ORDER
S.V. Maruthi, J.
1. These five T.R.Cs are disposed of by a common judgment as the question of law involved is one and the same.
2. The petitioners in all these cases is M/s. M.M.T.C. (India) Ltd., Visakhapatnam which is a Government of India undertaking. For the sake of convenience, we are referring to the facts in T.R.C.No.43 of 1991 as the facts are exactly similar in the other connected cases also T.R.C.No.43of 1991 the assessment year is 1984-85. T.R.C.No. 92 of 1995 the assessment year is 1983-84. T.R-C.No. 112 of 1995 the assessment year is 1982-83. T.R,C.No. 40 of 1995 the assessment year 1987-88. T.R.C.No. 12 of 1995 the assessment year is 1983-84.
3. For the assessment year 1984-85 the assessee claimed exemption on a turnover of Rs. 16,09, 11,777.30 and Rs.17,29,74,326.42 as the sales in the course of import of sulphur and rock phosphate falls under the 2nd limb of Section 5(2) of the CST Act (herein after referred to as the Act). The plea of the petitioner is that it has imported goods from foreign parties and as it has transferred the bills of lading in favour of the local buyers before the customs clearance of goods was effected, they are sales in the course of import under second limb of Section 5(2) read with Section 2(ab) of the Act which defines crossing the customs frontiers of India as 'crossing limits of customs station in which the imported goods or exported goods are ordinarily kept before clearance by customs authorities'. The Commercial Tax Officer disallowed the exemption holding that the crucial date for the purpose of determiningthe exemption is the date of arrival of the vessel and even in the cases where date of arrival of the vessel is subsequent to the date of transfer of documents, he rejected the plea on the ground that the original statement of facts issued by the Master of the ship was not filed. The petitioner filed before the authorities below the certificates issued by the customs authorities indicating the time of customs clearance in respect of most of the shipments. The Commercial Tax Officer has disallowed the exemption on some shipments on the ground that time was not recorded on the copies of the letters from the customs acknowledging the bill of lading. On an appeal the Appellate Deputy Commissioner took the date of 'arrival of the vessel at the port' as relevant. The Appellate Deputy Commissioner disallowed the exemption on the ground that the bill of lading have been tansferred subsequent to the date of arrival of the vessel at the roads ignoring the date of effecting the customs clearance of the goods. On a further appeal the Tribunal held that it is enough if the goods cross the outer limit of the customs clearance and it is not necessary that it has to cross the inner limit also. Aggrieved by the same present T.R.C. is filed.
4. From the facts narrated as above it is clear that the petitioners have imported the goods. According to the petitioner the goods were transferred by transferring the bills of lading in favour of the respective purchasers and that since the transfer was effected before the clearance of the goods, the provisions of the A.P.G.S.T. are not applicable by virtue of Section. 38 of the Act as it is a sale occasioned in the course of the import of goods into the territory of India, by transfer of documents of title before the goods are crossed the customs frontiers of India. On the other hand the case of the Revenue is that since the transfer was effected after the goods are crossed the limits of the area of the customs authorities in which the imported goods and exported goods are ordinarily kept before clearance by the customs authorities, the transaction falls outside Section 5(2) read with Section 2(ab) of the CST.
5. On the facts and circumstances of the case the question that arises for consideration is the interpretation of Section 5(2), read with Section 2(ab) of CST. In order to consider the above question it is necessary to refer to Section 5(2), read with Section 2(ab) of CST and also Section 38 of APGST.
6. Section 5(2) of CST reads as follows:
'Section 5(2) : A sale or purchase of goods shall be deemed to take place in the course of the 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 title to the goods before the goods have crossed the customs frontiers of India.'
Section 2(ab) of CST Act reads as follows :
'Crossing the customs frontiers of India means crossing the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities.'
Section 38 of the APGST reads as follows :
Section 38 Act not to apply to sales or purchases outside the State, in the course of import or export, etc.: Nothing contained in this Act shall be deemed to impose or authorise that imposition of a tax on the sale or purchase of any goods, were such sale or purchase takes place, -
(i) outside the State; or
(ii) in the course of the import of the goods into, or export of the goods out ofthe territory of India; or
(iii) in the course of inter-state trade or commerce.
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 customsfrontiers 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.
7. At this stage, it is necessary to refer to the history of the legislation for incorporating Section 2(ab) of CST. The Madras High Court prior to the introduction of Section 2(ab) was considering the interpretation of the expression under Section 5(2) of CST, which read as follows :
'A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.'
8. The learned Judges took into account the proclamation issued by the President of India under Section 3(A) of the Sea Customs Act declaring that the territorial waters of India extend into the sea to a distance of six nautical miles admeasuring from the appropriate baseline and held 'that the acceptance of the view that the customs frontier is the waterline at the end of six nautical miles from the shore would necessitate the investigation of the exact minutes when the ship crossed into the territorial waters and when the documents of title to goods were actually transferred. We doubt whether such matters can be satisfactorily determined by any Court or Tribunal. Though difficulties in the way of working an Act should not affect the plain meaning of the statutory language, they have a bearing when there is at least a doubt regarding its true meaning. In our opinion, it would be proper to construe the words 'customs frontiers' as 'customs barriers' in the Central Act.'
9. The learned Judges further held keeping in view Wadeyar's case (1960) 11 STC 757) that
'There is hardly any justification for holding that the Supreme Court has taken the view in Wadeyar's case that the customs barrier itself should be deemed to be located at the end of the six nautical miles limit of the President's notification. It would be illogical to assume and we see no basis for it, that though the property in the goods did not pass to the buyer at any point of time before shipment, as the contracts were FOB and there was no special agreement, the Supreme Court yet held that the sales were in the course of export. It is quite manifest that the Supreme Court equated the expression 'frontier' to 'barrier' and therefore held that the sales effected after the crossing of that barrier as being in the course of export'.
Having held that the entry at the end of six nautical miles cannot be deemed to have been occasioned sale in the course of import, the learned Judges held that
'The import stream dries up and ceases to flow after the customs department of the importing State levies the duty and thereby declares the eligibility of the goods to be cleared and mingled with the general mass of goods and merchandise in the country.It is not necessary that the goods should be physically removed from the harbour premises. Once the duty is levied despite the non-payment of the duty and its retention in bonded warehouse, the import is at an end and the notional customs barrier is supposed to have been crossed.'
The learned Judges further taking into account a passage in Empresa Siderurgica, S.A. v. Merced' (337 U:S 154) held that
'It is the entrance of the articles into the export stream that marks the start of the process of exportation. Then there is certainity that the goods are headed for their foreign destination and will not be diverted to domestic use. Nothing less will suffice.'
In other words according to the Madras High Court the relevant consideration for determining whether a sale has occasioned in the course of import is a certainty that the goods are headed for their domestic destination and cannot be diverted back to its foreign destination.
10. However, on an appeal to the Supreme Court in 'State of Madras v. Davar and Co.' (24 STC 483) the view expressed by the Madras High Court was reversed and it was held that
'The expression' customs frontiers oflndia' in Section 5(2) of the Central Act, in our opinion, must be construed in accordance with the notification issued by the Central Government under Section 3-A of the Act, on August 6, 1955, read with the Proclamation of the President of India dated March 22, 1956. So applying the definition of 'customs frontiers' it is clear that, in the instant case, the sales were effected by transfer of documents of title long after the goods had crossed the customs frontiers of India. We have already stated that the ships carrying the goods in question were all in the respective harbours within the State of Madras when the sales were effected by the assessees by transfer of documents of title to the buyers. If so, itfollows that the claim made by the assessees that the sales in question were sales in the course of import has been rightly rejected by the assessing authority. Unfortunately, though various aspects seem to have been pressed before the High Court by the State of Madras, this notification of August 6, 1955, issued by the Government of India, defining the 'customs frontiers' of India, was not brought to the notice of the High Court.
In other words according to the Supreme Court the customs frontiers means six nautical miles notified by the President of India by the proclamation under Section 3-A dated August 6, 1955. It is unfortunate that though the notification dated August, 6, 1955 was considered by the Madras High Court, the Supreme Court observed that the said notification was not placed before the High Court.
11. In order to get over the judgment of the Supreme Court the amendment in Section 2(ab) is made. On the basis of the report submitted by the Law Commission recommending amendment to Section 2 of CST to get over the difficulty to actually ascertain the point of time when a ship crosses the territorial waters of India.
12. 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 asale 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.
13. In the light of the above, the argument of the learned Counsel for the Revenue that the transfer of title deeds should take place before the entry into the port cannot be sustained, as it would amount to retaining the position as laid down by the Supreme Court referred to above, reversing the judgment Madras High Court. Inspite of the subsequent amendment it is pointed out that the effect of the amendment by defining crossing the customs frontiers of India under Section 2(ab)is to get over the difficulty in determining the point of time at which the goods have entered the territorial water as per the judgment of the Hon'ble Supreme Court in Slate of Madras v. Davar and Co. 24 STC 481 (1969). Further if the intention of the legislation is to say that the transfer should be effected before the goods enter the port, then they would have provided Section 2(ab) in the following manner:
'Before entering the goods into the limits of the area of a custom station in which imported goods or export goods are ordinarily kept before clearance by the customs authorities.''
14. In view of the above, the TRCs are remanded to the assessing authority for the purpose of determining as to when the transfer of goods by title deeds is effected, whether it is 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. 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 ofthe 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.