARAYANA MURTHY
WRIT PETITION NOS.4552 OF 2013 and batch
18-12-2014
M/s. Vellanki Frame Works, A sole proprietory Concern Rep., by its Proprietor
Sanjiv Agarwal, Vellanki Village, Anandapuram, Visakhapatnam. .Petitioner
The Commercial Tax Officer, Chinawaltair Circle, Visakhapatnam . Respondent
Counsel for the petitioner: Sri Ch.Pushyam Kiran
Counsel for respondent: Sri P. Balaji Varma, Learned Special
Standing Counsel for Commercial Taxes
<GIST:
>HEAD NOTE:
? Citations:
1) AIR 1961 SC SC 61 = 11 STC 655
2) (2011) 40 VST 150 (AP)
3) (1975) 35 Company Cases 571
4) 20 STC 146
5) 1997 (106) STC 460
6) (1986) 4 SCC 447
7) AIR 1964 SC 207 = (1964) 4 SCR 280
8) (2004) 10 SCC 201
9) (1926) AC 37
10) AIR 1940 PC 124
11) AIR 1981 SC 1887
12) (1990) 3 SCC 481
13) (1977) 39 STC 478 (SC)
14) (2007) 9 SCC 461
15) AIR 1977 SC 2149
16) (2008) 2 SCC 280
17) AIR 1966 SC 334
18) AIR 1962 SC 1210
19) AIR 1973 SC 964
20) (2002) 4 SCC 638
21) AIR 1962 SC 1183
22) (2003) 6 SCC 675
23) AIR 1954 SC 440
24) 1952-1 KB 338
25) AIR 1955 SC 233
26) AIR 1964 SC 477
27) (2004) 3 SCC 682
28) (1958) SCR 1240
29) 2002 (149) ELT 3 : (2003) 129 STC 294
30) 1983 E.L.T. 65 (Ker)
31) (1974) 48 A.L.J.R. 232
32) (1926) 38 C.L.R. 131
33) AIR 1958 SC 341
34) (1981 E.L.T. 153 (Madras HC
35) (1987) 12 Wheat 419 at p. 442 = 6 Law Ed. 678
36) (1849) 9 Q.B. 459
37) 1990 (45) ELT 9
38) (1980) 1 SCC 621
39) (1987) 1 SCC 424
40) (1989) 1 SCC 164
41) (2007) 3 SCC 607
42) AIR 1995 SC 1395
43) 1975 (3) All E R 158
44) 262 U.S. 100, 43 S.Ct. 504, 67 L.Ed. 894
45) AIR 1962 Calcutta 242
46) AIR 1960 Madras 281
47) AIR 1960 Bombay 479
48) 1999 (106) ELT 9 (SC)
49) 2000 (126) E.L.T. 79 (Mad.) = AIR 1967 Madras 124
50) A.I.R. 1963 S.C. 1760
51) (1985) 22 ELT 644 (Bombay HC F.B)
52) 1992 (59) E.L.T. 264 (Cal)
53) (1979) 3 SCC 54
54) 1999 (106) ELT 23
55) (1944) KB 718
56) (1941) 2 All ER 11
57) AIR 1962 SC 83
58) (1989)1 SCC 101
59) AIR 1967 SC 1480
60) (1991) 4 SCC 139
61) (2009) 6 SCC 379
62) (2004) 13 SCC 217
63) AIR 2003 Calcutta 96
64) (1996) 6 SCC 44
65) (2006) 1 SCC 275
66) (2005) 6 SCC 404
67) AIR 1968 SC 647
68) (1901) AC 495
69) (1991) 3 SCC 655
70) (2000) 5 SCC 488
71) 2012 (48) VST 443
72) (1985) 4 SCC 173
73) (1983)52STC268(AP)
74) (1994) 94STC 410(SC)
75) (2007) 7 VST 730 (AP)
THE HONBLE SRI JUSTICE RAMESH RANGANATHAN
AND
THE HONBLE SRI JUSTICE M.SATYANARAYANA MURTHY
WRIT PETITION Nos.4552 AND 6258 of 2013
COMMON ORDER: (per Honble Sri Justice Ramesh Ranganathan)
These two Writ Petitions are filed by the petitioner
questioning the validity of the assessment orders dated 20.1.2010
and 18.5.2010 passed by the Commercial Tax Officer,
Chinnawaltair circle, for the assessment years 2005-06 & 2006-07,
denying them exemption under Section 5(2) of the Central Sales
Tax Act, 1956, (hereinafter called the CST Act), on the turnover of
Rs.1,14,86,342/- & Rs.4,05,09,427/- respectively, as contrary to
the documents on record. During the pendency of the Writ
Petitions the Petitioner filed additional grounds, by way of WPMP
No.23096 and 23098 of 2014, contending, inter-alia, that the
assessment order was without jurisdiction in the absence of any
valid authorization from the Deputy Commissioner (CT),
Visakhapatnam authorizing the respondent to take up assessment,
under the CST Act, for the years 2005-06 and 2006-07.
For the tax period 2005-06, the Commercial Tax Officer,
Chinawaltair Circle, Visakhapatnam issued show cause notice
dated 19.11.2005, proposing to reject the petitioners claim of
exemption on a turnover of Rs.1,14,86,342/-, treating the
transaction as an inter-state sale falling under Section 3(a) of the
CST Act. In respect of the said turnover, the petitioner (M/s.
Vellanki Frame Works) had claimed exemption from payment of tax
on the ground that the relevant sales were effected by transfer of
documents of title before the goods had crossed the customs
frontiers of India. In their reply to the show cause notice, the
petitioner sought to explain the transactions, relatable to the
turnover of Rs.1,14,86,342/-, which they claimed was covered by
Section 5(2) of the CST Act. The petitioners case, as is noted by
the assessing authority in the assessment order, is that M/s.
Radha Industries, Lucknow, U.P (Radha for short), was their
close business associate; Radha, which did not have the requisite
infrastructure with the custom department, desired to purchase
the subject goods from M/s. World Best Trading Co. (L.L.C.), Dubai
(U.A.E), and had approached them for help; though they had the
requisite infrastructure facilities at Visakhapatnam Customs, they
did not have the letter of credit facilities to cause import; in these
circumstances, the petitioner and Radha entered into a quadri-
partite agreement with Indus Tropics Ltd. (Indus for short),
whereby it was agreed that Indus would purchase the goods and
sell them to the petitioner who would purchase the same from
Indus as the agent of Radha, and transfer the documents on high
seas in favour of Radha; in turn Radha agreed to pay the petitioner
commission of 2% plus bank charges; the petitioner paid the entire
amount to Indus without retaining a penny as commission; it was
a friendly transaction arranged by the petitioner in favour of
Radha; a quadri-partite agreement was entered into between
Indus, the petitioner, Radha and World Best Trading Co. (L.L.C.);
pursuant thereto, Indus purchased the goods and caused transfer
of the bill of lading on high seas on 10.12.2005; on 12.12.2005,
another high seas sale agreement was entered into between the
petitioner and Radha whereby the bill of lading was sold in favour
of Radha; the expression sold, as used in the said agreement, is a
misnomer; what the parties meant was only transfer of the bill of
lading in favour of Radha; on and from 12.12.2005, the petitioner
did not have control over the bill of lading dated 09.12.2005, as
they had parted with it in favour of Radha by then; since Radha
did not have the customs facility at Visakhapatnam customs port,
the petitioner had extended its help by filing a bill of entry in their
name for the purpose of customs bonding, as well as customs
clearance; the circumstance of filing a bill of entry has no relevance
in determining the nature of the transaction; as seen from all the
relevant documents, including (i) quadrilateral master agreement
dated 21.01.2005, and (ii) the High Seas Sale agreement dated
12.12.2005, the petitioner had transferred the import document on
high seas; at any rate, the title in the goods always stood vested in
Radha, as the owner of the goods; the petitioner was merely acting
as the agent of Radha at all points of time; by reason of transfer of
the import document, it could not be said that the petitioner had
sold the goods to Radha; on the contrary, as the petitioner had
acted as the agent of Radha, at all points of time including at the
time of purchase, the question of the petitioner selling the goods to
Radha did not arise; the transactions between the petitioner and
Radha cannot be treated as a transaction between one principal
and another; the fact that the petitioner had charged commission
at 2% plus bank charges to Radha, and had parted with the entire
amount to Indus is proof that they had only acted as a conduit, as
a friendly gesture to Radha; the transaction was accounted in the
petitioners books of accounts as an agency purchase; receipt and
payment of commission was also accounted in their books of
accounts; their Balance Sheet for the year also supported this
submission; transfer of imported goods by them to Radha did not
partake the character of sale of goods; in any event the transfer,
having being effected over high seas before bonding with the
custom authorities, cannot be treated as inter-state sale in the
State of Andhra Pradesh; and therefore further proceedings, in
pursuance of the show cause notice, should be dropped.
In the assessment order dated 20.01.2010, the Commercial
Tax Officer summed up the stand of the petitioner that the
documents of title to the goods were transferred to Radha
Industries on high seas by virtue of the high sea sale agreement
dated 12.12.2005; the transaction did not attain the character of
an inter-state sale; and filing of the bill of entry had no relevance in
the context of determining the nature of the transaction. The
Commercial Tax Officer held that it followed that it was not the
petitioners claim that the sale or purchased had occasioned the
import falling under the first limb of Section 5(2) of the CST Act;
the question which necessitated examination was whether there
was a sale of goods by the petitioner, or whether it constituted a
commission transaction as stated by them; and in the computer
print out of the petitioners trading account, for the year 2005-06,
the purchase was shown as purchase trading (high seas), and the
relevant sale was shown as sales trading (high seas). After
referring to a few other details, the assessing authority noted the
contents of the high seas sale agreement dated 10.12.2005 entered
into between M/s. Indus Tropics Ltd and the petitioner wherein the
latter was described as the buyer; the second high seas sales
agreement dated 12.12.2005, entered into between the petitioner
and M/s. Radha Industries, wherein the parties were described as
the seller and the buyer respectively; and the letter of the assessee
dated 25.11.2009 wherein, while submitting certain documents
like the sales invoice, the bill of lading, high sea sale agreement,
bill of entry for warehousing and the bill of entry of ex-bond, the
petitioner had stated that they had claimed exemption from
payment of tax on the ground that the said sales were effected by
transfer of documents of title to the goods before the goods had
crossed the customs frontiers of India.
The assessing authority held that it was obvious that the
petitioners intention was to sell the goods and, in fact, there was a
sale; there was no truth in their statement that they had acted as
the agent of M/s. Radha Industries; Indus Tropics Limited had
imported 324 PCS of Myanmar Hardwood Gurjan Round Logs from
Yangon (Myanmar) to Vizag (India), and the relevant bill of lading
dated 09.12.2005 was endorsed by the importer in favour of the
petitioner; on the strength of such endorsed documents, Sri Sanjiv
Kumar Agarwal (sole proprietor of the petitioner) had presented the
bill of entry for warehousing; customs duty was assessed on the
petitioner alone vide bill of entry for warehousing dated
12.12.2005; subsequently, the petitioner had filed the bill of entry
for home consumption; customs duty was assessed on the
petitioner alone vide bill of entry for ex-bond No.804353 dated
28.12.2005; the high sea sale agreement dated 12.12.2005 had not
come into operation; sale, subsequent to customs clearance, had
alone taken place; the petitioner had raised a debit note dated
12.01.2006 showing sales to M/s. Radha Industries for
Rs.1,14,86,342/-; the high sea sale agreement dated 12.12.2005,
entered into between the petitioner and the buyer, indicated that
the parties intended to effect the transaction by a transfer of
documents of title to the goods before the goods had crossed the
customs frontiers of India; the sale, however, was not effected in
such a manner; and the sale, in fact, took place on 12.01.2006 as
shown in the debit note.
On the petitioners claim for exemption, on the ground that
the said sale was effected by a transfer of documents of title to the
goods before the goods had crossed the customs frontiers of India
falling under Section 5(2) of the Act, the Commercial Tax Officer
held that the goods must be treated as having crossed the customs
frontiers of India, when the bill of entry was made and the goods
were assessed to customs duty; the sale, effected by the petitioner,
could not be said to be sales in the course of import or high sea
sales in as much as the goods had crossed the customs frontiers;
the second high sea sale agreement had not come into operation
when the sale took place; there was no case for claiming that the
transfer of documents was effected by virtue of the said agreement
itself; the Supreme Court, in Tata Iron & Steel Co. Ltd., Bombay
v. S.R. Sarkar , had held that the sale would be reckoned as a sale
on completion of such sale, and a mere contract of sale is not a
sale within the definition of sale; the sale had not taken place in
the manner contemplated in the agreement; the sale, in fact, took
place only after customs clearance; and the contention urged by
the petitioner was devoid of merits.
In his assessment order dated 18.05.2010, the Commercial
Tax Officer, Chinnawaltair circle, Visakhapatnam held that the
petitioner had claimed exemption from payment of tax, in respect
of a turnover of Rs.4,05,09,427/-, contending that this turnover
represented sales effected by transfer of documents of title before
the goods had crossed the customs frontiers of India; along with
their returns, they did not file any evidence to show that the said
sales were effected in such a manner; a show-cause notice dated
26.11.2009 was issued; pursuant thereto the assessee had
furnished certain documents; these documents revealed that
M/s.Porbunchal Lumbers (P) Ltd, Gujarat had imported 155 PCS
of Myanmar Hardwood Gurjan Round logs from Yangon (Myanmar)
to Vizag (India); the Bill of Lading was endorsed in favour of the
petitioner (M/s.Vellanki Frame Works, Visakhapatnam); on the
strength of these endorsed documents, and on filing a Bill of Entry
for warehousing and a Bill of Entry for Ex-bond, customs duty was
assessed on Sri Sanjiv Kumar Agarwal, Vellanki Frame Works,
Vizag; the petitioner had reported the said transaction as high-sea
sales to M/s.Radha Industries, Lucknow by raising a debit note;
the documents also revealed other similar transactions; M/s.Alpine
Panels Pvt. Ltd, Visakhapatnam had imported 273 PCS of
Malaysian Round Logs from Singapore to Vizag; the bill of lading
was claimed to have been endorsed in favour of the assessee; on
the strength of such an endorsement, Sri Sanjiv Kumar Agarwal,
Vellanki Frame Works, Vizag (the assessee) had filed the bill of
entry for warehousing; he filed the bill of entry for ex-bond based
on which duty was assessed on him alone; and the assessee had
reported the said transaction as high sea sales to M/s.Indo -
Bitumen Products, Rajasthan by raising a debit note. The
assessment order also refers to four other transactions in all of
which the bill of lading was endorsed in favour of the assessee; on
the strength of the endorsement Sri Sanjiv Kumar Agarwal,
Vellanki Frame Works, Vizag (assessee) had filed the bill of entry
for warehousing; he had, subsequently, filed the bill of entry for ex-
bond based on which duty was again assessed on him alone; and
he had reported the said transaction as high sea sales to M/s.Pine
Exporters, New Delhi by raising a debit note.
The assessing authority also held that transfer of documents
of title, before clearance of goods by the customs authorities on
making assessment, would be a sale in the course of import; and,
after assessment is made on filing of the bill of entry, the goods get
mingled with the general mass of goods and merchandise of the
country attracting the character of local goods; they cease to be
foreign goods thereafter; it was clear that in the present case, on
filing the bill of entry for warehousing and the bill of entry for ex-
bond, the petitioner alone was assessed to customs duty; the
import stream had dried upon such clearance by the customs
authorities; the goods had mixed into the stream of local goods;
any subsequent sale by the petitioner would, therefore, constitute
sale of local goods exigible to tax; the transactions, which the
assessee had claimed exemption as high sea sales, were liable to
be treated as inter-state sales falling under Section 3(a) of the CST
Act; as is ascertainable from the bills of entry for warehousing and
ex-bond, transfer of title had not taken place before filing of the
bills of entry, and assessment of customs duty; the sale took place
after the assessment was made on the assessee, and on his filing
the Bills of Entry; the said sales had, thus, attained the character
of sale of local goods; the goods must be treated as having crossed
the customs frontiers of India, after the bill of entry had been made
and the goods were assessed to customs duty; the sales effected by
the assessee cannot be said to be sales in the course of import or
high sea sales in as much as the goods had crossed the customs
frontiers; the letter addressed to M/s.Pine Exporters, New Delhi,
showed that they never received any Malaysian round logs from
the petitioner, which established that their claim was not genuine;
the letter sent to M/s.Esskay Impex, New Delhi, was returned with
the postal endorsement no such firm at this place which also
showed that the petitioners claim was not genuine; and the
transactions, on which the petitioner had claimed exemption as
high sea sales, should be treated as inter-state sales falling under
Section 3(a) of the CST Act.
Extensive arguments were put forth by Sri S.Ravi, Learned
Senior Counsel appearing on behalf of the petitioner, and Sri P.
Balaji Varma, Learned Special Standing Counsel for Commercial
Taxes. Written submissions were also filed by Sri Ch.Pushyam
Kiran, Learned Counsel for the petitioner, and Sri P. Balaji Varma,
Learned Special Standing Counsel for Commercial Taxes. It is
convenient to examine the rival submissions, urged by Learned
Counsel on either side, under different heads.
I. DOES THE TERRITORIAL ASSESSING AUTHORITY, BEFORE
WHOM THE DEALER FILES HIS RETURNS UNDER THE CST
ACT, HAVE JURISDICTION TO PASS AN ASSESSMENT
ORDER IN THE ABSENCE OF AUTHORISATION FROM THE
DEPUTY COMMISSIONER?
Sri S. Ravi, Learned Senior Counsel appearing on behalf of
the petitioner, would submit that the power of assessment is found
in Section 21(3) & (4) of the A.P. Value Added Tax Act, 2005 (VAT
Act for short) read with Rule 25(5) of the A.P. Value Added Tax
Rules, 2005 (VAT Rules for short); under Sections 21(3) & (4) of
the VAT Act, the authority competent to assess the petitioner to tax
is the prescribed authority; under Rule 59(4) (ii)(b) the Commercial
Tax Officer or the Deputy Commercial Tax Officer, having territorial
jurisdiction over the dealers in the circle, also require authorization
from the Deputy Commissioner concerned to make assessment;
the corresponding Sections indicated thereagainst are Sections
21(3), (4) & (5) and Rule 25(5); an assessment can be made, under
Section 21(3), (4) or (5) of the VAT Act read with Rule 25(5) of the
VAT Rules, only if the Commercial Tax Officer is authorized by the
Deputy Commissioner concerned; the only exception is in respect
of a Large Tax Payer dealer, where the Assistant Commissioner can
exercise the power to make assessment without the necessity of
authorization; Rule 59(4)(ii)(b) was amended by GO Ms.No.33 dated
23.01.2013; for assessments made thereafter, there is no necessity
of an authorization for the Commercial Tax Officer, having
territorial jurisdiction over the dealer concerned, to make
assessment; the assessment orders, in the present cases, were
passed on 20.1.2010 & 18.5.2010 prior to the amendment of Rule
59(4)(ii)(b); the Commercial Tax Officer cannot, therefore, assume
jurisdiction merely because he receives the returns under the VAT
Act, unless he has been authorized by the Deputy Commissioner;
in the present case, both the assessment orders were passed under
the CST Act; the CST Act does not define assessing authority; the
CST (Andhra Pradesh) Rules, 1957 (AP Rules for short) prescribes
the procedure for assessment; though the words appropriate
assessing authority is defined in Rule 2[c] of the AP Rules, this
expression is not found anywhere else in the Rules; Rule 14-A of
the AP Rules refers only to the assessing authority, and not the
appropriate assessing authority; the procedural provisions, applicable
under the VAT Act, automatically apply to the CST Act in view of
Section 9(2) of the CST Act; as the petitioners are liable to pay tax
under the general sales tax law of the State (VAT Act), the
assessing authority, for the purpose of the CST Act, would be the
assessing authority under the VAT Act; the authority who is
competent to assess, based on the authorization issued by the
competent authority, is the assessing authority under the VAT Act;
in the present case the Commercial Tax Officer, who is the
territorial assessing authority, must trace his power of assessment
to the authorization issued by the Deputy Commissioner even for
the purposes of the CST Act; the observations, in Sri Balaji Flour
Mills v. The Commercial Tax Officer , that the authorities, who
have territorial jurisdiction over the dealer, need not have a
separate authorization for assessment is contrary to the plain
reading of the Section and the Rules; since Section 20 & 21
relating to assessment, and various Rules including Rule 59(1),
use the term prescribed, the authority prescribed, wherever
mentioned, means the one prescribed by the Rules; no officer can
assume jurisdiction to himself under the VAT Act, (at the relevant
point of time i.e., prior to 23.1.2013), that he is competent to
assess a dealer merely because he falls within his territorial
jurisdiction, unless there is an authorization for assessment; and,
consequently, the respondent cannot assess the petitioner under
the CST Act merely because he is the territorial assessing authority
unless he is authorised by the Deputy Commissioner of the
Division.
On the other hand Sri P.Balaji Varma, Learned Special
Standing Counsel for Commercial Taxes, would submit that the
assessing authority has jurisdiction to pass the impugned order in
terms of Rule 14-A(6) of the AP Rules; Section 4 of the APGST Act,
1957 conferred power on the State government similar to those
conferred by Section 3-A of the VAT Act; in the exercise of its
powers under Section 4, the Government of Andhra Pradesh
delegated, to the Board of Revenue, the power to notify the local
limits within which the officers may perform the functions
conferred on them by or under the APGST Act; by virtue of Section
80(1) of the VAT Act, the notifications issued under the APGST Act
continue to govern; the territorial authority is competent to take up
assessment of dealers within his jurisdiction without any further
authorisation; the impugned assessment orders are, therefore, not
without jurisdiction; Rule 2(c) of the AP Rules, by implication,
makes the territorial authority or the prescribed authority, the
assessing authority under the CST Act; the prescribed authorities
under the VAT Act are the authorities enumerated under Rule 59
of the VAT Rules; as held by this Court, in Balaji Flour Mills2, the
territorial officer can assess in case of non-filing or incomplete
returns; the power of the territorial authority, for the purpose of
assessment, gets clouded/suspended only when a specific
authorisation is given to some one else; and, as such, he also
becomes the assessing authority under the CST Act.
Section 9(2) of the CST Act provides that the authorities
empowered to assess, reassess, collect and enforce payment of tax
under the general sales tax law of the appropriate State, shall
assess, re-assess, collect and enforce payment of tax under the
CST Act as if the tax payable by such a dealer under the CST Act is
a tax payable under the general sales tax law of the State. The
said section further provides that, for this purpose, the authorities
under the general sales tax law of the State may exercise all or any
of the powers they have under the general sales tax law of the
State and the provisions of such law, including provisions relating
to returns etc, shall apply accordingly. The last limb of Section
9(2) of the CST Act, viz. "and the provisions of such law........ shall apply
accordingly", mean that the provisions of the State Act are
applicable for the purpose of assessment, re-assessment, collection
and enforcement of payment of tax including penalty payable
under the CST Act. The words, in the last part of section 9(2) viz.
"shall apply accordingly", relate clearly to the words "and for this purpose"
with the result that the provisions of the State Act shall apply only
for the purpose of assessment, reassessment, collection and
enforcement. The entire authority of the State machinery is "for this
purpose" meaning thereby the purpose of assessing, re-assessing,
collecting and enforcing payment of tax including any penalty
payable under the Central Act; and they, meaning the State
agencies, may exercise powers under the general sales tax law of
the State. Section 9(2) of the CST Act only adopts the procedure of
the State Act for assessment, re-assessment, collection and
enforcement of tax payable under the CST Act. (Khemka & Co.
(Agencies) Pvt. Ltd. v. State of Maharashtra ; B. H. Shah & Co.
v. The State of Madras ). The law, which the States' sales tax
authorities must apply, is the CST Act. In such application, for
procedural purposes alone, the provisions of the State Act are
available. (India Carbon Ltd. v. State of Assam ). In view of
Section 9(2) of the CST Act, the assessing authority under the VAT
Act would, ordinarily, have been the assessing authority under the
CST Act also. Section 9(2) of the CST Act uses the words subject
to. The phrase subject to conveys the idea of a provision yielding
place to another provision or other provisions to which it is made
subject. (Chandavarkar Sita Ratna Rao v. Ashalata S. Guram ;
South India Corpn. (P) Ltd. v. Secy., Board of Revenue,
Trivandrum ). As Section 9(2) of the CST Act is itself subject to the
other provisions of the CST Act and the Rules made thereunder,
Section 9(2) must yield to the other provisions of the CST Act, and
the Rules made thereunder, if they provide otherwise.
Section 13 of the CST Act relates to the power to make rules.
Section 13(1) empowers the Central Government to make rules by
notification in the official gazette. Section 13(3) enables the State
Government to make rules, not inconsistent with the provisions of
the CST Act and the Rules made by the Central Government under
Section 13(1), to carry out the purposes of the CST Act. In the
exercise of the powers conferred by Section 13(3), (4) and (5) of the
CST Act, the Central Sales Tax (Andhra Pradesh) Rules, 1957 were
made and notified in G.O.Ms.No.302 Revenue dated 23.02.1957.
Rule 1 thereof stipulates that these rules may be called the Central
Sales Tax (Andhra Pradesh) Rules, 1957. Rule 2[c] of the AP Rules
defines appropriate assessing authority to mean, in the case of a
dealer who is liable to pay tax under the general sales tax law of
the State, the assessing authority under the said law. Rule 14-
A(1)(a) requires every dealer registered under Section 7 of the CST
Act, and every dealer liable to pay tax under the CST Act, to
submit, so as to reach the assessing authority on or before the 20th
of every month, a return in Form CST VI showing the total and net
turnover of his transactions including those in the course of inter-
State trade or commerce during the preceding month, and the
amount or amounts collected by way of tax. The return is required
to be accompanied by a receipt from a government treasury or a
crossed demand draft in favour of the assessing authority for the
full amount of tax payable for the month to which the return
relates. Rule 14-A(1)(b) requires the dealer to submit to the
assessing authority, along with the return mentioned in Rule 14-
A(1)(a), the originals of the declarations in Form C, Form-D, Form-
E-I & II or Form-F. Rule 14-A (3) stipulates that the return in
Form CST VI so filed shall, subject to the provisions of Rule 14-
A(4), be provisionally accepted.
Rule 14-A(6) of the AP Rules stipulates that, if no return had
been submitted by the dealer or if any return or returns submitted
by him appears to the assessing authority to be incorrect or
incomplete, the assessing authority shall, after making such
enquiry as he considers necessary and after giving the dealer an
opportunity of proving the correctness and completeness of the
return submitted by him, determine the turnover to the best of his
judgment; and finally assess, in a single order, the tax payable
under the Act. Rule 14-A(7) stipulates that if, on the final
assessment made under Rule 14-A (5) or (6), any tax is found to be
due from the dealer, the assessing authority shall serve on him a
notice in Form CST VII, and the dealer shall pay the sum
demanded in the notice within such time and in such manner as
specified therein. Under Rule 14-A(8) if, for any reason, the whole
or any part of the turnover of a dealer has escaped assessment to
tax, or has been under assessed in any year, the assessing
authority may, after issuing a notice to the dealer and after making
such enquiry as he considers necessary, determine, to the best of
his judgment, the correct turnover, and assess the tax payable on
such turnover within the time stipulated therein. Though Rule 2[c]
of the AP Rules defines an appropriate assessing authority, the
words appropriate assessing authority do not find mention in Rule
14-A, and reference is made therein only to the assessing
authority. It is, however, evident from Rule 2[c](i) of the AP Rules
itself that the appropriate assessing authority, in the case of a
dealer who is liable to pay tax under the VAT Act, shall be the
assessing authority under the CST Act. While Section 9(2) of the
CST Act makes the authority, empowered to assess under the VAT
Act, the assessing authority under the CST Act also, as Section
9(2) has been explicitly made subject to the CST (AP) Rules, the
authority to whom returns are to be submitted under the VAT Act,
can assess a dealer to tax under the CST Act.
Section 2(24) of the VAT Act defines prescribed to mean
prescribed by Rules made under the Act. Section 2(27) defines
rules to mean rules made under the Act. Section 20 of the VAT
Act relates to returns and self-assessments. Under sub-section (1)
thereof, every dealer registered under Section 17 of the Act shall
submit such return or returns, along with proof of payment of tax,
in such manner, within such time, and to such authority as may
be prescribed. Chapter IV of the VAT Rules relates to returns,
payments and assessments. Rule 23 relates to tax returns and,
under sub-rule (1) thereof, a return to be filed by a VAT dealer
under Section 20 shall be in Form VAT 200, and it shall be filed
within 20 days after the end of the tax period. The returns shall be
complete in duplicate and one copy, with the proof of receipt, shall
be retained by the VAT dealer. Form VAT 200 contains, among
others, the particulars of the circle and the division. The returns
which are required to be submitted, under Section 20(1) of the VAT
Act, is to such authority as may be prescribed. Rule 59 of the VAT
Rules stipulates that the authorities specified in Column 3 of the
table thereunder shall be the authorities prescribed for the
purpose of exercising powers specified in Column 2 of the table.
Rule 59(1)(3) relates to the power of receipt of VAT returns, and the
prescribed authority therefor is (i) the Assistant Commissioner
(Large Taxpayer Unit) or any other officer in his office, as duly
authorized by him, for the dealers in respect of LTU; or (ii) the
Commercial Tax Officer, or any other officer in his office as duly
authorized by him, for the dealers in respect of Circle. The
Commercial Tax Officer of the Circle is also the prescribed
authority to receive VAT returns. Unlike Rule 59(1)(3) which
confers power to receive VAT returns on the Commercial Tax
Officer of the circle, Rule 59(1)(4)(ii) of the VAT Rules hitherto
conferred the power of assessment on the Commercial Tax Officer
only if he was authorized by the Deputy Commissioner. Rule 14-A
(1)(a) of the AP Rules requires a dealer under the CST Act to
submit a monthly return to the assessing authority who, in terms
of Rule 59(1)(3) of the VAT Rules, is the Commercial Tax Officer of
the circle. The Commercial Tax Officer, before whom the dealer
files his monthly CST returns, is therefore empowered to make
assessment under the CST Act, and he does not require any
authorization from the Deputy Commissioner to do so, unlike the
power to make assessment under the VAT Act. Such an authority
would also be the assessing authority under Rule 2[c] r/w.Rule
14-A of the AP Rules, notwithstanding that he is not the
prescribed authority to make assessment under Section 21 of the
VAT Act.
Section 2(4) of the VAT Act defines assessing authority to
mean any officer of the commercial tax department authorized by
the Commissioner to make any assessment in such area or areas
or the whole of the State of Andhra Pradesh. Section 3-A of the
VAT Act relates to appointment of officers, and enables the State
Government to appoint a Commissioner of Commercial Taxes and
as many Additional Commissioners of Commercial Taxes, Joint
Commissioners of Commercial Taxes, Appellate Deputy
Commissioners of Commercial Taxes, Deputy Commissioners of
Commercial Taxes, Assistant Commissioners of Commercial Taxes,
Commercial Tax Officers and Deputy Commercial Tax Officers as
they think fit, for the purpose of performing the functions
respectively conferred on them by or under the Act. Section 3-A
also requires the officers specified therein to perform such
functions, within such area or areas or the whole of the State of
Andhra Pradesh, as the Government, or any authority or officer
empowered by them in this behalf, may assign to them. Thus, if
either the Government or the authority empowered by the
Government assign the functions of assessment on any of the
officers referred to in Section 3-A, such officers would be required
to perform the said function of making assessment within the
specified area or areas. In the exercise of the powers conferred
under Section 3-A of the A.P. VAT Act, G.O.Ms. No.1163 dated
14.08.2006 was issued conferring power on the Commissioner of
Commercial Taxes to require any officer, working under his
control, to exercise any powers under the State Act within such
area or areas or the whole of the State of A.P. Under the proviso
thereto where any officer, in the exercise of the powers delegated to
him by the Commissioner of Commercial Taxes in pursuance of the
above orders, undertakes the assessment of any dealer, the
assessing authority of the area, having jurisdiction to assess such
dealer, shall not exercise such jurisdiction for the relevant period.
The said G.O. came into force with retrospective effect from
01.04.2005.
Section 2(4) uses the word authorise. The word authorise
means permitted. (Ramanath Aiyer, Advanced Law Lexicon
Book 1, Reprint 2007, p.417). Section 3-A of the VAT Act, and
Rule 59(1) of the VAT Rules in many of its entries employ the word
empower. The word empower means to invest legally or formally
with power or to authorize to give official authority or legal
power to (Advanced Law Lexicon by Ramanath Aiyer). The
term prescribed is used in several provisions of the VAT Act as
well as the VAT Rules. Sections 20 and 21, and various Rules
including Rule 59(1), use the term prescribed. The authority
prescribed is the one prescribed by the Rules. (Sri Balaji Flour
Mills2). Section 21 of the VAT Act relates to assessments. Section
21(1) stipulates that where a VAT dealer fails to file a return, in
respect of any tax period within the prescribed time, the authority
prescribed is required to assess the dealer, for the said period for
such default, in the manner prescribed. Section 21(3) enables the
prescribed authority, if he is not satisfied with a return filed by the
VAT dealer or the return appears to be incorrect or incomplete, to
assess the dealer to the best of his judgment. Section 21(4)
enables the prescribed authority, based on any information
available or on any other basis, to conduct a detailed scrutiny of
the accounts of any VAT dealer and, where any assessment as a
result of such scrutiny becomes necessary, to then make such
assessment. Section 21 confers the power to make assessment
specifically on the prescribed authority which, in view of Section
2(24), means the authority prescribed under the Rules. Sl.No.4 of
the table, under Rule 59(1), relates to assessments under the VAT
Act and, under Sl.No.4(ii)(b), the Commercial Tax Officer or the
Deputy Commercial Tax Officer, in the case of dealers in the
territorial jurisdiction of the circle, as authorized by the Deputy
Commissioner concerned shall make assessment under the VAT
Act. Sections 3-A, 20 and 21 are the machinery provisions of the
VAT Act. While a strict rule of construction is applied to the
charging provisions of a taxing statute without implying anything
(State of West Bengal v Kesoram Industries Limited ), the
machinery sections of a taxing statute must be so construed as to
make the statute effective and workable. It is the duty of the
Court, while interpreting the machinery provisions of a taxing
statute, to give effect to its manifest purpose having a full view of
it. A common sense interpretation should be given to the
machinery sections so that the charge does not fall. While
charging provisions are construed strictly, machinery sections are
not generally subject to a rigorous construction. Courts are
expected to construe the machinery sections in such a manner
that a charge to tax is not defeated. (Sri Balaji Flour Mills2;
Whitney v IRC ; Commissioner of Income Tax v Mahaliram
Ramjidas A.C.C.Limited v CTO ).
Section 2 (1)(b) of the APGST Act defined assessing
authority to mean any person authorized by the State
Government, or by any other authority empowered in this behalf,
to make any assessment, in such area or areas or the whole of the
State of Andhra Pradesh, under the APGST Act. Section 14 thereof
empowered the assessing authority to undertake assessment if a
return submitted was found to be incorrect. In the exercise of the
powers conferred by Section 2(1)(b) of the APGST Act, the Governor
of Andhra Pradesh issued G.O.Ms.No.728 Revenue dated
14.07.1970 (published in the A.P. Gazette dated 13.08.1970)
authorizing (a) the Assistant Commercial Tax Officers to exercise
the powers of the assessing authority in the case of dealers whose
assessments were transferred to them by the Deputy Commercial
Tax Officer concerned; (b) the Deputy Commercial Tax Officers to
exercise the powers of an assessing authority in the case of dealers
whose total turnover was less than Rs.15.00 Lakhs; (c) the
Commercial Tax Officers to exercise the powers of an assessing
authority in the case of dealers whose total turnover was Rs.15.00
Lakhs or more a year. Under the proviso thereto, any of the higher
authorities viz., the Deputy Commercial Tax Officer and the
Commercial Tax Officer could, in his discretion, exercise the
powers of a lower authority within his jurisdiction in respect of any
dealer or class of dealers; and the Deputy Commissioner
(Commercial Taxes) of the division concerned could, by order,
authorize any Deputy Commercial Tax Officer to exercise the
powers of an assessing authority in the case of any dealer or class
of dealers whose total turnover exceeded Rs.15.00 Lakhs a year.
The APGST Act, 1957 was repealed by Section 80(1) of the
VAT Act. However, in view of the proviso thereto, such repeal did
not effect the previous operation of the APGST Act or any right,
title, obligation or liability already acquired, accrued or incurred
thereunder; and, subject thereto, anything done or any action
taken (including any appointment, notification etc.) in the exercise
of any power conferred by or under the APGST Act must be
deemed to have been done or taken in the exercise of the powers
conferred by or under the VAT Act, as if the VAT Act was in force
on the date on which such thing was done or action was taken.
While the assessing authority, as prescribed in GO Ms.No.728
dated 14.07.1970, continues to be the Commercial Tax Officer of
the circle even after the VAT Act came into force, the power of
assessment under the VAT Act is conferred not on the assessing
authority, but on the prescribed authority. It is only the
authority, prescribed under Rule 59, who can make assessment
under the VAT Act and not the assessing authority under Section
2(4) thereof or in G.O.Ms.No.728 dated 14.07.1970. Unlike the
VAT Act, which confers power of assessment on the prescribed
authority, the AP Rules confer power of assessment on the
assessing authority which, in terms of GO Ms.No.728 dated
14.07.1970 issued in the exercise of the powers conferred under
Section 2(1)(b) of the APGST Act, is the Commercial Tax Officer of
the concerned circle. As neither Section 2(4) of VAT Act, nor the
Commissioner under Section 3-A thereof, have specified who an
assessing authority is, the assessing authority under G.O.Ms.
No.728 dated 14.07.1970 continues to remain the assessing
authority even after the VAT Act came info force in view of the
proviso to Section 80 thereof.
Viewed from any angle the contention, urged on behalf of the
petitioner, that the Commercial Tax Officer of the circle, before
whom the petitioner files his monthly returns, lacks jurisdiction to
pass the impugned assessment orders does not merit acceptance.
It is made clear that this Court has not examined whether the
prescribed authority under Rule 59 of the VAT Rules, who is
empowered to make assessment under the VAT Act, can also
assess a dealer to tax under the CST Act, as this question does not
fall for consideration in these cases. Suffice it to make it clear that
the Commercial Tax Officer of the Circle, before whom a dealer files
his CST returns, is empowered to assess him to tax under the CST
Act.
II. JUDICIAL REVIEW OF AN ASSESSMENT ORDER
ADEQUACY OR SUFFICIENCY OF THE EVIDENCE, BASED
ON WHICH THE ASSESSING AUTHORITY RECORDED HIS
FINDINGS, CANNOT BE GONE INTO:
Sri S. Ravi, Learned Senior Counsel appearing on behalf of
the petitioners, would submit that the turnover relating to sale of
wooden round logs represented the value of the goods sold to M/s.
Radha Industries, Lucknow, India while the goods were on High
Seas and, consequently, it was a sale in the course of import; the
quadripartite Agreement, entered into between World Best Trading
Co. (L.L.C.), Dubai (the Seller), Indus Tropics Limited (Indus)
(importer), Vellanki Frameworks (the Petitioner) and Radha
Industries, contemplated purchase of goods by the importer from
the seller, and purchase of goods from Indus by Radha Industries
through the petitioner; the agency agreement, to be executed by
Radha Industries in favour of the petitioner, was annexed to it; this
agreement entrusted the work of clearance of goods at the port to
the petitioner; the petitioner was entitled to 2% commission on the
transaction; on the strength of the quadripartite agreement, a
purchase order was placed by the importer on the Seller; the seller
invoiced the goods to the importer; a Bill of Lading was issued by
the shipping carrier; the bill of lading was endorsed by the
importer in favour of the petitioner and was, subsequently,
endorsed by the Petitioner in favour of Radha Industries while the
goods were in high seas; the endorsement was also supported by a
High Sea Sale Agreement between the importer and the Petitioner,
and a subsequent High Sea Sale Agreement between the Petitioner
and Radha Industries; the goods were dispatched from Yangoon
(Myanmar), and were received in Vishakhapatnam Port; a bill of
entry was filed for ex-bond; customs duty was assessed on Mr.
Sanjeev Kumar Agarwal of the petitioner; the goods were cleared by
the Petitioner and dispatched to Radha Industries; the assessing
authority had examined the documents, and did not adversely
comment on any of them; there is no finding that the endorsement
on the Bill of Lading is not genuine; the order of Assessment is
liable to be set aside as the Quadripartite Agreement, which is not
a disputed document, came into existence before the Purchase
Order, and before a bill of lading was issued by the shipping line;
the ultimate purchaser of the goods, i.e., Radha Industries, was
identified even at that stage; the sale, by the Petitioner to Radha
Industries, was effected by endorsement of the Bill of Lading in
favour of Radha Industries while the goods were still in the
customs station as defined in Section 2(13) of the Customs Act,
1962; and, in view of Section 2(ab) of the CST Act, 1956 read with
Section 5(2) thereof, as long as the endorsement, and the
consequent transfer of title of the goods, had taken place before the
goods left the customs station, the sale would be in the course of
import. Learned Senior Counsel has referred to the preamble and
the provisions of the Indian Bills of Lading Act, 1856, and places
reliance on British India Steam Navigation Co. Ltd. v.
Shanmughavilas Cashew Industries in this regard.
The petitioner has invoked the jurisdiction of this Court,
under Article 226 of the Constitution of India, against the
assessment order passed by the first respondent without availing
the statutory remedy of appeal. The tax authorities, entrusted
with the power to make assessment of tax, discharge quasi-
judicial functions, (State of Kerala v. K.T. Shaduli Yousuff ),
and their orders are amenable to judicial review under Article 226
of the Constitution. While a writ of certiorari is the appropriate
remedy when the validity of a quasi-judicial order is under
challenge, the petitioner has sought a writ of mandamus from this
Court. It is necessary for us, therefore, to examine the scope of
judicial review, of an assessment order, in writ proceedings.
In order that mandamus may issue to compel the authorities
to do something, it must be shown that there is a statute which
imposes a legal duty and the aggrieved party has a legal right
under the statute to enforce its performance. (Tirumala Tirupati
Devasthanms v. K. Jotheeswara Pillai ; The Bihar Eastern
Gangetic Fishermen Cooperative Society Ltd. v. Sipahi
Singh ; Oriental Bank of Commerce v. Sunder Lal Jain ;
Lekhraj Satramdas Lalvani v. Deputy Custodian-cum-Managing
Officer ; Dr. Rai Shivendra Bahadur v. The Governing Body of
the Nalanda College and Dr. Umakant Saran v. State of
Bihar ). The duty that may be enjoined by a mandamus may be
one imposed by the Constitution, a statute, common law or by
rules or orders having the force of law. (Director of Settlements,
A.P. v. M.R. Apparao ; Kalyan Singh v. State of U.P. ). In order
that a writ of mandamus may be issued, the party asking for the
writ must have a legal right to compel the performance of some
statutory duty cast upon the authorities. (Oriental Bank of
Commerce16). It is not even the petitioners case that the first
respondent has failed to perform a statutory duty cast upon him or
that the petitioners legal right has been adversely affected. The
petitioner is, therefore, not entitled for a writ of mandamus from
this Court.
Even for a writ of certiorari to be issued, the tests prescribed
therefor must be satisfied. Certiorari, under Article 226 of the
Constitution, is issued for correcting gross errors of jurisdiction,
i.e., when a subordinate court is found to have acted (i) without
jurisdiction - by assuming jurisdiction where there exists none, or
(ii) in excess of its jurisdiction by overstepping or crossing the
limits of jurisdiction, or (iii) acting in flagrant disregard of law or
the rules of procedure or acting in violation of principles of natural
justice where there is no procedure specified, and thereby
occasioning failure of justice. (Surya Dev Rai v. Ram Chander
Rai ). In granting a writ of certiorari the superior Court does not
exercise the powers of an appellate Tribunal. It does not review or
reweigh the evidence upon which the determination of the inferior
Tribunal purports to be based. It does not take upon itself the task
of examining the correctness of the decision or decide what is the
proper view to be taken and the order which should be made. It
demolishes the order which it considers to be without jurisdiction
or palpably erroneous but does not substitute its own views for
those of the inferior Tribunal. (T.C. Basappa v. T. Nagappa ; Rex
v. Northumberland Compensation Appellate Tribunal ;
Veerappa Pillai23). The court, issuing a writ of certiorari, acts in
the exercise of a supervisory and not an appellate jurisdiction. The
court will not review findings of fact reached by the inferior court
or tribunal, even if they be erroneous. It is a manifest error
apparent on the face of the proceedings, e.g., when it is based on
clear ignorance or disregard of the provisions of the law, which can
be corrected by certiorari and not a mere wrong decision. (Surya
Dev Rai22). Certiorari will not issue as a cloak of an appeal in
disguise. It does not lie in order to bring up an order or decision for
re-hearing of the issue raised in the proceedings. It exists to
correct errors of law when revealed on the face of an order or
decision or irregularity or absence of or excess of jurisdiction when
shown. (Veerappa Pillai23; Rex24; Hari Vishnu v. Ahmad
Ishaque ).
Findings of fact reached by the inferior Court or Tribunal, on
appreciation of evidence, cannot be reopened or questioned in writ
proceedings. An error of law which is apparent on the face of the
record can be corrected by a writ, but not an error of fact, however
grave it may appear to be. In regard to a finding of fact recorded by
the Tribunal, a writ of certiorari can be issued if it is shown that,
in recording the said finding, the Tribunal had erroneously refused
to admit admissible and material evidence, or had erroneously
admitted inadmissible evidence which has influenced the
impugned finding. Similarly, if a finding of fact is based on no
evidence, that would be regarded as an error of law which can be
corrected by a writ of certiorari. A finding of fact recorded by the
Tribunal cannot be challenged in certiorari proceedings on the
ground that the relevant and material evidence adduced before the
Tribunal was insufficient or inadequate to sustain the impugned
finding. The adequacy or sufficiency of evidence led on a point, and
the inference of fact to be drawn from the said finding, are within
the exclusive jurisdiction of the Tribunal, and the said points
cannot be agitated before a Writ Court. To be amenable to
correction in certiorari jurisdiction, the error committed by the
authority, on whose judgment the High Court was exercising
jurisdiction, should be an error which is self-evident. If it is
reasonably possible to form two opinions on the same material, the
finding arrived at, one way or the other, cannot be called a patent
error. (Syed Yakoob v. K.S. Radhakrishnan ; Ranjeet Singh v.
Ravi Prakash ).
Mere formal or technical errors, even though of law, will not
be sufficient to attract this extra-ordinary jurisdiction. Where the
errors are merely errors in appreciation of documentary evidence
or affidavits, errors in drawing inferences or omission to draw
inference or in other words errors which a court, sitting as a court
of appeal, could only have examined, there is no case for the
exercise of the jurisdiction under Article 226. (Surya Dev Rai24;
Nagendra Nath Bora. v. Commissioner of Hills Division and
Appeals, Assam ). It is within this limited parameters can the
validity of the impugned assessment orders be examined.
By the impugned orders of assessment, the assessing
authority subjected the turnover to tax as inter-state sales under
the CST Act holding that in the computer print out of the
petitioners trading account, for the year 2005-06, the purchase
was shown as purchase trading (high seas), and the relevant sales
as sales trading (high seas); in the high sea sales agreement
dated 10.12.2005, the petitioner was shown as the buyer; in the
subsequent high sea sales agreement dated 12.12.2005 the
petitioner was described as the seller; in their letter dated
25.11.2009 the petitioner had claimed exemption on the ground
that the sales were effected by transfer of documents of title before
the goods had crossed the customs frontiers; the petitioners
intention was to sell the goods, and there was a sale; they did not
act as the agent of Radha Industries; the petitioner had filed the
bill of entry for warehousing and home consumption; customs duty
was assessed on the petitioner alone vide bill of entry for ex-bond;
sale, subsequent to customs clearance, had alone taken place; the
sale took place on 12.01.2006 as shown in the debit note, after the
goods had crossed the customs frontiers; after assessment to
customs duty is made on filing of the bill of entry, the goods get
mingled with the general mass of goods and merchandise of the
country attracting the character of local goods; they cease to be
foreign goods thereafter; on filing of the bill of entry for
warehousing and ex-bond, the petitioner alone was assessed to
customs duty; the import stream had dried upon such clearance
by the customs authorities; the goods had mixed into the stream of
local goods; as is ascertainable from the bills of entry from
warehousing and ex-bond, transfer of title had not taken place
before filing of the bills of entry and assessment of customs duty;
the sale took place after assessment was made on the petitioner,
and on their filing the bills of entry; the goods must be held to have
crossed the customs frontiers of India, after the bill of entry was
made and the goods were assessed to customs duty; thereafter the
sales cannot be said to be sales in the course of import or high sea
sales; and the transactions, on which the petitioner had claimed
exemption as high sea sales, should be treated as inter-state sales
falling under Section 3(a) of the CST Act.
In passing the impugned assessment orders, and in
subjecting the transactions to tax as an inter-state sale under
Section 3(a) of the CST Act, the assessing authority has not taken
into consideration the effect of the High Sea sales agreements and
other agreements, the bill of lading or the provisions of the Indian
Bill of Lading Act. He has held that the sale of goods by the
petitioner to Radha Industries (and other outside the State
purchasers) was an inter-state sale on the ground that these sales
could only have been effected after the petitioner had filed the bill
of entry for home consumption, and after he was assessed to
customs duty. It is only if these findings are set aside, would the
matter necessitate remand, and the assessing authority being
directed to consider the other documents relied upon by the
petitioner.
III. DOES FILING OF A BILL OF ENTRY BY THE PETITIONER,
AND THEIR BEING ASSESSED TO CUSTOMS DUTY, MAKE
THE SALE TO RADHA INDUSTRIES AN INTER-STATE
SALE?
Sri S. Ravi, Learned Senior Counsel, would submit that the
contention of the respondents, that transit ends upon payment of
customs duty by the petitioner, and any sale by the petitioner
thereafter can only be a sale in India, is erroneous; there is no
prohibition under the Customs Act, or the Rules or Regulations
made thereunder, for clearance of goods by the holder of an
authorization by the endorsee of the Bill of Lading; even otherwise
an importer under the Customs Act includes any owner or any
person holding himself out to be an importer; as the Bill of lading
had been endorsed in his favour, the Petitioner was entitled to and
had, in fact, filed the Bill of Entry as an importer; the documents
reveal that there were three importers in the present case i.e.,
Indus Tropics Limited, being the consignee in the Bill of Lading,
was the first importer; the Petitioner, as the first endorsee, was the
second importer; and Radha Industries, as the second endorsee,
was the third importer; the law permits any importer to file a bill of
entry under Section 46 of the Customs Act; the Petitioner was
entitled to file the bill of entry either as an importer or, in the
alternative and as there is no prohibition in law, as an agent of
Radha Industries, the ultimate purchaser; under the Customs Act,
especially for filing a Bill of Entry, the title and the passage of
title are irrelevant considerations; the objective of the said Act is to
realize customs duty when the goods are imported, or cross the
customs frontiers of the country; the Customs Act allows any
owner/importer to file a bill of entry and pay duty; and,
consequently, the contention that payment of customs duty by the
Petitioner is conclusive of the import having ended, and any sale
by the Petitioner thereafter can only be a domestic sale, does not
flow from the provisions of the Customs Act or from the
assessment order.
Sri P.Balaji Varma, Learned Special Standing Counsel for
Commercial Taxes, would submit that the petitioner alone was
assessed to Customs duty; he is therefore the last buyer and owner
or importer of the goods; the petitioner was assessed to duty, by
virtue of his filing the Bill of Entry, as the importer; the system
permitted only the petitioner to file the Bill of Entry as his name
alone was recorded in the Import General Manifest (IGM); based on
the data made available in the IGM, the Bill of Entry also showed
only the name of the foreign seller, the name of the original
importer, and the name of the petitioner as the importer being the
ultimate buyer; the contents of the Bill of Entry make it clear that
there is no high sea sales, subsequent to the high sea sales in
favour of the petitioner; the petitioner herein became the last buyer
in the importation; as such the petitioner was liable to pay
customs duty, and he was rightly assessed; Radha Industries was
not assessed to customs duty; while the petitioner could have
represented the assessee before the assessing authority, they could
not have been assessed for someone else; the petitioner, having
been assessed to customs duty, cannot claim that there is a
further high sea sale in its hands or that they had got themselves
assessed for, and on behalf of, Radha Industries as their agent;
accepting the petitioners contention would mean that Radha
Industries was the ultimate buyer before the goods crossed the
customs frontier, after Purbanchal the original importer, and the
Petitioner the subsequent high sea sale purchaser; if Radha
Industries was the last buyer during importation, the Import
General Manifest (IGM) would have reflected the same; only if the
IGM had reflected the name of Radha Industries would they have
been entitled to file the bill of entry; only the last buyer i.e., the last
importer is liable to be assessed to customs duty; the customs
duty is the value of the goods when the vessel enters Indian waters
i.e, the value of the goods in the hands of the last buyer i.e, Radha
Industries; and the Bill of Entry would then have shown Radha
Industries as the importer, and the petitioner as one of the
importers along with the names of the original importer i.e,
Purbanchal and the export seller M/s. Alkemal; the contention
regarding second high sales, to Radha Industries, are not true; the
name of Radha Industries is not reflected in the Bill of Entry;
Radha Industries was, admittedly, not assessed to customs duty;
the value of the goods (even if notional) paid by Radha Industries
to the petitioner was not assessed to customs duty; the Bill of
Entry was not filed by Radha Industries; a Bill of Entry is
generated on the basis of the Import General Manifest; the
petitioner is the last buyer/final importer of the goods and, as
such, was assessed to customs duty before the goods got mixed
with the general goods; since the alleged transactions, between the
petitioner and Radha Industries, are not subjected to assessment
under the Customs Act, the transaction is not during importation;
the inevitable consequence is that the sale of goods by petitioner to
Radha Industries is not a sale in the course of import; it is an
inter-state sale as Radha Industries is located outside the State of
A.P; the facts pleaded do not establish a high-sea sale, but lead to
the inevitable conclusion of a inter-state-sale; be it under a
principal agent relationship, or under a sale, the main contention
of the petitioner is that the goods were transferred on the high
seas, and is a high sea sale; their contention is also that they are
the transferor and Radha Industries is the transferee; if the
petitioner sells goods to M/s Radha Industries, and yet gets
himself assessed to customs duty, (assuming such transaction is
true), it can only mean that the petitioner and Radha Industries
had colluded to evade customs duty on the sale transaction value;
the case pleaded before this court, and also before the assessing
authority, is that the petitioner had sold goods to Radha Industries
as a 2nd High Sea Sale; while a Bill of Entry for warehousing would
not result in termination of importation, a Bill of Entry for home
consumption terminates the importation; a Bill of Entry for home
consumption is submitted only when the Importer intends to get
the goods released for home consumption; upon entry of goods in
the import manifest (Section 46 of the Customs Act), custom duty
is payable at the rates applicable on the date of arrival of the
vessel; however, in the case of warehousing, the importation
terminates upon filing of the Bill of Entry for Ex-bond for the
purpose of home consumption (Section 68 of the Customs Act);
and customs duty is paid along with interest, rent etc., till the date
of filing of the Bill of Entry for Ex-bond.
(A) IMPORTER OF GOODS UNDER SECTION 2(26) OF THE
CUSTOMS ACT:
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 effected by a
transfer of documents of title to the goods before the goods have
crossed the customs frontiers of India. The words "crossing the
customs frontiers of India" is defined, in Section 2 (ab) of the CST
Act, to mean crossing the limits of the area of a customs station in
which the imported goods or exported goods are ordinarily kept
before clearance by customs authorities. Under the Explanation
thereto, for the purposes of Section 2(ab), "customs station" and
"customs authorities" shall have the same meaning as in the
Customs Act, 1962. The Customs frontier, for the purpose of the
CST Act, is thus equated to the limits of the area of the customs
station in which the goods are stored, crossing of such station
being regarded as amounting to crossing the customs frontiers of
India. The 'customs station' referred to in Section 2(ab) of the CST
Act is the one which is defined under Section 2(13) of the Customs
Act to mean any customs port, customs airport or land customs
station. Customs Port is defined in Section 2(12) of the Customs
Act to mean any port appointed under Section 7(a) thereof to be a
customs port and includes a place appointed under clause (aa) of
that Section to be an inland container depot. Section 7(a) of the
Customs Act enables the Central Government, by notification in
the Official Gazette, to appoint the ports and airports which alone
shall be the customs ports or customs airports for the unloading of
imported goods. The crucial event for the purpose of Section 2 (ab)
of the CST Act, and consequently for Section 5(2) thereof, is the
crossing the limits of the area of the customs station. (State
Trading Corporation of India Ltd. v. State of Tamil Nadu ).
Section 2(23) of the Customs Act defines import, with its
grammatical variations and cognate expressions, to mean bringing
into India from a place outside India. Section 2(25) defines
imported goods to mean any goods brought into India from a
place outside India but does not include goods which have been
cleared for home consumption. Use of the words does not
include in Section 2(25) would mean that the moment goods,
brought into India from a foreign country, are cleared for home
consumption, they get mixed with the local goods and cease to be
imported goods thereafter. Going by the definition of the term
'import' under Section 2(25) of the Act as "to bring into India from
a place outside India," and as he has imported the goods (his name
being reflected in the Bill of Entry as the importer), the petitioner
has rightly been held to be the importer.
In ordinary understanding, goods would not be thought to
have been imported if they were carried through the territorial
waters of the Indian coast by a ship which did not put them into
an Indian port. Importation of goods does not take place as soon
as the ship carrying them enters the marginal seas, perhaps only
to leave them again for navigational purposes as it moves towards
the port of discharge. Entry into the port, with the intention of
being landed, constitutes importation. (Shri Ramlinga Mills Pvt.
Ltd. v. Assistant Collector of Customs ; The Queen v. Bull., ).
If the goods are brought into their port of destination for the
purpose of being there discharged, the act of importation is
complete. On the other hand, the act of importation is not
complete if a ship enter some port of call with goods on board
which is not the destined port of discharge of those goods. (Shri
Ramlinga Mills Pvt. Ltd.30; and Wilson v. Chambers & Co. Ply.
Ltd. ). Unless the goods, brought into the country for the
purpose of use, enjoyment, consumption, sale or distribution, are
incorporated in and get mixed up with the totality of the property
in the country, they cannot be said to have been imported. (Shri
Ramlinga Mills Pvt. Ltd.30; The Central India Spinning and
Weaving and Manufacturing Co., Ltd, The Empress Mills,
Nagpur v. The Municipal Committee, Wardha ; K.R. Ahmed
Shah v. Additional Collector of Customs, Madras ).
The scheme of the Customs Act is to control the due
importation of goods by channelling shipping through proclaimed
ports having defined limits, and through bearing stations within
the port to appropriate wharfage. The inward cargo is to be
reported, the goods are to be unshipped immediately upon
importation and, upon the passing of the entry, to be forthwith
dealt with in accordance with the terms of the entry. In order to
secure due importation, all goods from importation until passed
into home consumption or until exportation abroad are subject to
customs control. Goods in transit, not intended to be landed, are
also subject to that control. An importation is a voluntary arrival
within some port with the intention to unload the cargo. (Shri
Ramlinga Mills Pvt. Ltd.30; The Queen31). Imports generally take
place as a result of transactions between traders in two different
countries. Such transactions, in the modern commercial world,
mostly partake the character of a sale. That posits, as essential
ingredients, an agreement of sale, a passing of consideration and
delivery of property. All these are fixed with reference to two
distinct contracting parties. A concept of import, therefore, cannot
be dissociated with a person exporting the goods and a person who
imports them. The ingredients of the term 'import' have to be
linked with the importer of the country of destination of the goods.
The mere fact that the goods have crossed the customs frontiers in
a Port, in which the importer has no intention to have the goods
delivered from the ship, will not amount to import for the simple
reason that the importer had no intention whatsoever, in relation
to those goods, to have access to the goods except at the Port of
destination. (Shri Ramlinga Mills Pvt. Ltd.30; Brown v. State of
Maryland ). As regards the importer who contracted for the
goods, and the carriage thereof to a particular port, the question of
importation has to be determined in the light of the statutory
provisions but without forgetting the central fact that the importer
has intended the goods to be imported at the particular port.
Importation takes place only when the vessel has crossed the
customs barriers at the intended port of importation. (Shri
Ramlinga Mills Pvt. Ltd.30; Muller v. Badurin ).
The importer of the goods is, therefore, the person who
brings into India the goods from a place outside. The course of
import of goods starts at a point when the goods cross the customs
barrier of the foreign country and ends at a point in the importing
country after the goods cross the customs barrier. The sale which
occasions the import is a sale in the course of import. A purchase
by an importer of goods, when they are on the high seas by
payment against shipping documents, is also a purchase in the
course of import. A sale by an importer of goods, after the property
in the goods has passed to him either after receipt of the
documents of title against payment or otherwise, to a third party
by a similar process is also a sale in the course of import. (J.B.
Trading Corporation v. Union of India ).
In view of the definition of the term "import" in Section 2(23)
of the Customs Act, and imported goods under Section 2(25), an
importer is, ordinarily, the person who brings into India goods
from any place outside India. Section 2(26) of the Customs Act
does not lay down the statutory meaning of the word importer.
The word importer has been defined in Section 2(26) to include, in
relation to any goods at any time between their importation and
the time when they are cleared for home consumption, any owner
or any person who holds himself out to be the importer. What
does the word include, in the context of Section 2(26) of the
Customs Act, mean? The word include is generally used in
interpretation clauses in order to enlarge the meaning of the words
or phrases occurring in the body of the statute; and when it is so
used those words or phrases must be construed as
comprehending, not only such things as they signify according to
their natural import, but also those things which the interpretation
clause declares that they shall include. (Dadaji v. Sukhdeobabu ;
Reserve Bank of India v. Peerless General Finance and
Investment Co. Ltd. ; Mahalakshmi Oil Mills v. State of A.P. ;
Associated Indem Mechanical (P) Ltd. v. W.B. Small Industries
Development Corpn. Ltd., ; P.Kasilingam v. P.S.G.College of
Technology ). The word includes, as used in Section 2(26),
denotes that the word importer may refer to and may
comprehend not only what would ordinarily and in common
parlance be spoken of as an importer but also, in relation to any
goods at any time between their importation and the time they are
cleared for home consumption, the owner or a person holding
himself out to be an importer. Any ordinary meaning of the word
importer is not excluded by Section 2(26), and an extended
meaning is to be given thereto. (Carter v. Bradbeer ).
The words, namely, 'at any time between their importation
and the time when they are cleared for home consumption'
occurring in the second part of Section 2(26) are significant. What
does the word importation mean? The word importation is not
defined in the Customs Act. It means the commercial activity of
buying and bringing in goods from a foreign country. The word
importation is defined in Blacks Law Dictionary Sixth Edition
as the act of bringing goods and merchandise into a country from
a foreign country. (Cunard Steamship Co. v. Mellon ). The word
importation is defined in P.Ramanatha Aiyers The Law Lexicon
Reprint Edition 2002 as the bringing goods and merchandize
into the kingdom from other nations. (Tamlins Law Dic.); a thing
is imported when it reaches the borders of the country. If it is
imported by water then, as soon as a vessel reaches an Indian
port, the process of importation is complete. If the goods are
carried by sea and the vessel reaches an Indian port, it is the
moment of entry of the vessel which must be held to be the
moment of importation of the goods. (Additional Collector of
Customs v. Sitaram ; Devichand Jestimal and Co. Bangalore
v. Collector of Central Excise, Madras ; Gopal Mayaji v. T.C.
Seth ). The date on which the goods arrive in India is the date on
which the importation is complete having crossed the customs
barrier. But for the expanded definition of importer in Section
2(26), ordinarily, after completion of importation, there cannot be
another importer for the very same goods. (J.B. Trading
Corporation37). In view of the expanded definition of importer in
Section 2(26), while any person who imports goods from a foreign
country to India would undoubtedly be an importer, the owner of
the goods and a person holding himself out be an importer would
also be an importer, however only during the period between the
importation of the goods and the time they are cleared for home
consumption, and not prior thereto or thereafter. This period is
when the goods are warehoused after importation, and are cleared
from such warehouse by a person other than the person who
actually imported the goods. That limb of the definition of
importer, in Section 2(26) of the Customs Act, is designed to
protect the interests of the owner or the exporter where the goods
have not been claimed or redeemed by the designated importer in
India. The definition cannot be used to usurp the identity of an
importer from the person who filed the bill of entry. As Section
2(26) is an inclusive definition, the person in whose name the bill
of entry is filed does not cease to be the importer. In other words,
the person who has secured the release of the goods from the
carrier, who has filed the bill of entry, and who has undertaken the
work of clearance, continues to be an importer. The bill of entry
shows the goods to have been cleared for home consumption by
the petitioner who is, therefore, the importer of the goods.
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. No doubt, Section 2(26)
permits any one holding himself out to be the importer between the
date of importation and clearance of the goods for home
consumption. But here the petitioner, in whose name the goods
have been manifested, has, by filing a Bill of Entry, already held
himself out to be the importer. As shall be detailed hereinafter, the
import manifest has not been amended, the petitioner has filed the
Bill of Entry for clearance of the goods for home consumption, and
has held himself out to be the importer. In the context of Section
48 of the Customs Act whereunder, if the notified importer does
not clear the goods or abandons the goods, the authorities having
custody of the goods can only sell the goods by auction, another
person cannot be substituted as the importer. The name of the
importer cannot be changed in the manifest where fraud is
detected in the import as any such amendment is impermissible
under Section 30(3) of the Customs Act. If the contention of the
petitioner, that any person can file a bill of entry for clearance of
goods for home consumption, is accepted, the importer can easily
substitute himself by some other person, to file the bill of entry for
clearance, whenever any consignment is liable for confiscation for
violation of the provisions of the Customs Act. (J.B. Trading
Corpn.37). It is evident, therefore, that, before its importation, it is
only the person who imported the goods who would be the
importer. If, as contended by the petitioner, they had sold the
goods on high seas to Radha, it is only Radha who would be the
importer and not the petitioner. The very fact that the name of
Radha is not reflected as the importer in the bill of entry ex-bond
(home consumption) belies the petitioners contention of a high sea
sale by them to Radha Industries.
(B). AN IMPORT GENERAL MANIFEST WOULD REFLECT THE
NAME OF THE IMPORTER:
To regulate and have effective control on imports, the
Customs Act enjoins certain liabilities on the carriers. They are
required to bring in the imported cargo into the country for
unloading only at the notified ports/airports/Land Customs
Stations (Section 29); and furnish detailed information to Customs
about the goods brought in for unloading at that particular port.
The cargo must be declared in terms of an Import General
Manifest (IGM) prior to arrival of the vessel/aircraft at the
Customs station (Section 30). Ordinarily, unloading of cargo
cannot be undertaken from any vessel unless the IGM is furnished
in the prescribed form. After the IGM is delivered, unloading takes
place under the supervision of Customs Officers.
Section 2(24) of the Customs Act defines import manifest to
mean the manifest required to be delivered under Section 30.
Chapter-VI of the Customs Act contains provisions relating to the
conveyance carrying imported goods. Section 30(1) requires the
person-in-charge of the vessel carrying imported goods to deliver to
the proper officer an import manifest prior to the arrival of the
vessel. Section 30(2) requires the person, delivering the import
manifest at the foot thereof, to make and subscribe to a declaration
as to the truth of its contents. In terms of the Import Manifest
(Vessels) Regulations, 1971, any person, who delivers the import
manifest for a vessel to the proper officer under Section 30 of the
Customs Act is required to be registered with Customs. The
importer can either handle the import clearance documents
himself or appoint a Custom House Agent (CHA) licensed in terms
of the CHA Licensing Regulations. Section 146 of the Customs Act
requires Customs house agents to be licensed and, under sub-
section (1) thereof, no person shall carry on business as an agent,
relating to the entry or departure of a conveyance or the import or
export of goods at any customs-station, unless such person holds
a licence granted in this behalf in accordance with the regulations.
An obligation is cast on the Custom House Agent, acting on behalf
of the importer, to comply with Section 30 of the Act. (J.B. Trading
Corporation37).
Section 30(3) of the Customs Act read with the Levy of Fee
(Customs Documents) Regulations, 1970, allows the proper officer
to permit an IGM to be amended or supplemented, on payment of
prescribed fees, if he is satisfied that there is no fraudulent
intention. The Central Board of Excise and Customs has provided
for two broad categories of amendments Major and Minor. The
major amendments include changing the Importers/consignees
name. Section 32 stipulates that no imported goods, required to
be mentioned in an import manifest or import report, shall, except
with the permission of the proper officer, be unloaded at any
customs station unless they are specified in such manifest or
report for being unloaded at that customs station. In the exercise
of the powers conferred by Section 157 of the Customs Act, the
Central Board of Excise and Customs made the Import Manifest
(Vessels) Regulations, 1971. Regulation 3 thereof relates to the
import manifest and, under sub-regulation (1) thereof, every
import manifest shall (a) be delivered in duplicate; (b) cover all the
goods carried in a vessel; and (c) consist of, among others, a cargo
declaration in Form III. Regulation 5 prescribes the manner of
declaring cargo and, under sub-regulation (1)(a) thereof, the cargo
declaration shall be delivered in separate sheets in respect of each
of the categories of cargo, viz, the cargo to be landed. The cargo
declaration form contains, among others, the name of the ship, the
port of loading, the bill of lading number, the number and kinds of
packages, description of goods, name of the consignee/importer,
the date of presentation of the bill of entry, the name of the
customs house agent etc.
As shall be referred to in detail hereinafter, the bill of entry
submitted by the petitioner, in terms of the Bill of Entry (Electronic
Declaration) Regulations, 1995, records the Import General
Manifest number and date as 423/2006 dated 13.04.2006. The
Import General Manifest contains a cargo declaration wherein,
among others, the name of the importer, the importers code
number, IGM number and date are required to be detailed. It is
not even the petitioners case that his name is not reflected as the
importer in the Import General Manifest. If, as is now contended
by him, the goods had been sold on the high seas, the Import
General Manifest should have reflected the name of the last high
sea sale purchaser as the importer. Otherwise, the Import General
Manifest would have necessitated amendment as it is only the last
purchaser of the goods on high seas who would be the
importer/consignee. There is no material on record to show that
either the Import General Manifest contained the name of Radha
as the importer/consignee or that it was subsequently amended in
terms of Section 30(3) of the Customs Act. It is evident, therefore,
that the contention of high seas sales has been raised by the
petitioner only to avoid the goods being subjected to tax as inter-
state sales under the CST Act.
[C] BILL OF ENTRY EX-BOND/FOR HOME CONSUMPTION ITS
SCOPE:
Section 45(1) of the Customs Act requires all imported goods
unloaded in a customs area to remain in the custody of the person,
approved by the Commissioner of Customs, until they are cleared
for home consumption or are warehoused. Section 46(1) requires
the importer of the goods to make an entry thereof by presenting to
the proper officer a bill of entry for home consumption or
warehousing in the prescribed form. Section 46(3) requires a bill
of entry, under sub-section (1), to be presented at any time after
the delivery of the import manifest. Section 46(4) requires the
importer, while presenting a bill of entry, to make and subscribe,
at the foot thereof, a declaration as to the truth of the contents of
such bill of entry and, in support of such declaration, to produce to
the proper officer the invoice, if any, relating to the imported goods.
Section 47 relates to clearance of goods for home consumption
and, under sub-section (1) thereof, where the proper officer is
satisfied that any goods entered for home consumption are not
prohibited goods, and the importer has paid the import duty, if
any, assessed thereon and any charges payable under the Act in
respect thereof, he may make an order permitting clearance of the
goods for home consumption. Under the proviso to Section 149,
no amendment of a bill of entry shall be authorised after the
imported goods have been cleared for home consumption or
deposited in a warehouse, except on the basis of documentary
evidence which was in existence at the time the goods were cleared
or deposited as the case may be.
Section 49 relates to storage of imported goods in a
warehouse pending clearance and, thereunder, where in the case
of any imported goods, whether dutiable or not, entered for home
consumption, the Assistant Commissioner or Deputy
Commissioner of Customs is satisfied, on the application of the
importer, that the goods cannot be cleared within a reasonable
time, the goods may, pending clearance, be permitted to be in a
warehouse, but such goods shall not be deemed to be warehoused
goods for the purposes of the Act and, accordingly, the provisions
of Chapter-IX shall not apply to such goods. Section 68 relates to
clearance of warehoused goods for home consumption and,
thereunder, the importer of any warehoused goods may clear them
for home consumption if (a) a bill of entry for home consumption in
respect of such goods has been presented in the prescribed form;
(b) the import duty levibale on such goods and all penalties, rent,
interest and other charges payable in respect of such goods have
been paid; and (c) an order for clearance of such goods for home
consumption has been made by the proper officer.
For clearance of the goods, offloaded at the port, the
importer has the option either to clear the goods for home
consumption after payment of customs duties, or to clear them for
warehousing, without immediate discharge of customs duties, in
terms of the warehousing provisions of the Customs Act. For this
purpose every importer is required to file, in terms of the Section
46, a Bill of Entry for home consumption or warehousing, as the
case may be, in the form prescribed by the Regulations. The Bill of
Entry is to be submitted in sets, different copies meant for different
purposes. The Bill of Entry contains, among others, the name of
the customs house agent, his address and licence number, the
customs house agent code, the importers code, the Import-Export
Code (IEC) number, importers name and address, the name of the
vessel, the country of origin, the country of assignment, the bill of
lading and its date, the particulars of the goods, invoice
particulars, customs duty paid etc. Certain documents are also
required to be submitted with the Bill of Entry. The correctness of
the information has also to be certified by the importer in the form
of a declaration at the foot of the Bill of Entry, and any mis-
declaration/incorrect declaration has legal consequences.
In the exercise of the powers conferred by Section 157 read
with Section 46 of the Customs Act, the Central Board of Excise
and Customs made the Bill of Entry (Electronic Declaration)
Regulations, 1995. Regulation 2(a) thereof defines authorized
person to mean (i) the Customs House Agent who holds a
permanent licence under the Customs House Agents Licensing
Regulations, 1984, and is authorised by the Commissioner of
Customs with a user identification; or (ii) an importer who holds a
valid Import Export Code number, and is specially authorized by
the Commissioner of Customs with a user identification for the
purpose of obtaining clearance of goods imported by him.
Regulation 2(b) defines bill of entry to mean the electronic
declaration accepted and assigned with a number by the Customs
Computer system for further processing. Regulation 2(d) defines
electronic declaration to mean the declaration of the particulars
relating to the imported goods, lodged in the Customs Computer
System, through the data-entry facility provided at the service
centre or the data communication networking facility provided by
the National Informatics Centre. Regulation 3 requires the
authorised person to furnish, for the purpose of clearance of the
imported goods, a cargo declaration in the format set out in
Appendix-A to the regulations, and such other information as may
be necessary for preparing an electronic declaration of the bill of
entry. Regulation 5 stipulates that the data entry shall be deemed
to be complete when the option to lodge the electronic declaration
in the Customs Computer System is exercised, and the declaration
is accepted by the System. Regulation 8 requires the authorised
person, after completion of assessment of the bill of entry, to
obtain three copies of the print-out of the assessed bill of entry
from the service centre. Such person is required to sign the copies
of the print-out, indicating his name and designation at the space
provided for the purpose affirming the truth of the contents
recorded on the assessed bill of entry. He is required, thereafter,
to present the same along with copies of challans evidencing
payment of duty, and other supporting import documents in
original, relating to the goods referred to in the bill of entry, for the
examination of the said goods by the proper officer and for the
issue of the order permitting clearance of the said goods for home
consumption or warehousing. Regulation 10 requires the
authorised person to obtain a declaration from the importer
affirming the truth of the contents of documents relating to the
imported goods sought to be cleared in duplicate, and to present
one copy in original to the proper officer at the time of submission
of the bill the of entry, and to retain one copy with him for his
records. Regulation 11 requires the original print-out of the bill of
entry to be retained by the proper officer and the duplicate and the
triplicate print-outs to be returned to the importer.
Appendix-A, referred to in Regulation 3 above, contains
details of the cargo declaration. Among the details to be furnished
therein, are the importers code, the clearing house agents code,
port of shipment, country of origin, country of consignment, IGM
number and date, number of packages, its gross weight, invoice
details, the nature of the transaction (sale/consignment/
hire/gift/others), the terms of payment (LC/FOC/DP/SD/others),
conditions attached with the sale (if any), and whether the buyer
and seller are related. The said form also contains a declaration
certifying that the aforesaid documents, and the information
therein, are true and correct. The said declaration is required to
be signed either by the importer or the clearing house agent.
This Bill of Entry is subject to verification by the proper
officer of Customs (under the self assessment scheme), and may be
re-assessed if the declaration is found to be incorrect. The first
stage for processing a Bill of Entry is termed as the
noting/registration of the Bill of Entry vis--vis the IGM filed by the
carrier. The import clearance documents are tallied with the
related IGM to ensure that the goods, sought to be cleared, have
been declared in the particular IGM of the vessel/aircraft
mentioned in the Bill of Entry. The Bill of Entry is checked with
the consignment sought to be cleared having been manifested in
the particular vessel, and a Bill of Entry number is generated and
indicated on all copies. After noting, the Bill of Entry is sent to the
appraising section of the Custom House for assessment, payment
of duty etc. The Bill of Entry and the related
particulars/information are scrutinized, among others, to
determine the value, classification and duties leviable on the
imported goods. After the bill of entry is filed, the customs officer
assesses the customs duty liability, and the said sum is required
to be paid by the importer as customs duty.
The authorized person, entitled to furnish a cargo
declaration in terms of Regulation 3 read with Appendix-A and to
present various documents as stipulated in the Bill of Entry
(Electronic Declaration) Regulations, 1995, is either the clearing
house agent or the importer and none else. In terms of Regulation
2(a) thereof, the Clearing House Agent must have a permanent
licence and the importer a valid Importer-Export Code number.
Both of them are also required to be authorized by the
Commissioner of Customs with an user identification. The user
identification number is required for the importer to obtain
clearance of the goods imported by him. It is evident, therefore,
that it is either the Clearing House Agent or the Importer who
alone can clear the imported goods for home consumption. In this
context, it is useful to refer to the contents of one of the Bills of
Entry enclosed along with W.P.No.6258 of 2010. The head of the
said Bill of Entry refers to Indian Customs EDI System. Under
the column importer details, the Code No. is stated as 2605001091
and the PAN No. as ABMPA8919R. The name of the importer is
shown therein as Sanjay Kumar Agarwal, Vellanki Frame Works.
The IGM number and date are recorded as 423/2006 dated
13.04.2006. The port of loading is shown as Yangon and the
country of origin as Myanmar. The bill number is recorded as
GCTC No.5310611 and the bill date as 08.04.2006. The number of
packages is shown therein as 155 pcs. The invoice number and
date is recorded as 209/2006 dated 11.04.2006 of M/s.Alkemal
Singapore Private Limited. The invoice value is shown as
1,31,500.29 US Dollars and the HSS as Original Importer
No.37000009100 Purbanchal Lumbars Pvt. Ltd. The Bill of Entry
records the name of Srinivasa Transports as the clearing house
agent, and their number as DDC No./DT.Officer:2100/03-05-
2006/TKESAV. The declaration thereunder is signed both by Sri
Sanjiv Kumar Agarwal as the importer and Srinivasa Transports as
the clearing house agent. It is evident, from the said Bill of Entry,
that the goods were imported by the petitioner, and were cleared
from customs with the assistance of the customs house agent
M/s.Srinivasa Transports. If, as contended by the petitioner, the
goods were sold by them to M/s.Radha Industries on high seas,
and before the goods entered the customs port, the name of the
importer should have been shown as Radha Industries, and not
as Sanjiv Kumar Agarwal, Vellanki Frameworks. The fact that the
name of the importer is shown as Sanjiv Kumar Agarwal, Vellanki
Frameworks, and the Bill of Entry makes no reference to Radha
Industries, goes to show that the goods were imported by the
petitioner on a high sea sale effected in their favour by Purbanchal
Lumbers Private Limited; it is they who had imported the goods;
and sale of goods by them to Radha Industries could only have
been effected after the goods had been cleared for home
consumption.
(D). CAN AN AGENT FILE A BILL OF ENTRY IN HIS NAME?
The functions and responsibilities of the CHA, as an Agent,
are limited to arranging release of the goods, and once the goods
are cleared he has no further responsibilities to discharge. Section
147 relates to the liability of principal and agent and, under sub-
section (1) thereof, where the Customs Act requires anything to be
done by the owner or importer of any goods, it may be done on his
behalf by his agent. Section 147(2) stipulates that any such thing
done by an agent of the owner or importer of any goods shall,
unless the contrary is proved, be deemed to have been done with
the knowledge and consent of such owner or importer so that, in
any proceedings under this Act, the owner or importer of the goods
shall also be liable as if the thing had been done by himself. The
reference to the agent under Section 147 of the Customs Act is to
the agent of the Principal i.e. power of attorney holder of the
importer and where the relationship of "master and servant" comes
into play. In such cases the act of an agent is held to be the act of
the Principal. The CHA acts under separate Regulations and his
function, under the licence, is only to present papers for clearance
of imported goods under a Bill of Entry and not to act as an
contemplated under Section 147 of the Act. (Collector of
Customs, Cochin v. Trivandrum Rubber Works Ltd ). The
provisions of Section 147 of the Customs Act are attracted where
anything which the Act requires to be done by an importer or
owner is done by any other person at his instance. The procedure
relating to clearance of the goods, including production of a valid
licence for clearance, are required to be complied with by the
importer. The word "owner" is used, both in Section 2(26) and
Section 147 of the Customs Act, since the owner of the imported
goods is required to perform certain acts under the Customs Act.
Section 63 obligates the owner of the warehoused goods to pay
warehouse rent and warehouse charges. Section 64 empowers the
owner to deal with such goods, and Section 65 enables the owner
to carry out manufacturing process and other operations.
Section 147(3) of the Customs Act provides that, when any
person is expressly or impliedly authorised by the importer to be
his agent in respect of such goods for all or any of the purposes
under the Act, such person shall, without prejudice to the liability
of the owner or importer, be deemed to be the owner or importer.
The proviso to Section 147(3), however, makes it clear that where
any duty is, inter alia, short-levied for a reason other than any
wilful act, negligence or default of the agent, the agent shall not be
liable for payment of that duty, save and except where, in the
opinion of the Assistant Collector of Customs, the duty cannot be
recovered from the owner or the importer. Section 147(3) read with
the proviso specifies circumstances in which the clearing agent can
be treated as the owner/importer of the goods and made liable for
the payment of duty. (Trivandrum Rubber Works Ltd48). On a
conjoint reading of Sections 12, 28 and 147 of the Customs Act, it
is clear that, in cases in which duty had not been levied, the owner
should be called upon to pay customs duty. It is only if the
amount cannot be recovered from the owner, can it be collected
from the agent. (Pilmen Agents (P) Ltd. v. Collector of Customs,
Madras ).
If, as contended by him, the petitioner was merely acting as
an agent, the bill of entry would have reflected the name of the
importer as M/s.Radha Industries and the petitioner as their agent
instead of M/s. Srinivasa Traders as the clearing house agent; and
the petitioners name would have been recorded in the bill of entry,
along with Purbanchal Lumbers Private Limited. The very fact that
the name of the importer is shown as Sanjiv Kumar Agarwal,
Vellanki Frameworks, and the Bill of Entry makes no reference to
Radha Industries, shows that the goods were imported by the
petitioner, on the goods being sold to them on high seas by
Purbanchal Lumbers Private Limited. Sale of goods by them to
Radha Industries could only have been effected after the goods had
been cleared for home consumption.
(E). CUSTOMS DUTY CAN BE ASSESSED ONLY ON THE
IMPORTER OF THE GOODS AND NOT HIS AGENT:
Duties, according to the practice of most commercial
nations, are charged only on those articles which are intended for
sale or consumption in the country. Thus goods imported and re-
exported in the same vessel, but not for sale, are exempt from the
payment of duties. Sale is the object of importation, and is an
essential ingredient of that intercourse, of which importation
constitutes a part. It is as essential an ingredient as importation
itself. Import is not merely the bringing into, but comprises
something more i.e. incorporating and mixing up of the goods
imported with the mass of the property in the local area.
(Brown35; The Central India Spinning and Weaving and
Manufacturing Co., Ltd.33). Though customs duties are levied
with reference to goods, the taxable event is the import of goods
within the customs barriers. The imposition of an import duty, by
and large, results in a condition which must be fulfilled before the
goods can be brought inside the customs barriers i.e. before they
form part of the mass of goods within the country. (Shri Ramlinga
Mills Pvt. Ltd.30; In re : Sea Customs Act (1878) ).
Section 12(1) of the Customs Act stipulates that customs
duty shall be levied, at such rates as may be specified under the
Customs Tariff Act, 1975 or any other law for the time being in
force, on the goods imported into India. Under Section 14(1), the
value of the imported goods shall be the transaction value of such
goods ie the price actually paid or payable for the goods when sold
for import to India for delivery at the time and place of importation
where the buyer and seller of the goods are not related and price is
the sole consideration for the sale subject to such other conditions
as may be specified in the rules made in this behalf. Under the
first proviso thereto such transaction value, in the case of imported
goods, shall include, in addition to the price as aforesaid, any
amount paid or payable for costs and services, including
commission and brokerage, engineering, design work, royalties and
licence fees, cost of transportation to the place of importation,
insurance, loading, unloading and handling charges to the extent,
and in the manner, specified in the Rules made in this behalf.
The value of the imported goods, for the purpose of levy of Customs
Duty, is required to be determined in terms of Section 14 of the
Customs Act read with the Customs Valuation (Determination of
Prices of Imported Goods) Rules, 2007. Section 15(1) stipulates
that the rate of duty and tariff valuation, if any applicable to any
imported goods, shall be the rate and valuation in force (a) in the
case of goods entered for home consumption under Section 46, on
the date on which a bill of entry in respect of such goods is
presented under that section; (b) in the case of goods cleared from
a warehouse under Section 68, on the date on which a bill of entry
for home consumption in respect of such goods is presented under
that section; [c] in the case of any other goods, on the date of
payment of duty. Section 17 relates to assessment of duty and,
under sub-section (1) thereof, after an importer has entered any
imported goods under Section 46, the goods may, without undue
delay, be examined and tested by the proper officer. Section 17(2)
stipulates that, after such examination and testing, the duty, if
any, leviable on such goods shall be assessed.
If, as contended by the petitioner, they had effected sales on
high seas it is the person, who purchased the goods from them,
who would the last purchaser before the goods were cleared for
home consumption; and it is on the value of such sale, and on
such a purchaser who imported the goods, would customs duty
have been levied under the Customs Act. While the goods can also
be cleared by a customs house agent, or by the agent of the
principal, it is only the importer who can be assessed to customs
duty. No sooner than the goods become imported goods, they
become chargeable to duty. Upto the moment they are cleared for
home consumption, they constitute imported goods for the purpose
of the Customs Act. As soon as they are cleared for home
consumption, they cease to be imported goods. (Apar Pvt Ltd. v.
Union of India ; Associated Forest Products (P) Ltd. v. Asst.
Collector of Customs ; S.K. Gupta v. K.P. Jain ). Transfer of
title to the goods on high seas would make the person, who
purchased the goods on high seas, the importer of the goods and it
is he who would be liable to be assessed to customs duty. As the
Bill of Entry records the petitioners name as the importer, and as
it is not in dispute that it was he who was assessed to customs
duty, and not Radha, it is evident that the sale of goods by the
petitioner to Radha is not a high seas sale. Such a sale could only
have been effected after the petitioner was assessed to customs
duty, and he had cleared the goods for home consumption.
(F). DO THE OBSERVATIONS IN MINERALS AND METAL TRADING
CORPORATION, THAT THE NAME IN THE BILL OF ENTRY IS
IRRELEVANT, CONSTITUTE A BINDING PRECEDENT?
Sri S.Ravi, Learned Senior Counsel appearing on behalf of
the petitioner, would submit that, as held in Minerals & Metals
Trading Corporation of India Ltd., v. State of Andhra
Pradesh , the circumstance as to who is filing the bill of entry is
not a material circumstance; and the name on the bill of entry is
irrelevant because the name of the importer alone will be recorded
in it, even if the transfer of title deeds is effected before filing of the
bill of entry and assessment of duty under Section 28 of the
Customs Act.
In Minerals and Metals Trading Corporation of India
Ltd.54, the assessee claimed exemption on a part of the turnover as
sales in the course of import under Section 5(2) of the CST Act,
contending that it had imported goods from foreign parties and, as
it had transferred the bills of lading in favour of the local buyers
before the customs clearance of goods was effected, they were sales
in the course of import under the second limb of Section 5 (2) read
with Section 2 (ab) of the CST Act. The Commercial Tax Officer
disallowed the exemption holding that the crucial date, for the
purpose of determining exemption, is the date of arrival of the
vessel; and no exemption could be claimed as the original
statement of facts issued by the Master of the ship was not filed.
The petitioner had filed the certificates issued by the customs
authorities indicating the time of customs clearance in respect of
most of the shipments. The Commercial Tax Officer disallowed the
exemption on some shipments on the ground that the time was not
recorded on the copies, of the letters from the customs,
acknowledging the bill of lading. In appeal, the Appellate Deputy
Commissioner took the date of "arrival of the vessel at the port" as
relevant, and disallowed the exemption on the ground that the bill
of lading had been transferred subsequent to the date of arrival of
the vessel at the port, ignoring the date of effecting the customs
clearance of the goods. On further appeal, the Tribunal held that it
was enough if the goods had crossed the outer limit of the customs
clearance, and it was not necessary that it had to cross the inner
limit also. Aggrieved thereby the petitioner filed T.R.Cs before the
High Court contending that the goods were transferred by
transferring the bills of lading in favour of the respective
purchasers; and, since the transfer was effected before clearance of
the goods, the provisions of the APGST Act were not applicable, by
virtue of Section 38 of the Act, as it was a sale occasioned in the
course of import of the goods into the territory of India, by transfer
of documents of title before the goods had crossed the customs
frontiers of India. On the other hand the case of the Revenue was
that, since the transfer was effected after the goods had crossed
the limits of the area of the customs authorities in which the
imported goods were ordinarily kept before clearance by the
customs authorities, the transaction fell outside Section 5(2) read
with Section 2(ab) of the CST Act. It is in this context that the
Division Bench held:-
..A reading of Section 5 (2) makes it clear that if the sale is effected by a
transfer of documents of the goods before the goods have crossed the customs
frontiers of India then a sale or purchase of goods is deemed to have taken
place
in the course of import of the goods into the Indian territory. Crossing the
customs frontiers is defined under Section 2(ab) according to which crossing the
limits of the area of customs station where goods are ordinarily kept before
clearance by the customs authorities amounts to crossing the customs '
frontiers. Under the explanation, the customs station and customs authorities
have the same meaning as in the Customs Act. Customs station is defined
under the Customs Act as any customs port, customs airport, or land customs
station. Customs port means any port appointed under Section 7(a) and
includes a place appointed under clause (aa) of that section to be an inland
container report. Customs airport means any airport appointed under clause (a)
of Section 7. Land customs station means any place appointed under. Section
7(b), A reading of Section 2(ab) makes it clear that if the goods crosses the
area
of the customs station viz., the customs port which is notified under Section 7
of
the Act, where the goods are kept before clearance and if the transfer is
effected
by transfer of documents of title then it amounts to sale in the course of
import.
In other words if the goods are kept in the port before clearance, crossing the
limits of that port amounts to sale in the course of import.
..We have already referred to Section 5(2) read with Section 2(ab). The
goods will cross the limit of the area of the customs station only on
clearance by the customs authorities. Clearance by the customs authorities
will be after filing the bill of entry and after the assessment of duty under
Section 38 of the Act. Before the assessment of the duty the goods kept in
the customs port cannot cross the limits of the customs port. Therefore
irrespective of the fact whether duty is paid or not, when once the bill of
entry is filed and the imported duty is assessed, then only the goods can
cross the limits of the customs port, therefore, any transfer of documents
of title before the clearance of the goods by the customs authorities on
making the assessment of goods would amount to a sale in the course of
import, as after the assessment is made and on filing of the bill of entry
the goods get mingled with the general mass of goods and merchandize of
the country. The goods get the eligibility to be declared as local goods after
clearance, even though they are not physically removed from the harbour
premises. They attain the character of local goods and cease to be foreign
goods. Therefore, the relevant point of time for determining as to whether
the sale of goods is in the course of import by a transfer of title deeds is
the transfer by title deeds before filing the bill of entry and the assessment
of duty irrespective of the fact whether the goods are physically cleared
from the harbour or not and whether duty is paid or not. As pointed out in
the earlier paras after the filing of the bill of entry the assessment of the
duty the import stream dries up and ceases to flow after the customs
department levies the duty declaring the eligibility of the goods to be
cleared and mingles with the general mass of goods and merchandise in the
country. Once the duty is levied the import is at an end and the national
customs barrier is supposed to have been crossed. The reason being it is
difficult to ascertain the point of time or the place at which the goods have
entered the limits of the customs port. Therefore, the assessing authorities
under the APGST Act docs not get jurisdiction to assess the goods if the
transfer of title deeds is effected before the clearance of goods by filing the
bill of entry under the Customs Act and after making the assessment of the
import duty payable under Section 28 of the Customs Act, 1962
(emphasis supplied)
Having so held, the Division Bench remanded the T.R.Cs. to
the assessing authority for the purpose of determining as to when
the transfer of goods by title deeds was effected, whether it was
before filing of the bill of entry and assessing the duty or after filing
the bill of entry and assessment of duty under the Customs Act.
Thereafter, the Division Bench held as under:-
We also point out that the name on the bill of entry is irrelevant
because the name of the importer alone will be recorded in it even if the
transfer by title deeds is effected before filing the bill of entry and
assessment of duty under Section 28. We have to make this clear because
the taxing authorities tend to raise such doubts though the amendment
was specifically made to have a clear cut off time to determine when the
import ends. Therefore, let it be declared that if the transfer of title deeds
is effected before filing the bill of entry and making the assessment then
the sale is deemed to have been effected in the course of import, otherwise
not. In the light of the above, the assessing authorities are directed to hold
an enquiry and decide in each case, whether the transfer is before filing
the bill of entry and making assessment of duty or thereafter. The TRCs are
accordingly disposed of. (emphasis supplied)
The quotable in law is avoided and ignored if it is rendered
in ignoratium of a statute or other binding authority. (Young v.
Bristol Aeroplane Co. Ltd ). A decision passes sub-silentio,
when the particular point of law involved in the decision is not
perceived by the court or present to its mind. (Salmond on
Jurisprudence 12th Edn., p. 153). A decision rendered without any
argument, without reference to the crucial words of the rule and
without any citation of the authority is not a binding precedent.
(Lancaster Motor Company (London) Ltd. v. Bremith Ltd ). A
decision, which is neither founded on reasons nor it proceeds on a
consideration of an issue, cannot be deemed to be a law declared
to have a binding effect. That which escapes in the judgment
without any occasion is not the ratio decidendi. A decision is
binding not because of its conclusions but in regard to its ratio,
and the principles laid down therein. Any declaration or
conclusion arrived without application of mind or preceded without
any reason cannot be deemed to be the declaration of law or
authority of a general nature binding as a precedent. (Jaisri Sahu
v. Rajdewan Dubey ; Municipal Corporation of Delhi v.
Gurnam Kaur ; B. Shama Rao v. Union Territory of
Pondicherry ; State of U.P. v. Synthetics and Chemicals
Ltd. ). Any declaration or conclusion arrived at without being
preceded by any reason, cannot be deemed to be the declaration of
law or authority of a general nature binding as a precedent.
(Synthetics and Chemicals Ltd.,60; B. Shama Rao59). A mere
direction of the Court without considering the legal position is not a
precedent. (Vishnu Dutt Sharma v. Manju Sharma ). The view, if
any, expressed without analysing the statutory provision cannot
be treated as a binding precedent. (N. Bhargavan Pillai v. State of
Kerala ).
Passing observations in a judgment, without any argument
and without reason, do not form part of the ratio; they cannot be
treated as having the weight of authority or as constituting a
binding precedent. Mere casual expressions carry no weight at all.
Not every passing expression of a Judge, however eminent, can be
treated as an ex-cathedra statement having the weight of authority
(Gurnam Kaur58; Bengal Club Ltd. v. Susanta Kumar
Chowdhury ). A decision is only an authority for what it actually
decides. (Union of India v. Dhanwanti Devi ; State of Orissa v.
Mohd. Illiyas ; ICICI Bank v. Municipal Corpn. of Greater
Bombay ; State of Orissa v. Sudhansu Sekhar Misra ; Quinn
v. Leathem ). Observations, on matters not in issue in the case,
are not meant to be and ought not to be regarded as laying down
the law. (K. Veeraswami v. Union of India ). The view, if any,
expressed without analysing the statutory provision cannot be
treated as a binding precedent. (N. Bhargavan Pillai62). A decision
not expressed and accompanied by reasons, and not preceded by a
conscious consideration of the issue, cannot be deemed to be a law
declared to have binding effect. (Arnit Das v. State of Bihar ;
M.R. Apparao20; Synthetics and Chemicals Ltd.60; B. Shama
Rao59).
The law declared by the Division Bench, in Minerals and
Metals Trading Corporation of India Ltd.54, is that when the
goods are assessed to duty by the Customs Authorities, after the
bill of entry is filed, the importation is completed even if duty is not
paid, and the goods remain within the customs station; it is only
after the Bill of Entry is filed, and the import duty is assessed, can
the goods cross the limits of the Customs Station; transfer of
documents of title before clearance of goods by the Customs
authorities, but after assessment of goods, would not amount to a
sale in the course of import irrespective of whether duty is paid or
not; on assessment to customs duty, after the Bill of Entry is filed,
the goods get mingled with the general mass of goods and
merchandise in the country; and physical movement of goods out
of the customs station, and the time at which the duty is paid,
would not be relevant.
The questions, whether the name on the bill of entry is
relevant or not, and whether or not the name of the importer alone
will be recorded in the Bill of Entry even if transfer by title deeds is
effected before filing the bill of entry and assessment of duty under
Section 28 of the Customs Act, did not arise for consideration in
Minerals and Metals Trading Corporation54. The observations of
the Division bench in this regard are not preceded by an analysis
of the relevant provisions of the Customs Act nor is it supported by
any reason. These observations are, therefore, not a declaration of
law binding on a co-ordinate bench. The assessing authority is,
therefore, justified in holding that sale of goods by the petitioner to
Radha Industries is not a sale in the course of import, but an
inter-state sale liable to tax under the CST Act.
IV. DID THE SALE IN FAVOUR OF RADHA INDUSTRIES,
LUCKNOW OCCASION MOVEMENT OF GOODS INTO THE
COUNTRY?
Sri S. Ravi, Learned Senior Counsel appearing on behalf of
the petitioner, would submit that the entire import of the goods
was occasioned by the ultimate sale in favour of Radha Industries
by the Petitioner; although the documents executed referred to the
sale as a High Sea Sale, in as much as the very sale itself
occasioned the movement of goods across the customs barrier, the
sale is a sale in the course of import; and though the case was not
presented in this light before the Assessing Officer, it is a pure
question of law and can be considered even now.
On the other hand Sri P. Balaji Varma, Learned Special
Standing Counsel for Commercial Taxes, would submit that the
petitioners contentions in the writ affidavit are inconsistent,
contradictory and contrary to law; the contentions urged in the
written submissions show that the petitioner now claims that there
is no high sea sale to M/s. Radha Industries; the said contentions
are inconsistent with the averments in the writ petition; Sale and
no-sale being opposite to each other and the petitioner, being the
master of his transaction, is not entitled to take opposite stands;
these contentions are an afterthought made only for the purpose of
evading tax; this contention is contrary to their other contentions,
and the material on record; the writ petition is liable to be
dismissed on this ground alone; the petitioners contention that the
import is as a consequence of the master agreement, the import
was occasioned due to the purchase by M/s. Radha Industries,
and it is a case of import under Section 5(2) is not tenable; the law
requires the last buyer/last importer to file the Bill of Entry; the
Bill of Entry requires the names of all the parties to be mentioned
therein i.e, the export seller, the original importer, the high sea
buyer(s) if any, and the last buyer/importer; and the
circumstances and facts pleaded, both before the Assessing
Authority and before this Court, do not make out a case of direct
import by M/s. Radha Industries.
Under Section 5(2) of the CST Act, the sale or purchase of
goods shall be deemed to take place in the course of import of the
goods into the territory of India only if the sale or purchase either
occasions such import or is effected by a transfer of documents of
the title to the goods before the goods have crossed the customs
frontiers of India. Section 5(2) has two limbs, the first of which is
attracted if the sale or purchase occasions the import, and the
second is applicable when the sale or purchase is effected by a
transfer of documents of title to the goods before the goods have
crossed the customs frontiers of India.
The petitioners case before the assessing authority was that
the documents of title to the goods were transferred on high seas
i.e., during the movement of goods from the country of export to
India. It is for the first time before this Court, in proceedings
under Article 226 of the Constitution of India, has this plea, of the
sale of goods to M/s. Radha Industries having occasioned the
import of goods, been taken placing reliance on certain clauses of
the agreements. This Court would not, in proceedings under
Article 226 of the Constitution of India, either re-appreciate the
evidence on record or don the robes of the assessing authority to
examine disputed questions of fact or interpret the clauses of the
agreements. As this contention is not a pure question of law and,
at best, is a mixed question of facts and law, this Court would be
loathe to undertake such an exercise. Even otherwise, the
submission that the sale to Radha Industries occasioned the
import of goods is belied by the fact that it is the name of the
petitioner which is reflected in the Bill of Entry as the importer of
the goods, and not Radha Industries. The submission of Sri S.
Ravi, Learned Senior Counsel, that the sale of goods to Radha
Industries had occasioned the import necessitates rejection.
V. IS THE PROCEDURE PRESCRIBED FOR DUTY FREE SHOPS
APPLICABLE TO THE PRESENT CASE?
While placing reliance on the Judgments of the Andhra
Pradesh and Madras High Courts in Minerals and Metals Trading
Corporation of India Ltd.54 and State Trading Corporation of
India Ltd.29, Sri S. Ravi, Learned Senior Counsel would submit
that there is a tacit approval, of the principles ennunciated therein,
in the judgment of the Supreme Court in Hotel Ashoka (Indian
Tour. Dev. Cor.Ltd). v. Assistant Commissioner of Commercial
Taxes . On the other hand Sri P. Balaji Varma, Learned Special
Standing Counsel for Commercial Taxes, would submit that the
facts pleaded in the instant case do not make out a case for
applying the procedure adopted, or the law applicable, to Duty
Free Shops; the case of the petitioner is that they had sold the
goods even prior to filing of the Bill of Entry; even in the case of
Duty Free Shops, the goods stored therat are treated as goods
warehoused for a particular period; upon expiry of the time, the
unsold goods are required to be taken out for home consumption
by filing a Bill of Entry Ex-bond/for home consumption under
Section 68 of the Customs Act; in the event of a change in
ownership/name of importer, an amended Bill of Entry for
warehousing, and a Bill of Entry Ex-bond is filed; and such is not
the case on hand.
No tax, on the sale or purchase of goods, can be imposed by
any State when the transaction of sale or purchase takes place in
the course of import of the goods into the territory of India. If any
transaction of sale or purchase takes place when the goods are
being imported into India, no State can impose any tax thereon.
Under Section 5 of the CST Act, a sale or purchase of goods shall
be deemed to take place in the course of import of the goods into
the territory of India only if the sale or purchase takes place before
the goods have crossed its customs frontiers. In view of Section
2(11) of the Customs Act and Article 286 of the Constitution, it
cannot be said that the goods are imported into the territory of
India till the goods, or the documents of title to the goods, are
brought into India. Where goods have not been brought into the
customs frontiers of India, before the transaction of sales had
taken place, the transactions must be held to have taken place
beyond or outside the custom frontiers of India. The goods are
cleared from customs, and are brought into the country after
crossing the customs frontiers. Goods lying in bonded warehouses
are deemed to have been kept outside the customs frontiers of the
country. As duty free shops, situated at International Airports, are
beyond the customs frontiers of India, the goods sold thereat must
be said to have been sold before the goods have crossed the
customs frontiers of India. Transfer of documents of title to the
goods is one of the methods whereby delivery of the goods is
effected. Delivery may be physical also. Sales effected by physical
delivery of the goods, at the duty free shops, are not taxable under
the CST Act. (Hotel Ashoka (Indian Tour. Dev. Cor. Ltd).71).
Duty free shops are, in law, taken as being located beyond
the customs frontiers and, consequently, the sale of goods at the
duty free shops is in the course of import. Reliance placed by the
petitioner on Hotel Ashoka (Indian Tour. Dev. Cor. Ltd)71, to
contend that the goods sold to Radha Industries is in the course of
import, is therefore of no avail.
VI. IS THE PETITIONER ENTITLED TO BE GRANTED TIME TO
SUBMIT C FORMS:
Sri S. Ravi, Learned Senior Counsel, would submit that,
alternatively and without prejudice, if the subject sales are
considered as inter-state sales, the petitioner may then be provided
an opportunity to submit C Forms from the buyers within a time
frame; and the petitioner had no occasion to produce C Forms as it
was claiming exemption all along. Learned Senior Counsel would
rely on Sahney Steel & Press Works Ltd. v. Commercial Tax
Officer in this regard. On the other hand Sri P. Balaji Varma,
Learned Special Standing Counsel, would submit that the
petitioners case has always been that it is a High Sea Sale; they
had never pleaded any alternative case either before the authorities
or before this Court; there is no pleading or prayer for such a relief;
the assessment order was passed in the year 2010, the writ
petition was numbered in the year 2013, and interim orders were
obtained; now, at the stage of final hearing that too after
completion of oral arguments and submission of written
arguments by both sides, the petitioner cannot plead an alternative
case; the effect of granting such a relief would be (1) a fresh order
would have to be passed thereby granting further time to make
payment of the determined amount; (2) a fresh order on a new
plea, that too at this stage, would save the interest burden on
delayed payment on the dealer, and loss of interest to the Revenue;
(3) a fresh order, on a new plea at this stage, would amount to
granting a benefit to the defaulter at the cost of the Revenue; (4)
once the matter is remanded for furnishing C Forms, even if the
petitioner fails to produce the C-Forms, he would be saved from
payment of interest liability from 2010 (the date of the assessment
order), and they would also have the benefit of challenging the
orders once again by filing a first appeal, a second appeal and so
on.
In Sahney Steel and Press Works Ltd.72, the petitioners
challenged the findings of the Commercial Tax Officer that the
transactions in question constituted inter-State sales. They
contended that, when the registered office of the Company at
Hyderabad despatched the manufactured goods to its branch
office, it was merely a transfer of stock from the registered office to
the branch office; thereafter, the movement of the goods started
from the branch office to the buyer; the registered office and the
branch office were separately registered as dealers under the Sales
Tax law; the transactions effected by the branch office should not
be identified with the transactions effected by the registered office;
and the movement of the goods from Hyderabad to the branch
office was only for the purpose of enabling the sale by the branch
office and was not in the course of fulfillment of the contract of
sale. While expressing their inability to agree, the Supreme Court
held:-
.. Even if, as in the present case, the buyer places an order with the
branch office and the branch office communicates the terms and specifications
of the orders to the registered office and the branch office itself is concerned
with
the sales despatching, billing and receiving of the sale price, the conclusion
must be that the order placed by the buyer is an order placed with the
Company, and for the purpose of fulfilling that order the manufactured goods
commence their journey from the registered office within the State of Andhra
Pradesh to the branch office outside the State for delivery of the goods to the
buyer. We must not forget that both the registered office and the branch office
are offices of the same Company, and what in effect does take place is that the
Company from its registered office in Hyderabad takes the goods to its branch
office outside the State and arranges to deliver them to the buyer. The
registered
office and the branch office do not possess separate juridical personalities.
The
question really is whether the movement of the goods from the registered office
at Hyderabad is occasioned by the order placed by the buyer or is an incident of
the contract. If it is so, as it appears no doubt to us, its movement from the
very
beginning from Hyderabad all the way until delivery is received by the buyer is
an inter-State movement..
The manufacture of the goods at the Hyderabad factory and
their movement thereafter from Hyderabad to the branch office outside the
State was an incident of the contract entered into with the buyer, for it
was intended that the same goods should be delivered by the branch office
to the buyer. There was no break in the movement of the goods. The
branch office merely acted as a conduit through which the goods passed on
their way to the buyer. It would have been a different matter if the
particular goods had been despatched by the registered office at Hyderabad
to the branch office outside the State for sale in the open market and
without reference to any order placed by the buyer. In such a case if the
goods are purchased from the branch office, it is not a sale under which
the goods commenced their movement from Hyderabad. It is a sale where
the goods moved merely from the branch office to the buyer. The
movement of the goods from the registered office at Hyderabad to the
branch office outside the State cannot be regarded as an incident of the
sale made to the buyer. (emphasis supplied)
Having opined that the disputed transactions were inter-
State sales, the Supreme Court held that it was only appropriate
that an opportunity should be given to the appellant-company to
collect C Forms from the buyers for the purpose of obtaining relief
under Section 8(1) read with Section 8(4) of the CST Act, as the
question whether the transactions could be described as inter-
State sales was in doubt all along, and it was only now that the
doubt could be said to have been finally resolved. The Commercial
Tax Officer was directed to afford a reasonable opportunity to the
appellant-company, to collect C Forms and furnish them, before
making an assessment in respect of such transactions. In the
present case also the petitioner has, all through, been contending
that sale of goods to Radha Industries is a sale in the course of
import under Section 5(2) of the CST Act and is, therefore, exempt
from tax. The Assessing Authority has held for the first time, by
way of impugned assessment orders, that it is an inter-state sale
liable to tax under Section 3(a) of the CST Act.
Rule 12(7) of the Central Sales Tax (Registration and
Turnover) Rules, 1957 stipulates that the declaration in Form C
shall be furnished to the prescribed authority within three months
after the end of the period to which the declaration or the
certificate relates. Under the proviso thereto, if the prescribed
authority is satisfied that the person concerned was prevented by
sufficient cause, from furnishing such declaration or certificate
within the aforesaid time, he is empowered to allow such
declaration or certificate to be furnished within such prescribed
time as he may permit.
In Rajeswari Stone Polishers v. State of Andhra Pradesh
a Division Bench of this Court, while interpreting Rule 12(7) of the
Central Sales Tax (R&T) Rules, held that the proviso to sub-rule (7)
did not prescribe any time within which a dealer was required to
file C forms; this meant that, any time after making the
assessment, a dealer could file the forms; as long as he was able to
satisfy, with regards the sufficient cause contemplated by the
proviso, the authority was required to receive those forms; even the
appellate authority had the power to receive C forms on proof of
sufficient cause, as contemplated by the proviso to Rule 12(7),
being shown; if the appellate authority felt that the reasons shown
by the appellant was sufficient, as to require no further inquiry, he
could himself condone the delay and receive the C forms; but if he
thought that the question of sufficient cause called for a further
inquiry or investigation into facts, which could not be conveniently
done, he could remit the matter to the assessing authority to
determine the said issue.
The judgment of the Division Bench in Rajeswari Stone
Polishers73 was referred with approval by the Supreme Court in
State of Andhra Pradesh v. M/s.Hyderabad Asbestos Cement
Production Limited wherein it was held that the power, under
the proviso to Rule 12(7) ,could be exercised only when sufficient
cause was shown by the dealer, for not filing them upto the time of
assessment, before the first assessing authority; if, in a given case,
a dealer had obtained further time from the first assessing
authority, and yet failed to produce them before him, the appellate
authority should adopt a stiffer standard in judging the sufficient
cause shown by the dealer for not producing them earlier; receipt
of those forms in appeal cannot be as a matter of course; it should
be allowed only where sufficient cause is established by the dealer
for not producing them before the first assessing authority as
contemplated by Rule 12(7); the requirement of Rule 12(7) cannot
be excluded from consideration, by the appellate Court, while
judging the sufficiency of the cause shown; and the Sales Tax
Appellate Tribunal, under the Andhra Pradesh Act, was also
governed by Regulation 11(1) which was only a reiteration of the
very same power.
In Godrej Agrovet Limited v. Commercial Tax Officer,
Eluru, West Godavari District a Division Bench of this Court,
following its earlier judgment in Rajeswari Stone Polishers73 and
the judgment of the Supreme Court in Hyderabad Asbestos
Cement Production74, held that Rule 12(7) conferred power on the
assessing authority to receive C forms where sufficient cause was
shown by the dealer for not filing them upto the time of
assessment; there is no limitation, as such, provided for receiving
the C forms; they can be received at any time, after the order of
assessment, provided sufficient cause is shown; the making of
assessment itself cannot be postponed at the instance of a dealer,
in order to enable the dealer to produce such C forms, if such
postponement results in the bar of limitation in making the
assessment; if an assessment can be postponed, and such
postponement is not hit by limitation, time can always be extended
by the assessing authority to enable the dealer to produce the C
forms; and, in case such C forms are not produced, it does not
take away the right of the dealer to produce them even after
making of the assessment order, provided sufficient cause is
shown.
As noted hereinabove Rule 12(7) enables the assessing
authority, on sufficient cause being shown, to grant further time
for production of C forms. Such an opportunity can be granted
even after an assessment order is passed, provided sufficient cause
is shown. On production of the prescribed C-Forms, the petitioner
would be entitled to pay concessional rate of tax. As the petitioner
can furnish C-Forms, in terms of the proviso to Rule 12(7) of the
CST (R&T) Rules, even after the assessment order is passed, we see
no reason to deny them an opportunity to produce the C-Forms,
and avail the benefit of concessional rate of tax.
CONCLUSION:
For the reasons aforementioned, the impugned assessment
orders do not necessitate interference, and the challenge thereto by
the petitioner is rejected. The petitioner is, however, granted three
months time from today to produce the prescribed C- Forms.
While the assessing authority has expressed his doubts regarding
the very existence of some of the dealers outside the State, it is not
necessary for us to delve on this aspect any further, as it is only if
such dealers are in existence would the petitioner be able to
procure C-Forms from them, and furnish it to the assessing
authority. While the prescribed concessional rate of tax, payable
by the petitioner on the inter-state sale of goods, shall be paid by
them forthwith, the respondents shall not take coercive steps for
recovery of the balance tax for a period of three months from today.
In case the petitioner produces C-Forms within the aforesaid three
month period, they shall be extended the benefit of concessional
rate of tax to the extent for which C-Forms are produced. It is
made clear that, in case the petitioner fails to submit the C-Forms
within three months from today, it is open to the respondents
thereafter to proceed and recover the balance tax due from them in
accordance with law.
Subject to the above observations, both the Writ Petitions fail
and are, accordingly, dismissed. The miscellaneous petitions
pending, if any, shall also stand automatically dismissed.
However, in the circumstances, without costs.
_______________________________
(RAMESH RANGANATHAN, J)
____________________________________
(M. SATYANARAYANA MURTHY, J)
Date: 18.12.2014.
WRIT PETITION NOS.4552 OF 2013 and batch
18-12-2014
M/s. Vellanki Frame Works, A sole proprietory Concern Rep., by its Proprietor
Sanjiv Agarwal, Vellanki Village, Anandapuram, Visakhapatnam. .Petitioner
The Commercial Tax Officer, Chinawaltair Circle, Visakhapatnam . Respondent
Counsel for the petitioner: Sri Ch.Pushyam Kiran
Counsel for respondent: Sri P. Balaji Varma, Learned Special
Standing Counsel for Commercial Taxes
<GIST:
>HEAD NOTE:
? Citations:
1) AIR 1961 SC SC 61 = 11 STC 655
2) (2011) 40 VST 150 (AP)
3) (1975) 35 Company Cases 571
4) 20 STC 146
5) 1997 (106) STC 460
6) (1986) 4 SCC 447
7) AIR 1964 SC 207 = (1964) 4 SCR 280
8) (2004) 10 SCC 201
9) (1926) AC 37
10) AIR 1940 PC 124
11) AIR 1981 SC 1887
12) (1990) 3 SCC 481
13) (1977) 39 STC 478 (SC)
14) (2007) 9 SCC 461
15) AIR 1977 SC 2149
16) (2008) 2 SCC 280
17) AIR 1966 SC 334
18) AIR 1962 SC 1210
19) AIR 1973 SC 964
20) (2002) 4 SCC 638
21) AIR 1962 SC 1183
22) (2003) 6 SCC 675
23) AIR 1954 SC 440
24) 1952-1 KB 338
25) AIR 1955 SC 233
26) AIR 1964 SC 477
27) (2004) 3 SCC 682
28) (1958) SCR 1240
29) 2002 (149) ELT 3 : (2003) 129 STC 294
30) 1983 E.L.T. 65 (Ker)
31) (1974) 48 A.L.J.R. 232
32) (1926) 38 C.L.R. 131
33) AIR 1958 SC 341
34) (1981 E.L.T. 153 (Madras HC
35) (1987) 12 Wheat 419 at p. 442 = 6 Law Ed. 678
36) (1849) 9 Q.B. 459
37) 1990 (45) ELT 9
38) (1980) 1 SCC 621
39) (1987) 1 SCC 424
40) (1989) 1 SCC 164
41) (2007) 3 SCC 607
42) AIR 1995 SC 1395
43) 1975 (3) All E R 158
44) 262 U.S. 100, 43 S.Ct. 504, 67 L.Ed. 894
45) AIR 1962 Calcutta 242
46) AIR 1960 Madras 281
47) AIR 1960 Bombay 479
48) 1999 (106) ELT 9 (SC)
49) 2000 (126) E.L.T. 79 (Mad.) = AIR 1967 Madras 124
50) A.I.R. 1963 S.C. 1760
51) (1985) 22 ELT 644 (Bombay HC F.B)
52) 1992 (59) E.L.T. 264 (Cal)
53) (1979) 3 SCC 54
54) 1999 (106) ELT 23
55) (1944) KB 718
56) (1941) 2 All ER 11
57) AIR 1962 SC 83
58) (1989)1 SCC 101
59) AIR 1967 SC 1480
60) (1991) 4 SCC 139
61) (2009) 6 SCC 379
62) (2004) 13 SCC 217
63) AIR 2003 Calcutta 96
64) (1996) 6 SCC 44
65) (2006) 1 SCC 275
66) (2005) 6 SCC 404
67) AIR 1968 SC 647
68) (1901) AC 495
69) (1991) 3 SCC 655
70) (2000) 5 SCC 488
71) 2012 (48) VST 443
72) (1985) 4 SCC 173
73) (1983)52STC268(AP)
74) (1994) 94STC 410(SC)
75) (2007) 7 VST 730 (AP)
THE HONBLE SRI JUSTICE RAMESH RANGANATHAN
AND
THE HONBLE SRI JUSTICE M.SATYANARAYANA MURTHY
WRIT PETITION Nos.4552 AND 6258 of 2013
COMMON ORDER: (per Honble Sri Justice Ramesh Ranganathan)
These two Writ Petitions are filed by the petitioner
questioning the validity of the assessment orders dated 20.1.2010
and 18.5.2010 passed by the Commercial Tax Officer,
Chinnawaltair circle, for the assessment years 2005-06 & 2006-07,
denying them exemption under Section 5(2) of the Central Sales
Tax Act, 1956, (hereinafter called the CST Act), on the turnover of
Rs.1,14,86,342/- & Rs.4,05,09,427/- respectively, as contrary to
the documents on record. During the pendency of the Writ
Petitions the Petitioner filed additional grounds, by way of WPMP
No.23096 and 23098 of 2014, contending, inter-alia, that the
assessment order was without jurisdiction in the absence of any
valid authorization from the Deputy Commissioner (CT),
Visakhapatnam authorizing the respondent to take up assessment,
under the CST Act, for the years 2005-06 and 2006-07.
For the tax period 2005-06, the Commercial Tax Officer,
Chinawaltair Circle, Visakhapatnam issued show cause notice
dated 19.11.2005, proposing to reject the petitioners claim of
exemption on a turnover of Rs.1,14,86,342/-, treating the
transaction as an inter-state sale falling under Section 3(a) of the
CST Act. In respect of the said turnover, the petitioner (M/s.
Vellanki Frame Works) had claimed exemption from payment of tax
on the ground that the relevant sales were effected by transfer of
documents of title before the goods had crossed the customs
frontiers of India. In their reply to the show cause notice, the
petitioner sought to explain the transactions, relatable to the
turnover of Rs.1,14,86,342/-, which they claimed was covered by
Section 5(2) of the CST Act. The petitioners case, as is noted by
the assessing authority in the assessment order, is that M/s.
Radha Industries, Lucknow, U.P (Radha for short), was their
close business associate; Radha, which did not have the requisite
infrastructure with the custom department, desired to purchase
the subject goods from M/s. World Best Trading Co. (L.L.C.), Dubai
(U.A.E), and had approached them for help; though they had the
requisite infrastructure facilities at Visakhapatnam Customs, they
did not have the letter of credit facilities to cause import; in these
circumstances, the petitioner and Radha entered into a quadri-
partite agreement with Indus Tropics Ltd. (Indus for short),
whereby it was agreed that Indus would purchase the goods and
sell them to the petitioner who would purchase the same from
Indus as the agent of Radha, and transfer the documents on high
seas in favour of Radha; in turn Radha agreed to pay the petitioner
commission of 2% plus bank charges; the petitioner paid the entire
amount to Indus without retaining a penny as commission; it was
a friendly transaction arranged by the petitioner in favour of
Radha; a quadri-partite agreement was entered into between
Indus, the petitioner, Radha and World Best Trading Co. (L.L.C.);
pursuant thereto, Indus purchased the goods and caused transfer
of the bill of lading on high seas on 10.12.2005; on 12.12.2005,
another high seas sale agreement was entered into between the
petitioner and Radha whereby the bill of lading was sold in favour
of Radha; the expression sold, as used in the said agreement, is a
misnomer; what the parties meant was only transfer of the bill of
lading in favour of Radha; on and from 12.12.2005, the petitioner
did not have control over the bill of lading dated 09.12.2005, as
they had parted with it in favour of Radha by then; since Radha
did not have the customs facility at Visakhapatnam customs port,
the petitioner had extended its help by filing a bill of entry in their
name for the purpose of customs bonding, as well as customs
clearance; the circumstance of filing a bill of entry has no relevance
in determining the nature of the transaction; as seen from all the
relevant documents, including (i) quadrilateral master agreement
dated 21.01.2005, and (ii) the High Seas Sale agreement dated
12.12.2005, the petitioner had transferred the import document on
high seas; at any rate, the title in the goods always stood vested in
Radha, as the owner of the goods; the petitioner was merely acting
as the agent of Radha at all points of time; by reason of transfer of
the import document, it could not be said that the petitioner had
sold the goods to Radha; on the contrary, as the petitioner had
acted as the agent of Radha, at all points of time including at the
time of purchase, the question of the petitioner selling the goods to
Radha did not arise; the transactions between the petitioner and
Radha cannot be treated as a transaction between one principal
and another; the fact that the petitioner had charged commission
at 2% plus bank charges to Radha, and had parted with the entire
amount to Indus is proof that they had only acted as a conduit, as
a friendly gesture to Radha; the transaction was accounted in the
petitioners books of accounts as an agency purchase; receipt and
payment of commission was also accounted in their books of
accounts; their Balance Sheet for the year also supported this
submission; transfer of imported goods by them to Radha did not
partake the character of sale of goods; in any event the transfer,
having being effected over high seas before bonding with the
custom authorities, cannot be treated as inter-state sale in the
State of Andhra Pradesh; and therefore further proceedings, in
pursuance of the show cause notice, should be dropped.
In the assessment order dated 20.01.2010, the Commercial
Tax Officer summed up the stand of the petitioner that the
documents of title to the goods were transferred to Radha
Industries on high seas by virtue of the high sea sale agreement
dated 12.12.2005; the transaction did not attain the character of
an inter-state sale; and filing of the bill of entry had no relevance in
the context of determining the nature of the transaction. The
Commercial Tax Officer held that it followed that it was not the
petitioners claim that the sale or purchased had occasioned the
import falling under the first limb of Section 5(2) of the CST Act;
the question which necessitated examination was whether there
was a sale of goods by the petitioner, or whether it constituted a
commission transaction as stated by them; and in the computer
print out of the petitioners trading account, for the year 2005-06,
the purchase was shown as purchase trading (high seas), and the
relevant sale was shown as sales trading (high seas). After
referring to a few other details, the assessing authority noted the
contents of the high seas sale agreement dated 10.12.2005 entered
into between M/s. Indus Tropics Ltd and the petitioner wherein the
latter was described as the buyer; the second high seas sales
agreement dated 12.12.2005, entered into between the petitioner
and M/s. Radha Industries, wherein the parties were described as
the seller and the buyer respectively; and the letter of the assessee
dated 25.11.2009 wherein, while submitting certain documents
like the sales invoice, the bill of lading, high sea sale agreement,
bill of entry for warehousing and the bill of entry of ex-bond, the
petitioner had stated that they had claimed exemption from
payment of tax on the ground that the said sales were effected by
transfer of documents of title to the goods before the goods had
crossed the customs frontiers of India.
The assessing authority held that it was obvious that the
petitioners intention was to sell the goods and, in fact, there was a
sale; there was no truth in their statement that they had acted as
the agent of M/s. Radha Industries; Indus Tropics Limited had
imported 324 PCS of Myanmar Hardwood Gurjan Round Logs from
Yangon (Myanmar) to Vizag (India), and the relevant bill of lading
dated 09.12.2005 was endorsed by the importer in favour of the
petitioner; on the strength of such endorsed documents, Sri Sanjiv
Kumar Agarwal (sole proprietor of the petitioner) had presented the
bill of entry for warehousing; customs duty was assessed on the
petitioner alone vide bill of entry for warehousing dated
12.12.2005; subsequently, the petitioner had filed the bill of entry
for home consumption; customs duty was assessed on the
petitioner alone vide bill of entry for ex-bond No.804353 dated
28.12.2005; the high sea sale agreement dated 12.12.2005 had not
come into operation; sale, subsequent to customs clearance, had
alone taken place; the petitioner had raised a debit note dated
12.01.2006 showing sales to M/s. Radha Industries for
Rs.1,14,86,342/-; the high sea sale agreement dated 12.12.2005,
entered into between the petitioner and the buyer, indicated that
the parties intended to effect the transaction by a transfer of
documents of title to the goods before the goods had crossed the
customs frontiers of India; the sale, however, was not effected in
such a manner; and the sale, in fact, took place on 12.01.2006 as
shown in the debit note.
On the petitioners claim for exemption, on the ground that
the said sale was effected by a transfer of documents of title to the
goods before the goods had crossed the customs frontiers of India
falling under Section 5(2) of the Act, the Commercial Tax Officer
held that the goods must be treated as having crossed the customs
frontiers of India, when the bill of entry was made and the goods
were assessed to customs duty; the sale, effected by the petitioner,
could not be said to be sales in the course of import or high sea
sales in as much as the goods had crossed the customs frontiers;
the second high sea sale agreement had not come into operation
when the sale took place; there was no case for claiming that the
transfer of documents was effected by virtue of the said agreement
itself; the Supreme Court, in Tata Iron & Steel Co. Ltd., Bombay
v. S.R. Sarkar , had held that the sale would be reckoned as a sale
on completion of such sale, and a mere contract of sale is not a
sale within the definition of sale; the sale had not taken place in
the manner contemplated in the agreement; the sale, in fact, took
place only after customs clearance; and the contention urged by
the petitioner was devoid of merits.
In his assessment order dated 18.05.2010, the Commercial
Tax Officer, Chinnawaltair circle, Visakhapatnam held that the
petitioner had claimed exemption from payment of tax, in respect
of a turnover of Rs.4,05,09,427/-, contending that this turnover
represented sales effected by transfer of documents of title before
the goods had crossed the customs frontiers of India; along with
their returns, they did not file any evidence to show that the said
sales were effected in such a manner; a show-cause notice dated
26.11.2009 was issued; pursuant thereto the assessee had
furnished certain documents; these documents revealed that
M/s.Porbunchal Lumbers (P) Ltd, Gujarat had imported 155 PCS
of Myanmar Hardwood Gurjan Round logs from Yangon (Myanmar)
to Vizag (India); the Bill of Lading was endorsed in favour of the
petitioner (M/s.Vellanki Frame Works, Visakhapatnam); on the
strength of these endorsed documents, and on filing a Bill of Entry
for warehousing and a Bill of Entry for Ex-bond, customs duty was
assessed on Sri Sanjiv Kumar Agarwal, Vellanki Frame Works,
Vizag; the petitioner had reported the said transaction as high-sea
sales to M/s.Radha Industries, Lucknow by raising a debit note;
the documents also revealed other similar transactions; M/s.Alpine
Panels Pvt. Ltd, Visakhapatnam had imported 273 PCS of
Malaysian Round Logs from Singapore to Vizag; the bill of lading
was claimed to have been endorsed in favour of the assessee; on
the strength of such an endorsement, Sri Sanjiv Kumar Agarwal,
Vellanki Frame Works, Vizag (the assessee) had filed the bill of
entry for warehousing; he filed the bill of entry for ex-bond based
on which duty was assessed on him alone; and the assessee had
reported the said transaction as high sea sales to M/s.Indo -
Bitumen Products, Rajasthan by raising a debit note. The
assessment order also refers to four other transactions in all of
which the bill of lading was endorsed in favour of the assessee; on
the strength of the endorsement Sri Sanjiv Kumar Agarwal,
Vellanki Frame Works, Vizag (assessee) had filed the bill of entry
for warehousing; he had, subsequently, filed the bill of entry for ex-
bond based on which duty was again assessed on him alone; and
he had reported the said transaction as high sea sales to M/s.Pine
Exporters, New Delhi by raising a debit note.
The assessing authority also held that transfer of documents
of title, before clearance of goods by the customs authorities on
making assessment, would be a sale in the course of import; and,
after assessment is made on filing of the bill of entry, the goods get
mingled with the general mass of goods and merchandise of the
country attracting the character of local goods; they cease to be
foreign goods thereafter; it was clear that in the present case, on
filing the bill of entry for warehousing and the bill of entry for ex-
bond, the petitioner alone was assessed to customs duty; the
import stream had dried upon such clearance by the customs
authorities; the goods had mixed into the stream of local goods;
any subsequent sale by the petitioner would, therefore, constitute
sale of local goods exigible to tax; the transactions, which the
assessee had claimed exemption as high sea sales, were liable to
be treated as inter-state sales falling under Section 3(a) of the CST
Act; as is ascertainable from the bills of entry for warehousing and
ex-bond, transfer of title had not taken place before filing of the
bills of entry, and assessment of customs duty; the sale took place
after the assessment was made on the assessee, and on his filing
the Bills of Entry; the said sales had, thus, attained the character
of sale of local goods; the goods must be treated as having crossed
the customs frontiers of India, after the bill of entry had been made
and the goods were assessed to customs duty; the sales effected by
the assessee cannot be said to be sales in the course of import or
high sea sales in as much as the goods had crossed the customs
frontiers; the letter addressed to M/s.Pine Exporters, New Delhi,
showed that they never received any Malaysian round logs from
the petitioner, which established that their claim was not genuine;
the letter sent to M/s.Esskay Impex, New Delhi, was returned with
the postal endorsement no such firm at this place which also
showed that the petitioners claim was not genuine; and the
transactions, on which the petitioner had claimed exemption as
high sea sales, should be treated as inter-state sales falling under
Section 3(a) of the CST Act.
Extensive arguments were put forth by Sri S.Ravi, Learned
Senior Counsel appearing on behalf of the petitioner, and Sri P.
Balaji Varma, Learned Special Standing Counsel for Commercial
Taxes. Written submissions were also filed by Sri Ch.Pushyam
Kiran, Learned Counsel for the petitioner, and Sri P. Balaji Varma,
Learned Special Standing Counsel for Commercial Taxes. It is
convenient to examine the rival submissions, urged by Learned
Counsel on either side, under different heads.
I. DOES THE TERRITORIAL ASSESSING AUTHORITY, BEFORE
WHOM THE DEALER FILES HIS RETURNS UNDER THE CST
ACT, HAVE JURISDICTION TO PASS AN ASSESSMENT
ORDER IN THE ABSENCE OF AUTHORISATION FROM THE
DEPUTY COMMISSIONER?
Sri S. Ravi, Learned Senior Counsel appearing on behalf of
the petitioner, would submit that the power of assessment is found
in Section 21(3) & (4) of the A.P. Value Added Tax Act, 2005 (VAT
Act for short) read with Rule 25(5) of the A.P. Value Added Tax
Rules, 2005 (VAT Rules for short); under Sections 21(3) & (4) of
the VAT Act, the authority competent to assess the petitioner to tax
is the prescribed authority; under Rule 59(4) (ii)(b) the Commercial
Tax Officer or the Deputy Commercial Tax Officer, having territorial
jurisdiction over the dealers in the circle, also require authorization
from the Deputy Commissioner concerned to make assessment;
the corresponding Sections indicated thereagainst are Sections
21(3), (4) & (5) and Rule 25(5); an assessment can be made, under
Section 21(3), (4) or (5) of the VAT Act read with Rule 25(5) of the
VAT Rules, only if the Commercial Tax Officer is authorized by the
Deputy Commissioner concerned; the only exception is in respect
of a Large Tax Payer dealer, where the Assistant Commissioner can
exercise the power to make assessment without the necessity of
authorization; Rule 59(4)(ii)(b) was amended by GO Ms.No.33 dated
23.01.2013; for assessments made thereafter, there is no necessity
of an authorization for the Commercial Tax Officer, having
territorial jurisdiction over the dealer concerned, to make
assessment; the assessment orders, in the present cases, were
passed on 20.1.2010 & 18.5.2010 prior to the amendment of Rule
59(4)(ii)(b); the Commercial Tax Officer cannot, therefore, assume
jurisdiction merely because he receives the returns under the VAT
Act, unless he has been authorized by the Deputy Commissioner;
in the present case, both the assessment orders were passed under
the CST Act; the CST Act does not define assessing authority; the
CST (Andhra Pradesh) Rules, 1957 (AP Rules for short) prescribes
the procedure for assessment; though the words appropriate
assessing authority is defined in Rule 2[c] of the AP Rules, this
expression is not found anywhere else in the Rules; Rule 14-A of
the AP Rules refers only to the assessing authority, and not the
appropriate assessing authority; the procedural provisions, applicable
under the VAT Act, automatically apply to the CST Act in view of
Section 9(2) of the CST Act; as the petitioners are liable to pay tax
under the general sales tax law of the State (VAT Act), the
assessing authority, for the purpose of the CST Act, would be the
assessing authority under the VAT Act; the authority who is
competent to assess, based on the authorization issued by the
competent authority, is the assessing authority under the VAT Act;
in the present case the Commercial Tax Officer, who is the
territorial assessing authority, must trace his power of assessment
to the authorization issued by the Deputy Commissioner even for
the purposes of the CST Act; the observations, in Sri Balaji Flour
Mills v. The Commercial Tax Officer , that the authorities, who
have territorial jurisdiction over the dealer, need not have a
separate authorization for assessment is contrary to the plain
reading of the Section and the Rules; since Section 20 & 21
relating to assessment, and various Rules including Rule 59(1),
use the term prescribed, the authority prescribed, wherever
mentioned, means the one prescribed by the Rules; no officer can
assume jurisdiction to himself under the VAT Act, (at the relevant
point of time i.e., prior to 23.1.2013), that he is competent to
assess a dealer merely because he falls within his territorial
jurisdiction, unless there is an authorization for assessment; and,
consequently, the respondent cannot assess the petitioner under
the CST Act merely because he is the territorial assessing authority
unless he is authorised by the Deputy Commissioner of the
Division.
On the other hand Sri P.Balaji Varma, Learned Special
Standing Counsel for Commercial Taxes, would submit that the
assessing authority has jurisdiction to pass the impugned order in
terms of Rule 14-A(6) of the AP Rules; Section 4 of the APGST Act,
1957 conferred power on the State government similar to those
conferred by Section 3-A of the VAT Act; in the exercise of its
powers under Section 4, the Government of Andhra Pradesh
delegated, to the Board of Revenue, the power to notify the local
limits within which the officers may perform the functions
conferred on them by or under the APGST Act; by virtue of Section
80(1) of the VAT Act, the notifications issued under the APGST Act
continue to govern; the territorial authority is competent to take up
assessment of dealers within his jurisdiction without any further
authorisation; the impugned assessment orders are, therefore, not
without jurisdiction; Rule 2(c) of the AP Rules, by implication,
makes the territorial authority or the prescribed authority, the
assessing authority under the CST Act; the prescribed authorities
under the VAT Act are the authorities enumerated under Rule 59
of the VAT Rules; as held by this Court, in Balaji Flour Mills2, the
territorial officer can assess in case of non-filing or incomplete
returns; the power of the territorial authority, for the purpose of
assessment, gets clouded/suspended only when a specific
authorisation is given to some one else; and, as such, he also
becomes the assessing authority under the CST Act.
Section 9(2) of the CST Act provides that the authorities
empowered to assess, reassess, collect and enforce payment of tax
under the general sales tax law of the appropriate State, shall
assess, re-assess, collect and enforce payment of tax under the
CST Act as if the tax payable by such a dealer under the CST Act is
a tax payable under the general sales tax law of the State. The
said section further provides that, for this purpose, the authorities
under the general sales tax law of the State may exercise all or any
of the powers they have under the general sales tax law of the
State and the provisions of such law, including provisions relating
to returns etc, shall apply accordingly. The last limb of Section
9(2) of the CST Act, viz. "and the provisions of such law........ shall apply
accordingly", mean that the provisions of the State Act are
applicable for the purpose of assessment, re-assessment, collection
and enforcement of payment of tax including penalty payable
under the CST Act. The words, in the last part of section 9(2) viz.
"shall apply accordingly", relate clearly to the words "and for this purpose"
with the result that the provisions of the State Act shall apply only
for the purpose of assessment, reassessment, collection and
enforcement. The entire authority of the State machinery is "for this
purpose" meaning thereby the purpose of assessing, re-assessing,
collecting and enforcing payment of tax including any penalty
payable under the Central Act; and they, meaning the State
agencies, may exercise powers under the general sales tax law of
the State. Section 9(2) of the CST Act only adopts the procedure of
the State Act for assessment, re-assessment, collection and
enforcement of tax payable under the CST Act. (Khemka & Co.
(Agencies) Pvt. Ltd. v. State of Maharashtra ; B. H. Shah & Co.
v. The State of Madras ). The law, which the States' sales tax
authorities must apply, is the CST Act. In such application, for
procedural purposes alone, the provisions of the State Act are
available. (India Carbon Ltd. v. State of Assam ). In view of
Section 9(2) of the CST Act, the assessing authority under the VAT
Act would, ordinarily, have been the assessing authority under the
CST Act also. Section 9(2) of the CST Act uses the words subject
to. The phrase subject to conveys the idea of a provision yielding
place to another provision or other provisions to which it is made
subject. (Chandavarkar Sita Ratna Rao v. Ashalata S. Guram ;
South India Corpn. (P) Ltd. v. Secy., Board of Revenue,
Trivandrum ). As Section 9(2) of the CST Act is itself subject to the
other provisions of the CST Act and the Rules made thereunder,
Section 9(2) must yield to the other provisions of the CST Act, and
the Rules made thereunder, if they provide otherwise.
Section 13 of the CST Act relates to the power to make rules.
Section 13(1) empowers the Central Government to make rules by
notification in the official gazette. Section 13(3) enables the State
Government to make rules, not inconsistent with the provisions of
the CST Act and the Rules made by the Central Government under
Section 13(1), to carry out the purposes of the CST Act. In the
exercise of the powers conferred by Section 13(3), (4) and (5) of the
CST Act, the Central Sales Tax (Andhra Pradesh) Rules, 1957 were
made and notified in G.O.Ms.No.302 Revenue dated 23.02.1957.
Rule 1 thereof stipulates that these rules may be called the Central
Sales Tax (Andhra Pradesh) Rules, 1957. Rule 2[c] of the AP Rules
defines appropriate assessing authority to mean, in the case of a
dealer who is liable to pay tax under the general sales tax law of
the State, the assessing authority under the said law. Rule 14-
A(1)(a) requires every dealer registered under Section 7 of the CST
Act, and every dealer liable to pay tax under the CST Act, to
submit, so as to reach the assessing authority on or before the 20th
of every month, a return in Form CST VI showing the total and net
turnover of his transactions including those in the course of inter-
State trade or commerce during the preceding month, and the
amount or amounts collected by way of tax. The return is required
to be accompanied by a receipt from a government treasury or a
crossed demand draft in favour of the assessing authority for the
full amount of tax payable for the month to which the return
relates. Rule 14-A(1)(b) requires the dealer to submit to the
assessing authority, along with the return mentioned in Rule 14-
A(1)(a), the originals of the declarations in Form C, Form-D, Form-
E-I & II or Form-F. Rule 14-A (3) stipulates that the return in
Form CST VI so filed shall, subject to the provisions of Rule 14-
A(4), be provisionally accepted.
Rule 14-A(6) of the AP Rules stipulates that, if no return had
been submitted by the dealer or if any return or returns submitted
by him appears to the assessing authority to be incorrect or
incomplete, the assessing authority shall, after making such
enquiry as he considers necessary and after giving the dealer an
opportunity of proving the correctness and completeness of the
return submitted by him, determine the turnover to the best of his
judgment; and finally assess, in a single order, the tax payable
under the Act. Rule 14-A(7) stipulates that if, on the final
assessment made under Rule 14-A (5) or (6), any tax is found to be
due from the dealer, the assessing authority shall serve on him a
notice in Form CST VII, and the dealer shall pay the sum
demanded in the notice within such time and in such manner as
specified therein. Under Rule 14-A(8) if, for any reason, the whole
or any part of the turnover of a dealer has escaped assessment to
tax, or has been under assessed in any year, the assessing
authority may, after issuing a notice to the dealer and after making
such enquiry as he considers necessary, determine, to the best of
his judgment, the correct turnover, and assess the tax payable on
such turnover within the time stipulated therein. Though Rule 2[c]
of the AP Rules defines an appropriate assessing authority, the
words appropriate assessing authority do not find mention in Rule
14-A, and reference is made therein only to the assessing
authority. It is, however, evident from Rule 2[c](i) of the AP Rules
itself that the appropriate assessing authority, in the case of a
dealer who is liable to pay tax under the VAT Act, shall be the
assessing authority under the CST Act. While Section 9(2) of the
CST Act makes the authority, empowered to assess under the VAT
Act, the assessing authority under the CST Act also, as Section
9(2) has been explicitly made subject to the CST (AP) Rules, the
authority to whom returns are to be submitted under the VAT Act,
can assess a dealer to tax under the CST Act.
Section 2(24) of the VAT Act defines prescribed to mean
prescribed by Rules made under the Act. Section 2(27) defines
rules to mean rules made under the Act. Section 20 of the VAT
Act relates to returns and self-assessments. Under sub-section (1)
thereof, every dealer registered under Section 17 of the Act shall
submit such return or returns, along with proof of payment of tax,
in such manner, within such time, and to such authority as may
be prescribed. Chapter IV of the VAT Rules relates to returns,
payments and assessments. Rule 23 relates to tax returns and,
under sub-rule (1) thereof, a return to be filed by a VAT dealer
under Section 20 shall be in Form VAT 200, and it shall be filed
within 20 days after the end of the tax period. The returns shall be
complete in duplicate and one copy, with the proof of receipt, shall
be retained by the VAT dealer. Form VAT 200 contains, among
others, the particulars of the circle and the division. The returns
which are required to be submitted, under Section 20(1) of the VAT
Act, is to such authority as may be prescribed. Rule 59 of the VAT
Rules stipulates that the authorities specified in Column 3 of the
table thereunder shall be the authorities prescribed for the
purpose of exercising powers specified in Column 2 of the table.
Rule 59(1)(3) relates to the power of receipt of VAT returns, and the
prescribed authority therefor is (i) the Assistant Commissioner
(Large Taxpayer Unit) or any other officer in his office, as duly
authorized by him, for the dealers in respect of LTU; or (ii) the
Commercial Tax Officer, or any other officer in his office as duly
authorized by him, for the dealers in respect of Circle. The
Commercial Tax Officer of the Circle is also the prescribed
authority to receive VAT returns. Unlike Rule 59(1)(3) which
confers power to receive VAT returns on the Commercial Tax
Officer of the circle, Rule 59(1)(4)(ii) of the VAT Rules hitherto
conferred the power of assessment on the Commercial Tax Officer
only if he was authorized by the Deputy Commissioner. Rule 14-A
(1)(a) of the AP Rules requires a dealer under the CST Act to
submit a monthly return to the assessing authority who, in terms
of Rule 59(1)(3) of the VAT Rules, is the Commercial Tax Officer of
the circle. The Commercial Tax Officer, before whom the dealer
files his monthly CST returns, is therefore empowered to make
assessment under the CST Act, and he does not require any
authorization from the Deputy Commissioner to do so, unlike the
power to make assessment under the VAT Act. Such an authority
would also be the assessing authority under Rule 2[c] r/w.Rule
14-A of the AP Rules, notwithstanding that he is not the
prescribed authority to make assessment under Section 21 of the
VAT Act.
Section 2(4) of the VAT Act defines assessing authority to
mean any officer of the commercial tax department authorized by
the Commissioner to make any assessment in such area or areas
or the whole of the State of Andhra Pradesh. Section 3-A of the
VAT Act relates to appointment of officers, and enables the State
Government to appoint a Commissioner of Commercial Taxes and
as many Additional Commissioners of Commercial Taxes, Joint
Commissioners of Commercial Taxes, Appellate Deputy
Commissioners of Commercial Taxes, Deputy Commissioners of
Commercial Taxes, Assistant Commissioners of Commercial Taxes,
Commercial Tax Officers and Deputy Commercial Tax Officers as
they think fit, for the purpose of performing the functions
respectively conferred on them by or under the Act. Section 3-A
also requires the officers specified therein to perform such
functions, within such area or areas or the whole of the State of
Andhra Pradesh, as the Government, or any authority or officer
empowered by them in this behalf, may assign to them. Thus, if
either the Government or the authority empowered by the
Government assign the functions of assessment on any of the
officers referred to in Section 3-A, such officers would be required
to perform the said function of making assessment within the
specified area or areas. In the exercise of the powers conferred
under Section 3-A of the A.P. VAT Act, G.O.Ms. No.1163 dated
14.08.2006 was issued conferring power on the Commissioner of
Commercial Taxes to require any officer, working under his
control, to exercise any powers under the State Act within such
area or areas or the whole of the State of A.P. Under the proviso
thereto where any officer, in the exercise of the powers delegated to
him by the Commissioner of Commercial Taxes in pursuance of the
above orders, undertakes the assessment of any dealer, the
assessing authority of the area, having jurisdiction to assess such
dealer, shall not exercise such jurisdiction for the relevant period.
The said G.O. came into force with retrospective effect from
01.04.2005.
Section 2(4) uses the word authorise. The word authorise
means permitted. (Ramanath Aiyer, Advanced Law Lexicon
Book 1, Reprint 2007, p.417). Section 3-A of the VAT Act, and
Rule 59(1) of the VAT Rules in many of its entries employ the word
empower. The word empower means to invest legally or formally
with power or to authorize to give official authority or legal
power to (Advanced Law Lexicon by Ramanath Aiyer). The
term prescribed is used in several provisions of the VAT Act as
well as the VAT Rules. Sections 20 and 21, and various Rules
including Rule 59(1), use the term prescribed. The authority
prescribed is the one prescribed by the Rules. (Sri Balaji Flour
Mills2). Section 21 of the VAT Act relates to assessments. Section
21(1) stipulates that where a VAT dealer fails to file a return, in
respect of any tax period within the prescribed time, the authority
prescribed is required to assess the dealer, for the said period for
such default, in the manner prescribed. Section 21(3) enables the
prescribed authority, if he is not satisfied with a return filed by the
VAT dealer or the return appears to be incorrect or incomplete, to
assess the dealer to the best of his judgment. Section 21(4)
enables the prescribed authority, based on any information
available or on any other basis, to conduct a detailed scrutiny of
the accounts of any VAT dealer and, where any assessment as a
result of such scrutiny becomes necessary, to then make such
assessment. Section 21 confers the power to make assessment
specifically on the prescribed authority which, in view of Section
2(24), means the authority prescribed under the Rules. Sl.No.4 of
the table, under Rule 59(1), relates to assessments under the VAT
Act and, under Sl.No.4(ii)(b), the Commercial Tax Officer or the
Deputy Commercial Tax Officer, in the case of dealers in the
territorial jurisdiction of the circle, as authorized by the Deputy
Commissioner concerned shall make assessment under the VAT
Act. Sections 3-A, 20 and 21 are the machinery provisions of the
VAT Act. While a strict rule of construction is applied to the
charging provisions of a taxing statute without implying anything
(State of West Bengal v Kesoram Industries Limited ), the
machinery sections of a taxing statute must be so construed as to
make the statute effective and workable. It is the duty of the
Court, while interpreting the machinery provisions of a taxing
statute, to give effect to its manifest purpose having a full view of
it. A common sense interpretation should be given to the
machinery sections so that the charge does not fall. While
charging provisions are construed strictly, machinery sections are
not generally subject to a rigorous construction. Courts are
expected to construe the machinery sections in such a manner
that a charge to tax is not defeated. (Sri Balaji Flour Mills2;
Whitney v IRC ; Commissioner of Income Tax v Mahaliram
Ramjidas A.C.C.Limited v CTO ).
Section 2 (1)(b) of the APGST Act defined assessing
authority to mean any person authorized by the State
Government, or by any other authority empowered in this behalf,
to make any assessment, in such area or areas or the whole of the
State of Andhra Pradesh, under the APGST Act. Section 14 thereof
empowered the assessing authority to undertake assessment if a
return submitted was found to be incorrect. In the exercise of the
powers conferred by Section 2(1)(b) of the APGST Act, the Governor
of Andhra Pradesh issued G.O.Ms.No.728 Revenue dated
14.07.1970 (published in the A.P. Gazette dated 13.08.1970)
authorizing (a) the Assistant Commercial Tax Officers to exercise
the powers of the assessing authority in the case of dealers whose
assessments were transferred to them by the Deputy Commercial
Tax Officer concerned; (b) the Deputy Commercial Tax Officers to
exercise the powers of an assessing authority in the case of dealers
whose total turnover was less than Rs.15.00 Lakhs; (c) the
Commercial Tax Officers to exercise the powers of an assessing
authority in the case of dealers whose total turnover was Rs.15.00
Lakhs or more a year. Under the proviso thereto, any of the higher
authorities viz., the Deputy Commercial Tax Officer and the
Commercial Tax Officer could, in his discretion, exercise the
powers of a lower authority within his jurisdiction in respect of any
dealer or class of dealers; and the Deputy Commissioner
(Commercial Taxes) of the division concerned could, by order,
authorize any Deputy Commercial Tax Officer to exercise the
powers of an assessing authority in the case of any dealer or class
of dealers whose total turnover exceeded Rs.15.00 Lakhs a year.
The APGST Act, 1957 was repealed by Section 80(1) of the
VAT Act. However, in view of the proviso thereto, such repeal did
not effect the previous operation of the APGST Act or any right,
title, obligation or liability already acquired, accrued or incurred
thereunder; and, subject thereto, anything done or any action
taken (including any appointment, notification etc.) in the exercise
of any power conferred by or under the APGST Act must be
deemed to have been done or taken in the exercise of the powers
conferred by or under the VAT Act, as if the VAT Act was in force
on the date on which such thing was done or action was taken.
While the assessing authority, as prescribed in GO Ms.No.728
dated 14.07.1970, continues to be the Commercial Tax Officer of
the circle even after the VAT Act came into force, the power of
assessment under the VAT Act is conferred not on the assessing
authority, but on the prescribed authority. It is only the
authority, prescribed under Rule 59, who can make assessment
under the VAT Act and not the assessing authority under Section
2(4) thereof or in G.O.Ms.No.728 dated 14.07.1970. Unlike the
VAT Act, which confers power of assessment on the prescribed
authority, the AP Rules confer power of assessment on the
assessing authority which, in terms of GO Ms.No.728 dated
14.07.1970 issued in the exercise of the powers conferred under
Section 2(1)(b) of the APGST Act, is the Commercial Tax Officer of
the concerned circle. As neither Section 2(4) of VAT Act, nor the
Commissioner under Section 3-A thereof, have specified who an
assessing authority is, the assessing authority under G.O.Ms.
No.728 dated 14.07.1970 continues to remain the assessing
authority even after the VAT Act came info force in view of the
proviso to Section 80 thereof.
Viewed from any angle the contention, urged on behalf of the
petitioner, that the Commercial Tax Officer of the circle, before
whom the petitioner files his monthly returns, lacks jurisdiction to
pass the impugned assessment orders does not merit acceptance.
It is made clear that this Court has not examined whether the
prescribed authority under Rule 59 of the VAT Rules, who is
empowered to make assessment under the VAT Act, can also
assess a dealer to tax under the CST Act, as this question does not
fall for consideration in these cases. Suffice it to make it clear that
the Commercial Tax Officer of the Circle, before whom a dealer files
his CST returns, is empowered to assess him to tax under the CST
Act.
II. JUDICIAL REVIEW OF AN ASSESSMENT ORDER
ADEQUACY OR SUFFICIENCY OF THE EVIDENCE, BASED
ON WHICH THE ASSESSING AUTHORITY RECORDED HIS
FINDINGS, CANNOT BE GONE INTO:
Sri S. Ravi, Learned Senior Counsel appearing on behalf of
the petitioners, would submit that the turnover relating to sale of
wooden round logs represented the value of the goods sold to M/s.
Radha Industries, Lucknow, India while the goods were on High
Seas and, consequently, it was a sale in the course of import; the
quadripartite Agreement, entered into between World Best Trading
Co. (L.L.C.), Dubai (the Seller), Indus Tropics Limited (Indus)
(importer), Vellanki Frameworks (the Petitioner) and Radha
Industries, contemplated purchase of goods by the importer from
the seller, and purchase of goods from Indus by Radha Industries
through the petitioner; the agency agreement, to be executed by
Radha Industries in favour of the petitioner, was annexed to it; this
agreement entrusted the work of clearance of goods at the port to
the petitioner; the petitioner was entitled to 2% commission on the
transaction; on the strength of the quadripartite agreement, a
purchase order was placed by the importer on the Seller; the seller
invoiced the goods to the importer; a Bill of Lading was issued by
the shipping carrier; the bill of lading was endorsed by the
importer in favour of the petitioner and was, subsequently,
endorsed by the Petitioner in favour of Radha Industries while the
goods were in high seas; the endorsement was also supported by a
High Sea Sale Agreement between the importer and the Petitioner,
and a subsequent High Sea Sale Agreement between the Petitioner
and Radha Industries; the goods were dispatched from Yangoon
(Myanmar), and were received in Vishakhapatnam Port; a bill of
entry was filed for ex-bond; customs duty was assessed on Mr.
Sanjeev Kumar Agarwal of the petitioner; the goods were cleared by
the Petitioner and dispatched to Radha Industries; the assessing
authority had examined the documents, and did not adversely
comment on any of them; there is no finding that the endorsement
on the Bill of Lading is not genuine; the order of Assessment is
liable to be set aside as the Quadripartite Agreement, which is not
a disputed document, came into existence before the Purchase
Order, and before a bill of lading was issued by the shipping line;
the ultimate purchaser of the goods, i.e., Radha Industries, was
identified even at that stage; the sale, by the Petitioner to Radha
Industries, was effected by endorsement of the Bill of Lading in
favour of Radha Industries while the goods were still in the
customs station as defined in Section 2(13) of the Customs Act,
1962; and, in view of Section 2(ab) of the CST Act, 1956 read with
Section 5(2) thereof, as long as the endorsement, and the
consequent transfer of title of the goods, had taken place before the
goods left the customs station, the sale would be in the course of
import. Learned Senior Counsel has referred to the preamble and
the provisions of the Indian Bills of Lading Act, 1856, and places
reliance on British India Steam Navigation Co. Ltd. v.
Shanmughavilas Cashew Industries in this regard.
The petitioner has invoked the jurisdiction of this Court,
under Article 226 of the Constitution of India, against the
assessment order passed by the first respondent without availing
the statutory remedy of appeal. The tax authorities, entrusted
with the power to make assessment of tax, discharge quasi-
judicial functions, (State of Kerala v. K.T. Shaduli Yousuff ),
and their orders are amenable to judicial review under Article 226
of the Constitution. While a writ of certiorari is the appropriate
remedy when the validity of a quasi-judicial order is under
challenge, the petitioner has sought a writ of mandamus from this
Court. It is necessary for us, therefore, to examine the scope of
judicial review, of an assessment order, in writ proceedings.
In order that mandamus may issue to compel the authorities
to do something, it must be shown that there is a statute which
imposes a legal duty and the aggrieved party has a legal right
under the statute to enforce its performance. (Tirumala Tirupati
Devasthanms v. K. Jotheeswara Pillai ; The Bihar Eastern
Gangetic Fishermen Cooperative Society Ltd. v. Sipahi
Singh ; Oriental Bank of Commerce v. Sunder Lal Jain ;
Lekhraj Satramdas Lalvani v. Deputy Custodian-cum-Managing
Officer ; Dr. Rai Shivendra Bahadur v. The Governing Body of
the Nalanda College and Dr. Umakant Saran v. State of
Bihar ). The duty that may be enjoined by a mandamus may be
one imposed by the Constitution, a statute, common law or by
rules or orders having the force of law. (Director of Settlements,
A.P. v. M.R. Apparao ; Kalyan Singh v. State of U.P. ). In order
that a writ of mandamus may be issued, the party asking for the
writ must have a legal right to compel the performance of some
statutory duty cast upon the authorities. (Oriental Bank of
Commerce16). It is not even the petitioners case that the first
respondent has failed to perform a statutory duty cast upon him or
that the petitioners legal right has been adversely affected. The
petitioner is, therefore, not entitled for a writ of mandamus from
this Court.
Even for a writ of certiorari to be issued, the tests prescribed
therefor must be satisfied. Certiorari, under Article 226 of the
Constitution, is issued for correcting gross errors of jurisdiction,
i.e., when a subordinate court is found to have acted (i) without
jurisdiction - by assuming jurisdiction where there exists none, or
(ii) in excess of its jurisdiction by overstepping or crossing the
limits of jurisdiction, or (iii) acting in flagrant disregard of law or
the rules of procedure or acting in violation of principles of natural
justice where there is no procedure specified, and thereby
occasioning failure of justice. (Surya Dev Rai v. Ram Chander
Rai ). In granting a writ of certiorari the superior Court does not
exercise the powers of an appellate Tribunal. It does not review or
reweigh the evidence upon which the determination of the inferior
Tribunal purports to be based. It does not take upon itself the task
of examining the correctness of the decision or decide what is the
proper view to be taken and the order which should be made. It
demolishes the order which it considers to be without jurisdiction
or palpably erroneous but does not substitute its own views for
those of the inferior Tribunal. (T.C. Basappa v. T. Nagappa ; Rex
v. Northumberland Compensation Appellate Tribunal ;
Veerappa Pillai23). The court, issuing a writ of certiorari, acts in
the exercise of a supervisory and not an appellate jurisdiction. The
court will not review findings of fact reached by the inferior court
or tribunal, even if they be erroneous. It is a manifest error
apparent on the face of the proceedings, e.g., when it is based on
clear ignorance or disregard of the provisions of the law, which can
be corrected by certiorari and not a mere wrong decision. (Surya
Dev Rai22). Certiorari will not issue as a cloak of an appeal in
disguise. It does not lie in order to bring up an order or decision for
re-hearing of the issue raised in the proceedings. It exists to
correct errors of law when revealed on the face of an order or
decision or irregularity or absence of or excess of jurisdiction when
shown. (Veerappa Pillai23; Rex24; Hari Vishnu v. Ahmad
Ishaque ).
Findings of fact reached by the inferior Court or Tribunal, on
appreciation of evidence, cannot be reopened or questioned in writ
proceedings. An error of law which is apparent on the face of the
record can be corrected by a writ, but not an error of fact, however
grave it may appear to be. In regard to a finding of fact recorded by
the Tribunal, a writ of certiorari can be issued if it is shown that,
in recording the said finding, the Tribunal had erroneously refused
to admit admissible and material evidence, or had erroneously
admitted inadmissible evidence which has influenced the
impugned finding. Similarly, if a finding of fact is based on no
evidence, that would be regarded as an error of law which can be
corrected by a writ of certiorari. A finding of fact recorded by the
Tribunal cannot be challenged in certiorari proceedings on the
ground that the relevant and material evidence adduced before the
Tribunal was insufficient or inadequate to sustain the impugned
finding. The adequacy or sufficiency of evidence led on a point, and
the inference of fact to be drawn from the said finding, are within
the exclusive jurisdiction of the Tribunal, and the said points
cannot be agitated before a Writ Court. To be amenable to
correction in certiorari jurisdiction, the error committed by the
authority, on whose judgment the High Court was exercising
jurisdiction, should be an error which is self-evident. If it is
reasonably possible to form two opinions on the same material, the
finding arrived at, one way or the other, cannot be called a patent
error. (Syed Yakoob v. K.S. Radhakrishnan ; Ranjeet Singh v.
Ravi Prakash ).
Mere formal or technical errors, even though of law, will not
be sufficient to attract this extra-ordinary jurisdiction. Where the
errors are merely errors in appreciation of documentary evidence
or affidavits, errors in drawing inferences or omission to draw
inference or in other words errors which a court, sitting as a court
of appeal, could only have examined, there is no case for the
exercise of the jurisdiction under Article 226. (Surya Dev Rai24;
Nagendra Nath Bora. v. Commissioner of Hills Division and
Appeals, Assam ). It is within this limited parameters can the
validity of the impugned assessment orders be examined.
By the impugned orders of assessment, the assessing
authority subjected the turnover to tax as inter-state sales under
the CST Act holding that in the computer print out of the
petitioners trading account, for the year 2005-06, the purchase
was shown as purchase trading (high seas), and the relevant sales
as sales trading (high seas); in the high sea sales agreement
dated 10.12.2005, the petitioner was shown as the buyer; in the
subsequent high sea sales agreement dated 12.12.2005 the
petitioner was described as the seller; in their letter dated
25.11.2009 the petitioner had claimed exemption on the ground
that the sales were effected by transfer of documents of title before
the goods had crossed the customs frontiers; the petitioners
intention was to sell the goods, and there was a sale; they did not
act as the agent of Radha Industries; the petitioner had filed the
bill of entry for warehousing and home consumption; customs duty
was assessed on the petitioner alone vide bill of entry for ex-bond;
sale, subsequent to customs clearance, had alone taken place; the
sale took place on 12.01.2006 as shown in the debit note, after the
goods had crossed the customs frontiers; after assessment to
customs duty is made on filing of the bill of entry, the goods get
mingled with the general mass of goods and merchandise of the
country attracting the character of local goods; they cease to be
foreign goods thereafter; on filing of the bill of entry for
warehousing and ex-bond, the petitioner alone was assessed to
customs duty; the import stream had dried upon such clearance
by the customs authorities; the goods had mixed into the stream of
local goods; as is ascertainable from the bills of entry from
warehousing and ex-bond, transfer of title had not taken place
before filing of the bills of entry and assessment of customs duty;
the sale took place after assessment was made on the petitioner,
and on their filing the bills of entry; the goods must be held to have
crossed the customs frontiers of India, after the bill of entry was
made and the goods were assessed to customs duty; thereafter the
sales cannot be said to be sales in the course of import or high sea
sales; and the transactions, on which the petitioner had claimed
exemption as high sea sales, should be treated as inter-state sales
falling under Section 3(a) of the CST Act.
In passing the impugned assessment orders, and in
subjecting the transactions to tax as an inter-state sale under
Section 3(a) of the CST Act, the assessing authority has not taken
into consideration the effect of the High Sea sales agreements and
other agreements, the bill of lading or the provisions of the Indian
Bill of Lading Act. He has held that the sale of goods by the
petitioner to Radha Industries (and other outside the State
purchasers) was an inter-state sale on the ground that these sales
could only have been effected after the petitioner had filed the bill
of entry for home consumption, and after he was assessed to
customs duty. It is only if these findings are set aside, would the
matter necessitate remand, and the assessing authority being
directed to consider the other documents relied upon by the
petitioner.
III. DOES FILING OF A BILL OF ENTRY BY THE PETITIONER,
AND THEIR BEING ASSESSED TO CUSTOMS DUTY, MAKE
THE SALE TO RADHA INDUSTRIES AN INTER-STATE
SALE?
Sri S. Ravi, Learned Senior Counsel, would submit that the
contention of the respondents, that transit ends upon payment of
customs duty by the petitioner, and any sale by the petitioner
thereafter can only be a sale in India, is erroneous; there is no
prohibition under the Customs Act, or the Rules or Regulations
made thereunder, for clearance of goods by the holder of an
authorization by the endorsee of the Bill of Lading; even otherwise
an importer under the Customs Act includes any owner or any
person holding himself out to be an importer; as the Bill of lading
had been endorsed in his favour, the Petitioner was entitled to and
had, in fact, filed the Bill of Entry as an importer; the documents
reveal that there were three importers in the present case i.e.,
Indus Tropics Limited, being the consignee in the Bill of Lading,
was the first importer; the Petitioner, as the first endorsee, was the
second importer; and Radha Industries, as the second endorsee,
was the third importer; the law permits any importer to file a bill of
entry under Section 46 of the Customs Act; the Petitioner was
entitled to file the bill of entry either as an importer or, in the
alternative and as there is no prohibition in law, as an agent of
Radha Industries, the ultimate purchaser; under the Customs Act,
especially for filing a Bill of Entry, the title and the passage of
title are irrelevant considerations; the objective of the said Act is to
realize customs duty when the goods are imported, or cross the
customs frontiers of the country; the Customs Act allows any
owner/importer to file a bill of entry and pay duty; and,
consequently, the contention that payment of customs duty by the
Petitioner is conclusive of the import having ended, and any sale
by the Petitioner thereafter can only be a domestic sale, does not
flow from the provisions of the Customs Act or from the
assessment order.
Sri P.Balaji Varma, Learned Special Standing Counsel for
Commercial Taxes, would submit that the petitioner alone was
assessed to Customs duty; he is therefore the last buyer and owner
or importer of the goods; the petitioner was assessed to duty, by
virtue of his filing the Bill of Entry, as the importer; the system
permitted only the petitioner to file the Bill of Entry as his name
alone was recorded in the Import General Manifest (IGM); based on
the data made available in the IGM, the Bill of Entry also showed
only the name of the foreign seller, the name of the original
importer, and the name of the petitioner as the importer being the
ultimate buyer; the contents of the Bill of Entry make it clear that
there is no high sea sales, subsequent to the high sea sales in
favour of the petitioner; the petitioner herein became the last buyer
in the importation; as such the petitioner was liable to pay
customs duty, and he was rightly assessed; Radha Industries was
not assessed to customs duty; while the petitioner could have
represented the assessee before the assessing authority, they could
not have been assessed for someone else; the petitioner, having
been assessed to customs duty, cannot claim that there is a
further high sea sale in its hands or that they had got themselves
assessed for, and on behalf of, Radha Industries as their agent;
accepting the petitioners contention would mean that Radha
Industries was the ultimate buyer before the goods crossed the
customs frontier, after Purbanchal the original importer, and the
Petitioner the subsequent high sea sale purchaser; if Radha
Industries was the last buyer during importation, the Import
General Manifest (IGM) would have reflected the same; only if the
IGM had reflected the name of Radha Industries would they have
been entitled to file the bill of entry; only the last buyer i.e., the last
importer is liable to be assessed to customs duty; the customs
duty is the value of the goods when the vessel enters Indian waters
i.e, the value of the goods in the hands of the last buyer i.e, Radha
Industries; and the Bill of Entry would then have shown Radha
Industries as the importer, and the petitioner as one of the
importers along with the names of the original importer i.e,
Purbanchal and the export seller M/s. Alkemal; the contention
regarding second high sales, to Radha Industries, are not true; the
name of Radha Industries is not reflected in the Bill of Entry;
Radha Industries was, admittedly, not assessed to customs duty;
the value of the goods (even if notional) paid by Radha Industries
to the petitioner was not assessed to customs duty; the Bill of
Entry was not filed by Radha Industries; a Bill of Entry is
generated on the basis of the Import General Manifest; the
petitioner is the last buyer/final importer of the goods and, as
such, was assessed to customs duty before the goods got mixed
with the general goods; since the alleged transactions, between the
petitioner and Radha Industries, are not subjected to assessment
under the Customs Act, the transaction is not during importation;
the inevitable consequence is that the sale of goods by petitioner to
Radha Industries is not a sale in the course of import; it is an
inter-state sale as Radha Industries is located outside the State of
A.P; the facts pleaded do not establish a high-sea sale, but lead to
the inevitable conclusion of a inter-state-sale; be it under a
principal agent relationship, or under a sale, the main contention
of the petitioner is that the goods were transferred on the high
seas, and is a high sea sale; their contention is also that they are
the transferor and Radha Industries is the transferee; if the
petitioner sells goods to M/s Radha Industries, and yet gets
himself assessed to customs duty, (assuming such transaction is
true), it can only mean that the petitioner and Radha Industries
had colluded to evade customs duty on the sale transaction value;
the case pleaded before this court, and also before the assessing
authority, is that the petitioner had sold goods to Radha Industries
as a 2nd High Sea Sale; while a Bill of Entry for warehousing would
not result in termination of importation, a Bill of Entry for home
consumption terminates the importation; a Bill of Entry for home
consumption is submitted only when the Importer intends to get
the goods released for home consumption; upon entry of goods in
the import manifest (Section 46 of the Customs Act), custom duty
is payable at the rates applicable on the date of arrival of the
vessel; however, in the case of warehousing, the importation
terminates upon filing of the Bill of Entry for Ex-bond for the
purpose of home consumption (Section 68 of the Customs Act);
and customs duty is paid along with interest, rent etc., till the date
of filing of the Bill of Entry for Ex-bond.
(A) IMPORTER OF GOODS UNDER SECTION 2(26) OF THE
CUSTOMS ACT:
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 effected by a
transfer of documents of title to the goods before the goods have
crossed the customs frontiers of India. The words "crossing the
customs frontiers of India" is defined, in Section 2 (ab) of the CST
Act, to mean crossing the limits of the area of a customs station in
which the imported goods or exported goods are ordinarily kept
before clearance by customs authorities. Under the Explanation
thereto, for the purposes of Section 2(ab), "customs station" and
"customs authorities" shall have the same meaning as in the
Customs Act, 1962. The Customs frontier, for the purpose of the
CST Act, is thus equated to the limits of the area of the customs
station in which the goods are stored, crossing of such station
being regarded as amounting to crossing the customs frontiers of
India. The 'customs station' referred to in Section 2(ab) of the CST
Act is the one which is defined under Section 2(13) of the Customs
Act to mean any customs port, customs airport or land customs
station. Customs Port is defined in Section 2(12) of the Customs
Act to mean any port appointed under Section 7(a) thereof to be a
customs port and includes a place appointed under clause (aa) of
that Section to be an inland container depot. Section 7(a) of the
Customs Act enables the Central Government, by notification in
the Official Gazette, to appoint the ports and airports which alone
shall be the customs ports or customs airports for the unloading of
imported goods. The crucial event for the purpose of Section 2 (ab)
of the CST Act, and consequently for Section 5(2) thereof, is the
crossing the limits of the area of the customs station. (State
Trading Corporation of India Ltd. v. State of Tamil Nadu ).
Section 2(23) of the Customs Act defines import, with its
grammatical variations and cognate expressions, to mean bringing
into India from a place outside India. Section 2(25) defines
imported goods to mean any goods brought into India from a
place outside India but does not include goods which have been
cleared for home consumption. Use of the words does not
include in Section 2(25) would mean that the moment goods,
brought into India from a foreign country, are cleared for home
consumption, they get mixed with the local goods and cease to be
imported goods thereafter. Going by the definition of the term
'import' under Section 2(25) of the Act as "to bring into India from
a place outside India," and as he has imported the goods (his name
being reflected in the Bill of Entry as the importer), the petitioner
has rightly been held to be the importer.
In ordinary understanding, goods would not be thought to
have been imported if they were carried through the territorial
waters of the Indian coast by a ship which did not put them into
an Indian port. Importation of goods does not take place as soon
as the ship carrying them enters the marginal seas, perhaps only
to leave them again for navigational purposes as it moves towards
the port of discharge. Entry into the port, with the intention of
being landed, constitutes importation. (Shri Ramlinga Mills Pvt.
Ltd. v. Assistant Collector of Customs ; The Queen v. Bull., ).
If the goods are brought into their port of destination for the
purpose of being there discharged, the act of importation is
complete. On the other hand, the act of importation is not
complete if a ship enter some port of call with goods on board
which is not the destined port of discharge of those goods. (Shri
Ramlinga Mills Pvt. Ltd.30; and Wilson v. Chambers & Co. Ply.
Ltd. ). Unless the goods, brought into the country for the
purpose of use, enjoyment, consumption, sale or distribution, are
incorporated in and get mixed up with the totality of the property
in the country, they cannot be said to have been imported. (Shri
Ramlinga Mills Pvt. Ltd.30; The Central India Spinning and
Weaving and Manufacturing Co., Ltd, The Empress Mills,
Nagpur v. The Municipal Committee, Wardha ; K.R. Ahmed
Shah v. Additional Collector of Customs, Madras ).
The scheme of the Customs Act is to control the due
importation of goods by channelling shipping through proclaimed
ports having defined limits, and through bearing stations within
the port to appropriate wharfage. The inward cargo is to be
reported, the goods are to be unshipped immediately upon
importation and, upon the passing of the entry, to be forthwith
dealt with in accordance with the terms of the entry. In order to
secure due importation, all goods from importation until passed
into home consumption or until exportation abroad are subject to
customs control. Goods in transit, not intended to be landed, are
also subject to that control. An importation is a voluntary arrival
within some port with the intention to unload the cargo. (Shri
Ramlinga Mills Pvt. Ltd.30; The Queen31). Imports generally take
place as a result of transactions between traders in two different
countries. Such transactions, in the modern commercial world,
mostly partake the character of a sale. That posits, as essential
ingredients, an agreement of sale, a passing of consideration and
delivery of property. All these are fixed with reference to two
distinct contracting parties. A concept of import, therefore, cannot
be dissociated with a person exporting the goods and a person who
imports them. The ingredients of the term 'import' have to be
linked with the importer of the country of destination of the goods.
The mere fact that the goods have crossed the customs frontiers in
a Port, in which the importer has no intention to have the goods
delivered from the ship, will not amount to import for the simple
reason that the importer had no intention whatsoever, in relation
to those goods, to have access to the goods except at the Port of
destination. (Shri Ramlinga Mills Pvt. Ltd.30; Brown v. State of
Maryland ). As regards the importer who contracted for the
goods, and the carriage thereof to a particular port, the question of
importation has to be determined in the light of the statutory
provisions but without forgetting the central fact that the importer
has intended the goods to be imported at the particular port.
Importation takes place only when the vessel has crossed the
customs barriers at the intended port of importation. (Shri
Ramlinga Mills Pvt. Ltd.30; Muller v. Badurin ).
The importer of the goods is, therefore, the person who
brings into India the goods from a place outside. The course of
import of goods starts at a point when the goods cross the customs
barrier of the foreign country and ends at a point in the importing
country after the goods cross the customs barrier. The sale which
occasions the import is a sale in the course of import. A purchase
by an importer of goods, when they are on the high seas by
payment against shipping documents, is also a purchase in the
course of import. A sale by an importer of goods, after the property
in the goods has passed to him either after receipt of the
documents of title against payment or otherwise, to a third party
by a similar process is also a sale in the course of import. (J.B.
Trading Corporation v. Union of India ).
In view of the definition of the term "import" in Section 2(23)
of the Customs Act, and imported goods under Section 2(25), an
importer is, ordinarily, the person who brings into India goods
from any place outside India. Section 2(26) of the Customs Act
does not lay down the statutory meaning of the word importer.
The word importer has been defined in Section 2(26) to include, in
relation to any goods at any time between their importation and
the time when they are cleared for home consumption, any owner
or any person who holds himself out to be the importer. What
does the word include, in the context of Section 2(26) of the
Customs Act, mean? The word include is generally used in
interpretation clauses in order to enlarge the meaning of the words
or phrases occurring in the body of the statute; and when it is so
used those words or phrases must be construed as
comprehending, not only such things as they signify according to
their natural import, but also those things which the interpretation
clause declares that they shall include. (Dadaji v. Sukhdeobabu ;
Reserve Bank of India v. Peerless General Finance and
Investment Co. Ltd. ; Mahalakshmi Oil Mills v. State of A.P. ;
Associated Indem Mechanical (P) Ltd. v. W.B. Small Industries
Development Corpn. Ltd., ; P.Kasilingam v. P.S.G.College of
Technology ). The word includes, as used in Section 2(26),
denotes that the word importer may refer to and may
comprehend not only what would ordinarily and in common
parlance be spoken of as an importer but also, in relation to any
goods at any time between their importation and the time they are
cleared for home consumption, the owner or a person holding
himself out to be an importer. Any ordinary meaning of the word
importer is not excluded by Section 2(26), and an extended
meaning is to be given thereto. (Carter v. Bradbeer ).
The words, namely, 'at any time between their importation
and the time when they are cleared for home consumption'
occurring in the second part of Section 2(26) are significant. What
does the word importation mean? The word importation is not
defined in the Customs Act. It means the commercial activity of
buying and bringing in goods from a foreign country. The word
importation is defined in Blacks Law Dictionary Sixth Edition
as the act of bringing goods and merchandise into a country from
a foreign country. (Cunard Steamship Co. v. Mellon ). The word
importation is defined in P.Ramanatha Aiyers The Law Lexicon
Reprint Edition 2002 as the bringing goods and merchandize
into the kingdom from other nations. (Tamlins Law Dic.); a thing
is imported when it reaches the borders of the country. If it is
imported by water then, as soon as a vessel reaches an Indian
port, the process of importation is complete. If the goods are
carried by sea and the vessel reaches an Indian port, it is the
moment of entry of the vessel which must be held to be the
moment of importation of the goods. (Additional Collector of
Customs v. Sitaram ; Devichand Jestimal and Co. Bangalore
v. Collector of Central Excise, Madras ; Gopal Mayaji v. T.C.
Seth ). The date on which the goods arrive in India is the date on
which the importation is complete having crossed the customs
barrier. But for the expanded definition of importer in Section
2(26), ordinarily, after completion of importation, there cannot be
another importer for the very same goods. (J.B. Trading
Corporation37). In view of the expanded definition of importer in
Section 2(26), while any person who imports goods from a foreign
country to India would undoubtedly be an importer, the owner of
the goods and a person holding himself out be an importer would
also be an importer, however only during the period between the
importation of the goods and the time they are cleared for home
consumption, and not prior thereto or thereafter. This period is
when the goods are warehoused after importation, and are cleared
from such warehouse by a person other than the person who
actually imported the goods. That limb of the definition of
importer, in Section 2(26) of the Customs Act, is designed to
protect the interests of the owner or the exporter where the goods
have not been claimed or redeemed by the designated importer in
India. The definition cannot be used to usurp the identity of an
importer from the person who filed the bill of entry. As Section
2(26) is an inclusive definition, the person in whose name the bill
of entry is filed does not cease to be the importer. In other words,
the person who has secured the release of the goods from the
carrier, who has filed the bill of entry, and who has undertaken the
work of clearance, continues to be an importer. The bill of entry
shows the goods to have been cleared for home consumption by
the petitioner who is, therefore, the importer of the goods.
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. No doubt, Section 2(26)
permits any one holding himself out to be the importer between the
date of importation and clearance of the goods for home
consumption. But here the petitioner, in whose name the goods
have been manifested, has, by filing a Bill of Entry, already held
himself out to be the importer. As shall be detailed hereinafter, the
import manifest has not been amended, the petitioner has filed the
Bill of Entry for clearance of the goods for home consumption, and
has held himself out to be the importer. In the context of Section
48 of the Customs Act whereunder, if the notified importer does
not clear the goods or abandons the goods, the authorities having
custody of the goods can only sell the goods by auction, another
person cannot be substituted as the importer. The name of the
importer cannot be changed in the manifest where fraud is
detected in the import as any such amendment is impermissible
under Section 30(3) of the Customs Act. If the contention of the
petitioner, that any person can file a bill of entry for clearance of
goods for home consumption, is accepted, the importer can easily
substitute himself by some other person, to file the bill of entry for
clearance, whenever any consignment is liable for confiscation for
violation of the provisions of the Customs Act. (J.B. Trading
Corpn.37). It is evident, therefore, that, before its importation, it is
only the person who imported the goods who would be the
importer. If, as contended by the petitioner, they had sold the
goods on high seas to Radha, it is only Radha who would be the
importer and not the petitioner. The very fact that the name of
Radha is not reflected as the importer in the bill of entry ex-bond
(home consumption) belies the petitioners contention of a high sea
sale by them to Radha Industries.
(B). AN IMPORT GENERAL MANIFEST WOULD REFLECT THE
NAME OF THE IMPORTER:
To regulate and have effective control on imports, the
Customs Act enjoins certain liabilities on the carriers. They are
required to bring in the imported cargo into the country for
unloading only at the notified ports/airports/Land Customs
Stations (Section 29); and furnish detailed information to Customs
about the goods brought in for unloading at that particular port.
The cargo must be declared in terms of an Import General
Manifest (IGM) prior to arrival of the vessel/aircraft at the
Customs station (Section 30). Ordinarily, unloading of cargo
cannot be undertaken from any vessel unless the IGM is furnished
in the prescribed form. After the IGM is delivered, unloading takes
place under the supervision of Customs Officers.
Section 2(24) of the Customs Act defines import manifest to
mean the manifest required to be delivered under Section 30.
Chapter-VI of the Customs Act contains provisions relating to the
conveyance carrying imported goods. Section 30(1) requires the
person-in-charge of the vessel carrying imported goods to deliver to
the proper officer an import manifest prior to the arrival of the
vessel. Section 30(2) requires the person, delivering the import
manifest at the foot thereof, to make and subscribe to a declaration
as to the truth of its contents. In terms of the Import Manifest
(Vessels) Regulations, 1971, any person, who delivers the import
manifest for a vessel to the proper officer under Section 30 of the
Customs Act is required to be registered with Customs. The
importer can either handle the import clearance documents
himself or appoint a Custom House Agent (CHA) licensed in terms
of the CHA Licensing Regulations. Section 146 of the Customs Act
requires Customs house agents to be licensed and, under sub-
section (1) thereof, no person shall carry on business as an agent,
relating to the entry or departure of a conveyance or the import or
export of goods at any customs-station, unless such person holds
a licence granted in this behalf in accordance with the regulations.
An obligation is cast on the Custom House Agent, acting on behalf
of the importer, to comply with Section 30 of the Act. (J.B. Trading
Corporation37).
Section 30(3) of the Customs Act read with the Levy of Fee
(Customs Documents) Regulations, 1970, allows the proper officer
to permit an IGM to be amended or supplemented, on payment of
prescribed fees, if he is satisfied that there is no fraudulent
intention. The Central Board of Excise and Customs has provided
for two broad categories of amendments Major and Minor. The
major amendments include changing the Importers/consignees
name. Section 32 stipulates that no imported goods, required to
be mentioned in an import manifest or import report, shall, except
with the permission of the proper officer, be unloaded at any
customs station unless they are specified in such manifest or
report for being unloaded at that customs station. In the exercise
of the powers conferred by Section 157 of the Customs Act, the
Central Board of Excise and Customs made the Import Manifest
(Vessels) Regulations, 1971. Regulation 3 thereof relates to the
import manifest and, under sub-regulation (1) thereof, every
import manifest shall (a) be delivered in duplicate; (b) cover all the
goods carried in a vessel; and (c) consist of, among others, a cargo
declaration in Form III. Regulation 5 prescribes the manner of
declaring cargo and, under sub-regulation (1)(a) thereof, the cargo
declaration shall be delivered in separate sheets in respect of each
of the categories of cargo, viz, the cargo to be landed. The cargo
declaration form contains, among others, the name of the ship, the
port of loading, the bill of lading number, the number and kinds of
packages, description of goods, name of the consignee/importer,
the date of presentation of the bill of entry, the name of the
customs house agent etc.
As shall be referred to in detail hereinafter, the bill of entry
submitted by the petitioner, in terms of the Bill of Entry (Electronic
Declaration) Regulations, 1995, records the Import General
Manifest number and date as 423/2006 dated 13.04.2006. The
Import General Manifest contains a cargo declaration wherein,
among others, the name of the importer, the importers code
number, IGM number and date are required to be detailed. It is
not even the petitioners case that his name is not reflected as the
importer in the Import General Manifest. If, as is now contended
by him, the goods had been sold on the high seas, the Import
General Manifest should have reflected the name of the last high
sea sale purchaser as the importer. Otherwise, the Import General
Manifest would have necessitated amendment as it is only the last
purchaser of the goods on high seas who would be the
importer/consignee. There is no material on record to show that
either the Import General Manifest contained the name of Radha
as the importer/consignee or that it was subsequently amended in
terms of Section 30(3) of the Customs Act. It is evident, therefore,
that the contention of high seas sales has been raised by the
petitioner only to avoid the goods being subjected to tax as inter-
state sales under the CST Act.
[C] BILL OF ENTRY EX-BOND/FOR HOME CONSUMPTION ITS
SCOPE:
Section 45(1) of the Customs Act requires all imported goods
unloaded in a customs area to remain in the custody of the person,
approved by the Commissioner of Customs, until they are cleared
for home consumption or are warehoused. Section 46(1) requires
the importer of the goods to make an entry thereof by presenting to
the proper officer a bill of entry for home consumption or
warehousing in the prescribed form. Section 46(3) requires a bill
of entry, under sub-section (1), to be presented at any time after
the delivery of the import manifest. Section 46(4) requires the
importer, while presenting a bill of entry, to make and subscribe,
at the foot thereof, a declaration as to the truth of the contents of
such bill of entry and, in support of such declaration, to produce to
the proper officer the invoice, if any, relating to the imported goods.
Section 47 relates to clearance of goods for home consumption
and, under sub-section (1) thereof, where the proper officer is
satisfied that any goods entered for home consumption are not
prohibited goods, and the importer has paid the import duty, if
any, assessed thereon and any charges payable under the Act in
respect thereof, he may make an order permitting clearance of the
goods for home consumption. Under the proviso to Section 149,
no amendment of a bill of entry shall be authorised after the
imported goods have been cleared for home consumption or
deposited in a warehouse, except on the basis of documentary
evidence which was in existence at the time the goods were cleared
or deposited as the case may be.
Section 49 relates to storage of imported goods in a
warehouse pending clearance and, thereunder, where in the case
of any imported goods, whether dutiable or not, entered for home
consumption, the Assistant Commissioner or Deputy
Commissioner of Customs is satisfied, on the application of the
importer, that the goods cannot be cleared within a reasonable
time, the goods may, pending clearance, be permitted to be in a
warehouse, but such goods shall not be deemed to be warehoused
goods for the purposes of the Act and, accordingly, the provisions
of Chapter-IX shall not apply to such goods. Section 68 relates to
clearance of warehoused goods for home consumption and,
thereunder, the importer of any warehoused goods may clear them
for home consumption if (a) a bill of entry for home consumption in
respect of such goods has been presented in the prescribed form;
(b) the import duty levibale on such goods and all penalties, rent,
interest and other charges payable in respect of such goods have
been paid; and (c) an order for clearance of such goods for home
consumption has been made by the proper officer.
For clearance of the goods, offloaded at the port, the
importer has the option either to clear the goods for home
consumption after payment of customs duties, or to clear them for
warehousing, without immediate discharge of customs duties, in
terms of the warehousing provisions of the Customs Act. For this
purpose every importer is required to file, in terms of the Section
46, a Bill of Entry for home consumption or warehousing, as the
case may be, in the form prescribed by the Regulations. The Bill of
Entry is to be submitted in sets, different copies meant for different
purposes. The Bill of Entry contains, among others, the name of
the customs house agent, his address and licence number, the
customs house agent code, the importers code, the Import-Export
Code (IEC) number, importers name and address, the name of the
vessel, the country of origin, the country of assignment, the bill of
lading and its date, the particulars of the goods, invoice
particulars, customs duty paid etc. Certain documents are also
required to be submitted with the Bill of Entry. The correctness of
the information has also to be certified by the importer in the form
of a declaration at the foot of the Bill of Entry, and any mis-
declaration/incorrect declaration has legal consequences.
In the exercise of the powers conferred by Section 157 read
with Section 46 of the Customs Act, the Central Board of Excise
and Customs made the Bill of Entry (Electronic Declaration)
Regulations, 1995. Regulation 2(a) thereof defines authorized
person to mean (i) the Customs House Agent who holds a
permanent licence under the Customs House Agents Licensing
Regulations, 1984, and is authorised by the Commissioner of
Customs with a user identification; or (ii) an importer who holds a
valid Import Export Code number, and is specially authorized by
the Commissioner of Customs with a user identification for the
purpose of obtaining clearance of goods imported by him.
Regulation 2(b) defines bill of entry to mean the electronic
declaration accepted and assigned with a number by the Customs
Computer system for further processing. Regulation 2(d) defines
electronic declaration to mean the declaration of the particulars
relating to the imported goods, lodged in the Customs Computer
System, through the data-entry facility provided at the service
centre or the data communication networking facility provided by
the National Informatics Centre. Regulation 3 requires the
authorised person to furnish, for the purpose of clearance of the
imported goods, a cargo declaration in the format set out in
Appendix-A to the regulations, and such other information as may
be necessary for preparing an electronic declaration of the bill of
entry. Regulation 5 stipulates that the data entry shall be deemed
to be complete when the option to lodge the electronic declaration
in the Customs Computer System is exercised, and the declaration
is accepted by the System. Regulation 8 requires the authorised
person, after completion of assessment of the bill of entry, to
obtain three copies of the print-out of the assessed bill of entry
from the service centre. Such person is required to sign the copies
of the print-out, indicating his name and designation at the space
provided for the purpose affirming the truth of the contents
recorded on the assessed bill of entry. He is required, thereafter,
to present the same along with copies of challans evidencing
payment of duty, and other supporting import documents in
original, relating to the goods referred to in the bill of entry, for the
examination of the said goods by the proper officer and for the
issue of the order permitting clearance of the said goods for home
consumption or warehousing. Regulation 10 requires the
authorised person to obtain a declaration from the importer
affirming the truth of the contents of documents relating to the
imported goods sought to be cleared in duplicate, and to present
one copy in original to the proper officer at the time of submission
of the bill the of entry, and to retain one copy with him for his
records. Regulation 11 requires the original print-out of the bill of
entry to be retained by the proper officer and the duplicate and the
triplicate print-outs to be returned to the importer.
Appendix-A, referred to in Regulation 3 above, contains
details of the cargo declaration. Among the details to be furnished
therein, are the importers code, the clearing house agents code,
port of shipment, country of origin, country of consignment, IGM
number and date, number of packages, its gross weight, invoice
details, the nature of the transaction (sale/consignment/
hire/gift/others), the terms of payment (LC/FOC/DP/SD/others),
conditions attached with the sale (if any), and whether the buyer
and seller are related. The said form also contains a declaration
certifying that the aforesaid documents, and the information
therein, are true and correct. The said declaration is required to
be signed either by the importer or the clearing house agent.
This Bill of Entry is subject to verification by the proper
officer of Customs (under the self assessment scheme), and may be
re-assessed if the declaration is found to be incorrect. The first
stage for processing a Bill of Entry is termed as the
noting/registration of the Bill of Entry vis--vis the IGM filed by the
carrier. The import clearance documents are tallied with the
related IGM to ensure that the goods, sought to be cleared, have
been declared in the particular IGM of the vessel/aircraft
mentioned in the Bill of Entry. The Bill of Entry is checked with
the consignment sought to be cleared having been manifested in
the particular vessel, and a Bill of Entry number is generated and
indicated on all copies. After noting, the Bill of Entry is sent to the
appraising section of the Custom House for assessment, payment
of duty etc. The Bill of Entry and the related
particulars/information are scrutinized, among others, to
determine the value, classification and duties leviable on the
imported goods. After the bill of entry is filed, the customs officer
assesses the customs duty liability, and the said sum is required
to be paid by the importer as customs duty.
The authorized person, entitled to furnish a cargo
declaration in terms of Regulation 3 read with Appendix-A and to
present various documents as stipulated in the Bill of Entry
(Electronic Declaration) Regulations, 1995, is either the clearing
house agent or the importer and none else. In terms of Regulation
2(a) thereof, the Clearing House Agent must have a permanent
licence and the importer a valid Importer-Export Code number.
Both of them are also required to be authorized by the
Commissioner of Customs with an user identification. The user
identification number is required for the importer to obtain
clearance of the goods imported by him. It is evident, therefore,
that it is either the Clearing House Agent or the Importer who
alone can clear the imported goods for home consumption. In this
context, it is useful to refer to the contents of one of the Bills of
Entry enclosed along with W.P.No.6258 of 2010. The head of the
said Bill of Entry refers to Indian Customs EDI System. Under
the column importer details, the Code No. is stated as 2605001091
and the PAN No. as ABMPA8919R. The name of the importer is
shown therein as Sanjay Kumar Agarwal, Vellanki Frame Works.
The IGM number and date are recorded as 423/2006 dated
13.04.2006. The port of loading is shown as Yangon and the
country of origin as Myanmar. The bill number is recorded as
GCTC No.5310611 and the bill date as 08.04.2006. The number of
packages is shown therein as 155 pcs. The invoice number and
date is recorded as 209/2006 dated 11.04.2006 of M/s.Alkemal
Singapore Private Limited. The invoice value is shown as
1,31,500.29 US Dollars and the HSS as Original Importer
No.37000009100 Purbanchal Lumbars Pvt. Ltd. The Bill of Entry
records the name of Srinivasa Transports as the clearing house
agent, and their number as DDC No./DT.Officer:2100/03-05-
2006/TKESAV. The declaration thereunder is signed both by Sri
Sanjiv Kumar Agarwal as the importer and Srinivasa Transports as
the clearing house agent. It is evident, from the said Bill of Entry,
that the goods were imported by the petitioner, and were cleared
from customs with the assistance of the customs house agent
M/s.Srinivasa Transports. If, as contended by the petitioner, the
goods were sold by them to M/s.Radha Industries on high seas,
and before the goods entered the customs port, the name of the
importer should have been shown as Radha Industries, and not
as Sanjiv Kumar Agarwal, Vellanki Frameworks. The fact that the
name of the importer is shown as Sanjiv Kumar Agarwal, Vellanki
Frameworks, and the Bill of Entry makes no reference to Radha
Industries, goes to show that the goods were imported by the
petitioner on a high sea sale effected in their favour by Purbanchal
Lumbers Private Limited; it is they who had imported the goods;
and sale of goods by them to Radha Industries could only have
been effected after the goods had been cleared for home
consumption.
(D). CAN AN AGENT FILE A BILL OF ENTRY IN HIS NAME?
The functions and responsibilities of the CHA, as an Agent,
are limited to arranging release of the goods, and once the goods
are cleared he has no further responsibilities to discharge. Section
147 relates to the liability of principal and agent and, under sub-
section (1) thereof, where the Customs Act requires anything to be
done by the owner or importer of any goods, it may be done on his
behalf by his agent. Section 147(2) stipulates that any such thing
done by an agent of the owner or importer of any goods shall,
unless the contrary is proved, be deemed to have been done with
the knowledge and consent of such owner or importer so that, in
any proceedings under this Act, the owner or importer of the goods
shall also be liable as if the thing had been done by himself. The
reference to the agent under Section 147 of the Customs Act is to
the agent of the Principal i.e. power of attorney holder of the
importer and where the relationship of "master and servant" comes
into play. In such cases the act of an agent is held to be the act of
the Principal. The CHA acts under separate Regulations and his
function, under the licence, is only to present papers for clearance
of imported goods under a Bill of Entry and not to act as an
contemplated under Section 147 of the Act. (Collector of
Customs, Cochin v. Trivandrum Rubber Works Ltd ). The
provisions of Section 147 of the Customs Act are attracted where
anything which the Act requires to be done by an importer or
owner is done by any other person at his instance. The procedure
relating to clearance of the goods, including production of a valid
licence for clearance, are required to be complied with by the
importer. The word "owner" is used, both in Section 2(26) and
Section 147 of the Customs Act, since the owner of the imported
goods is required to perform certain acts under the Customs Act.
Section 63 obligates the owner of the warehoused goods to pay
warehouse rent and warehouse charges. Section 64 empowers the
owner to deal with such goods, and Section 65 enables the owner
to carry out manufacturing process and other operations.
Section 147(3) of the Customs Act provides that, when any
person is expressly or impliedly authorised by the importer to be
his agent in respect of such goods for all or any of the purposes
under the Act, such person shall, without prejudice to the liability
of the owner or importer, be deemed to be the owner or importer.
The proviso to Section 147(3), however, makes it clear that where
any duty is, inter alia, short-levied for a reason other than any
wilful act, negligence or default of the agent, the agent shall not be
liable for payment of that duty, save and except where, in the
opinion of the Assistant Collector of Customs, the duty cannot be
recovered from the owner or the importer. Section 147(3) read with
the proviso specifies circumstances in which the clearing agent can
be treated as the owner/importer of the goods and made liable for
the payment of duty. (Trivandrum Rubber Works Ltd48). On a
conjoint reading of Sections 12, 28 and 147 of the Customs Act, it
is clear that, in cases in which duty had not been levied, the owner
should be called upon to pay customs duty. It is only if the
amount cannot be recovered from the owner, can it be collected
from the agent. (Pilmen Agents (P) Ltd. v. Collector of Customs,
Madras ).
If, as contended by him, the petitioner was merely acting as
an agent, the bill of entry would have reflected the name of the
importer as M/s.Radha Industries and the petitioner as their agent
instead of M/s. Srinivasa Traders as the clearing house agent; and
the petitioners name would have been recorded in the bill of entry,
along with Purbanchal Lumbers Private Limited. The very fact that
the name of the importer is shown as Sanjiv Kumar Agarwal,
Vellanki Frameworks, and the Bill of Entry makes no reference to
Radha Industries, shows that the goods were imported by the
petitioner, on the goods being sold to them on high seas by
Purbanchal Lumbers Private Limited. Sale of goods by them to
Radha Industries could only have been effected after the goods had
been cleared for home consumption.
(E). CUSTOMS DUTY CAN BE ASSESSED ONLY ON THE
IMPORTER OF THE GOODS AND NOT HIS AGENT:
Duties, according to the practice of most commercial
nations, are charged only on those articles which are intended for
sale or consumption in the country. Thus goods imported and re-
exported in the same vessel, but not for sale, are exempt from the
payment of duties. Sale is the object of importation, and is an
essential ingredient of that intercourse, of which importation
constitutes a part. It is as essential an ingredient as importation
itself. Import is not merely the bringing into, but comprises
something more i.e. incorporating and mixing up of the goods
imported with the mass of the property in the local area.
(Brown35; The Central India Spinning and Weaving and
Manufacturing Co., Ltd.33). Though customs duties are levied
with reference to goods, the taxable event is the import of goods
within the customs barriers. The imposition of an import duty, by
and large, results in a condition which must be fulfilled before the
goods can be brought inside the customs barriers i.e. before they
form part of the mass of goods within the country. (Shri Ramlinga
Mills Pvt. Ltd.30; In re : Sea Customs Act (1878) ).
Section 12(1) of the Customs Act stipulates that customs
duty shall be levied, at such rates as may be specified under the
Customs Tariff Act, 1975 or any other law for the time being in
force, on the goods imported into India. Under Section 14(1), the
value of the imported goods shall be the transaction value of such
goods ie the price actually paid or payable for the goods when sold
for import to India for delivery at the time and place of importation
where the buyer and seller of the goods are not related and price is
the sole consideration for the sale subject to such other conditions
as may be specified in the rules made in this behalf. Under the
first proviso thereto such transaction value, in the case of imported
goods, shall include, in addition to the price as aforesaid, any
amount paid or payable for costs and services, including
commission and brokerage, engineering, design work, royalties and
licence fees, cost of transportation to the place of importation,
insurance, loading, unloading and handling charges to the extent,
and in the manner, specified in the Rules made in this behalf.
The value of the imported goods, for the purpose of levy of Customs
Duty, is required to be determined in terms of Section 14 of the
Customs Act read with the Customs Valuation (Determination of
Prices of Imported Goods) Rules, 2007. Section 15(1) stipulates
that the rate of duty and tariff valuation, if any applicable to any
imported goods, shall be the rate and valuation in force (a) in the
case of goods entered for home consumption under Section 46, on
the date on which a bill of entry in respect of such goods is
presented under that section; (b) in the case of goods cleared from
a warehouse under Section 68, on the date on which a bill of entry
for home consumption in respect of such goods is presented under
that section; [c] in the case of any other goods, on the date of
payment of duty. Section 17 relates to assessment of duty and,
under sub-section (1) thereof, after an importer has entered any
imported goods under Section 46, the goods may, without undue
delay, be examined and tested by the proper officer. Section 17(2)
stipulates that, after such examination and testing, the duty, if
any, leviable on such goods shall be assessed.
If, as contended by the petitioner, they had effected sales on
high seas it is the person, who purchased the goods from them,
who would the last purchaser before the goods were cleared for
home consumption; and it is on the value of such sale, and on
such a purchaser who imported the goods, would customs duty
have been levied under the Customs Act. While the goods can also
be cleared by a customs house agent, or by the agent of the
principal, it is only the importer who can be assessed to customs
duty. No sooner than the goods become imported goods, they
become chargeable to duty. Upto the moment they are cleared for
home consumption, they constitute imported goods for the purpose
of the Customs Act. As soon as they are cleared for home
consumption, they cease to be imported goods. (Apar Pvt Ltd. v.
Union of India ; Associated Forest Products (P) Ltd. v. Asst.
Collector of Customs ; S.K. Gupta v. K.P. Jain ). Transfer of
title to the goods on high seas would make the person, who
purchased the goods on high seas, the importer of the goods and it
is he who would be liable to be assessed to customs duty. As the
Bill of Entry records the petitioners name as the importer, and as
it is not in dispute that it was he who was assessed to customs
duty, and not Radha, it is evident that the sale of goods by the
petitioner to Radha is not a high seas sale. Such a sale could only
have been effected after the petitioner was assessed to customs
duty, and he had cleared the goods for home consumption.
(F). DO THE OBSERVATIONS IN MINERALS AND METAL TRADING
CORPORATION, THAT THE NAME IN THE BILL OF ENTRY IS
IRRELEVANT, CONSTITUTE A BINDING PRECEDENT?
Sri S.Ravi, Learned Senior Counsel appearing on behalf of
the petitioner, would submit that, as held in Minerals & Metals
Trading Corporation of India Ltd., v. State of Andhra
Pradesh , the circumstance as to who is filing the bill of entry is
not a material circumstance; and the name on the bill of entry is
irrelevant because the name of the importer alone will be recorded
in it, even if the transfer of title deeds is effected before filing of the
bill of entry and assessment of duty under Section 28 of the
Customs Act.
In Minerals and Metals Trading Corporation of India
Ltd.54, the assessee claimed exemption on a part of the turnover as
sales in the course of import under Section 5(2) of the CST Act,
contending that it had imported goods from foreign parties and, as
it had transferred the bills of lading in favour of the local buyers
before the customs clearance of goods was effected, they were sales
in the course of import under the second limb of Section 5 (2) read
with Section 2 (ab) of the CST Act. The Commercial Tax Officer
disallowed the exemption holding that the crucial date, for the
purpose of determining exemption, is the date of arrival of the
vessel; and no exemption could be claimed as the original
statement of facts issued by the Master of the ship was not filed.
The petitioner had filed the certificates issued by the customs
authorities indicating the time of customs clearance in respect of
most of the shipments. The Commercial Tax Officer disallowed the
exemption on some shipments on the ground that the time was not
recorded on the copies, of the letters from the customs,
acknowledging the bill of lading. In appeal, the Appellate Deputy
Commissioner took the date of "arrival of the vessel at the port" as
relevant, and disallowed the exemption on the ground that the bill
of lading had been transferred subsequent to the date of arrival of
the vessel at the port, ignoring the date of effecting the customs
clearance of the goods. On further appeal, the Tribunal held that it
was enough if the goods had crossed the outer limit of the customs
clearance, and it was not necessary that it had to cross the inner
limit also. Aggrieved thereby the petitioner filed T.R.Cs before the
High Court contending that the goods were transferred by
transferring the bills of lading in favour of the respective
purchasers; and, since the transfer was effected before clearance of
the goods, the provisions of the APGST Act were not applicable, by
virtue of Section 38 of the Act, as it was a sale occasioned in the
course of import of the goods into the territory of India, by transfer
of documents of title before the goods had crossed the customs
frontiers of India. On the other hand the case of the Revenue was
that, since the transfer was effected after the goods had crossed
the limits of the area of the customs authorities in which the
imported goods were ordinarily kept before clearance by the
customs authorities, the transaction fell outside Section 5(2) read
with Section 2(ab) of the CST Act. It is in this context that the
Division Bench held:-
..A reading of Section 5 (2) makes it clear that if the sale is effected by a
transfer of documents of the goods before the goods have crossed the customs
frontiers of India then a sale or purchase of goods is deemed to have taken
place
in the course of import of the goods into the Indian territory. Crossing the
customs frontiers is defined under Section 2(ab) according to which crossing the
limits of the area of customs station where goods are ordinarily kept before
clearance by the customs authorities amounts to crossing the customs '
frontiers. Under the explanation, the customs station and customs authorities
have the same meaning as in the Customs Act. Customs station is defined
under the Customs Act as any customs port, customs airport, or land customs
station. Customs port means any port appointed under Section 7(a) and
includes a place appointed under clause (aa) of that section to be an inland
container report. Customs airport means any airport appointed under clause (a)
of Section 7. Land customs station means any place appointed under. Section
7(b), A reading of Section 2(ab) makes it clear that if the goods crosses the
area
of the customs station viz., the customs port which is notified under Section 7
of
the Act, where the goods are kept before clearance and if the transfer is
effected
by transfer of documents of title then it amounts to sale in the course of
import.
In other words if the goods are kept in the port before clearance, crossing the
limits of that port amounts to sale in the course of import.
..We have already referred to Section 5(2) read with Section 2(ab). The
goods will cross the limit of the area of the customs station only on
clearance by the customs authorities. Clearance by the customs authorities
will be after filing the bill of entry and after the assessment of duty under
Section 38 of the Act. Before the assessment of the duty the goods kept in
the customs port cannot cross the limits of the customs port. Therefore
irrespective of the fact whether duty is paid or not, when once the bill of
entry is filed and the imported duty is assessed, then only the goods can
cross the limits of the customs port, therefore, any transfer of documents
of title before the clearance of the goods by the customs authorities on
making the assessment of goods would amount to a sale in the course of
import, as after the assessment is made and on filing of the bill of entry
the goods get mingled with the general mass of goods and merchandize of
the country. The goods get the eligibility to be declared as local goods after
clearance, even though they are not physically removed from the harbour
premises. They attain the character of local goods and cease to be foreign
goods. Therefore, the relevant point of time for determining as to whether
the sale of goods is in the course of import by a transfer of title deeds is
the transfer by title deeds before filing the bill of entry and the assessment
of duty irrespective of the fact whether the goods are physically cleared
from the harbour or not and whether duty is paid or not. As pointed out in
the earlier paras after the filing of the bill of entry the assessment of the
duty the import stream dries up and ceases to flow after the customs
department levies the duty declaring the eligibility of the goods to be
cleared and mingles with the general mass of goods and merchandise in the
country. Once the duty is levied the import is at an end and the national
customs barrier is supposed to have been crossed. The reason being it is
difficult to ascertain the point of time or the place at which the goods have
entered the limits of the customs port. Therefore, the assessing authorities
under the APGST Act docs not get jurisdiction to assess the goods if the
transfer of title deeds is effected before the clearance of goods by filing the
bill of entry under the Customs Act and after making the assessment of the
import duty payable under Section 28 of the Customs Act, 1962
(emphasis supplied)
Having so held, the Division Bench remanded the T.R.Cs. to
the assessing authority for the purpose of determining as to when
the transfer of goods by title deeds was effected, whether it was
before filing of the bill of entry and assessing the duty or after filing
the bill of entry and assessment of duty under the Customs Act.
Thereafter, the Division Bench held as under:-
We also point out that the name on the bill of entry is irrelevant
because the name of the importer alone will be recorded in it even if the
transfer by title deeds is effected before filing the bill of entry and
assessment of duty under Section 28. We have to make this clear because
the taxing authorities tend to raise such doubts though the amendment
was specifically made to have a clear cut off time to determine when the
import ends. Therefore, let it be declared that if the transfer of title deeds
is effected before filing the bill of entry and making the assessment then
the sale is deemed to have been effected in the course of import, otherwise
not. In the light of the above, the assessing authorities are directed to hold
an enquiry and decide in each case, whether the transfer is before filing
the bill of entry and making assessment of duty or thereafter. The TRCs are
accordingly disposed of. (emphasis supplied)
The quotable in law is avoided and ignored if it is rendered
in ignoratium of a statute or other binding authority. (Young v.
Bristol Aeroplane Co. Ltd ). A decision passes sub-silentio,
when the particular point of law involved in the decision is not
perceived by the court or present to its mind. (Salmond on
Jurisprudence 12th Edn., p. 153). A decision rendered without any
argument, without reference to the crucial words of the rule and
without any citation of the authority is not a binding precedent.
(Lancaster Motor Company (London) Ltd. v. Bremith Ltd ). A
decision, which is neither founded on reasons nor it proceeds on a
consideration of an issue, cannot be deemed to be a law declared
to have a binding effect. That which escapes in the judgment
without any occasion is not the ratio decidendi. A decision is
binding not because of its conclusions but in regard to its ratio,
and the principles laid down therein. Any declaration or
conclusion arrived without application of mind or preceded without
any reason cannot be deemed to be the declaration of law or
authority of a general nature binding as a precedent. (Jaisri Sahu
v. Rajdewan Dubey ; Municipal Corporation of Delhi v.
Gurnam Kaur ; B. Shama Rao v. Union Territory of
Pondicherry ; State of U.P. v. Synthetics and Chemicals
Ltd. ). Any declaration or conclusion arrived at without being
preceded by any reason, cannot be deemed to be the declaration of
law or authority of a general nature binding as a precedent.
(Synthetics and Chemicals Ltd.,60; B. Shama Rao59). A mere
direction of the Court without considering the legal position is not a
precedent. (Vishnu Dutt Sharma v. Manju Sharma ). The view, if
any, expressed without analysing the statutory provision cannot
be treated as a binding precedent. (N. Bhargavan Pillai v. State of
Kerala ).
Passing observations in a judgment, without any argument
and without reason, do not form part of the ratio; they cannot be
treated as having the weight of authority or as constituting a
binding precedent. Mere casual expressions carry no weight at all.
Not every passing expression of a Judge, however eminent, can be
treated as an ex-cathedra statement having the weight of authority
(Gurnam Kaur58; Bengal Club Ltd. v. Susanta Kumar
Chowdhury ). A decision is only an authority for what it actually
decides. (Union of India v. Dhanwanti Devi ; State of Orissa v.
Mohd. Illiyas ; ICICI Bank v. Municipal Corpn. of Greater
Bombay ; State of Orissa v. Sudhansu Sekhar Misra ; Quinn
v. Leathem ). Observations, on matters not in issue in the case,
are not meant to be and ought not to be regarded as laying down
the law. (K. Veeraswami v. Union of India ). The view, if any,
expressed without analysing the statutory provision cannot be
treated as a binding precedent. (N. Bhargavan Pillai62). A decision
not expressed and accompanied by reasons, and not preceded by a
conscious consideration of the issue, cannot be deemed to be a law
declared to have binding effect. (Arnit Das v. State of Bihar ;
M.R. Apparao20; Synthetics and Chemicals Ltd.60; B. Shama
Rao59).
The law declared by the Division Bench, in Minerals and
Metals Trading Corporation of India Ltd.54, is that when the
goods are assessed to duty by the Customs Authorities, after the
bill of entry is filed, the importation is completed even if duty is not
paid, and the goods remain within the customs station; it is only
after the Bill of Entry is filed, and the import duty is assessed, can
the goods cross the limits of the Customs Station; transfer of
documents of title before clearance of goods by the Customs
authorities, but after assessment of goods, would not amount to a
sale in the course of import irrespective of whether duty is paid or
not; on assessment to customs duty, after the Bill of Entry is filed,
the goods get mingled with the general mass of goods and
merchandise in the country; and physical movement of goods out
of the customs station, and the time at which the duty is paid,
would not be relevant.
The questions, whether the name on the bill of entry is
relevant or not, and whether or not the name of the importer alone
will be recorded in the Bill of Entry even if transfer by title deeds is
effected before filing the bill of entry and assessment of duty under
Section 28 of the Customs Act, did not arise for consideration in
Minerals and Metals Trading Corporation54. The observations of
the Division bench in this regard are not preceded by an analysis
of the relevant provisions of the Customs Act nor is it supported by
any reason. These observations are, therefore, not a declaration of
law binding on a co-ordinate bench. The assessing authority is,
therefore, justified in holding that sale of goods by the petitioner to
Radha Industries is not a sale in the course of import, but an
inter-state sale liable to tax under the CST Act.
IV. DID THE SALE IN FAVOUR OF RADHA INDUSTRIES,
LUCKNOW OCCASION MOVEMENT OF GOODS INTO THE
COUNTRY?
Sri S. Ravi, Learned Senior Counsel appearing on behalf of
the petitioner, would submit that the entire import of the goods
was occasioned by the ultimate sale in favour of Radha Industries
by the Petitioner; although the documents executed referred to the
sale as a High Sea Sale, in as much as the very sale itself
occasioned the movement of goods across the customs barrier, the
sale is a sale in the course of import; and though the case was not
presented in this light before the Assessing Officer, it is a pure
question of law and can be considered even now.
On the other hand Sri P. Balaji Varma, Learned Special
Standing Counsel for Commercial Taxes, would submit that the
petitioners contentions in the writ affidavit are inconsistent,
contradictory and contrary to law; the contentions urged in the
written submissions show that the petitioner now claims that there
is no high sea sale to M/s. Radha Industries; the said contentions
are inconsistent with the averments in the writ petition; Sale and
no-sale being opposite to each other and the petitioner, being the
master of his transaction, is not entitled to take opposite stands;
these contentions are an afterthought made only for the purpose of
evading tax; this contention is contrary to their other contentions,
and the material on record; the writ petition is liable to be
dismissed on this ground alone; the petitioners contention that the
import is as a consequence of the master agreement, the import
was occasioned due to the purchase by M/s. Radha Industries,
and it is a case of import under Section 5(2) is not tenable; the law
requires the last buyer/last importer to file the Bill of Entry; the
Bill of Entry requires the names of all the parties to be mentioned
therein i.e, the export seller, the original importer, the high sea
buyer(s) if any, and the last buyer/importer; and the
circumstances and facts pleaded, both before the Assessing
Authority and before this Court, do not make out a case of direct
import by M/s. Radha Industries.
Under Section 5(2) of the CST Act, the sale or purchase of
goods shall be deemed to take place in the course of import of the
goods into the territory of India only if the sale or purchase either
occasions such import or is effected by a transfer of documents of
the title to the goods before the goods have crossed the customs
frontiers of India. Section 5(2) has two limbs, the first of which is
attracted if the sale or purchase occasions the import, and the
second is applicable when the sale or purchase is effected by a
transfer of documents of title to the goods before the goods have
crossed the customs frontiers of India.
The petitioners case before the assessing authority was that
the documents of title to the goods were transferred on high seas
i.e., during the movement of goods from the country of export to
India. It is for the first time before this Court, in proceedings
under Article 226 of the Constitution of India, has this plea, of the
sale of goods to M/s. Radha Industries having occasioned the
import of goods, been taken placing reliance on certain clauses of
the agreements. This Court would not, in proceedings under
Article 226 of the Constitution of India, either re-appreciate the
evidence on record or don the robes of the assessing authority to
examine disputed questions of fact or interpret the clauses of the
agreements. As this contention is not a pure question of law and,
at best, is a mixed question of facts and law, this Court would be
loathe to undertake such an exercise. Even otherwise, the
submission that the sale to Radha Industries occasioned the
import of goods is belied by the fact that it is the name of the
petitioner which is reflected in the Bill of Entry as the importer of
the goods, and not Radha Industries. The submission of Sri S.
Ravi, Learned Senior Counsel, that the sale of goods to Radha
Industries had occasioned the import necessitates rejection.
V. IS THE PROCEDURE PRESCRIBED FOR DUTY FREE SHOPS
APPLICABLE TO THE PRESENT CASE?
While placing reliance on the Judgments of the Andhra
Pradesh and Madras High Courts in Minerals and Metals Trading
Corporation of India Ltd.54 and State Trading Corporation of
India Ltd.29, Sri S. Ravi, Learned Senior Counsel would submit
that there is a tacit approval, of the principles ennunciated therein,
in the judgment of the Supreme Court in Hotel Ashoka (Indian
Tour. Dev. Cor.Ltd). v. Assistant Commissioner of Commercial
Taxes . On the other hand Sri P. Balaji Varma, Learned Special
Standing Counsel for Commercial Taxes, would submit that the
facts pleaded in the instant case do not make out a case for
applying the procedure adopted, or the law applicable, to Duty
Free Shops; the case of the petitioner is that they had sold the
goods even prior to filing of the Bill of Entry; even in the case of
Duty Free Shops, the goods stored therat are treated as goods
warehoused for a particular period; upon expiry of the time, the
unsold goods are required to be taken out for home consumption
by filing a Bill of Entry Ex-bond/for home consumption under
Section 68 of the Customs Act; in the event of a change in
ownership/name of importer, an amended Bill of Entry for
warehousing, and a Bill of Entry Ex-bond is filed; and such is not
the case on hand.
No tax, on the sale or purchase of goods, can be imposed by
any State when the transaction of sale or purchase takes place in
the course of import of the goods into the territory of India. If any
transaction of sale or purchase takes place when the goods are
being imported into India, no State can impose any tax thereon.
Under Section 5 of the CST Act, a sale or purchase of goods shall
be deemed to take place in the course of import of the goods into
the territory of India only if the sale or purchase takes place before
the goods have crossed its customs frontiers. In view of Section
2(11) of the Customs Act and Article 286 of the Constitution, it
cannot be said that the goods are imported into the territory of
India till the goods, or the documents of title to the goods, are
brought into India. Where goods have not been brought into the
customs frontiers of India, before the transaction of sales had
taken place, the transactions must be held to have taken place
beyond or outside the custom frontiers of India. The goods are
cleared from customs, and are brought into the country after
crossing the customs frontiers. Goods lying in bonded warehouses
are deemed to have been kept outside the customs frontiers of the
country. As duty free shops, situated at International Airports, are
beyond the customs frontiers of India, the goods sold thereat must
be said to have been sold before the goods have crossed the
customs frontiers of India. Transfer of documents of title to the
goods is one of the methods whereby delivery of the goods is
effected. Delivery may be physical also. Sales effected by physical
delivery of the goods, at the duty free shops, are not taxable under
the CST Act. (Hotel Ashoka (Indian Tour. Dev. Cor. Ltd).71).
Duty free shops are, in law, taken as being located beyond
the customs frontiers and, consequently, the sale of goods at the
duty free shops is in the course of import. Reliance placed by the
petitioner on Hotel Ashoka (Indian Tour. Dev. Cor. Ltd)71, to
contend that the goods sold to Radha Industries is in the course of
import, is therefore of no avail.
VI. IS THE PETITIONER ENTITLED TO BE GRANTED TIME TO
SUBMIT C FORMS:
Sri S. Ravi, Learned Senior Counsel, would submit that,
alternatively and without prejudice, if the subject sales are
considered as inter-state sales, the petitioner may then be provided
an opportunity to submit C Forms from the buyers within a time
frame; and the petitioner had no occasion to produce C Forms as it
was claiming exemption all along. Learned Senior Counsel would
rely on Sahney Steel & Press Works Ltd. v. Commercial Tax
Officer in this regard. On the other hand Sri P. Balaji Varma,
Learned Special Standing Counsel, would submit that the
petitioners case has always been that it is a High Sea Sale; they
had never pleaded any alternative case either before the authorities
or before this Court; there is no pleading or prayer for such a relief;
the assessment order was passed in the year 2010, the writ
petition was numbered in the year 2013, and interim orders were
obtained; now, at the stage of final hearing that too after
completion of oral arguments and submission of written
arguments by both sides, the petitioner cannot plead an alternative
case; the effect of granting such a relief would be (1) a fresh order
would have to be passed thereby granting further time to make
payment of the determined amount; (2) a fresh order on a new
plea, that too at this stage, would save the interest burden on
delayed payment on the dealer, and loss of interest to the Revenue;
(3) a fresh order, on a new plea at this stage, would amount to
granting a benefit to the defaulter at the cost of the Revenue; (4)
once the matter is remanded for furnishing C Forms, even if the
petitioner fails to produce the C-Forms, he would be saved from
payment of interest liability from 2010 (the date of the assessment
order), and they would also have the benefit of challenging the
orders once again by filing a first appeal, a second appeal and so
on.
In Sahney Steel and Press Works Ltd.72, the petitioners
challenged the findings of the Commercial Tax Officer that the
transactions in question constituted inter-State sales. They
contended that, when the registered office of the Company at
Hyderabad despatched the manufactured goods to its branch
office, it was merely a transfer of stock from the registered office to
the branch office; thereafter, the movement of the goods started
from the branch office to the buyer; the registered office and the
branch office were separately registered as dealers under the Sales
Tax law; the transactions effected by the branch office should not
be identified with the transactions effected by the registered office;
and the movement of the goods from Hyderabad to the branch
office was only for the purpose of enabling the sale by the branch
office and was not in the course of fulfillment of the contract of
sale. While expressing their inability to agree, the Supreme Court
held:-
.. Even if, as in the present case, the buyer places an order with the
branch office and the branch office communicates the terms and specifications
of the orders to the registered office and the branch office itself is concerned
with
the sales despatching, billing and receiving of the sale price, the conclusion
must be that the order placed by the buyer is an order placed with the
Company, and for the purpose of fulfilling that order the manufactured goods
commence their journey from the registered office within the State of Andhra
Pradesh to the branch office outside the State for delivery of the goods to the
buyer. We must not forget that both the registered office and the branch office
are offices of the same Company, and what in effect does take place is that the
Company from its registered office in Hyderabad takes the goods to its branch
office outside the State and arranges to deliver them to the buyer. The
registered
office and the branch office do not possess separate juridical personalities.
The
question really is whether the movement of the goods from the registered office
at Hyderabad is occasioned by the order placed by the buyer or is an incident of
the contract. If it is so, as it appears no doubt to us, its movement from the
very
beginning from Hyderabad all the way until delivery is received by the buyer is
an inter-State movement..
The manufacture of the goods at the Hyderabad factory and
their movement thereafter from Hyderabad to the branch office outside the
State was an incident of the contract entered into with the buyer, for it
was intended that the same goods should be delivered by the branch office
to the buyer. There was no break in the movement of the goods. The
branch office merely acted as a conduit through which the goods passed on
their way to the buyer. It would have been a different matter if the
particular goods had been despatched by the registered office at Hyderabad
to the branch office outside the State for sale in the open market and
without reference to any order placed by the buyer. In such a case if the
goods are purchased from the branch office, it is not a sale under which
the goods commenced their movement from Hyderabad. It is a sale where
the goods moved merely from the branch office to the buyer. The
movement of the goods from the registered office at Hyderabad to the
branch office outside the State cannot be regarded as an incident of the
sale made to the buyer. (emphasis supplied)
Having opined that the disputed transactions were inter-
State sales, the Supreme Court held that it was only appropriate
that an opportunity should be given to the appellant-company to
collect C Forms from the buyers for the purpose of obtaining relief
under Section 8(1) read with Section 8(4) of the CST Act, as the
question whether the transactions could be described as inter-
State sales was in doubt all along, and it was only now that the
doubt could be said to have been finally resolved. The Commercial
Tax Officer was directed to afford a reasonable opportunity to the
appellant-company, to collect C Forms and furnish them, before
making an assessment in respect of such transactions. In the
present case also the petitioner has, all through, been contending
that sale of goods to Radha Industries is a sale in the course of
import under Section 5(2) of the CST Act and is, therefore, exempt
from tax. The Assessing Authority has held for the first time, by
way of impugned assessment orders, that it is an inter-state sale
liable to tax under Section 3(a) of the CST Act.
Rule 12(7) of the Central Sales Tax (Registration and
Turnover) Rules, 1957 stipulates that the declaration in Form C
shall be furnished to the prescribed authority within three months
after the end of the period to which the declaration or the
certificate relates. Under the proviso thereto, if the prescribed
authority is satisfied that the person concerned was prevented by
sufficient cause, from furnishing such declaration or certificate
within the aforesaid time, he is empowered to allow such
declaration or certificate to be furnished within such prescribed
time as he may permit.
In Rajeswari Stone Polishers v. State of Andhra Pradesh
a Division Bench of this Court, while interpreting Rule 12(7) of the
Central Sales Tax (R&T) Rules, held that the proviso to sub-rule (7)
did not prescribe any time within which a dealer was required to
file C forms; this meant that, any time after making the
assessment, a dealer could file the forms; as long as he was able to
satisfy, with regards the sufficient cause contemplated by the
proviso, the authority was required to receive those forms; even the
appellate authority had the power to receive C forms on proof of
sufficient cause, as contemplated by the proviso to Rule 12(7),
being shown; if the appellate authority felt that the reasons shown
by the appellant was sufficient, as to require no further inquiry, he
could himself condone the delay and receive the C forms; but if he
thought that the question of sufficient cause called for a further
inquiry or investigation into facts, which could not be conveniently
done, he could remit the matter to the assessing authority to
determine the said issue.
The judgment of the Division Bench in Rajeswari Stone
Polishers73 was referred with approval by the Supreme Court in
State of Andhra Pradesh v. M/s.Hyderabad Asbestos Cement
Production Limited wherein it was held that the power, under
the proviso to Rule 12(7) ,could be exercised only when sufficient
cause was shown by the dealer, for not filing them upto the time of
assessment, before the first assessing authority; if, in a given case,
a dealer had obtained further time from the first assessing
authority, and yet failed to produce them before him, the appellate
authority should adopt a stiffer standard in judging the sufficient
cause shown by the dealer for not producing them earlier; receipt
of those forms in appeal cannot be as a matter of course; it should
be allowed only where sufficient cause is established by the dealer
for not producing them before the first assessing authority as
contemplated by Rule 12(7); the requirement of Rule 12(7) cannot
be excluded from consideration, by the appellate Court, while
judging the sufficiency of the cause shown; and the Sales Tax
Appellate Tribunal, under the Andhra Pradesh Act, was also
governed by Regulation 11(1) which was only a reiteration of the
very same power.
In Godrej Agrovet Limited v. Commercial Tax Officer,
Eluru, West Godavari District a Division Bench of this Court,
following its earlier judgment in Rajeswari Stone Polishers73 and
the judgment of the Supreme Court in Hyderabad Asbestos
Cement Production74, held that Rule 12(7) conferred power on the
assessing authority to receive C forms where sufficient cause was
shown by the dealer for not filing them upto the time of
assessment; there is no limitation, as such, provided for receiving
the C forms; they can be received at any time, after the order of
assessment, provided sufficient cause is shown; the making of
assessment itself cannot be postponed at the instance of a dealer,
in order to enable the dealer to produce such C forms, if such
postponement results in the bar of limitation in making the
assessment; if an assessment can be postponed, and such
postponement is not hit by limitation, time can always be extended
by the assessing authority to enable the dealer to produce the C
forms; and, in case such C forms are not produced, it does not
take away the right of the dealer to produce them even after
making of the assessment order, provided sufficient cause is
shown.
As noted hereinabove Rule 12(7) enables the assessing
authority, on sufficient cause being shown, to grant further time
for production of C forms. Such an opportunity can be granted
even after an assessment order is passed, provided sufficient cause
is shown. On production of the prescribed C-Forms, the petitioner
would be entitled to pay concessional rate of tax. As the petitioner
can furnish C-Forms, in terms of the proviso to Rule 12(7) of the
CST (R&T) Rules, even after the assessment order is passed, we see
no reason to deny them an opportunity to produce the C-Forms,
and avail the benefit of concessional rate of tax.
CONCLUSION:
For the reasons aforementioned, the impugned assessment
orders do not necessitate interference, and the challenge thereto by
the petitioner is rejected. The petitioner is, however, granted three
months time from today to produce the prescribed C- Forms.
While the assessing authority has expressed his doubts regarding
the very existence of some of the dealers outside the State, it is not
necessary for us to delve on this aspect any further, as it is only if
such dealers are in existence would the petitioner be able to
procure C-Forms from them, and furnish it to the assessing
authority. While the prescribed concessional rate of tax, payable
by the petitioner on the inter-state sale of goods, shall be paid by
them forthwith, the respondents shall not take coercive steps for
recovery of the balance tax for a period of three months from today.
In case the petitioner produces C-Forms within the aforesaid three
month period, they shall be extended the benefit of concessional
rate of tax to the extent for which C-Forms are produced. It is
made clear that, in case the petitioner fails to submit the C-Forms
within three months from today, it is open to the respondents
thereafter to proceed and recover the balance tax due from them in
accordance with law.
Subject to the above observations, both the Writ Petitions fail
and are, accordingly, dismissed. The miscellaneous petitions
pending, if any, shall also stand automatically dismissed.
However, in the circumstances, without costs.
_______________________________
(RAMESH RANGANATHAN, J)
____________________________________
(M. SATYANARAYANA MURTHY, J)
Date: 18.12.2014.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.