M/S VELLANKI FRAME WORKS versus THE COMMERCIAL TAX OFFICER, VISAKHAPATNAM on 13 January 2021

[2021] 3 S.C.R. 903

M/S VELLANKI FRAME WORKS

v.

THE COMMERCIAL TAX OFFICER, VISAKHAPATNAM

(Civil Appeal Nos. 1322-1323 of 2019)

JANUARY, 13 2021

[A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]

Central Sales Tax Act, 1956: s.5(2) – ‘sale in the course ofimport’ – Essential features – The basic principles for determiningas to when a sale or purchase of goods takes place in the course ofimport or export are contained in s.5 of the CST Act – Under sub-section (2), a sale or purchase of goods shall be deemed to takeplace in the course of the import of the goods into the territory ofIndia only if the sale or purchase either occasions such import or iseffected by a transfer of documents of title to the goods before thegoods have crossed the customs frontiers of India – The phrase‘sale in the course of import’ carries three essential features - (i)that there must be a sale; (ii) that goods must actually be importedinto the territory of India; and (iii) that the sale must be part andparcel of the import – A sale would become part and parcel of importif it either occasions such import or if it occurs by way of a transferof document of title to the goods before the goods cross the customsfrontiers of India.

Customs Act, 1962: s.2(26) – Importer, who is – Sale on HighSeas – Appellant’s case was that there was a quadripartite agreementwhereby the supplier sold the goods in question to the first-buyerand delivered them at the port of shipment – Thereafter, while thegoods were on high seas, first buyer transferred them to the appellantby endorsing the bill of lading in favour of the appellant – Furtherto this and while the goods were yet on high seas, appellantallegedly transferred them to the end-buyer by endorsing the bill oflading in favour of the end-buyer – Appellant also suggested thatsince the end-buyer did not have ‘the requisite infrastructure’ toundertake importation of goods whereas the appellant had therequisite infrastructure for importation, therefore, appellant was toact as an agent of the end-buyer and to clear the goods from customsauthorities – Held: The inclusive definition of “importer” in s.2(26)

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Aof the Customs Act cannot be used to usurp the identity of an importerfrom the person who filed the bill of entry; and the person in whosename the bill of entry is filed, does not cease to be an importer – Inthis case, the name of the appellant was reflected as importer in theImport General Manifest (IGM) of the vessel/s that brought the goodsin question to the port at Visakhapatnam – High Court observedBthat if the alleged second high seas sale had taken place, the IGMwould have reflected the name of the last high seas sale purchaseras the importer and if there was any bonafide omission, the IGMwould have necessitated amendment because only the last purchaserof the goods on high seas could have been the importer/consigneeC– It is but apparent that that while bringing anything into Indiafrom a place outside India is generally regarded as “import” but,when the goods are cleared for home consumption, they are nolonger imported goods for the purpose of the Customs Act –Significantly, in the process of importation, the importer, in relationto any goods, includes any owner or any other person holdingDhimself to be the importer but, only between the time of theirimportation and their clearance for home consumption – In otherwords, the net result of the expanded definition of the expression“importer” is that while any person who imports goods into Indiawould be an importer but, the owner of the goods or a person holdingEhimself to be an importer would also be regarded as an importerduring the period between importation of goods and their clearancefor home consumption – This crucial period would generally bethat period when the goods have been warehoused after importationand are cleared from warehouse by a person other than the personwho actually imported the goods – That being the position, HighFCourt rightly held that this definition of importer cannot be used tousurp the identity of an importer from the person who filed the billof entry – In other words, the person in whose name the bill of entryis filed does not cease to be an importer and, if that person claimsto be not the owner or importer, the onus would be heavy on him toGestablish that someone else is the owner or importer of goods –Further, if the appellant was merely acting as an agent, then bill ofentry would have reflected the name of end-buyer as the importerand the appellant as an agent of the importer; and further to that,the said end-buyer would have been assessed for customs duty – Itwas not so – Thus, when all official documents as also dealings ofH

the appellant clearly establish that the appellant had been theimporter, the consequences are bound to follow – It gets perforcereiterated that when the bills of entry recorded the name of theappellant as importer and the appellant alone was assessed tocustoms duty, the so called second high seas sale agreements nevercame into operation – Central Sales Tax Act, 1956 – s.5(2).

Central Sales Tax Act, 1956: s.5(2) – Claim for exemptionunder – Raising of debit notes by the appellant on the end-buyers –Effect of – Inter State Sales – Appellant had admittedly raised debitnotes on the end-buyers but only after having cleared the goods byfiling the bill of entry for home consumption – Once the suggestionabout the second high seas sales is not accepted and it is foundthat the appellant had been the importer of goods and had clearedthem for home consumption, the natural consequence of raising ofsuch debit notes on the end-buyers situated in different States andmovement of goods to such end-buyers would be to take thesetransactions in the category of inter-State sales in terms of s.3(a) ofthe CST Act – Appellant was not entitled to the exemption of s.5(2)of the CST Act and rightly been held liable for tax over inter-Statesales – After the appellant got the goods released by filing bill ofentry for home consumption, indisputably, the goods were ultimatelyreceived by various end-buyers in different States and appellantraised debit notes from the State of Andhra Pradesh – These factswere sufficient to establish that the movement of goods inside thecountry from one State to another had been on account of the saleby appellant to the end-buyers; and such sales took place onlyafter the appellant obtained the goods from the bonded warehousefor home consumption – High Court was right in observing thatonce the appellant got released the goods after filing the bill ofentry for home consumption, the import stream dried up and thegoods got mixed in the local goods – Any movement of the goodsthereafter was bound to be a sale under s.3(a) of the CST Act; andsuch movement being from the State of Andhra Pradesh to otherState, it had been a matter of inter-State sale – The principle thatactual sale may not necessarily precede the movement of goods, inits true effect, operates rather against the appellant in relation tothe sale to end-buyers after the goods were cleared for homeconsumption – The claimed exemption under s.5(2) of the CST Actwas rightly denied to the appellant and the High Court was justified AB

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Ain dismissing the writ petitions filed by the appellant – No case forinterference is made out.

Central Sales Tax Act, 1956: s.5(2) – Whether any case forrelegating the appellant to the remedy of appeal made out –Appellant, despite being aware of the availability of remedy ofBstatutory appeal, consciously chose to file writ petitions against theassessment orders and consciously contested the entire matter inthe High Court – High Court, even after noticing the framework ofcertiorari jurisdiction, examined the merits of the case thoroughlyand even examined the submission made for the first time in writpetitions that the import of goods was occasioned by the sales inCquestion – Of course, in that regard, the High Court pointed outthat it was not a pure question of law but in any case, suchsubmission was belied by the fact that the name of the appellantwas reflected in the bill of entry as the importer and not that of theend-buyer – There is no error or fault in the approach of HighDCourt in this case – After having consciously invoked the writjurisdiction of the High Court and having contested the matter onmerits, the appellant cannot now be allowed to re-open the matterin appeal – The extraordinary writ jurisdiction cannot be utilisedby a litigant only to take chance and then to seek recourse to theother remedy after failing in its attempt on the basic merits of theEcase before the High Court – A litigation cannot be allowed to beunendingly kept alive at the choice of a litigant – Writ jurisdiction.

Conclusion

Dismissing the appeals, the Court

HELD: 1.1 In exercise of its powers under Clause (2) ofFArticle 286, the Parliament has enacted the Central Sales TaxAct, 1956. In Section 3, thereof, it is laid down that a sale orpurchase of goods shall be deemed to take place in the course ofinter-State trade or commerce if the sale or purchase-(a)occasions the movement of goods from one State to another; or(b) is effected by a transfer of documents of title to the goodsGduring their movement from one State to another. [Para 20.2][943-E-F]

1.2 The basic principles for determining as to when a saleor purchase of goods takes place in the course of import or exportare contained in Section 5 of the CST Act. Under sub-section (2),H

a sale or purchase of goods shall be deemed to take place in thecourse of the import of the goods into the territory of India onlyif the sale or purchase either occasions such import or is effectedby a transfer of documents of title to the goods before the goodshave crossed the customs frontiers of India. [Para 20.3][944-D-F]

Hotel Ashoka (Indian Tourist Development CorporationLtd.). v. Assistant Commissioner of Commercial Taxesand Anr. (2012) 3 SCC 204 : [2012] 1 SCR 808 – heldinapplicable.

Tata Iron and Steel Co. Ltd., Bombay v. S.R. Sarkarand Ors. AIR 1961 SC 65 : [1961] 1 SCR 379; Minerals& Metals Trading Corporation of India Ltd. v. SalesTax Officer and Ors. (1998) 7 SCC 19 : [1998] 2 Suppl.SCR 112 – distinguished.

K. Gopinathan Nair and Ors. v. State of Kerala (1997)10 SCC 1 : [1997] 3 SCR 226 – relied on.

J.V. Gokal & Co. (Private) Ltd. v. Assistant Collector ofSales-Tax (Inspection) and Ors. [1960] 2 SCR 852; Stateof Maharashtra v. Embee Corporation, Bombay (1997)7 SCC 190 : [1997] 3 Suppl. SCR 497 – referred to.

2.1 The appellant has suggested existence of quadripartiteagreement whereby and whereunder, the supplier (party number1) sold the goods in question to the first-buyer (party number 2)and delivered them at the port of shipment. Thereafter, while thegoods were on high seas, party number 2 transferred them to theappellant (invariably party number 3 in these transactions), byendorsing the bill of lading in favour of the appellant. Further tothis and while the goods were yet on high seas, the appellantallegedly transferred them to the end-buyer (party number 4) byendorsing the bill of lading in favour of the end-buyer. The appellanthas also suggested that though the goods were being purchasedby the end-buyer and were to move only after inspection andselection by the end-buyer but the methodology of suchquadripartite agreement was adopted because of the reasons thatthe end-buyer was not having ‘the requisite infrastructure’ toundertake importation of goods whereas the appellant was having A

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Athe requisite infrastructure for importation and the first-buyerwas having the credit facility with the seller. It has, therefore,been suggested that there was always a privity of contract betweenthe seller and the end-buyer; and that the appellant was to act asan agent of the end-buyer and to clear the goods from customsauthorities. The appellant has also suggested that in each of theBtransactions, the process was carried out as envisaged in thequadripartite agreement and in the manner that the first-buyerendorsed the bill of lading in favour of the appellant when thegoods were on high seas; and while the goods continued to be onhigh seas and had not crossed the customs frontiers of India, theCappellant endorsed the bill of lading in favour of the end-buyer.According to these suggestions, the appellant only acted as anagent of the end-buyer while getting the goods cleared from thecustoms port at Visakhapatnam. [Para 26][962-F-H; 963-A-D]

2.2 However, the suggestions by the appellant do not remainDas innocuous and over-simplified as projected, for the reason thatin each of these transactions, when the goods in question reachedthe port at Visakhapatnam, the appellant carried out theproceedings envisaged by the Customs Act and filed a bill of entryfor warehousing and thereafter, filed another bill of entry for homeconsumption (ex-bond); and on the basis of such bills of entry,Ethe appellant was duly assessed for customs duty. Admittedly,after the goods were cleared for home consumption, they movedfrom the State of Andhra Pradesh to different States where therespective end-buyers were situated; and the appellant raiseddebit notes on the end-buyers.In these transactions, the goodsFin question, upon reaching the port of destination, were notcleared by the end-buyers after paying the requisite customsduties.[Para 26.1][963-D-G]

3. Filing of bill of entry for home consumption by theappellant: Implication G

3.1 The High Court has observed that the inclusivedefinition of “importer” in Section 2(26) of the Customs Act cannotbe used to usurp the identity of an importer from the person whofiled the bill of entry; and the person in whose name the bill ofentry is filed, does not cease to be an importer. In this case, the H

name of the appellant was reflected as importer in the ImportGeneral Manifest of the vessel/s that brought the goods inquestion to the port at Visakhapatnam. The High Court hasmeticulously examined the entire process relating to the arrivalof goods as cargo in a vessel; and filing of IGM as also the contentsof the bill of entry and has pointed out that the cargo declarationform, an essential part of IGM, was required to carry, amongstothers, the particulars of bill of lading and the name of consignee/importer. After finding that the name of the appellant was reflectedas importer in IGM, the High Court has observed that if thealleged second high seas sale had taken place, the IGM wouldhave reflected the name of the last high seas sale purchaser asthe importer and if there was any bonafide omission, the IGMwould have necessitated amendment because only the lastpurchaser of the goods on high seas could have been the importer/consignee. The High Court has also observed that there was nomaterial on record to show that either the IGM contained thename of end-buyer as the importer/consignee or that the samewas subsequently amended in terms of Section 30(3) of theCustoms Act. These had been the pivotal reasons for which theHigh Court rejected the suggestion of second high seas sales infavour of the end-buyers and held that the only attempt of theappellant had been to avoid inter-State sales under the CST Act.In the given facts, the High Court specifically recorded thefindings that the sale of goods by appellant to the end-buyers hadnot been high seas sales; and such sales could have been effectedonly after the appellant was assessed to customs duty and hadcleared the goods for home consumption. [Para 27.1][964-D-H;965-A-C]

3.2 It is but apparent that that while bringing anything intoIndia from a place outside India is generally regarded as “import”and the imported goods are those goods which are brought intoIndia from a place outside but, when the goods are cleared forhome consumption, they are no longer imported goods for thepurpose of the Customs Act. Significantly, in the process ofimportation, the importer, in relation to any goods, includes anyowner or any other person holding himself to be the importerbut, only between the time of their importation and their clearancefor home consumption. In other words, the net result of the AB

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Aexpanded definition of the expression “importer” is that whileany person who imports goods into India would be an importerbut, the owner of the goods or a person holding himself to be animporter would also be regarded as an importer during the periodbetween importation of goods and their clearance for homeconsumption. This crucial period would generally be that periodBwhen the goods have been warehoused after importation and arecleared from warehouse by a person other than the person whoactually imported the goods. That being the position, the HighCourt has rightly said that this definition of importer cannot beused to usurp the identity of an importer from the person whoCfiled the bill of entry. In other words, the person in whose namethe bill of entry is filed does not cease to be an importer and, ifthat person claims to be not the owner or importer, the onuswould be heavy on him to establish that someone else is the owneror importer of goods. [Para 30][967-B-C; 968-A-C]

DUnion of India and Anr. v. Sampat Raj Dugar and Anr.(1992) 2 SCC 66 : [1992] 1 SCR 269 – heldinapplicable.

3.3 The definition of “importer” in Section 2(26) of theCustoms Act, even if not directly decisive of the question of title,Ehas its implications on the facts of the present case for the reasonthat the appellant alone filed the bills of entry for warehousing asalso for home consumption. Yet further, the requirements of filingimport manifest, as per Section 30 of the Customs Act, have theirown bearing on the present case. It remains indisputable thatthe name of the appellant was reflected as importer in IGM. If,Fas asserted by the appellant, the goods had been sold on the highseas, the cargo declaration of IGM would have reflected the nameof last high seas purchaser as importer and in other event, theIGM would have necessitated amendment because only the lastpurchaser of the goods on high seas would have been declaredGas consignee/importer in IGM. The fact that the name of Radha(and other end-buyers) was not mentioned in IGM as theimporter/consignee nor the relevant IGM was amended, thesuggestion about second high seas sale in favour of Radha (andother end-buyers) turns out to be only a self-serving suggestionof the appellant, which has no corroboration on the record; ratherH

the official records totally belie the suggestion of the appellant.[Para 32][973-D-G; 974-A]

3.4 The fact of the matter remains that even though theappellant has suggested that the bills of lading were endorsed infavour of Radha (and other end-buyers) when goods were on highseas but this bald assertion is not corroborated by any of theofficial documents which form the part of the process ofimportation, warehousing and clearance of goods. On the contrary,the High Court has pointed out as illustration the details of oneof the bills of entry, which distinctively gave out all the particularsof IGM, the invoice, the value of cargo, etc. and the High Courthas found that in the bill of entry, the name of appellant alone wasshown as the importer who cleared the goods from customs withthe assistance of the Customs House Agent. In the given set offacts, if the goods were at all sold to Radha (and other end-buyers)on high seas, the name of such end-buyer would have appearedas importer and not that of the appellant. The same considerationsoperate against the assertion that the appellant was only actingas an agent of the end-buyers. The High Court has rightly pointedout that the Customs House Agent is an entirely different personwho acts only to present papers for clearance of the importedgoods under a bill of entry. Of course, under Section 147 of theCustoms Act, a person could act on behalf of importer or ownerbut such a person cannot be treated as owner of the goods norcould be made liable for customs duty. If the appellant was merelyacting as an agent, then bill of entry would have reflected thename of end-buyer as the importer and the appellant as an agentof the importer; and further to that, the said end-buyer wouldhave been assessed for customs duty. It were not so. [Paras 32.1,33][974-A-F]

3.5 Though the definition of importer includes owner orany person holding out himself as the importer; and this definitionof importer is not really relevant to the question of title but, thatdoes not mean that a person who holds out himself to be theimporter; and who files the bill of entry for home consumption;and who is assessed for customs duty; and whose suggestionabout transfer of title to a third person is not established by anyreference to any official record, the transfer on high seas may be AB

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Apresumed on mere suggestion about the alleged endorsement ofbill of lading.When all other official documents as also dealings ofthe appellant clearly establish that the appellant had been theimporter, the consequences are bound to follow. It gets perforcereiterated that when the bills of entry recorded the name of theappellant as importer and the appellant alone was assessed toBcustoms duty, the so called second high seas sale agreementsnever came into operation. [Paras 34, 34.1][974-F-H; 975-A-B]

4. Whether sale in question occasioned import of goods:

4. Whether sale in question occasioned import of goods:

The CTO specifically observed that it had not been theCcase of the appellant that the sale in question occasioned theimport of goods into the country. However, an attempt was madebefore the High Court to suggest that the entire import wasoccasioned by ultimate sale in favour of Radha and, therefore,the matter would also be covered in the first part of sub-sectionD(2) of Section 5 of the CST Act. The High Court noticed that sucha plea could not have been raised for the first time in the writpetition for being a mixed question of facts and law. The HighCourt also observed that even such suggestion was belied bythe fact that only the name of the appellant was reflected in thebill of entry as importer and not of Radha. The argument wasEmade that the quadripartite agreement triggered the movementof goods from foreign country to India and not merely from AndhraPradesh to other States; that, in fact, the sales in question hadnot been inter-State sales but these sales had occasioned themovement of goods from outside India into India; and that theFIndian leg of the integrated transaction cannot be segregated soas to be taxed as inter-State sale under the CST Act. Thesesuggestions also remain totally baseless. [Para 35][975-B-F]

5. These had been inter-State sales

5.1 The effect of raising of debit notes by the appellant onGthe end-buyers has its own bearing in the present case.Theappellant had admittedly raised such debit notes on the end-buyersbut only after having cleared the goods by filing the bill of entryfor home consumption. Once the suggestion about the secondhigh seas sales is not accepted and it is found that the appellantH

had been the importer of goods and had cleared them for homeconsumption, the natural consequence of raising of such debitnotes on the end-buyers situated in different States and movementof goods to such end-buyers would be to take these transactionsin the category of inter-State sales in terms of Section 3(a) of theCST Act. The appellant was not entitled to the exemption ofSection 5(2) of the CST Act and has rightly been held liable fortax over inter-State sales. [Para 37][978-G-H; 979-A-B]

5.2 After the appellant got the goods released by filing billof entry for home consumption, indisputably, the goods wereultimately received by Radha at Lucknow in the State of UttarPradesh (and other end-buyers in different States) and appellantraised debit notes from the State of Andhra Pradesh. These factsare sufficient to establish that the movement of goods inside thecountry from one State to another had been on account of thesale by appellant to the end-buyers; and such sales took placeonly after the appellant obtained the goods from the bondedwarehouse for home consumption. [Para 38][979-B-D]

5.3 The High Court was right in observing that once theappellant got released the goods after filing the bill of entry forhome consumption, the import stream dried up and the goodsgot mixed in the local goods. Any movement of the goodsthereafter was bound to be a sale under Section 3(a) of the CSTAct; and such movement being from the State of Andhra Pradeshto other State, it had been a matter of inter-State sale. Theprinciple that actual sale may not necessarily precede themovement of goods, in its true effect, operates rather againstthe appellant in relation to the sale to end-buyers after the goodswere cleared for home consumption. [Para 39][979-D-F]

6. If any case for relegating the appellant to the remedy ofappeal made out The appellant, despite being aware of the availability ofremedy of statutory appeal, consciously chose to file writ petitionsagainst the assessment orders aforesaid and consciously AB

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Acontested the entire matter in the High Court. The High Court,even after noticing the framework of certiorari jurisdiction,examined the merits of the case thoroughly and even examinedthe submission made for the first time in writ petitions that theimport of goods was occasioned by the sales in question. Ofcourse, in that regard, the High Court pointed out that it was notBa pure question of law but in any case, such submission was beliedby the fact that the name of the appellant was reflected in the billof entry as the importer and not that of the end-buyer. There isno error or fault in the approach of High Court in this case. Afterhaving consciously invoked the writ jurisdiction of the High CourtCand having contested the matter on merits, the appellant cannotnow be allowed to re-open the matter in appeal. The extraordinarywrit jurisdiction cannot be utilised by a litigant only to take chanceand then to seek recourse to the other remedy after failing in itsattempt on the basic merits of the case before the High Court. Alitigation cannot be allowed to be unendingly kept alive at theDchoice of a litigant. [Paras 40.1, 40.2, 40.3][979-G-H; 980-A-C;981-C-D]

Star Paper Mills Ltd. v. Union of India and Ors. (1995)4 Suppl. SCC 674 – held inapplicable.

EMinerals and Metals Trading Corporation of India Ltd.v. State of Andhra Pradesh 1999 (106) ELT 23; Stateof Travancore-Cochin and Ors. v. Shanmugha VilasCashewnut Factory, Quilon AIR 1953 SC 333 : [1954]SCR 53 – referred to.

FCase Law Reference

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAXOFFICER, VISAKHAPATNAM

(1995) 4 Suppl. SCC 674held inapplicablePara 16.8A

[1997] 3 SCR 226referred toPara 24

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1322-1323 of 2019.

From the Judgment and Order dated 18.12.2014 of the High Courtof Judicature at Hyderabad for the State of Telangana and the State ofAndhra Pradesh in Writ Petition Nos. 4552 of 2013 and 6258 of 2013.

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Siddharth Bhatnagar, R. Venkataramani, Sr. Advs., Ms. CharanyaLakshmikumaran, Aaditya Bhattacharya, Ms. Apeksha Mehta, Ms. IshitaMathur, Dhruv Surana, Aditya Sidhra, Joydeep Mazumdar, AshishChoudhary, Ms. Shalini Kaul, Rohit Dutta, Ms. Priyata Chakraborty,Ms. Sujatha Bagadhi, Praveen Vignesh, T. Vijaya Bhaskar Reddy, G. N.Reddy, Ms. Urmila Kar Purkayastha, Sandeep, Ms. MadhumitaBhattacharjee, Advs. for the appearing parties.

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The Judgment of the Court was delivered by D

DINESH MAHESHWARI, J.

Preliminary and brief outline

1. These appeals by special leave are directed against the commonjudgment and order dated 18.12.2014 in Writ Petition Nos. 2552 of 2013and 6258 of 2013 whereby, the High Court of Judicature at Hyderabadfor the State of Telangana and the State of Andhra Pradesh[1] upheld theassessment orders dated 20.01.2010 and 18.05.2010 passed by theCommercial Tax Officer, Chinawaltair Circle[2] and held that thetransactionsin question were not the sales in the course of import buthad been inter-State sales, liable to Central Sales Tax; and denied theexemption claimed under Section 5(2) of the Central Sales Tax Act,1956[3 ]while granting time to the appellant to produce the prescribedC-Forms to the assessing authority for availing the benefit of concessionalrate of tax.

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2. We may usefully observe at the outset that, in all, seventransactions of similar nature form the subject matter of these appeals;one relating to the assessment for the year 2005-06 and others relating G

1 Hereinafter referred to as ‘the High Court’

2 Hereinafter referred to as ‘the CTO’.

3 Hereinafter referred to as ‘the CST Act’.

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Ato the assessment for the year 2006-07. The common salient features ofall these transactions had been that they were for supply of timber froma foreign country and were allegedly executed in a similar fashion thus:The supplier (party number 1) sold the goods in question to the firstbuyer (party number 2) and delivered them at the port of shipment.Thereafter, while the goods were in transit on high seas, party number 2Btransferred the goods to the appellant (who was invariably party number3 in these transactions) by endorsing the bill of lading in favour of theappellant. Further to this and while the goods were on high seas, theappellant allegedly transferred them to the end-buyer (party number 4)by endorsing the bill of lading in favour of the end-buyer.

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2.1. However, in each of these transactions, when the goods inquestion reached the port at Visakhapatnam (also known as Vizag), theappellant carried out the proceedings envisaged by the Customs Act,1962[4] and filed a bill of entry for warehousing and thereafter, filed anotherbill of entry for home consumption (ex-bond). Accordingly and on theDbasis of such bills of entry, the appellant was duly assessed for customsduty. The appellant later on raised debit notes on the end-buyers.

3. With reference to the aforementioned transactions and the highseas sale agreements, the case of appellant had been that it had onlyacted as an agent of the end-buyers while filing the bills of entry; and theEsales of the goods in question to the end-buyers, being the sales takingplace in the course of import of goods into the territory of India,wereeligible for exemption from payment of sales tax by virtue of Section5(2) of the CST Act. However, in the assessment orders dated20.01.2010 and 18.05.2010, the CTO denied the benefit of exemption tothe appellant, particularly for the reason that the appellant cleared theFgoods from the customs after filing the bills of entry and later on raiseddebit notes, showing sales to the end-buyers. The CTO held that thegoods in question had crossed the customs frontiers of India when thebills of entry were filed by the appellant and the goods were assessed tocustoms duty and hence, the sales effected by the appellant to the end-Gbuyers could not be said to be high sea sales.

4. The appellant felt aggrieved of the orders so passed by theCTO but, instead of availing the statutory remedy of appeal, chose tochallenge the same by way of writ petitions in the High Court. Thesewrit petitions have been considered and dismissed by the High Court by H4 Hereinafter referred to as ‘the Customs Act’.

way of the impugned judgment and order dated 18.12.2014. The HighCourt rejected the contention that the appellant had only acted as anagent of the respective end-buyers while filing the bills of entry at theport of destination with the findings, inter alia, to the effect that customsduty could be assessed only on the importer of goods; that neither in thebill of entry nor in the Import General Manifest[5] the name of end-buyerwas reflected as the importer; that it was the appellant alone who hadimported the goods; and that the sale by the appellant to the end-buyercould have only been effected after the goods were cleared for homeconsumption. The High Court also rejected the contention that high seassale to end-buyer had occasioned the import of goods into the territoryof India. The appellant has challenged the decision of the High Court byway of these appeals on a variety of grounds as shall be noticed hereafter.

5. As noticed, the transactions involved in the present matters hadbeen of similar nature. For appropriate dealing with the issues involved,we may take note of the facts relating to the assessment order dated20.01.2010 pertaining to the tax period 2005-06 and the assessment orderdated 18.05.2010 pertaining to the tax period 2006-07 in necessary details.

Assessment Order dated 20.01.2010: relevant facts andbackground

6. The appellant M/s. Vellanki Frame Works is said to be a soleproprietary concern, engaged in the business of sale and purchase oflogs, timber and wooden batons; and in the course of its business, theappellant also imports timber from other countries.

7. For the tax period 2005-06, in respect of inter-State sales fallingwithin clause (a) of Section 3 of the CST Act, the appellant claimedpayment of tax at the concessional rate of 4% covering a turnover ofRs. 55,23,233/- and in support thereof, furnished 9-Nos. of C-Forms;and also sought exemption from payment of tax on a turnover ofRs. 1,14,86,342/- on the ground that these sales were effected by transferof title documents before the goods had crossed the customs frontiers ofIndia. Even while accepting the claim of the appellant for concessionalrate of tax on the inter-State sales turnover, the CTO proposed to rejectthe claim for exemption for want of evidence and to treat the transactionsin question as inter-State sales under Section 3(a) of the CST Act. Hence,the CTO issued show-cause notice dated 19.11.2009 to the appellant 5 ‘IGM’ for short.

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Astating, inter alia, that the appellant had claimed exemption on the groundthat the said sales were effected by transfer of the document of titlebefore the goods had crossed customs frontiers of India but had notfurnished any evidence in support thereof.

7.1. In response to the said show-cause notice, the appellantBasserted that the transactions in question were covered by Section 5(2)of the CST Act; and furnished seven documents being the sales invoice,bill of lading, two high seas sale agreements, bill of entry for warehousing,bill of entry for ex-bond and the debit note raised on the end-buyer. TheCTO, however, found that on filing of the said bills of entry, the appellantalone was assessed to customs duty at both the stages. Hence, the CTOCwas of opinion that the import stream dried up on such clearance by thecustoms authorities and the goods got mixed into the stream of localgoods; and any subsequent sale by the appellant would constitute a saleof local goods exigible to tax. In view of this opinion, the CTO proposedto treat the sale by the appellant to the end-buyer as inter-State sale Dfalling under Section 3(a) of the CST Act and issued further show-causenotice dated 02.12.2009 inviting objections, if any, from the appellant.

8. After taking a few adjournments, the appellant filed its letter ofobjection to the show-cause notice dated 02.12.2009 while giving outthe particulars of the transactions in question and the details of its standEwhich could be usefully noticed as follows:

8.1. The case of the appellant had been that M/s. Radha Industries,Lucknow (Uttar Pradesh)[6] was its close business associate; that Radhadesired to purchase the subject goods from M/s. World Best TradingCo. (L.L.C.), Dubai (U.A.E.)[7] but, for not having the requisiteFinfrastructure with the Customs Department, approached the appellantfor help; that though the appellant had the requisite infrastructure facilitiesat Visakhapatnam Customs, but was not having the letter of credit facilitiesfor import; that in the given circumstances, the appellant and Radhaentered into a quadripartite agreement with the seller and Indus TropicsLtd.[8] whereby, it was agreed that Indus would purchase the goods andGduring the course of transit of the goods from the port of shipment,would sell them to the appellant; that the appellant would purchase thesaid goods from Indus as the agent of Radha and transfer the documents 6 The end-buyer, hereinafter also referred to as ‘Radha’.

6 The end-buyer, hereinafter also referred to as ‘Radha’.

7 The seller, hereinafter also referred to as ‘WBT’.

H8 The first buyer, hereinafter also referred to as ‘Indus’.

on high seas in favour of Radha for which, Radha would pay the appellantcommission of 2% plus bank charges.

8.2. It was asserted by the appellant that pursuant to the saidquadripartite agreement, Indus purchased the goods from WBT and theseller sent the consignment from the port of shipment with bill of ladingdated 09.12.2005; that on 10.12.2005, Indus caused transfer of the billof lading on high seas in favour of the appellant; and that on 12.12.2005,another high seas sale agreement was entered into between the appellantand Radha whereby the bill of lading was sold in favour of Radha. Itwas further asserted by the appellant that on and from 12.12.2005, theappellant did not have control over the bill of lading dated 09.12.2005, asthe same had been parted in favour of Radha by then. It was yet furtherasserted that since Radha did not have the customs facility atVisakhapatnam customs port, the appellant had extended its help byfiling the bills of entry in its name for the purpose of customs bonding aswell as customs clearance but, it had only been a friendly transactionarranged by the appellant in favour of Radha and the appellant paid theentire amount to Indus without retaining anything as commission.

8.3. The submissions of the appellant had been that thecircumstance of its filing the bill of entry had no relevance in determiningthe nature of transaction which was evidenced by the relevant documents,including (i) quadripartite Master Agreement dated 21.11.2005; and (ii)High Seas Sale Agreement dated 12.12.2005. According to the appellant,it had transferred the import document on high seas and at any rate, thetitle in the goods always stood vested in Radha, as the owner of thegoods; and that the appellant was merely acting as an agent of Radha atall points of time. The appellant maintained that by reason of transfer ofthe import document, it could not be said that it had sold the goods toRadha; on the contrary, as the appellant had acted as the agent of Radha,at all points of time including at the time of purchase,the transactionsbetween the appellant and Radha cannot be treated as between oneprincipal and another. The appellant further maintained that it had chargedcommission at 2% plus bank charges to Radha and had parted with theentire amount to Indus, which was the proof that it had only acted as aconduit, as a friendly gesture to Radha. It was also submitted that thetransaction was accounted in the books of accounts of the appellant asan agency purchase; that receipt and payment of commission was alsoaccounted in its books of accounts; and the balance sheet for the year AB

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Aalso supported this submission. Put in a nutshell, the appellant assertedthat the transfer of imported goods by it to Radha did not partake thecharacter of sale of goods and that, in any event, the transfer, havingbeen effected over high seas before bonding with the customs authorities,cannot be treated as inter-State sale in the State of Andhra Pradesh.

B9. The contentions of the appellant were examined by the CTO inthe impugned assessment order dated 20.01.2010.For their relevance,the observations and findings in this assessment order could be usefullynoticed as follows:

9.1. The CTO summed up the stand of the appellant that theCdocuments of title to the goods were transferred to Radha on high seasby virtue of the High Seas Sale Agreement dated 12.12.2005; that thetransaction did not attain the character of an inter-State sale; and thatfiling of the bill of entry had no relevance in determining the nature ofthe transaction. The CTO observed that it was not the case of the appellantthat the sale or purchase had occasioned the import falling under theDfirst limb of Section 5(2) of the CST Act and the question whichnecessitated examination was as to whether there was a sale of goodsby the appellant, or it had been a commission transaction as stated bythe appellant. The CTO examined the computer printout of the TradingAccount for the year 2005-2006 where the purchase was shown asEpurchase trading (high seas), and the relevant sale was shown as salestrading (high seas). After referring to a few other details of the ledgeraccount and debit note etc., the CTO noted the contents of High SeasSale Agreement dated 10.12.2005 entered into between Indus and theappellant wherein the appellant was described as ‘the buyer’; the contentsof second High Seas Sale Agreement dated 12.12.2005 wherein theFappellant and Radha were described as ‘the seller’ and ‘the buyer’respectively; and the letter of the appellant dated 25.11.2009 wherein,while submitting certain documents like the sales invoice, the bill of lading,high seas sale agreement, bill of entry for warehousing and the bill ofentry for home consumption, the appellant had stated that exemptionGfrom payment of tax was claimed on the ground that the said sales wereeffected by transfer of documents of title to the goods before the goodshad crossed the customs frontiers of India. The CTO, therefore, observedthat obviously, the intention of the appellant was to sell the goods and, infact, there was a sale; and there was no truth in the statement of appellantthat it had acted as the agent of Radha.The relevant part of the orderHreads as follows:

“1)….In the High Sea sale agreement dated 10.12.2005 enteredinto between M/s Indus Tropics Ld and M/s Vellanki Frame Worksthe assessee was described as ‘the buyer’.

In the 2[nd] High Sea sale agreement dated 12.12.2005 entered intobetween the assessee M/s Vellanki frame Works and M/s RadhaIndustries -the parties were described as ‘the seller’ and ‘thebuyer’ respectively.

Similarly in the letter dated 25.11.2009…..the assessee stated thatthey claimed exemption from payment of tax on the ground thatthe said sales were effected by the transfer of document of titleto the goods before the goods have crossed the customs frontiersof India.

Therefore, it is obvious that there is intention to sell the goods andinfact there was sale. There is no truth in their statement thatthey acted as an agent to M/s Radha Industries.”

9.2. In regard to the main contention of the appellant that documentof title was transferred before the goods had crossed the customs frontierof Indiaand the transaction fell within Section 5(2) of the Act, the CTOexamined the documentary evidence placed on record and found thefacts that: (i) Indus had imported 324 PCS of Myanmar Hardwood GurjanRound Logs from Yangon (Myanmar) to Vizag (India) and the bill oflading No. 01/YGN-VZG dated 09.12.2005 was endorsed by the importerin favour of the appellant; (ii) on the strength of such endorsed documents,Sri Sanjiv Kumar Agarwal (sole proprietor of the appellant) presentedthe bill of entry No. 804116 dated 12.12.2005 for warehousing and customsduty was assessed on the appellant alone on this bill of entry forwarehousing; and (iii) subsequently, the appellant filed the bill of entryfor home consumption No. 804353 dated 28.12.2005 and customs dutywas assessed on the appellant alone on this bill of entry. The CTO alsoreferred to the debit note dated 12.01.2006 raised by the appellant onRadha for a sum of Rs. 1,14,86,342/-and observed that though the intentionof the parties in High Seas Sale Agreement dated 12.12.2005 was toeffect the transfer before the goods crossed the customs frontiers inIndia but, in fact, the said agreement did not come into operation and thesale took place on 12.01.2006, as shown in the debit note.

9.3. The CTO further held that the goods must be treated ashaving crossed the customs frontiers of India when the bill of entry was A

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Amade and the goods were assessed to customs duty; and the sale effectedby the appellant could not be said to be sale in the course of import orhigh seas sale inasmuch as the goods had crossed the customs frontiers.The CTO reiterated that the second high seas sale agreement had notcome into operation; and there was no case for claiming that the transferof documents was effected by virtue of the said agreement itself. WithBreference to the facts of the case and the relevant case-law, the CTOheld that the sale in fact took place only after customs clearance andproceeded to overrule the contentions of the appellant. The CTO, interalia, observed and held as under:

“2)…. In view of the above legal position and the facts of theCcase, it is to be treated that the goods had crossed customs frontiersof India when the bill of entry having been made, the goods wereassessed to customs duty, Hence the sales effected by the asseseescan’t be said to be sales in the course of import or High Sea Salesin as much as the goods had crossed the customs frontiers.

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4) It may not be out of place to mention that as far as thequadripartite agreement to have been entered into on 21.11.05 isconcerned, it has not come into operation while the transactionsistaking place. Had there been any nexus in respect thereof theEnecessity of the subsequent two high sea sale agreements dated10.12.2005 and 12.12.2005 would not have arose in the scheme.

5) It is to be further noted that obviously the 2[nd] high sea saleagreement has not come into operation when the sale is takingplace. Thus there is no case in claiming that the transfer ofFdocuments was effected by virtue of the said agreement itself.As. was held by the Honourable Apex Court in the case of TataIron & Steel Co Ltd, Bombay Vs. S.R. Sarkar and others 11 STC655 – a sale will be reckoned as a sale on completion of such saleand a mere contract of sale is not a sale within the definition ofGsale in Section 2(a). Therefore, it is to be observed that the salehas not taken place in the manner contemplated in the agreement.The sale in fact took place after-customs clearance only. Thus,there is no nexus to the said agreement.”

9.4. In view of the above, the CTO disallowed the exemptionsclaimed by the appellant on the turnover of Rs. 1,14,86,342/- while treatingH

the transactions as inter-State sales falling under Section 3(a) of theCST Act and carried out assessment accordingly, holding the appellantliable to pay balance tax to the tune of Rs. 14,35,793/-.

Assessment Order dated 18.05.2010: relevant facts andbackground

10. Six other transactions of similar nature formed the subjectmatter of the assessment order dated 18.05.2010 relating to the tax period2006-07. The CTO found that the appellant had claimed exemption frompayment of tax, in respect of a turnover of Rs. 4,05,09,427/-, whilecontending that this turnover represented the sales effected by transferof documents of title before the goods had crossed the customs frontiersof India but, had not filed any evidence to show that the said sales wereeffected in such a manner. Accordingly, a show-cause notice dated26.11.2009 was issued. In response thereto, the appellant furnishedcertain documents relating to these six transactions of similar natureinvolving four parties, being the seller, the first buyer, the appellant, andthe end-buyer respectively.

10.1. As regards first transaction, Master Agreement dated01.04.2006 for supply of timber logs was entered into amongst AlkemalSingapore Pte Ltd. (seller), Purbanchal Lumbers Pvt. Ltd. (first buyer),Vellanki Frame Works (appellant) and the said Radha Industries (end-buyer). Purbanchal Lumbers Pvt. Ltd., imported 155 PCS of MyanmarHardwood Gurjan Round logs from Yangon (Myanmar) to Vizag (India);the bill of lading No. GCTC/531/06/11 dated 08.04.2016 was endorsedin favour of the appellant on 11.04.2006 pursuant to the High SeasSaleAgreement; and on 11.04.2006 itself, bill of lading was endorsed by theappellant in favour of Radha. Thereafter, on 12.04.2006, bill of entry forwarehousing (B/E No. 601744) was filed by the appellant for warehousingof timber and then, on 26.04.2006, bill of entry for home consumption(B/E No. 602044) was filed by the appellant.

10.2. As regards second transaction, Master Agreement dated01.08.2006 for supply of timber was entered into amongst Wood CraftInternational Pte. Ltd. (seller), Alpine Panels Pvt. Ltd. (first buyer),Vellanki Frame Works (appellant) and M/s. Indo Bitumen Products,Rajasthan (end-buyer). M/s. Alpine Panels Pvt. Ltd., imported 273 PCSof Malaysian Round Logs from Singapore to Vizag; the bill of lading No.AMB1106/VIZ-05 dated 20.08.2006 was endorsed in favour of the A

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Aappellant on 26.08.2006 and on this very date, the bill of lading wasendorsed by the appellant in favour of the end-buyer M/s. Indo BitumenProducts. Thereafter, on 30.08.2006, bill of entry for warehousing (B/ENo. 604498) was filed by the appellant for warehousing of timber andthen, on 07.09.2006, bill of entry for home consumption (B/E No. 604677)was filed by the appellant. Here again, customs duty was assessed onBSri Sanjiv Kumar Agarwal, Vellanki Frame Works, Vizag (the appellant).

10.3. The third and fourth transactions in this assessment hadbeen of the same nature wherein two Master Agreements dated01.10.2006 for supply of timber were asserted involving the said WoodCraft International Pte Ltd. (seller), Purbanchal Lumbers Pvt. Ltd. (firstCbuyer), Vellanki Frame Works (appellant) and M/s. Pine Exporter, NewDelhi (end-buyer). These transactions involved two bills of lading, Nos.AMB1306/VIZ-01 and AMB1306/VIZ-02 dated 08.10.2006, which weresimilarly endorsed by the first buyer in favour of the appellant on18.10.2006 and on the same date, the appellant endorsed the same inDfavour of the end-buyer. Thereafter, in a similar fashion, the appellantfiled the bills of entry on 19.10.2006 for warehousing and then, on31.10.2006 for home consumption.

10.4. Again, the fifth and sixth transactions in this assessmenthad also been of the same nature wherein two Master Agreements datedE11.12.2006 and 15.12.2006 for supply of timber were asserted involvingthe said Wood Craft International Pte Ltd. (seller), M/s. G.K. Ganeriwala& Sons (first buyer), Vellanki Frame Works (appellant) and M/s. EsskayImpex, New Delhi (end-buyer). These transactions involved two bills oflading, Nos. CON1206/VIZ-04 and CON1206/VIZ-05 dated 21.12.2006which were similarly endorsed by the first buyer in favour of the appellantFon 04.01.2007 and on the same date, the appellant endorsed the same infavour of the end-buyer. Thereafter, in the similar fashion, the appellantfiled the bills of entry on 05.01.2007 for warehousing and then, on18.01.2007 for home consumption.

10.5. In all these transactions and dealings, after filing of bills ofGentry, customs duty was assessed on Sri Sanjiv Kumar Agarwal, theproprietor of appellant firm. However, the appellant maintained that thesaid transactions had been of high seas sales to the respective end-buyers, on whom the debit notes were raised by the appellant later.

11. In the assessment order dated 18.05.2010, the CTO held, interHalia, that on filing the bill of entry for warehousing and the bill of entry for ex-bond (home consumption), the appellant alone was assessed tocustoms duty; that the import stream dried upon such clearance by thecustoms authorities and the goods mixed into the stream of local goods;that any subsequent sale by the appellant, therefore, constituted sale oflocal goods exigible to tax; and that the transactions, for which theappellant had claimed exemption as high sea sales, were liable to betreated as inter-State sales falling under Section 3(a) of the CST Act. Inother words, the assessing authority held that the sales by the appellantto the end-buyers took place only after assessment of customs duty onthe appellant upon filing the bills of entry and thus, the said sales attainedthe character of sale of local goods, for the goods in question havingcrossed the customs frontiers of India.

11.1. Apart from the above, the CTO also pointed out that whenthe letters were addressed to the dealers at the other end (i.e., the end-buyers), one of them, M/s. Pine Exporters, New Delhi, stated that thereferred party (i.e., the appellant) was not known to them and that theyhad never received any Malaysian Round logs from the appellant whereasthe letter sent to M/s. Esskay Impex, New Delhi, was returned with thepostal endorsement that no such firm was existing at the given address.These factors were also taken into account by the assessing authority tohold that the claim of the appellant was not genuine; and the transactions,on which the appellant had claimed exemption as high sea sales, shouldbe treated as inter-State sales falling under Section 3(a) of the CST Act.

11.2. The relevant part of the observations and findings of theCTO in the assessment order dated 18.05.2010 could also be usefullyextracted as under:- “When these settled principles are applied to the instantcase, as is ascertainable from the bills of entry for ware-houseand the ex-bond of entry-transfer of title deeds has not takenplace before filing the bills of entry and the assessment of duty.The sale took place after the assessment is made on the assesseeand on filing of the bills of entry. Thus the said sales attained thecharacter of sales of local goods.

Therefore, in view of the above legal position and the factsof the case, it is to be treated that the goods had crossed customsfrontiers of India when the bill of entry having been made, thegoods were assessed to customs duty. Hence the sales effectedby the assessee cant be said to be sales in the course of import or AB

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Ahigh sea sales in as much as the goods had crossed the customsfrontiers.

Further, when addressed the dealers at the other endrequesting to confirm the purchase from the assessee- M/s PineExporters, New Delhi (sale reported at transaction No.3BRs.11057059/- and transaction No.4 Rs.4124375/- total 15581434-00)the party replied that they do not know the referred party andhave never received any Malaysian Round Logs from the saidparty which shows that the dealer’s claim is not genuine.

Further, the letter sent to M/s Esskay Impex, New DelhiCrequesting to confirm the purchase from the assessee in transactionNo. 5 Rs.8277263 and transaction No.6 Rs.3454968 total =11732231/-, was returned by the postal authorities with anendorsement “No such firm at this place” which also shows thatthe dealer’s claim is not genuine.

DIn view of this position, the transactions on which theassessee has claimed exemption being high sea sales are treatedas interstate sales falling under Section 3(a) of CST Act.”

Writ Petitions before the High Court

12. As noticed, the assessment orders aforesaid could have beenEchallenged in statutory appeal but the appellant chose to challenge thesame by way of writ petitions, being W.P. No. 4552 of 2013 (against theassessment order dated 20.01.2010) and W.P. No. 6258 of 2013 (againstthe assessment order dated 18.05.2010). Both these writ petitions weretaken up for consideration together by the High Court and were dismissedFby the common judgment and order dated 18.12.2014.

13. The High Court, in the impugned judgment and order dated18.12.2014, examined the variety of contentions urged by the partiesand took up for determination the issues arising in the matter under differentheadings while primarily dealing with the facts relating to the assessmentorder dated 20.01.2010 as involved in W.P. No. 4552 of 2013.The HighGCourt examined the issues: (i) as to whether the CTO before whom thedealer had filed returns under CST Act was having authority to pass theassessment order in the absence of authorisation from the DeputyCommissioner; (ii) the extent, scope and contours of judicial review ofassessment order in the writ jurisdiction; (iii) as to whether the sale byHappellant to Radha was an inter-State sale for the appellant having filed

the bill of entry and having been assessed to customs duty; (iv) as towhether the sale in favour of Radha occasioned movement of goodsinto the country; (v) as to whether the procedure prescribed for duty-free shop was applicable to the present case; and (vi) as to whether theappellant was entitled to be granted time to submit C-Forms?

14. Having regard to the facts and circumstance of the case, wemay briefly summarise the observations and findings of the High Courtin relation to these issues.

14.1. As regards the question of the authority of CTO to pass theassessment order in question, the High Court extensively examined thescope of the provisions contained in A.P. Value Added Tax Act, 2005,A.P. Value Added Tax Rules, 2005 and Section 9(2) of the CST Act andultimately rejected the contentions urged on behalf of the appellant thatthe CTO was lacking authority to assess the appellant to tax under theCST Act.

14.2. As regards judicial review of assessment order in writjurisdiction, the High Court took note of the extensive arguments onbehalf of the appellant as regards nature of transaction with referenceto quadripartite agreement and endorsement of bill of lading by theimporter in favour of the appellant and subsequently by the appellant infavour of Radha (end-buyer) while the goods were on high seas as alsothe argument that there was no finding against genuineness of theendorsements on the bill of lading. The High Court observed that theappellant had invoked writ jurisdiction against the assessment orderwithout availing the statutory remedy of appeal; and also pointed outthat though certiorari was the appropriate remedy in challenge to a quasi-judicial order, the appellant had sought a writ of mandamus. The HighCourt further observed that it was not even the case of the appellantthat the first respondent had failed to perform a statutory duty or that theappellant’s legal rights were adversely affected and therefore, theappellant was not entitled to a writ of mandamus. The High Court,thereafter, pointed out the limited parameters within which the validityof assessment orders and findings therein could be examined in certiorarijurisdiction. The High Court took note of the consideration adopted andthe findings recorded in the impugned assessment orders and observedthat the assessing authority had not taken into consideration the effectof high seas sale agreement and bill of lading etc., but has held the salesby appellant to Radha and other end-buyers outside the State to be inter- A

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AState sales for the reason that those sales could only have been effectedafter the appellant had filed the bills of entry for home consumption andwas assessed to customs duty. The High Court observed that only ifthose findings were set aside would the matter call for remand withdirection to the assessing authority to consider the other documents reliedupon by the appellant. The High Court observed thus:B

“In passing the impugned assessment orders, and insubjecting the transactions to tax as an inter-state sale underSection 3(a) of the CST Act, the assessing authority has not takeninto consideration the effect of the High Sea sales agreementsand other agreements, the bill of lading or the provisions of theCIndian Bill of Lading Act. He has held that the sale of goods bythe petitioner to Radha Industries (and other outside the Statepurchasers) was an inter-state sale on the ground that these salescould only have been effected after the petitioner had filed the billof entry for home consumption, and after he was assessed toDcustoms duty. It is only if these findings are set aside, would thematter necessitate remand, and the assessing authority beingdirected to consider the other documents relied upon by thepetitioner.”

14.3. After having dealt with the aforesaid preliminary aspects,Ethe High Court entered into the core issue involved in the matter i.e., asto whether the sale by appellant to Radha was an inter-State sale for theappellant having filed the bill of entry and having been assessed to customsduty. The High Court took note of the rival submission where, on onehand, it was contended on behalf of the appellant that there was noprohibition under the Customs Act or the Rules/Regulations madeFthereunder, for clearance of goods by the holder of an authorisation bythe endorsee of the bill of lading; that even otherwise, an importer underthe Customs Act includes any owner or any person holding himself outto be an importer and, as the bill of lading had been endorsed in hisfavour, the appellant was entitled to file the bill of entry as an importer;Gand that the department’s contention, that payment of customs duty bythe appellant was conclusive of the import having ended and any sale bythe appellant thereafter could only be a domestic sale, was not flowingfrom the provisions of the Customs Act.On the other hand,it wascontended on behalf of the department that the appellant alone wasassessed to customs duty by virtue of his filing the bill of entry as theH

importer; that the system permitted only the appellant to file the bill ofentry as his name alone was recorded in the Import General Manifest(IGM) as the importer; that the contents of the bill of entry made it clearthat there was no high seas sale, subsequent to the high seas sale infavour of the appellant asthe bill of entry was generated on the basis ofthe IGM; that Radha was not assessed to customs duty and if Radhawas the last buyer during importation, IGM would have reflected thesame; that the appellant was assessed to customs duty as being the lastbuyer/final importer of the goods before the goods got mixed with thegeneral goods and the sale of goods by appellant to Radha was not asale in the course of import, rather it was an inter-State sale as Radhawas located outside the State of Andhra Pradesh; and that if theappellanthad sold the goods to Radha and yet gotitself assessed tocustoms duty, it could only mean that the appellant and Radha hadcolluded to evade customs duty on the sale transaction value.

14.4. In view of the rival submissions, the High Court took note ofthe requirements of Section 5(2) of the CST Act that, for a sale to be ‘inthe course of import’, it has to be either the one which has occasionedthe import or the one which has been effected by a transfer of documentof title to the goods before the goods had crossed the customs frontiersof India. As the claim of the appellant, for treating the sale in question tobe in the course of import, was being denied by the department for thereason that the appellant alone had filed the bill of entry for warehousingas also the bill of entry for home consumption, the High Court proceededto examine the facts of the case vis-a-vis the essential features relatedwith the processes of importation and filing of bill of entry while sub-dividing its consideration with reference to various terms in, and variousprovisions of, the Customs Act and the CST Act.

14.4.1. The High Court took note that the expression ‘‘crossingthe customs frontiers of India” was defined in Section 2(ab) of the CSTAct to mean crossing the limits of the area of a customs station in whichthe imported goods or exported goods are ordinarily kept before clearanceby customs authorities; and as per the Explanation thereto, “customsstation” and “customs authorities” shall have the same meaning as inthe Customs Act. The High Court observed that “the customs frontiers”,for the purpose of the CST Act, was equated to the limits of the area ofthe customs station in which the goods were stored; and crossing ofsuch station being regarded as amounting to crossing the customs frontiersof India.

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A14.4.2. As regards connotation of the term “importer”, the HighCourt examined the definition of “import” in Section 2(23) and of“imported goods” in Section 2(25) of the Customs Act and observedthat the moment goods, brought into India from a foreign country, arecleared for home consumption, they get mixed with the local goods andcease to be imported goods thereafter. The High Court also examinedBthe inclusive definition of “importer” in Section 2(26) of the CustomsAct and observed that any person who imports goods from a foreigncountry to India would undoubtedly be an importer; and the owner of thegoods and a person holding himself out be an importer would also be animporter, but only during the period between the importation of the goodsCand the time they are cleared for home consumption, and not prior theretoor thereafter. The High Court observed that the expanded definition of“importer” could not be used to usurp the identity of an importer fromthe person who has filed the bill of entry; and as the bill of entry showedthe goods to have been cleared by the appellant for home consumption,the appellant was the importer of the goods. The High Court also observedDthat if the appellant had sold the goods on high seas to Radha, it was onlyRadha who would be the importer and not the appellant and the veryfact that the name of Radha was not reflected as the importer in the billof entry for home consumption belied the contention of the appellantabout high seas sale to Radha. The relevant parts of observations andEfindings of the High Court could be usefully extracted as under:- “Section 2(23) of the Customs Act defines import, with itsgrammatical variations and cognate expressions, to mean bringinginto India from a place outside India. Section 2(25) defines importedgoods to mean any goods brought into India from a place outsideFIndia but does not include goods which have been cleared forhome consumption. Use of the words does not include in Section2(25) would mean that the moment goods, brought into India froma foreign country, are cleared for home consumption, they getmixed with the local goods and cease to be imported goodsthereafter. Going by the definition of the term ‘import’ underGSection 2(25) of the Act as “to bring into India from a place outsideIndia,” and as he has imported the goods (his name being reflectedin the Bill of Entry as the importer), the petitioner has rightly beenheld to be the importer.

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In view of the expanded definition of importer in Section2(26), while any person who imports goods from a foreign countryto India would undoubtedly be an importer, the owner of the goodsand a person holding himself out be an importer would also be animporter, however only during the period between the importationof the goods and the time they are cleared for home consumption,and not prior thereto or thereafter. This period is when the goodsare warehoused after importation, and are cleared from suchwarehouse by a person other than the person who actuallyimported the goods. That limb of the definition of importer, inSection 2(26) of the Customs Act, is designed to protect the interestsof the owner or the exporter where the goods have not beenclaimed or redeemed by the designated importer in India. Thedefinition cannot be used to usurp the identity of an importer fromthe person who filed the bill of entry. As Section 2(26) is aninclusive definition, the person in whose name the bill of entry isfiled does not cease to be the importer. In other words, the personwho has secured the release of the goods from the carrier, whohas filed the bill of entry, and who has undertaken the work ofclearance, continues to be an importer. The bill of entry showsthe goods to have been cleared for home consumption by thepetitioner who is, therefore, the importer of the goods.

The person who holds himself out to be the importer of thegoods must furnish proof of being the importer before the goodsare cleared for home consumption. No doubt, Section 2(26) permitsany one holding himself out to be the importer between the dateof importation and clearance of the goods for home consumption.But here the petitioner, in whose name the goods have beenmanifested, has, by filing a Bill of Entry, already held himself outto be the importer. As shall be detailed hereinafter, the importmanifest has not been amended, the petitioner has filed the Bill ofEntry for clearance of the goods for home consumption, and hasheld himself out to be the importer. …. It is evident, therefore,that, before its importation, it is only the person who imported thegoods who would be the importer. If, as contended by the petitioner,they had sold the goods on high seas to Radha, it is only Radhawho would be the importer and not the petitioner. The very factthat the name of Radha is not reflected as the importer in the bill AB

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Aof entry ex-bond (home consumption) belies the petitionerscontention of a high sea sale by them to Radha Industries.”

14.4.3. The High Court, thereafter, proceeded to examine therelevance and importance of Import General Manifest required to bedelivered prior to the arrival of vessel at the customs station in terms ofBSection 30 of the Customs Act; permissibility of its amendment orsupplementation under the Levy of Fee (Customs Documents)Regulations, 1970; and its contents in terms of Import Manifest (Vessels)Regulations, 1971. The High Court observed that as per the requirementsof IGM, it should have reflected the name of the last high sea salepurchaser as the importer; and otherwise, the IGM would haveCnecessitated amendment, as it is only the last purchaser of the goods onhigh seas who would be the importer/consignee. The High Court observedthat there was no material on record to show that either the IGMcontained the name of Radha as the importer/consignee or that it wassubsequently amended in terms of Section 30(3) of the Customs Act;Dand hence, held that the contention of high seas sales was raised by theappellant only to avoid the goods being subjected to tax as inter-Statesales under the CST Act. The High Court observed and held as under:- “The Import General Manifest contains a cargo declarationwherein, among others, the name of the importer, the importersEcode number, IGM number and date are required to be detailed.It is not even the petitioners case that his name is not reflected asthe importer in the Import General Manifest. If, as is now contendedby him, the goods had been sold on the high seas, the ImportGeneral Manifest should have reflected the name of the last highsea sale purchaser as the importer. Otherwise, the Import GeneralFManifest would have necessitated amendment as it is only thelast purchaser of the goods on high seas who would be theimporter/consignee. There is no material on record to show thateither the Import General Manifest contained the name of Radhaas the importer/consignee or that it was subsequently amended inGterms of Section 30(3) of the Customs Act. It is evident, therefore,that the contention of high seas sales has been raised by thepetitioner only to avoid the goods being subjected to tax as inter-state sales under the CST Act.”

14.4.4. After having found that the appellant was rightly held toHbe the importer of goods and such a conclusion was fortified by the

contents of IGM, the High Court proceeded to further examine the effectof filing of bill of entry for home consumption by the appellant. In thisregard, the High Court examined the scope and requirements of theprovisions contained in the Customs Act relating to entry of goods onimportation; clearance of goods for home consumption as also therequirements of the Bill of Entry (Electronic Declaration) Regulations,1995. The High Court further examined the contents of one of the billsof entry, as placed on the record of W.P. No. 6258 of 2013 where thesecond party (first buyer) was Purbanchal Lumbers Pvt. Ltd. and foundthat the said bill of entry made no reference to Radha and held that thisomission made it clear that the goods were imported by the appellant ona high seas sale effected in its favour by the said first buyer. The HighCourt, accordingly, concluded that the appellant had imported the goods;and the sale of goods by the appellant to Radha could have only beeneffected after the goods had been cleared for home consumption. TheHigh Court, inter alia, observed and held as under:- “…..It is evident, from the said Bill of Entry, that the goods wereimported by the petitioner, and were cleared from customs withthe assistance of the customs house agent M/s.SrinivasaTransports. If, as contended by the petitioner, the goods weresold by them to M/s. Radha Industries on high seas, and beforethe goods entered the customs port, the name of the importershould have been shown as Radha Industries, and not as SanjivKumar Agarwal, Vellanki Frameworks. The fact that the nameof the importer is shown as Sanjiv Kumar Agarwal, VellankiFrameworks, and the Bill of Entry makes no reference to RadhaIndustries, goes to show that the goods were imported by thepetitioner on a high sea sale effected in their favour by PurbanchalLumbers Private Limited; it is they who had imported the goods;and sale of goods by them to Radha Industries could only havebeen effected after the goods had been cleared for homeconsumption.”

14.4.5. The High Court also examined the submissions that theappellant acted merely as an agent of the end-buyer and rejected thesame, again with reference to the contents of the bill of entry where thename of appellant was shown as the importer and there was no referenceto Radha. The High Court also observed that customs duty could beassessed only on the importer of goods and not on his agent; and found A

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Athat the appellant alone was assessed to customs duty and not Radha. Inview of the given facts, the High Court reiterated its findings that thesale of goods by appellant to Radha was not a high seas sale; and sucha sale could have been effected only after the appellant was assessed tocustoms duty and had cleared the goods for home consumption. TheHigh Court observed and held, inter alia, as follows:-B

“If, as contended by him, the petitioner was merely actingas an agent, the bill of entry would have reflected the name of theimporter as M/s.Radha Industries and the petitioner as their agentinstead of M/s. Srinivasa Traders as the clearing house agent;and the petitioners name would have been recorded in the bill ofCentry, along with Purbanchal Lumbers Private Limited. The veryfact that the name of the importer is shown as Sanjiv KumarAgarwal, Vellanki Frameworks, and the Bill of Entry makes noreference to Radha Industries, shows that the goods were importedby the petitioner, on the goods being sold to them on high seas byDPurbanchal Lumbers Private Limited. Sale of goods by them toRadha Industries could only have been effected after the goodshad been cleared for home consumption.

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Transfer of title to the goods on high seas would make theEperson, who purchased the goods on high seas, the importer ofthe goods and it is he who would be liable to be assessed to customsduty. As the Bill of Entry records the petitioners name as theimporter, and as it is not in dispute that it was he who was assessedto customs duty, and not Radha, it is evident that the sale of goodsFby the petitioner to Radha is not a high seas sale. Such a salecould only have been effected after the petitioner was assessedto customs duty, and he had cleared the goods for homeconsumption.”

14.4.6. With reference to a Division Bench decision of AndhraGPradesh High Court in the case of Minerals and Metals TradingCorporation of India Ltd. v. State of Andhra Pradesh: 1999 (106)ELT 23, an argument was advanced on behalf of the appellant that thename on the bill of entry was irrelevant because the name of the importeralone would be recorded in it, even if the transfer of title deeds waseffected before filing of the bill of entry and assessment of duty. TheH

High Court took note of the principal issue involved in the said case ofMinerals and Metals and held that the question, as to whether name onthe bill of entry was relevant or not and as to whether the name ofimporter alone would be recorded therein, even if transfer by title deedwas effected before filing of bill of entry and assessment of duty, did notarise for consideration therein. Therefore, the observations occurring insaid decision as regards the relevance of name in the bill of entry wereheld to be not of a binding declaration of law.

14.5. Having thus held that CTO was justified in holding that saleof goods by appellant to Radha was an inter-State sale liable to taxunder the CST Act, the High Court took note of another submissionmade on behalf of the appellant that the sale in favour of Radhaoccasioned the movement of goods into the country. It was contendedon behalf of the appellant that the entire import of the goods wasoccasioned by the ultimate sale by the appellant in favour of Radha andeven though the documents executed referred to the sale as a high seassale, but when the very sale itself occasioned the movement of goodsacross the customs barrier, it had been a sale in the course of import. Itwas also submitted on behalf of the appellant that though the case wasnot presented in this light before the assessing officer, it being a purequestion of law, could be considered by the High Court. Per contra, itwas submitted on behalf of the department that such submissions wereinconsistent and contrary to the earlier stand of the appellant that it hadbeen a high seas sale. It was also submitted, again with reference to billof entry, that the name of Radha was not reflected there as the lastbuyer.

14.5.1. The High Court observed that it was for the first timesuch a plea was taken in the writ proceedings that the sale of goods toRadha occasioned the import of goods; and the writ Court would bedisinclined to entertain this plea, being based on certain clauses ofagreements and being a mixed question of facts and law. This apart, theHigh Court also observed that even otherwise, such a submission wasbelied by the fact that the name of the appellant, and not Radha, wasreflected in the bill of entry as the importer of the goods.

14.6. Another argument advanced on behalf of the appellant beforethe High Court had been that the principles enunciated in the said DivisionBench decision of Andhra Pradesh High Court in the case of Mineralsand Metals and another decision of Madras High Court got tacit approval AB

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Ain the decision of this Court in the case of Hotel Ashoka (Indian TouristDevelopment Corporation Ltd.). v. Assistant Commissioner ofCommercial Taxes and Anr.: (2012) 3 SCC 204. The High Courtdistinguished the said decision of this Court while pointing out that itrelated to the goods sold at duty-free shops which are beyond the customsfrontier of India; the goods sold thereat must be said to have been soldBbefore having crossed the customs frontiers of India; and consequently,the sale of goods thereat is in the course of import.

14.7. Having thus held that the sale in question was an inter-Statesale, the High Court took note of the alternative prayer made on behalfof the appellant for an opportunity to submit C-Forms from the buyersCand granted this prayer with reference to Rule 12(7) of the CentralSales Tax (Registration and Turnover) Rules, 1957.

14.8. With the aforesaid findings and liberty, the High Courtproceeded to reject the challenge to the impugned assessment orderswhile granting three months’ time to the appellant to produce the prescribedDC-Forms. The High Court also commented on the doubts expressed bythe assessing officer about existence of some of the dealers and observedthat the appellant would be able to procure C-Forms only if such dealerswere in existence. The High Court concluded on the writ petitions in thefollowing words:-E

“For the reasons aforementioned, the impugned assessmentorders do not necessitate interference, and the challenge theretoby the petitioner is rejected. The petitioner is, however, grantedthree months time from today to produce the prescribed C-Forms.While the assessing authority has expressed his doubts regardingFthe very existence of some of the dealers outside the State, it isnot necessary for us to delve on this aspect any further, as it isonly if such dealers are in existence would the petitioner be ableto procure C-Forms from them, and furnish it to the assessingauthority. While the prescribed concessional rate of tax, payableby the petitioner on the inter-state sale of goods, shall be paid byGthem forthwith, the respondents shall not take coercive steps forrecovery of the balance tax for a period of three months fromtoday. In case the petitioner produces C-Forms within the aforesaidthree month period, they shall be extended the benefit ofconcessional rate of tax to the extent for which C-Forms areproduced. It is made clear that, in case the petitioner fails to submit G

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the C-Forms within three months from today, it is open to therespondents thereafter to proceed and recover the balance taxdue from them in accordance with law.

Subject to the above observations, both the Writ Petitionsfail and are, accordingly, dismissed. The miscellaneous petitionspending, if any, shall also stand automatically dismissed. However,in the circumstances, without costs.”

Rival Submissions and the issues involved

15. The aforesaid decision of the High Court is questioned in theseappeals. We may now summarize the principal submissions made onbehalf of the parties.

16. Assailing the impugned judgment, learned counsel for theappellant has made elaborate reference to the quadripartite agreementdated 21.11.2005 involving four parties and stipulating that Indus wouldraise the purchase order on the foreign exporter i.e., WBT and thereafter,when the goods were on high seas, Indus would transfer the documentsof title (bill of lading) in favour of the appellant; and the appellant wouldthen transfer the documents of title to the goods in favour of Radhabefore the goods cross the customs frontiers of India. The learned counselwould submit that the intention behind entering into a quadripartiteagreement was that Indus enjoyed a 180-day line of credit with WBTwhile the appellant had the requisite infrastructure to undertakeimportation of goods but the agreement specifically identified Radha asfinal buyer of the goods and stipulated that the goods would move onlyafter inspection and selection by Radha and hence, there was always aprivity of contract between WBT (the seller) and Radha (the end-buyer).The learned counsel has further submitted that as per Schedule I to theagreement, the appellant was to act as an agent of Radha and to clearthe goods from customs authorities where delivery of goods was to becompleted once the appellant had issued a delivery note to Radha; andthe responsibility of carriage of goods, after clearance, from the port tothe factory premises in the State of Uttar Pradesh was that of Radha.

16.1. In the aforesaid backdrop, the learned counsel for theappellant has strenuously contended that the sale in question, being inthe nature of “sale in the course of import”, is not taxable under the CSTAct; that the sale in question, having not occasioned movement of goodsbetween two States within India, is not an “inter-State sale” under Section A

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A3(a) of the CST Act and rather, this sale has occasioned movement ofgoods from outside India into India; and that the department had beenunjustified and wrong in ignoring the second high seas sale agreementbetween the appellant and Radha and by treating the appellant as ownerof goods only for having filed the bill of entry and having raised the debitnote.B

16.2. Elaborating on the submissions, learned counsel has referredto Article 286 of the Constitution of India while pointing out that it prohibitsthe State Government from imposing sales tax on sales made in thecourse of import or export; and the Parliament could formulate theprinciples to determine as to when a sale takes place in the course ofCimport or export. The learned counsel has referred to Section 5 of theCST Act, laying down as to when a sale is treated to have taken place inthe course of import or export and has referred to sub-section (2) thereof,providing that sale of goods is deemed to take place in the course ofimport of the goods into the territory of India only if the sale occasionsDsuch import or is effected by a transfer of document of title to the goodsbefore they have crossed the customs frontiers of India. Learned counselhas also referred to Section 3 of the CST Act and the decision of thisCourt in the case of State of Maharashtra v. Embee Corporation,Bombay: (1997) 7 SCC 190 to submitthat the terms ‘sale occasioningmovement of goods’ and ‘sale occasioning import of goods’ carry theEsame meaning insofar as Sections 3 and 5 of the CST Act are concerned;and that the words “sale of goods” in Section 3 and the words “contractof sale” in Section 4(2) of the CST Act have been assigned the samemeaning, which is wider to the meaning of sale in the general law. Whilealso relying on the decision of this Court in Tata Iron and Steel Co.

FLtd., Bombay v. S.R. Sarkar and Ors.: AIR1961 SC 65, the learnedcounsel has submitted that in both the situations where sale occasionsmovement of goods and sale occasions import of goods, the contract ofsale or a covenant of a contract of sale triggers the movement fromeither one State to another or from outside India into India.

G16.3. Learned counsel for the appellant has contended that toqualify under Section 5(2) of the CST Act, the essential ingredients ofhigh sea sales would be of the transfer of document of title and transferof goods to be made while the goods are on high seas. With reference tothe definition of term “crossing the customs frontiers of India”, asoccurring in Section 2(ab) of the CST Act, learned counsel has pointedH

out that this term means crossing the limits of the area of customs stationin which imported goods or exported goods are ordinarily kept beforeclearance by customs authorities. Then, with reference to Section 2(4)of the Sale of Goods Act, 1930[9] and the decisions of this Court in J.V.Gokal& Co. (Private) Ltd. v. Assistant Collector of Sales-Tax(Inspection) and Ors: (1960) 2 SCR 852 and Minerals & MetalsTrading Corporation of India Ltd. v. Sales Tax Officer and Ors:(1998) 7 SCC 19[10], learned counsel has submitted that the transfer ofbill of lading signifies transfer of title in the goods. As regards transferbefore the goods crossing customs frontiers of India, the learned counselhas referred to the decision of this Court in Hotel Ashoka (supra) tosubmit that when the goods are kept in the bonded warehouse, theycannot be said to have crossed the customs frontiers of India.

16.4. As regards the facts of the case, learned counsel wouldsubmit that the endorsement by appellant on the bill of lading in favour ofRadha was made on 12.12.2005 when the goods were on the high seasand had not even reached the customs frontiers of India and then, thebill of entry for home consumption was filed on 28.12.2005. Therefore,according to the learned counsel, the title to the goods in question wastransferred in favour of Radha before the goods crossed the customsfrontiers of India and, accordingly, the transaction between the petitionerand Radha had been a sale in the course of import not liable to be taxedunder the CST Act.

16.5. The learned counsel has also contended that the transactionin question is sought to be taxed as inter-State sale within the ambit ofSection 3(a) of the CST Act, for being not covered under Section 5(2) ofthe CST Act but, for a transaction to be covered under Section 3(a) ofthe CST Act, the agreement of sale must trigger the movement of goodsand the goods must move between one State to another within India asa consequence of such agreement. The learned counsel has referred tothe decision of this Court in State of Travancore-Cochin and Ors. v.Shanmugha Vilas Cashewnut Factory, Quilon: AIR 1953 SC 333and has strenuously argued that in the present case, the goods movedinto India from outside as a result of the quadripartite agreement; that 9 Hereinafter referred to as ‘the Sale of Goods Act’.

10 Hereinafter this case of Minerals & Metals has also been referred to as ‘Orissa case’,in order to maintain the distinction with the other decision of Andhra Pradesh HighCourt carrying the same first name, which was referred to by the High Court in theimpugned judgment.

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Athe inter-State movement within India was only a part of one wholeintegrated transaction of sale; that when a part of integrated importtransaction involves movement of goods within India, the departmentcannot selectively question only one part of the transaction; and that thequadripartite agreement, clearly establishing the privity amongst theparties involved, could not have been ignored in part and the Indian legBof the transaction could not have been dissected in order to be taxed.

16.6. In another leg of principal submissions, learned counsel hascontended that the High Court has fallen in error in using the bill of entryto determine the ownership of goods. Learned counsel would submitthat the ownership of goods could only be determined under the Sale ofCGoods Act read with the Indian Contract Act; that the customs duty iscollected from the person having possession of goods at the time ofimportation, who need not be the owner of good, as appearing from thedefinition of “importer” under the Customs Act, which includes “ownerand any other person”; that in distinction to the customs duty, sales tax isDa tax on the transaction of sales or purchase when ownership of goodsis transferred and the questions as to when does the sale take place andwho is the owner of goods would be determined only under the Sale ofGoods Act, and not under the Customs Act. With a strong reliance onthe decision of this Court in the case of Union of India and Anr. v.Sampat Raj Dugar and Anr.: (1992) 2 SCC 66, learned counsel hasEsubmitted that the definition of importer in the Customs Act only indicatesthe person who is in possession of goods at the time of filing of bill ofentry but does not indicate the title to the goods.

Analysis

16.7. As regards raising of debit note, learned counsel has arguedthat the respondent has tried to rely upon a subsequent debit note raisedFby the appellant on Radha to conclude that the sale took place after thegoods crossed the customs frontiers of India but, as per the definitioncontained in Section 2(g) of the CST Act, “sale” includes transfer ofproperty in goods for deferred payment and therefore, issuance of debitnote on a later date is of no effect on the passing of title of goods, whichGhad taken place before the goods crossed the customs frontiers of India.According to the learned counsel, endorsement of the bill of lading andits date are the only factors relevant for determination as to whether thesale in question is covered by Section 5(2) of the CST Act or not; and allother factors are irrelevant for determining the core issue regarding pointof sale; and the High Court has been in error in proceeding on irrelevantH

considerations while ignoring the relevant aspects and the law applicableto the case.

16.8. In the alternative part, learned counsel has contended thatthe High Court, despite indicating its disinclination to reappreciate theevidence in writ jurisdiction, has proceeded to render findings on factrather than relegating the matter to the appellate authority. While relyingon the decision in the case of Star Paper Mills Ltd. v. Union of Indiaand Ors.: 1995 Supp (4) SCC 674, the learned counsel would submitthat the appellant may be allowed to contest the matter in the statutoryappeal, particularly in view of the facts involved.

17. Per contra, learned counsel for the respondent has contendedthat on a conjoint reading of the agreements sought to be relied upon bythe appellant and the appellant’s dealing with the goods before the customsfrontier at Visakhapatnam, make it clear that the alleged agencyagreement between the appellant and Radha was a sham and nominaldocument, drawn only for the purpose of evasion of tax liability underthe CST Act. The learned counsel would submit that the alleged agencyagreement played no role at all in the import transaction and it was theappellant alone who was the real importer and was rightly treated so.The learned counsel would further submit that the documents presentedby the appellant before the customs frontier at Visakhapatnam could nothave shown Radha as the real importer since the high seas saleagreement designated appellant as the buyer; and the customs frontierat Visakhapatnam was not called upon to even consider the agencyagreement as the basis for the bill of entry.

17.1. Learned counsel for the respondent has emphatically arguedthat in the given set of facts and circumstances, while reading theagreements in question and the real intent behind them, coupled withfiling of bill of entry by the appellant, the conclusion drawn by the HighCourt that the appellant alone was the importer remains unexceptionable.Learned counsel would also submit that the import was complete onlyby and through the appellant and until completion of importation, Radhawas nowhere in picture; and the monetary transactions between theappellant and Radha are proof enough of the transaction of sale betweenthem after the goods had crossed the customs frontiers of India. Inother words, according to the learned counsel, delivery of goods to Radhaby the appellant and their movement from Visakhapatnam (in the Stateof Andhra Pradesh) on way to Lucknow (in the State of Uttar Pradesh)

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Aconstituted an inter-State sale and hence, the appellant has rightly beenheld liable to tax for this inter-State sale.

17.2. While distinguishing the decisions cited on behalf of theappellant, learned counsel for the respondent has argued that the reliedupon decisions, essentially relating to the questions as to what triggeredBan import and when did the title pass on to an importer, are not relevantfor the purpose of deciding as to who has been the importer in the presentcase. This question, according to the learned counsel, has rightly beenexamined by the Assessing Officer with reference to the nature of dealingsof the parties and such conclusions have rightly been endorsed by theHigh Court.C

18. We have heard learned counsel for the parties at length andhave scanned the record with reference to the law applicable.

19. In summation of what has been noticed hereinabove, it isapparent that while asserting that the sales in question took place “in theDcourse of the import” and do qualify for exemption under Section 5(2) ofthe CST Act, the main plank of the case of the appellant is that inaccordance with the quadripartite agreements, the appellant hadtransferred the goods on high seas (before goods had crossed the customsfrontiers of India) by endorsing the bills of lading in favour of therespective end-buyers and that had completed the sale. On the otherEhand, the mainstay of the department is that the appellant alone clearedthe goods from the customs area after filing the respective bills of entryand thereafter raised debit notes showing sales to the end-buyers; andsuch sales having taken place only after the goods crossing the customsfrontiers of India and the end-buyers being situated outside the State ofFAndhra Pradesh to whom the goods were dispatched, the sales inquestion had only been inter-State sales. The appellant’s counter to sucha stand of the department is that filing of bill of entry and assessment tocustoms duty in accordance with the Customs Act are not the factorsdeterminative of the ownership of goods because the importer could bethe owner or even any other person and merely becausethe appellantGfiled the bills of entry, the legal consequences of transfer of bill of ladingwhen the goods were on high seas cannot be ignored.

19.1. Therefore, the principal issue in these appeals is as to whetherthe sales in question took place in the course of the import of the goodsinto the territory of India and qualify for exemption under Section 5(2) ofHthe CST Act?

Sale in the course of import: Connotations

20. For determination of the principal issue and variety of questionsarising in this matter, at the outset, a brief insight into the constitutionaland statutory provisions relating to the “sale in the course of import”shall be apposite.

20.1. Under Article 286 of the Constitution of India, restrictionshave been placed on the power of the State as to imposition of tax on thespecified category of sales and purchases. At the relevant point of time,Clauses (1) and (2) of Article 286 read as under[11]:- “286.Restrictions as to imposition of tax on the sale orpurchase of goods.-(1) No law of a State shall impose, orauthorize the imposition of, a tax on the sale or purchase of goodswhere such sale or purchase takes place—

(a) outside the State; or

(b) in the course of the import of the goods into, or export of thegoods out of, the territory of India.

(2) Parliament may by law formulate principles for determiningwhen a sale or purchase of goods takes place in any of the waysmentioned in clause (1).”

20.2. In exercise of its powers under Clause (2) of Article 286,the Parliament has enacted the Central Sales Tax Act, 1956. In Section3, thereof, it is laid down that a sale or purchase of goods shall be deemedto take place in the course of inter-State trade or commerce if the saleor purchase-(a) occasions the movement of goods from one State toanother; or (b) is effected by a transfer of documents of title to thegoods during their movement from one State to another. Section 3 withits Explanation 1 and Explanation 2 could also be usefully extracted asunder[12]:- “3.When is a sale or purchase of goods said to take placein the course of inter-State trade or commerce. —

11 This Article 286 has undergone a few amendments later which need not be referredherein.

12 Explanation 3 inserted to this Section 3 by Act 28 of 2016 is not relevant for thepresent purpose.

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AA sale or purchase of goods shall be deemed to take place in thecourse of inter-State trade or commerce if the sale or purchase—

(a) occasions the movement of goods from one State to another;or (b) is effected by a transfer of documents of title to the goodsBduring their movement from one State to another.

Explanation 1. — Where goods are delivered to a carrier or otherbailee for transmission, the movement of the goods shall, for thepurposes of clause (b), be deemed to commence at the time ofsuch delivery and terminate at the time when delivery is takenCfrom such carrier or bailee.

Explanation 2. — Where the movement of goods commencesand terminates in the same State it shall not be deemed to be amovement of goods from one State to another by reason merelyof the fact that in the course of such movement the goods passDthrough the territory of any other State.”

20.3. The basic principles for determining as to when a sale orpurchase of goods takes place in the course of import or export arecontained in Section 5 of the CST Act. As per sub-section (1) of Section5, a sale or purchase of goods shall be deemed to take place in theEcourse of the export of the goods out of the territory of India only if thesale or purchase either occasions such export or is effected by a transferof documents of title to the goods after the goods have crossed thecustoms frontiers of India. Under sub-section (2), a sale or purchase ofgoods shall be deemed to take place in the course of the import of theFgoods into the territory of India only if the sale or purchase either occasionssuch import or is effected by a transfer of documents of title to thegoods before the goods have crossed the customs frontiers of India.Inthe present case, we are only concerned with sub-section (2) of Section5 relating to the course of import and hence, may extract the relevantpart of Section 5 of the CST Act as under:-G“5. When is a sale or purchase of goods said to take placein the course of import or export. —

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(2) A sale or purchase of goods shall be deemed to take place inHthe course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or iseffected by a transfer of documents of title to the goods beforethe goods have crossed the customs frontiers of India.

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20.4. The definition/meaning of the expressions “crossing thecustoms frontiers of India” and “sale”, as occurring at the relevant timein Clauses (ab) and (g) of Section 2 of the CST Actmay also be usefullynoticed as under[13]:-

“(ab) “crossing the customs frontiers of India” means crossingin the limits of the area of a customs station in which importedgoods or export goods are ordinarily kept before clearance bycustoms authorities.

Explanation.- For the purposes of this clause, “customs station”and “customs authorities” shall have the same meanings as inthe Customs Act, 1962 (52 of 1962); (g) “sale”, with its grammatical variations and cognate expressions,means any transfer of property in goods by one person to anotherfor cash or deferred payment or for any other valuableconsideration, and includes,—

(i) a transfer, otherwise than in pursuance of a contract, of propertyin any goods for cash, deferred payment or other valuableconsideration;

(ii) a transfer of property in goods (whether as goods or in someother form) involved in the execution of a works contract;

(iii) a delivery of goods on hire-purchase or any system of paymentby instalments;

(iv) a transfer of the right to use any goods for any purpose(whether or not for a specified period) for cash, deferred paymentor other valuable consideration; 13At the relevant time, the expression goods was defined in the CST Act in Section 2(d)as under:- “(d) “goods” includes all materials, articles, commodities and all other kinds ofmovable property, but does not include newspapers actionable claims, stocks,shares and securities.”Indisputably, the goods in question were covered in the said definition.

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A(v) a supply of goods by any unincorporated association or bodyof persons to a member thereof for cash, deferred payment orother valuable consideration; (vi) a supply, by way of or as part ofany service or in any other manner whatsoever, of goods, beingfood or any other article for human consumption or any drink(whether or not intoxicating), where such supply or service, is forBcash, deferred payment or other valuable consideration, but doesnot include a mortgage or hypothecation of or a charge or pledgeon goods;”

20.5. The expression “crossing the customs frontiers of India”refers to “customs port” and “customs station”, as defined in the CustomsCAct. Hence, we may usefully refer to the relevant definitions in Clauses(11), (12), (13) and (29) of Section 2 of the Customs Act, as applicableat the relevant time, asunder:- “(11) “customs area” means the area of a customs station[14] andincludes any area in which imported goods or export goods areDordinarily kept before clearance by Customs Authorities;

(12) “customs port” means any port appointed under clause (a)of section 7 to be a customs port and includes a place appointedunder clause (aa) of that section to be an inland container depot; E(13) “customs station” means any customs port, customs airport[15]or land customs station;

(29) “land customs station” means any place appointed underclause (b) of section 7 to be aland customs station;”

20.6. Having regard to the submissions made and the questionsFraised, we may also take note of the definition of the expression“document of title to goods” in Section 2(4) ofthe Sale of Goods Actasunder:- “(4) “document of title to goods” includes a bill of lading, dock-warrant, warehouse keeper’s certificate, wharfingers’ certificate,Grailway receipt, multimodal transport document, warrant or orderfor the delivery of goods and any other document used in theordinary course of business as proof of the possession or control 14 The words “or a warehouse” inserted at this place by Act 18 of 2017

15 The words “customs airport, international courier terminal, foreign post office”Hsubstituted in place of “customs airport” at this place by Act 7 of 2017

of goods, or authorizing or purporting to authorise, either byendorsement or by delivery, the possessor of the document totransfer or receive goods thereby represented;”

21. The meaning, connotation, effect and operation of the saidprovisions related with ‘sale in the course of import’ had come up forconsideration in several decisions of this Court and had been the subjectmatter of adjudication in variegated factual setups concerning thetransactions and the dealings of the parties involved. Before enteringinto all the necessary niceties, we may usefully notice that the phrase‘sale in the course of import’carries three essential features - (i) thatthere must be a sale; (ii) that goods must actually be imported into theterritory of India; and (iii) that the sale must be part and parcel of theimport. A sale would become part and parcel of import if it eitheroccasions such import or if it occursby way of a transfer of document oftitle to the goods before the goods cross the customs frontiers of India.

22. Having taken note of the essential features of the phrase ‘salein the course of import’, we may now refer to the cited decisions, to findthe expositions therein and examine their applicability to the present case.

22.1. In the Constitution Bench decision of this Court in the caseof J. V. Gokal & Co. (supra), the petitioner company entered into twocontracts on 24.03.1954 and 15.04.1954 with Government of India forselling two consignments of sugar - One of 9,500 long tons of Peruvianorigin and the other of 25,000 metric tons of continental origin. Thepetitioner placed orders with dealers in foreign countries. Some weeksbefore the vessel carrying the goods in question arrived at the Bombayharbour i.e., when the vessels were on the high seas, the Government ofIndia received the documents of title, including bills of lading, pertainingto the sugar purchased by them and paid the price to the petitioner. Afterthe goods reached the port, they were unloaded, taken delivery of, andcleared by the Government of India after paying the requisite customsduties.For the assessment year 1954-55, the petitioner was assessed tosales tax wherethe Sales Tax Officer deducted the price of the said twosales from the petitioner’s turnover. However, on 31.01.1958, theAssistant Collector of Sales Tax issued notice to the petitioner, proposingto review the said assessment. The petitioner filed its objectionscontending, inter alia, that the sales had taken place in the course ofimport and therefore they were not liable to sales tax. The first respondentrejected the contentions of the petitioner and held that sales tax was A

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Apayable in respect of said two transactions. The petitioner questionedthe demand notice consequently issued against it by way of the petitionin this Court. It was contented, inter alia, that the sales in question werenot liable to sales tax inasmuch as they took place in course of import ofthe goods into the territory of India. This Court examined the questionsas to what does the phrase “in the course of the import of the goods intoBthe territory of India” convey and when could it be said that a sale hastaken place in the course of import journey. This Court referred to variousdecisions including the opinions expressed in the case of ShanmughaVilas Cashew Nut Factory (supra) and said as under:- “9……We respectfully agree with the aforesaid observations ofCthe learned Judges. The course of the import of the goods may besaid to begin when the goods enter their import journey i.e. whenthey cross the customs barrier of the foreign country and endwhen they cross the customs barrier of the importing country.

10. The next question is, when can it be said that a saleDtakes place in the course of import journey? This Court in Stateof Travancore-Cochinv. The Bombay Co. Ltd., held that a salewhich occasioned the export was a sale that took place in thecourse of export of the goods. If A, a merchant in India, sells hisgoods to a merchant in London and puts through the transactionEby transporting the goods by a ship to London, the said sale whichoccasioned the export is exempted under Art. 286(1)(b) of theConstitution from the levy of sales-tax. The same principle appliesto a converse case of goods which occasioned the import of thegoods into India. This Court again inState of Travancore-Cochhinand Ors. v. Shanmugha Vilas Cashewnut Factory extendedFthe doctrine to a case of sale or a purchase of goods effectedwithin the State by transfer of shipping documents while the goodswere in the course of transit. The decision dealt with three typesof purchases viz. (i) purchases made in the local marker; (ii)purchases made in the neighbouring districts of an adjacent State;Gand (iii) imports from Africa. The imports from Africa consistedof two groups - one group consisted of goods that were purchasedwhen they were on the high seas and shipped from the Africanports to Cochin or Quilon: we are not concerned with the othergroup. In the said case some commission agents at Bombayarranged for the purchase on behalf of the assessee, got delivery H

of the shipping documents at Bombay through a bank whichadvanced money against the shipping documents and collectedthe same from the assesses at destination. This Court, by a majority,held that, in respect of the purchases falling under the first groupof imports, the commission agents acted merely as agents of therespondents therein and that the said purchases occasioned theimport and therefore came within the exemption. That was not acase where the goods were sold by an importer in India to a thirdparty when the goods were on the high seas. It was a case wherea party in Cochin purchased goods which were on the high seasthrough his agent at Bombay and the agent paid the price througha bank against the shipping documents. But the learned Judge,Patanjali Sastri, C.J., expressing the majority view, consideredthe scope of the exemption in all its aspects and summarized theconclusions thus p. 69 :

“Our conclusion may be summed up as follows:(1) Sales byexport and purchases by import fall within the exemption underarticle 286(1)(b) ...... (2) Purchases in the State by the exporterfor the purpose of export as well as sales in the State by theimporter after the goods have crossed the customs barrier arenot within the exemption. (3) Sales in the State by the exporteror importer by transfer of shipping documents while the goodsare beyond the customs barrier are within the exemption,assuming that the State power of taxation extends to suchtransactions.”

Das, J., as he then was, in his dissenting judgment, agreed withPatanjali Sastri, C.J., on the third conclusion with which we arenow concerned. The learned Judge put forward his view at p. 94thus:

“Such sales or purchases, by delivery of shipping documentswhile the goods are on the high seas on their import journeywere and are well recognised species of transactions doneevery day on a large scale in big commercial towns like Bombayand Calcutta and are indeed the necessary and concomitantincidents of foreign trade. To hold that these sales or purchasesdo not take place ‘in the course of’ import or export but are tobe regarded as purely ordinary local or home transactionsdistinct from foreign trade, is to ignore the realities of the A

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situation. Such a construction will permit the imposition of taxby a State over and above the customs duty or export dutylevied by Parliament. Such double taxation on the same lot ofgoods will increase the price of the goods and, in the case ofexport, may prevent the exporters from competing in the worldmarket and, in the case of import, will put a greater burden onthe consumers. This will eventually hamper and prejudiciallyaffect our foreign trade and will bring about precisely thatcalamity which it is the intention and purpose of our Constitutionto prevent.”

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The learned Judge also in his judgment elaborately considered theCgreat hardship that would be caused to an Indian importer if hewas not permitted to sell the goods which were on the high seasby delivery of shipping documents against payment. Though thatcase dealt with a different situation, we agree with the learnedJudge’s observations that an importer can, if he receives theDshipping documents, transfer the property in the goods when theyare on the high seas to a third party by delivering to him shippingdocuments against payment and such a sale is one made in thecourse of import.”

22.1.1. The Court thereafter proceeded to summarize the legalEposition in respect of import sale in the following words:- “11. The legal position vis-a-vis the import-sale can besummarized thus; (1) The course of import of goods starts at apoint when the goods cross the customs barrier of the foreigncountry and ends at a point in the importing country after theFgoods cross the customs barrier; (2) the sale which occasions theimport is a sale in the course of import; (3) a purchase by animporter of goods when they are on the high seas by paymentagainst shipping documents is also a purchase in the course ofimport, and (4) a sale by an importer of goods, after the propertyin the goods passed to him either after the receipt of the documentsGof title against payment or otherwise, to a third party by a similarprocess is also a sale in the course of import.”

22.1.2. Having expounded on the legal position, the Courtexamined the facts of the case and held that the case fell under thefourth principle aforesaid when the petitioner, pursuant to the earlier H

contract with the Government, delivered the shipping documents includingthe bill of lading to the Government against payment when the goodswere on high seas. Hence, it was held that the sales in question tookplace in the course of imports of goods into India. The Court alsoscrutinized the terms of contract to ascertain whether they disclosedany intention of the parties that notwithstanding the delivery of bills oflading against payment, the property in the goods should not pass to theGovernment and held, after scrutiny of all the terms of contract thatthey did not indicate any such intention. Though the scrutiny and analysisof the terms of contract relates to the facts of that case only butworthwhile it would be to reproduce the same to indicate that ultimately,on the facts, the Court found that the sale took place in the course ofimport. The Court analysed and held as follows:-

“13. Let us now scrutinize the terms of the contract toascertain whether they disclose any intention of the parties thatnotwithstanding the delivery of the bill of lading against paymentthe property in the goods should not pass to the Government. Thecircumstances under which the contracts were entered intobetween the parties indicate that both the parties were interestedto see that property in the goods passed in the ordinary way whenthe shipping documents were handed over to the Governmentagainst payment. The sellers had to meet their liability to the foreigncompanies with whom they opened letters of credit and theGovernment must have been anxious to get the title to the goodsso that the sellers might not divert the goods towards their othercommitments or to other buyers for more tempting prices. Underthe contract every safeguard for securing the goods of agreedspecifications was provided for in the earlier clauses and thereforethere was no reason for postponing the passing of the property inthe goods to the buyer till the goods were actually delivered in theport. The sellers on their side would have been anxious that theproperty should pass when the goods were on the high seas, forotherwise they would be compelled to pay sales-tax. Nor are theclauses of the contracts relied upon by the respondents inconsistentwith the property in the goods passing in accordance with themercantile usage. ……….

14. Apart from the terms of the contract, reliance is alsoplaced by the learned counsel for the respondents on the following AB

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Acircumstances: (i) the seller himself chartered the ship; and (ii)the licence issued by the Government was made non-transferable.We do not see how these two facts indicate the contrary intention.If the seller himself chartered a steamer, when the goods hepurchased were loaded in the ship, the property in the goods passedto him and therefore he was in a position to sell the same to theBGovernment. The fact that the licence was non-transferable hasno relation to the property in the goods passing to the Government.

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15. For all the foregoing reasons we hold that the propertyin the goods passed to the Government of India when the shippingCdocuments were delivered to them against payment. It followsthat the sale of the goods by the petitioner to the Government ofIndia took place when the goods were on the high seas.

16. That being so, the sales in question must be held tohave taken place in the course of the import into India and thereforeDthey would be exempted from sales tax under Art. 286(1)(b) ofthe Constitution.”

22.2. It does not appear necessary to dilate further on the decisionin the case of Shanmugha Vilas Cashew Nut Factory (supra) whichhad been, as noticed, considered in detail in the case of J.V. Gokal &ECo. (supra). However, another decision cited on behalf of the appellantand relating to multiple transactions involving import, being the Orissacase of Minerals & Metals (supra), need to be noticed. The fact situationin that case had been that the appellant, a Government of Indiaundertaking,was functioning as a canalising agent for import and exportFof minerals and metals. On 31.03.1991, Steel Authority of India Limited(SAIL) requested appellant to register import of 15,000MT of tin millblack plate coils. On 14.07.1991, SAIL opened a letter of credit directlyin favour of the exporter, M/s. Samsung Co. Ltd., Seoul, South Korea.The consignee therein was shown as SAIL. On 02.08.1991, the appellantplaced a purchase order with the exporter for and on behalf of SAIL.GOn 16.08.1991, the appellant wrote to SAIL enclosing a copy of itspurchase order and stating that they shall arrange delivery on high seasby endorsement and transfer of shipping documents after the documentshave been paid by the banker. On 23.10.1991, the appellant sent to SAILits invoice, adjusting the amount that had already been paid by SAILHthrough its bankers. On 28.10.1991, the appellant wrote to SAIL that it

had decided to make a high seas sale of the said coils to SAIL. Accordingly,the documents, including the original bill of lading, with due endorsement,were sent to SAIL to get the said coils cleared. On the same day, theappellant wrote to Assistant Collector of Customs, Paradeep Port, Cuttackthat the said coils had been imported by the appellant and had been soldto SAIL on high seas basis and SAIL would process the bill of entry andpay the customs duty. The vessel arrived at Paradeep Port on 11.11.1991.Then, on 18.11.1991, the bill of entry in respect of the said coils wassubmitted and processed by SAIL. However, on 31.12.1994, the SalesTax Officer levied sales tax on the aforesaid sale while rejecting thecase of the appellant that no sales tax was payable, this being a sale inthe course of import covered by Section 5(2) of the Central Sales TaxAct, 1956. The Sales Tax Officer held that there had been two sales,one between the exporter and the appellant and the other between theappellant and SAIL; and that the sale to SAIL had not occasioned theimport. There had been another sale made by the appellant to ParadeepPhosphates Ltd., the facts whereof were similar. The appellant’schallenge to the levy of sales tax on the aforesaid sales failed in the HighCourt and hence, the matter was before this Court.

22.2.1. After taking note of the relevant constitutional and statutoryprovisions as also the decision in J.V. Gokal & Co. (supra), this Courtsaid thus:- “The judgment states that it is well settled in the commercialworld that a bill of lading represents the goods and the transfer ofit operates as the transfer of goods. The delivery of the bill oflading while the goods are afloat is equivalent to the delivery ofthe goods themselves.”

22.2.2. The Court examined the facts of the case and held thesales in question to be those in the course of import in the followingwords:- “9. The facts aforestated, based upon documents, showthat the bill of lading had been endorsed in favour of SAIL whilethe consignment of the said coils was still upon the high seas. Thesale, therefore, was a sale in the course of the import of the saidcoils into the territory of India; it was effected by transfer of thedocuments to the said coils before they had crossed the limits ofthe customs station at Paradeep Port. The position would be thesame in respect of the goods sold to Paradeep Phosphates Ltd.”

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A22.3. The appellants have cited the decision in the case of EmbeeCorporation (supra) to submit that the terms ‘sale occasioning movementof goods’ and ‘sale occasioning import of goods’ in Sections 3 and 5 ofthe CST Act carry the same meaning; and that the use of words “sale ofgoods” in Section 3 of the CST Act and the words “contract of sale” inSection 4(2) of the Sales Tax Act were assigned the same meaning,Bwhich is much wider than the meaning of sale in general law. In the saidcase, this Court examined the definition of sale as existing at the relevanttime in Section 2(g) of the CST Act and held as under:- A

“6. On perusal of the aforesaid provisions of the Act, thequestion that arises for consideration herein is, what meaning shouldCbe given to the expression “sale occasions import”. It is almostsettled by numerous decisions of the Supreme Court that theexpression “sale occasions import” is to be interpreted in the samemanner in which the expression “occasions the movement ofgoods” occurring in Section 3(a) of the Act has receivedDinterpretation. In other words, the expression “sale occasionsimport” has to be given the same meaning which the expression“occasions the movement of goods” has received by the Courts.In the light of aforesaid settled legal position emerging from theConstitution Bench decisions, we will now examine the meaningof “sale” as defined in the Act. Section 2(g) of the Act definesE“sale” thus:

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2(g) ‘sale’, with its grammatical variations and cognateexpressions, means any transfer of property in goods by oneperson to another for cash or for deferred payment or for anyother valuable consideration, and includes a transfer of goodsFon the hire-purchase or other system of payment byinstallments, but does not include a mortgage or hypothecationof or a charge or pledge on goods;

7. The above definition of “sale” in the Act shows that theword “sale” has been given a very wide meaning so as to includenot only the sale of goods, but also the transactions, namely, atransfer of goods on hire-purchase system. Further, the use ofwords “sale of goods” in Section 3 of the Act and the words“contract of sale” occurring in Section 4(2) of the Act have beenassigned the same meaning which is wider than the meaning ofsale in the general law. In such a situation the word “sale” defined G

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in Section 2(g) of the Act and employed in Section 3 and othersections of the Act would embrace not only completed contract,but also the contract of sale or agreement of sale if such contractof sale or agreement of sale provides for movement of goods ormovement of goods is incident of the contract of sale. This mattermay be examined from another angle. An agreement to transfergoods to the buyer for a price is an important element of sale andthe same is also borne out from Section 4 of Sale of Goods Act. IfSection 4 of the Sale of Goods Act is read along with Sections 3and 4 of the Act, it would mean an agreement to sell would alsobe a sale within the meaning of sale provided such agreement ofsale stipulates for transfer or movement of goods or movement ofgoods is incident of the contract of sale and in that case, suchmovement of goods would be deemed to be occasioned by thesale. It is immaterial that actual sale does not take place at thattime of movement of goods and takes place later on. Thisinterpretation of Section 3(a) of the Act if applied to sub-section(2)of Section 5 of the Act, would mean that if an agreement for salestipulates import of goods or import of goods is incident of contractof sale and goods have entered the import stream, such importwould fall within the expression “sale occasions import”.In thepresent case, the import of Carbamite is direct result of thecontract of sale and as such it can be safely held in the presentcase that sale has occasioned the import.”

22.3.1. In the said case of Embee Corporation, the respondent/assessee, who was engaged in the business of buying and selling chemical,replied to the invitation of tender of Director General of Supplies andDisposal (DGS&D) for the supply of Carbamite. The tender of therespondent was accepted by DGS&D with a few conditions includingthe one that the contracted material shall be inspected by the ChiefInspector, C.I.M.E., Kirkee, Pune at Bombay Port and the GeneralManager, Cordite Factory, Aruvankadu was mentioned as the indentor.The respondent mentioned the name of the supplier from Germany fromwhom the materials were to be imported and for which, importrecommendation certificate was required. The required importrecommendation certificate was issued whereupon the authorityconcerned issued the requisite licence with the condition, inter alia, thatthe goods imported shall be utilised in the manner stipulated in DGS&D’sletter and the imported materials shall not be utilised or disposed of in ABC

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Aany other manner. The DGS&D also furnished the necessary end-usecertificate. In the bill of lading, the name of respondent was shown as aparty to be notified and the General Manager, Cordite Factory Aruvankaduwas described as the consignee of Carbamite. After the consignmentarrived, the same was forwarded to the consignee so named in thecontract.Once the goods were supplied to DGS&D, the respondentBclaimed exemption from levy of sales tax on the ground that the supplyunder the contract was a sale in the course of import of goods into India.The plea of the respondent was rejected by the department and theTribunal. The High Court, however, held that there were two sales: Onebetween the respondent and DGS&D and the other between the foreignCsupplier and the respondent; and that the sale had occasioned the importof material, liable for exemption from sales tax under the CST Act. Inthe appeal, this Court while dismissing the appeal of the State, was ofthe view that while interpreting the expression “sale occasions import”occurring in Section 5(2) of the Act, it was not necessary that a completedsale should precede the import.D

22.4. In the case of Tata Iron and Steel Co. (supra), the petitionerwas engaged in the business of manufacturing and selling iron and steelgoods and had its factory at Jamshedpur in the State of Bihar and HeadSales office at Calcutta in the State of West Bengal. The petitioner wasregistered as dealer under the Bihar Sales Tax Act as also under theECentral Sales Tax Act in the State of West Bengal. For the period ofassessment 01.07.1957 to 31.03.1958, the petitioner submitted its returnof taxable sales to the Commercial Tax Officer, Lyons Range, Calcutta,disclosing the gross taxable turnover in respect of sales liable to CentralSales Tax in the State of West Bengal. The said Commercial Tax OfficerFdirected the petitioner to submit a statement of sales from Jamshedpurfor the period under assessment, “documents relating to which weretransferred in West Bengal or of any other sales that may have takenplace in West Bengal under Section3(b) of the Central Sales Tax Act,1956”. The petitioner, by its letter dated 30.09.1959, informed the Tax Officer that the requisition for production of statement of sales madeGfrom Jamshedpur in the course of inter-State trade or commerce waswithout jurisdiction while contending that “all the sales from Jamshedpurwere of the type mentioned in Section 3(a) of the Central Sales Tax Actand at the same time, some of them also fell within the category mentionedin Section 3(b) of the Act”; that even if the sales were “of the typeHmentioned in Section 3(b) of the Act, the appropriate State of the place where the sales take place or are effected alone had jurisdiction to assesssuch sales to Central sales tax”; and that in respect of inter-State salesfrom Jamshedpur, the situs of the sale was always the State of Bihar asthe goods were in Bihar either at the time of the contract of sale or atthe time of appropriation to the contract. However, the Tax Officerproceeded to make ‘best judgment assessment’ on a gross turnover whileincluding the disputed sales too which were accounted for in the returnfiled with the Sales Tax Officer, Jamshedpur. Hence, in the said case,the petitioner Company felt aggrieved of the proposition of the Tax Officerat Calcutta to recover Central Sales Tax in respect of the sales whichwere included in the assessment proceedings before the Bihar SalesTax Authorities. In the given backdrop, this Court expounded on thescope of Section 3 of the CST Act, inter alia, in the following:-

“18. In our view, therefore, within clause (b) of section 3 areincluded sales in which property in the goods passes during themovement of the goods from one State to another by transfer ofdocuments of title thereto: clause (a) of Section 3 covers sales,other than those included in clause (b), in which the movement ofgoods from one State to another is the result of a covenant orincident of the contract of sale, and property in the goods passesin either State”

This Court pointed out the error on the part of the Tax Officer atCalcutta and held as under:- “30. The Commercial Tax Officer has taxed all the sales effectedby the company under Section 3, clause (b), on the view thatsales in which the documents of title were handed over in Calcuttawere taxable in the State of West Bengal. The assessment ismade on two assumptions, (1) that all the sales effected in favourof West Bengal parties satisfied the conditions prescribed bySection 3(b), and (2) that the place where the documents aredelivered by the company through its Head Sales Office to thepurchaser is the place where the sale is effected. Neither of theseassumptions is correct. The Commercial Tax Officer had, in ourjudgment, to ascertain before he could order payment of tax underthe Central Sales Tax Act, whether on the materials he wassatisfied, (a) that the goods at the time of transfer of documentsof title were in movement from the State of Bihar to the State ofWest Bengal, (b) that the place where the sale was effected was AB

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Aunder Section 4, clause (2), within the State of West Bengal. TheCommercial Tax Officer has, in our view, failed to apply the correcttests and has made assumptions which are not warranted and ona true interpretation of the provisions of the Central Sales TaxAct, the order of assessment discloses an error apparent on itsface and a writ of certiorari must issue quashing the assessment.BIt will be for the Commercial Tax Officer of West Bengal to re-assess the company in respect of transactions of sale which areproperly taxable within the State of West Bengal by the applicationof the test which we have already set out.”

22.5. Learned counsel for the appellant has also attempted to relyCupon the decision in the case of Hotel Ashoka (supra) which wasrendered in the fact situation where the goods were kept in the bondedwarehouse and were made available in the duty-free shops for sale.This Court opined that since the goods were supplied to the duty-freeshops situated at the International Airport, Bengaluru for sale, it cannotDbe said that the said goods had crossed the customs frontiers of India.The Court finally answered the claim of the appellants therein on thefinding that the liquor, cigarettes, perfumes and food articles were sold“at the duty-free shops” at the International Airport, Bengaluru, for whichno tax was payable by the appellants as the goods sold at the duty-freeshops were sold directly to the passengers and even the delivery ofEgoods took place at the duty-free shops before importing the goods orbefore the goods had crossed the customs frontiers of India. The issueconsidered in the said decision, therefore, was as to whether the sale atthe duty-free shops situated at the Bengaluru International Airport wouldattract levy of sales tax.F23. Before proceeding further, we may cull out the relevantattributes of the decisions aforesaid vis-à-vis the questions involved inthe present case.

23.1. The basic question in the case of Hotel Ashoka (supra)was as to whether the sales at duty-free shops would attract levy ofGsales tax. As noticed earlier, the definition of “customs station” clearlyrefers to customs airport as defined in Section 2(10) of the CustomsAct. As the duty-free shop is situated in airport area, the sale of goods atthe duty-free shop was deemed to have taken place in the course ofimport of the goods into the territory of India and before the goods crossingHcustoms frontiers of India. In the present case, the appellant alleges that

the sale took place on high seas before goods had crossed customsfrontiers of India, whereas the department contends that the sale inquestion took place after the appellant had filed the bill of entry for homeconsumption and the goods were taken out of the bonded warehouse. Itis but apparent that the decision in Hotel Ashoka (supra), relating to thesale of goods at duty-free shops, has no relevance whatsoever to thepresent case. The decision in Tata Iron and Steel Co. (supra) alsorelated to an entirely different factual set up and the question involvedtherein was also different. The said case related to the movement ofgoods from one State to another on the sale made by the petitioner-company having its works in the State of Bihar and having sales officeat Calcutta in the State of West Bengal. What was sought to be taxed inthe State of West Bengal were the sales in which the documents of titlewere handed over in that State on the assumption that the sales effectedin favour of West Bengal parties satisfied the conditions prescribed bySection 3(b) of CST Act; and that the place where the documents weredelivered by the company to the purchaser was the place where the salewas effected. The enunciations in the said case as regards the operationof Section 3 of CST Act do not call for any debate but they hardlyprovide any guide for determination of the real questions involved in thepresent matter. Similarly, the observations in Embee Corporation (supra)to the effect that “sale occasioning movement of goods” and “saleoccasioning import of goods” respectively in Section 3 and Section 5 ofCST Act carry the same meaning are not of much dispute. The otherobservations, that for interpreting the expression “sale occasions import”occurring in Section 5(2) of the Act, it is not necessary that a completedsale should precede the import, shall have their implication only whenthe nature of dealings of the parties in the transactions in question andthe effect of movement of goodsare examined.

23.2. This takes us to the decisions of this Court in Minerals &Metals (Orissa case) and in J. V. Gokal & Co. (supra).

23.2.1. As noticed, in the case of Minerals & Metals (Orissacase), the appellant, a Government of India undertaking, had beenfunctioning as canalising agent for import and export of minerals. It wasin such a capacity that the appellant was requested by SAIL to ensureimport of the goods in question and the appellant took up the proceedingsaccordingly. The dealings of the parties made it clear that the appellanthad sold the goods to SAIL on high seas by endorsement on the bill of AB

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Alading. The fact was duly communicated to the port authorities too.Significantly, when the vessel arrived at the port of destination, the bill ofentry in respect of the goods was submitted and processed by SAIL, theend-buyer. This Court specifically found that bill of lading had beenendorsed in favour of SAIL while the consignment of goods was stillupon the high seas. It had been, on such findings of fact, that the sale inBquestion was held to be a sale in the course of import and having beeneffected by transfer of goods (bill of lading) before they had crossed thelimits of customs frontiers of India.

23.2.2. The law declared in J. V. Gokal & Co. (supra) that bill oflading represents the goods and its transfer operates as transfer of goods;Cand delivery of bill of lading while the goods are afloat is equivalent tothe delivery of goods (as duly applied by this Court in Minerals & Metals)is neither of any doubt nor could be a matter of debate. However, in thesaid case of J. V. Gokal & Co. too, on facts, it was found by the Courtthat the petitioner, pursuant to the earlier contract with the Government,Ddelivered the shipping documents including the bill of lading to theGovernment against payment when the goods were on high seas. It wasalso noticed that after the goods reached the port, they were unloaded,taken delivery of, and cleared by the Government (the end-buyer) afterpaying the requisite customs duties. Significantly, in J. V.Gokal & Co.,the Constitution Bench went on to scrutinize the terms of contract toEascertain whether they disclosed any intention of the parties thatnotwithstanding delivery of bill of lading against payment, the property ingoods should not pass and then, the Court found no such intention beingindicated. It was only after such finding on facts the Court held that thesale of goods by the petitioner to the Government took place when theFgoods were on the high seas and hence, the sales took place in thecourse of import into India.

23.2.3. Noteworthy common features in the decisions of this Courtin J. V. Gokal & Co. and Orissa case of Minerals & Metals (supra)had been that pursuant to a previous contract with the end-buyer, theGseller concerned arranged for importation of goods; and transferred theproperty in goods in favour of the end-buyer by endorsement of bill oflading when the goods were on high seas. Coupled with these, anothercommon feature had been that in both those cases, the goods in question,upon reaching the port of destination, were taken delivery of, and clearedby the end-buyer after paying the requisite customs duties. Those hadH

not been the cases like the present one where the seller purportedlyacted as an intermediary and even after alleged transfer of bill of ladingwhen the goods were on high seas, filed the bill of entry for homeconsumption at the port of destination and got the goods cleared fromthe customs.

24. Apart from the decisions so cited, for taking into comprehensionthe nuances of ‘sale in the course of import’ with involvement of anintermediary, we may take note of the case of K. Gopinathan Nairand Ors. v. State of Kerala: (1997) 10 SSC 1 wherein, after a detailedreference to various Constitution Bench decisions, this Court hasexpounded on the factors to be reckoned for determining as to whethera particular sale or purchase could be deemed to have taken place in thecourse of import. We may point out that the decision in this case ofK. Gopinathan Nair had been by a 3-Judge Bench of this Court wherethe learned Judges differed in their views on the question as to whetherthe transactions in question were in the course of import and, therefore,immune under Section 5(2) of the CST Act. We shall refer to this decisionand implication of different views therein over the factual setup of thepresent case in the later part of this judgment. At present, we mayreproduce the relevant part of the decision of majority, delineating thebasic factors which are germane to determination of the question as towhether a particular sale had been in the course of import or not, asunder:- “14. In the light of the aforesaid settled legal position emergingfrom the Constitution Bench decisions of this Court the followingpropositions clearly get projected for deciding whether theconcerned sale or purchase of goods can be deemed to take placein the course of import as laid down by Section 5(2) of the CentralSales Tax Act:

(1) The sale or the purchase, as the case may be, must actuallytake place.

(2) Such sale or purchase in India must itself occasion such import,and not vice versa i.e. import should not occasion such sale.

(3) The goods must have entered the import stream when theyare subjected to sale or purchase.

(4) The import of the goods concerned must be effected as adirect result of the sale or purchase transaction concerned.

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(5) The course of import can be taken to have continued till theimported goods reach the local users only if the import hascommenced through the agreement between foreign exporter andan intermediary who does not act on his own in the transactionwith the foreign exporter and who in his turn does not sell asprincipal the imported goods to the local users.

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(6) There must be either a single sale which itself causes theimport or is in the progress or process of import or though theremay appear to be two sale transactions they are so integrallyinterconnected that they almost resemble one transaction so thatthe movement of goods from a foreign country to India can beCascribed to such a composite well-integrated transaction consistingof two transactions dovetailing into each other.

(7) A sale or purchase can be treated to be in the course of importif there is a direct privity of contract between the Indian importerand the foreign exporter and the intermediary through which suchDimport is effected merely acts as an agent or a contractor for andon behalf of the Indian importer.

(8) The transaction in substance must be such that the canalizingagency or the intermediary agency through which the imports areeffected into India so as to reach the ultimate local users appearsEonly as a mere name lender through whom it is the local importer-cum-local user who masquerades.”

25. The principles aforesaid would obviously apply to the presentcase; and if the factors so indicated are answered in favour of theappellant, it could be treated to be a matter of sale in the course ofFimport.

26. In order to bring the case within the four-corners of the factorsaforesaid, the appellant has suggested existence of quadripartiteagreement whereby and whereunder,the supplier (party number 1) soldthe goods in question to the first-buyer (party number 2) and deliveredGthem at the port of shipment. Thereafter, while the goods were on highseas, party number 2 transferred them to the appellant (invariably partynumber 3 in these transactions), by endorsing the bill of lading in favourof the appellant. Further to this and while the goods were yet on highseas, the appellant allegedly transferred them to the end-buyer (partynumber 4) by endorsing the bill of lading in favour of the end-buyer. TheH

appellant has also suggested that though the goods were being purchasedby the end-buyer and were to move only after inspection and selectionby the end-buyer but the methodology of such quadripartite agreementwas adopted because of the reasons that the end-buyer was not having‘the requisite infrastructure’ to undertake importation of goods whereasthe appellant was having the requisite infrastructure for importation andthe first-buyer was having the credit facility with the seller. It has,therefore, been suggested that there was always a privity of contractbetween the seller and the end-buyer; and that the appellant was to actas an agent of the end-buyer and to clear the goods from customsauthorities. The appellant has also suggested that in each of thetransactions, the process was carried out as envisaged in the quadripartiteagreement and in the manner that the first-buyer endorsed the bill oflading in favour of the appellant when the goods were on high seas; andwhile the goods continued to be on high seas and had not crossed thecustoms frontiers of India, the appellant endorsed the bill of lading infavour of the end-buyer. According to these suggestions, the appellantonly acted as an agent of the end-buyer while getting the goods clearedfrom the customs port at Visakhapatnam.

26.1. However, the suggestions by the appellant do not remain asinnocuous and over-simplified as projected, for the reason that in eachof these transactions, when the goods in question reached the port atVisakhapatnam, the appellant carried out the proceedings envisaged bythe Customs Act and filed a bill of entry for warehousing and thereafter,filed another bill of entry for home consumption (ex-bond); and on thebasis of such bills of entry, the appellant was duly assessed for customsduty. Admittedly, after the goods were cleared for home consumption,they moved from the State of Andhra Pradesh to different States wherethe respective end-buyers were situated; and the appellant raised debitnotes on the end-buyers.In these transactions, the goods in question,upon reaching the port of destination, were not cleared by the end-buyersafter paying the requisite customs duties, as had been the fact situationin the case of J. V. Gokal & Co. as also in Orissa case of Minerals &Metals (supra). While examining the question pertinent if the appellantacted merely as an intermediary or name-lender through whom the importwas effected and merely acted as an agent for and on behalf of theIndian importer that is, the end-buyer, the significant facts of the presentcase cannot be overlooked that in relation to the goods in question, onlythe appellant filed the bill of entry for warehousing as also the bill of A

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Aentry for home consumption and was assessed to customs duty andfurther that before the customs authorities, there was no suggestion thatthe goods in question had already been transferred, on high seas, to thealleged real importer. Obviously, on the facts of the present case, theeffect of dealings of the appellant before the customs authorities atVisakhapatnamwith filing the bill of entry for home consumption need toBbe examined.Filing of bill of entry for home consumption by the appellant:Implication

27. As noticed, the High Court examined the contention of theCappellant that while filing the bills of entry, the appellant had acted merelyas an agent of the end-buyers and rejected the same, with reference tothe contents of the bills of entry where the name of appellant was shownas the importer and there was no reference to the end-buyers; as alsowith reference to the facts that the appellant alone was the importerwho filed the bills of entry for home consumption and was assessed toDthe customs duty and that the IGM did not contain the name of end-buyers.

27.1. The High Court has observed that the inclusive definitionof “importer” in Section 2(26) of the Customs Act cannot be used tousurp the identity of an importer from the person who filed the bill ofEentry; and the person in whose name the bill of entry is filed, does notcease to be an importer.In this case, the name of the appellant wasreflected as importer in the Import General Manifest of the vessel/s thatbrought the goods in question to the port at Visakhapatnam.The HighCourt has meticulously examined the entire process relating to the arrivalFof goods as cargo in a vessel; and filing of IGM as also the contents ofthe bill of entry and has pointed out that the cargo declaration form,anessential part of IGM, was required to carry, amongst others, theparticulars of bill of lading and the name of consignee/importer. Afterfinding that the name of the appellant was reflected as importer in IGM,the High Court has observed that if the alleged second high seas saleGhad taken place, the IGM would have reflected the name of the last highseas sale purchaser as the importer and if there was any bonafideomission, the IGM would have necessitated amendment because onlythe last purchaser of the goods on high seas could have been the importer/consignee. The High Court has also observed that there was no material H

on record to show that either the IGM contained the name of end-buyeras the importer/consignee or that the same was subsequently amendedin terms of Section 30(3) of the Customs Act. These had been the pivotalreasons for which the High Court rejected the suggestion of second highseas sales in favour of the end-buyers and held that the only attempt ofthe appellant had been to avoid inter-State sales under the CST Act. Inthe given facts, the High Court specifically recorded the findings thatthe sale of goods by appellant to the end-buyers had not been high seassales; and such sales could have been effected only after the appellantwas assessed to customs duty and had cleared the goods for homeconsumption.

28. To get over the aforesaid findings of the High Court, learnedcounsel for the appellant has argued, with strong reliance on the decisionof this Court in the case of Sampat Raj Dugar (supra), that the definitionof importer in the Customs Act only indicates the person who is inpossession of goods at the time of filing of bill of entry but does notindicate the title to the goods; and that the questions as to when does thesale take place and who is the owner of goods would be determined onlyunder the Sale of Goods Act and not under the Customs Act.

29. For dealing with this part of submissions, we may usefullytake note of the relevant definitions in Clauses (23), (24), (25) and (26)of Section 2 as also the other provisions in Sections 30 and 47 (1) of theCustoms Act,as applicable and effective at the relevant point of time,asfollows: - “(23) “import”, with its grammatical variations and cognateexpressions, means bringing into India from a place outside India;

(24) “import manifest”[16] or “import report” means the manifestor reportrequired to be delivered under section 30;

(25) “imported goods” means any goods brought into India from aplace outside India but does not include goods which have beencleared for home consumption;

(26) “importer”, in relation to any goods at any time between theirimportation and the time when they are cleared for home 16 The words “arrival manifest or import manifest” were substituted in place of thewords “import manifest” by Act 13 of 2018.

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Aconsumption, includes any owner[17] or any person holding himselfout to be the importer;

30. Delivery of import manifest or import report.-

(1) The person-in-charge of-

(i) a vessel; or

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(ii) an aircraft; or

(iii) a vehicle,

carrying imported goods or any other person as may be specifiedby the Central Government, by notification in the Official Gazette,Cin this behalf shall, in the case of a vessel or an aircraft, deliver tothe proper officer an import manifest prior to arrival of the vesselor the aircraft, as the case may be, and in the case of a vehicle, animport report within twelve hours after its arrival in the customsstation, in the prescribed form and if the import manifest or theDimport report or any part thereof, is not delivered to the properofficer within the time specified in this sub-section and if the properofficer is satisfied that there was no sufficient cause for suchdelay, the person-in-charge or any other person referred to in thissub-section, who caused such delay, shall be liable to a penaltynot exceeding fifty thousand rupees.E

(2) The person delivering the import manifest or import reportshall at the foot thereof make and subscribe to a declaration as tothe truth of its contents.

(3) If the proper officer is satisfied that the import manifest orFimport report is in any way incorrect or incomplete, and that therewas no fraudulent intention, he may permit it to be amended orsupplemented.[18]

47. Clearance of goods for home consumption.- (1) Wherethe proper officer is satisfied that any goods entered for homeGconsumption are not prohibited goods and the importer has paid the import duty, if any, assessed thereon and any charges payable 17 The words “any owner, beneficial owner” were substituted in place of the words“any owner” by Act 7 of 2017.

18 This Section 30 has undergone several amendments over the course of time. In itsHpresent form, it reads as under:- under this Act in respect of the same, the proper officer maymake an order permitting clearance of the goods for homeconsumption:

xxxxxx”[19]

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30. It is but apparent that that while bringing anything into Indiafrom a place outside India is generally regarded as “import” and theimported goods are those goods which are brought into India from aplace outside but, when the goods are cleared for home consumption,they are no longer imported goods for the purpose of the Customs Act.Significantly, in the process of importation, the importer, in relation toany goods, includes any owner or any other person holding himself to bethe importer but, only between the time of their importation and theirclearance for home consumption. In other words, the net result of the “30. Delivery of arrival manifest or import manifest or import report.-

(1) The person-in-charge of-

(i) a vessel; or

(ii) an aircraft; or

(iii) a vehicle, carrying imported goods or export goods or any other person as may be specifiedby the Central Government, by notification in the Official Gazette, in thisbehalf shall, in the case of a vessel or an aircraft, deliver to the proper officer anarrival manifest or import manifest by presenting electronically prior to thearrival of the vessel or the aircraft, as the case may be, and in the case of avehicle, an import report within twelve hours after its arrival in the customsstation, in such form and manner as may be prescribed and if the arrival manifestor import manifest or the import report or any part thereof, is not delivered tothe proper officer within the time specified in this sub-section and if the properofficer is satisfied that there was no sufficient cause for such delay, the person-in-charge or any other person referred to in this sub-section, who caused suchdelay, shall be liable to a penalty not exceeding fifty thousand rupees:

Provided that the Principal Commissioner of Customs or Commissionerof Customs may, in cases where it is not feasible to deliver arrival manifest orimport manifest by presenting electronically, allow the same to be delivered inany other manner.

(2) The person delivering the arrival manifest or import manifest or importreport shall at the foot thereof make and subscribe to a declaration as to thetruth of its contents.

(3) If the proper officer is satisfied that the arrival manifest or import manifestor import report is in any way incorrect or incomplete, and that there was nofraudulent intention, he may permit it to be amended or supplemented.’’

19 The provisos to sub-section (1) which came to be inserted and amended later on asalso sub section (2) and its proviso, which were also amended several times are notreproduced for being not directly relevant for the purpose of the present case.

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Aexpanded definition of the expression “importer” is that while any personwho imports goods into India would be an importer but, the owner of thegoods or a person holding himself to be an importer would also beregarded as an importer during the period between importation of goodsand their clearance for home consumption. This crucial period wouldgenerally be that period when the goods have been warehoused afterBimportation and are cleared from warehouse by a person other than theperson who actually imported the goods. That being the position, in ourview, the High Court has rightly said that this definition of importer cannotbe used to usurp the identity of an importer from the person who filedthe bill of entry. In other words, the person in whose name the bill ofCentry is filed does not cease to be an importer and, if that person claimsto be not the owner or importer, the ouns would be heavy on him toestablish that someone else is the owner or importer of goods.

31. As noticed, on the connotation of the term “importer” for thepurpose of the Customs Act, learned counsel for the appellant has placedDreliance upon the decision in Sampat Raj Dugar (supra). We mayexamine the facts and the ratio of the case of Sampat Raj Dugar, toappreciate the implication, if any, of the observations occurring thereinon the questions involved in the present case.

31.1. In the case of Sampat Raj Dugar (supra), the relevantEfactual aspects had been that the second respondent Ms. Renu Pahilajwas doing business at Delhi in the name and style of “Acquarius.”whereas the first respondent, an Indian national resident abroad, wasdoing business at Hong Kong in the name and style of UNISILK. Thesecond respondent obtained an advance import licence on 20.05.1985for importing raw silk that was valid for 18 months. The import licenceFwas granted subject to the condition that raw silk imported should beutilised for manufacturing garments which ought to be exported. Sometimeprior to the month of October, 1985, the second respondent receivedthree consignments sent by the first respondent from Hong Kong but didnot fulfil the said condition of import licence. Then, during the months ofGOctober-November, 1985 the first respondent sent to India certainquantities of raw silk in four lots, to be delivered to the second respondent.The requisite documents were sent to the banker of the second respondentwith instructions to deliver the same on receiving the payment. However,by the time the consignments arrived at Bombay, the customs authoritieshad come to know about the non-compliance of the aforesaid conditionH

of licence with respect to the three earlier consignments and also of thealleged misrepresentation while obtaining the advance import licence.Accordingly, the proceedings were initiated against the second respondentby the Collector of Customs. On the other hand, the second respondentfailed to make the payment and receive the documents of title and didnot clear the goods. While the proceedings were pending before theCollector of Customs, the said advance import licence was cancelledbut no orders were passed with respect to the said goods. The firstrespondent, who appeared in the proceedings of his own, contendedbefore the Collector that title to the goods had not passed to secondrespondent; that he was still the owner of the goods; and that therefore,the said goods could not be confiscated or proceeded against for theviolations, if any, by the second respondent. He submitted that he wasnot a party to the misuse of the earlier imports nor was he aware of thealleged fraud practised by the second respondent in obtaining the advanceimport licence and prayed that he may be permitted to re-export thegoods to Hong Kong. The Collector of Customs took the view thatpermission for re-export could not be granted for the reasons that theadvance import licence having been cancelled, there was no valid licencefor clearance of those goods; that for re-exporting the goods, a validimport licence was necessary which was not there; and also becausethe second respondent had abandoned the goods. On that basis, theCollector of Customs rejected the claims of the first respondent andimposed a penalty of Rs. 5 lakhs on him.

31.2. In the aforesaid background, the first respondent, who hadsent the goods from Hong Kong, filed a writ petition before the HighCourt. The case of the Collector of Customs and the Union of India wasthat the second respondent must be deemed to be the owner of theconsignments by virtue of the definition of “importer” in Section 2 (26)of the Customs Act read with Clause 5(3)(ii) of the Imports (Control)Order, 1955. Reliance was also placed upon Para 26(iv) of the Importsand Exports Policy issued for the year 1985-86 and it was submitted thatthe goods were liable to be confiscated for the acts and defaults ofrespondent. It was also submitted that in view of non-compliance withthe condition relating to export of garments manufactured out of theimported raw silk yarn, the second respondent had rendered all the goodscovered by the import licence liable to confiscation. The High Court,however, allowed the writ petition and directed re-export of the goods tofirst respondent. Hence, the matter was in appeal before this Court.

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A31.3. A bare look at the relevant background aspects of the saidcase makes it clear that essentially, the effect of the conditions in theimport licence and non-compliance thereof had been the subject matterof consideration therein; and particularly Clause 5(3)(ii) of the importlicence, deeming the imported goods as being the property of licensee,was under consideration in view of the facts that the imported goodsBwere abandoned by the importer and were not cleared from customs bymaking payments and receiving documents of title sent by the seller.While examining such a condition of licence and its impact, this Courtobserved that the definition of “importer” in Section 2(26) of the CustomsAct was not really relevant to the question of title. The Court alsoCexamined the object of the said Clause 5(3)(ii) of the import licence andobserved that the idea had been to hold the licensee responsible foranything and everything that would happen from the time of import tillthe goods were cleared through customs. The Court found that whenthe goods were imported into the country at the instance of the licensee,the Imports (Control) Order created a fiction that such licensee shall beDdeemed to be the owner of such goods from the time of their import tillthey were cleared through customs; and observed that this fiction, meantfor proper and effective implementation of Imports and Exports (Control)Act, could not be carried beyond that; and it could not have been employedto attribute ownership of the imported goods to the importer even in aEcase where he abandons them. This Court also indicated that holdingotherwise would be putting the exporter in a position of losing goodswithout receiving payment with only remedy to sue the importer forprice and damages which would not be conducive to international trade.The relevant parts of observations and consideration in paragraph 19 ofthe said decision could be usefully reproduced as under: –F

“19. We may first consider the question of title to the saidgoods. If we keep aside the provisions of law relied upon by theappellants viz., definition of ‘importer’ in Section 2(26) of theCustoms Act, clause 5(3)(ii) of the Imports (Control) Order aswell as para 26(iv) of the Import-Export Policy, the position isGquite simple. Since respondent 2 did not pay for and receive thedocuments of the title she did not become the owner of the saidgoods, which means that respondent 1 continued to be the owner.How do the aforesaid provisions make any difference to thisposition? The definition of ‘importer’ in Section 2(26) of theHCustoms Act is not really relevant to the question of title. It only

defines the expression ‘importer’. Respondent 1 does not claimto be the importer. The provision upon which strong reliance isplaced by the appellants in this behalf is the one contained in clause5(3)(ii) of the Imports (Control) Order. Sub-clause (1) of clause5 specifies conditions which can be attached to an import licenceat the time of its grant. Sub-clause (2) says that a licence grantedunder the Order shall be subject to the conditions specified inFifth Schedule to the Order. Sub-clause (3) sets out three otherconditions mentioned as (i), (ii), and (iii) which shall attach toevery import licence granted under the Order. First of theseconditions says that the import licence shall be non-transferableexcept under the written permission of the licensing authority orother competent authority. Condition (ii)-which is the provisionrelevant herein-says that the goods for the import of which a licenceis granted “shall be the property of the licensee at the time ofimport and thereafter upto the time of clearance through customs.”This condition, however, does not apply to STC, MMTC and othersimilar institutions entrusted with canalisation of imports. It alsodoes not apply to certain eligible export houses, trading housesand public sector agencies mentioned in the second proviso.Condition (iii) says that the goods for which the import licence isgranted shall be new goods unless otherwise mentioned in thelicence. Now coming back to condition (ii), the question is whatdoes it mean and what is the object underlying it when it says thatthe imported goods shall be the property of the licensee from thetime of import till they are cleared through customs. It is necessaryto notice the language of the sub-clause. It says “it shall be deemedto be a condition of every such licence that-the goods for theimport of which a licence is granted shall be the property of thelicensee at the time of import and thereafter upto the time ofclearance through customs.” The rule-making authority (CentralGovernment), which issued the order, must be presumed to beaware of the fact that in many cases, the importer is not the ownerof the goods imported at the time of their import and that hebecomes their owner only at a later stage, i.e., when he pays forand obtains the relevant documents. Why did the CentralGovernment declare that such goods shall be the property of thelicensee from the time of import? For appreciating this, one has toascertain the object underlying the said provision. The interpretation ABC

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to be placed upon the provision should be consistent with andshould be designed to achieve such object. In this context, it shouldalso be remembered that expressions like ‘property of’ and ‘vest’do not have a single universal meaning. Their content varies withthe context. The aphorism that a word is not a crystal and that ittakes its colour from the context is no less true in the case ofthese words. In our opinion the object underlying condition (ii) inclause 5(3) is to ensure a proper implementation of the Imports(Control) Order and the Imports and Exports (Control) Act, 1947.The idea is to hold the licensee responsible for anything andeverything that happens from the time of import till they are clearedthrough customs. The exporter is outside the country, while theimporter, i.e., the licensee is in India. It is at the instance of thelicensee that the goods are imported into this country. Whether ornot he is the owner of such goods in law, the Imports (Control)Order creates a fiction that he shall be deemed to be the owner ofthe such goods from the time of their import till they are clearedthrough customs. This fiction is created for the proper and effectiveimplementation of the said order and the Imports and Exports(Control) Act. The fiction however cannot be carried beyond that.It cannot be employed to attribute ownership of the imported goodsto the importer even in a case where he abandons them, that is, ina situation where he does not pay for and receive the documentsof title. It may be that for such act of abandonment, action maybe taken against him for suspension/cancellation of licence. Maybe, some other proceedings can also be taken against him. Butcertainly he cannot be treated as the owner of the goods even insuch a case. Holding otherwise would place the exporter in avery difficult position; he loses the goods without receiving thepayment and his only remedy is to sue the importer for the priceof goods and for such damage as he may have suffered. Thiswould not be conducive to international trade. We can well imaginesituations where for one or other reason, an importer chooses orfails to pay for and take delivery of the imported goods. He justabandons them. (We may reiterate that we are speaking of acase where the import is not contrary to law). It is only with sucha situation that we are concerned in this case and our decision isalso confined only to such a situation. Condition (ii) in sub-clause(3) of clause 5, in our opinion, does not operate to deprive theexporter of his title to said goods in such a situation.”

31.4. A close look at the discussion and observations above-quoted makes it clear that basically, the fiction created under the Imports(Control) Order, to the effect that the licensee shall be deemed to be theowner of goods from the time of their import till they were cleared throughcustoms, was under consideration in that case; and having examined theobject behind such a fiction, this Court observed that the same wasmeant for proper and effective implementation of Imports and Exports(Control) Act and could not be carried beyond that, so as to attributeownership of the imported goods to the importer even when the importerabandons them. The observations of this Court, when read and understoodin their context, make it clear that they are of no bearing on the facts ofthe present case as also the questions involved herein. It has not beenlaid down that in Sampat Raj Dugar (supra) that a person who is shownto be the importer by virtue of his filing bills of entry for warehousingand for home consumption, as also for his having been assessed to customsduty, would yet fall outside the definition of “importer” in Section 2 (26)of the Customs Act. The said decision in Sampat Raj Dugar does notadvance the cause of the appellant in any manner.

32. As noticed, the definition of “importer” in Section 2(26) of theCustoms Act, even if not directly decisive of the question of title, has itsimplications on the facts of the present case for the reason that theappellant alone filed the bills of entry for warehousing as also for homeconsumption. Yet further, the requirements of filing import manifest, asper Section 30 of the Customs Act, have their own bearing on the presentcase. It remains indisputable that the name of the appellant was reflectedas importer in IGM. If, as asserted by the appellant, the goods had beensold on the high seas, the cargo declaration of IGM[20] would havereflected the name of last high seas purchaser as importer and in otherevent, the IGM would have necessitated amendment because only thelast purchaser of the goods on high seas would have been declared asconsignee/importer in IGM. The fact that the name of Radha (and otherend-buyers) was not mentioned in IGM as the importer/consignee northe relevant IGM was amended, the suggestion about second high seassale in favour of Radha (and other end-buyers) turns out to be only aself-serving suggestion of the appellant, which has no corroboration on 20 As per the requirements of Regulation 3 (c) (iii) of Import Manifest (Vessels)Regulations, 1971, the import manifest has to consist, inter alia, of a ‘cargo declaration’in Form No. III. Such ‘cargo declaration’ is required to carry, amongst others, particularsof ‘bill of lading’ and ‘the name of consignee/importer, if different’.

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Athe record; rather the official records totally belie the suggestion of theappellant.

32.1. The fact of the matter remains that even though the appellanthas suggested that the bills of lading were endorsed in favour of Radha(and other end-buyers) when goods were on high seas but this baldBassertionis not corroborated by any of the official documents which formthe part of the process of importation, warehousing and clearance ofgoods. On the contrary, the High Court has pointed out as illustration thedetails of one of the bills of entry, which distinctively gave out all theparticulars of IGM, the invoice, the value of cargo, etc. and the HighCourt has found that in the bill of entry, the name of appellant alone wasCshown as the importer who cleared the goods from customs with theassistance of the Customs House Agent.In the given set of facts, if thegoods were at all sold to Radha (and other end-buyers)on high seas, thename of such end-buyer would have appeared as importer and not thatof the appellant.

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33. The same considerations operate against the assertion thatthe appellant was only acting as an agent of the end-buyers. The HighCourt has rightly pointed out that the Customs House Agent is an entirelydifferent person who acts only to present papers for clearance of theimported goods under a bill of entry. Of course, under Section 147 of theECustoms Act, a person could act on behalf of importer or owner butsuch a person cannot be treated as owner of the goods nor could bemade liable for customs duty. If the appellant was merely acting as anagent, then bill of entry would have reflected the name of end-buyer asthe importer and the appellant as an agent of the importer; and further tothat, the said end-buyer would have been assessed for customs duty. ItFwere not so.

34. The discussion foregoing leads to the position that though thedefinition of importer includes owner or any person holding out himselfas the importer; and this definition of importer is not really relevant tothe question of title but, that does not mean that a person who holds outGhimself to be the importer; and who files the bill of entry for homeconsumption; and who is assessed for customs duty; and whosesuggestion about transfer of title to a third person is not established byany reference to any official record, the transfer on high seas may bepresumed on mere suggestion about the alleged endorsement of bill ofHlading.

34.1. When all other official documents as also dealings of theappellant clearly establish that the appellant had been the importer, theconsequences are bound to follow. It gets perforce reiterated that whenthe bills of entry recorded the name of the appellant as importer and theappellant alone was assessed to customs duty, the so called second highseas sale agreementsnever came into operation.

Whether sale in question occasioned import of goods:

35. As noticed, the CTO specifically observed that it had not beenthe case of the appellant that the sale in question occasioned the importof goods into the country. However, an attempt was made before theHigh Court to suggest that the entire import was occasioned by ultimatesale in favour of Radha and, therefore, the matter would also be coveredin the first part of sub-section (2) of Section 5 of the CST Act. The HighCourt noticed that such a plea could not have been raised for the firsttime in the writ petition for being a mixed question of facts and law. TheHigh Court also observed that even such suggestion was belied by thefact that only the name of the appellant was reflected in the bill of entryas importer and not of Radha. It has been argued before us too that thequadripartite agreement triggered the movement of goods from foreigncountry to India and not merely from Andhra Pradesh to other States;that, in fact, the sales in question had not been inter-State sales but thesesales had occasioned the movement of goods from outside India intoIndia; and that the Indian leg of the integrated transaction cannot besegregated so as to be taxed as inter-State sale under the CST Act.These suggestions also remain totally baseless as noticed infra.

36. We had indicated in the earlier part of the judgment that thedecision in the case of K.Gopinathan Nair (supra) shall be referred ata later stage. We are impelled to refer to the said decision now to dealwith the aforesaid suggestions of the appellant. We may, however, observethat this suggestion, that the sales in question had occasioned import ofgoods into the country, is incompatible with the other assertion that thesales were effected by transfer of documents of title when the goodswere on high seas. The two alternative parts of sub-section (2) of Section5 cannot ordinarily go together.

36.1. Be that as it may, the submissions made by the appellantabout the inter-linked nature of transactions under the quadripartiteagreements and the suggestion about the sales in question occasioning A

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Aimport stand effectively repelled by the decision of this Court inK.Gopinathan Nair (supra). In the said case, this Court dealt with theset of appeals arising from the decisions of Kerala High Court andKarnataka High Court. The background aspects had been that theappellants before Kerala High Court were the persons importing cashewnuts from African countries directly but after issuance of a Import TradeB(Control) Order on 31.08.1970, cashew nuts could be imported onlythrough a canalising agency namely, the Cashew Corporation of India(CCI). Consequently, the said appellants imported cashew nuts fromAfrican countries through CCI. The CCI used to collect the informationregarding requirement of actual users but was thereafter importingCcashew nuts on its own by entering into independent contracts with theforeign exporters and then, the goods were obtained by local users. Inthe appeal arising from the decision of Karnataka High Court, CCI itselfwas the appellant. The principal contention of the appellants before thetaxing authorities had been that transaction of sale by CCI to actualusers was in the course of import and, therefore, the State Sales TaxDAct could not encompass such a transaction. The contentions wererejected by the respective Tax Tribunals as also by the respective HighCourts. The common question for determination before this Court wasas to whether the import of raw cashew nuts by CCI from Africanexporters was in the course of import and, therefore, eligible forEexemption under Sections 5(2) of the CST Act. As noticed, the learnedJudges of this Court differed in their views. In the majority decision,after delineating the determinative factors, the Court examined the factsof the case and the nature of transactions and dealings of the partiesandobserved that clearly, there were two transactions: one being of theimport of raw cashew by CCI from foreign exporters; and the secondFbeing back-to-back sale by the canalising agency like CCI in favour ofthe local users for whom the goods were indented. The Court held thatindependent sale which may be based even on a prior agreement of saleby CCI to local users would remain an independent transaction betweenthe importer CCI and the local purchaser but there was noprivity ofGcontract between the local users and the foreign exporter. Hence, thisCourt rejected the contention of the appellants that transaction of saleby CCI to actual users was in the course of import in the followingpassage:- “19…..All the aforesaid features which are well establishedHon record leave no room for doubt that it is on account of the sale

to CCI by foreign exporter that the raw cashew get imported inIndia and the importer is CCI and not the local user. It is thedemand of the local users which prompted the canalising agencylike CCI to place orders for import of the quantities concerned.But CCI deals with foreign exporter on its own and gets bulkimports of cashewnuts. It is the sale to the CCI by the foreignexporter or conversely the purchase by the CCI of the raw cashewfrom the foreign exporter that occasions the movement of rawcashew from African countries to India. The imported cashewremains of the ownership of the importer CCI and only onretirement of documents on payment of value of the allotted cashewby the local users and on their getting the goods cleared fromcustoms that the property in the imported goods concerned wouldpass from CCI to the local users. Thus there are two cleartransactions. One transaction is the import of raw cashew byCCI from foreign exporters. The second transaction which is aback-to-back transaction is of sale by the canalising agency likeCCI which is the wholesale importer in favour of the local usersfor whom the goods are indented. That independent sale whichmay be based even on a prior agreement of sale by CCI to localusers would remain an independent transaction between importerCCI and the local purchaser, namely, the local user. There is noprivity of contract between the local users on the one hand andthe foreign exporter on the other. These two transactions cannotbe said to be so integrally interconnected as to represent onecomposite transaction in the course of import of raw cashewnutsas tried to be submitted by the learned Senior Counsel for theappellants….”

36.2. For yet further clarity, we may refer to the relevant parts ofthe minority view, wherein the import of goods and sale to the localpurchasers were taken to be inextricably linked hence, the contentionsof the said appellants were proposed to be accepted with the followingobservations:- “48. This seldom happens in the case of imports whenever thelocal seller imports the goods as per the specifications of a specificlocal buyer and on the mutual understanding between the localbuyer and the local seller that the goods so imported by the localseller will be purchased by the local buyer. There is in such cases, AB

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Aa direct link between the local sale and the import. In fact it is thismutual understanding between the local buyer and the local sellerwhich occasions the import. That is why the cases dealing withimports have not resorted to differentiating between one sale ortwo sales. They have applied the test as prescribed by Section 5:Whether the import is a result of understanding/contract betweenBthe local buyer and local seller? If it is, the local sale falls underSection 5. If it is not — as may well happen if the importer sellshis goods after they arrive to the best available offeror in themarket, then the sale is not covered by Section 5. That is whythere has been no need to amend Section 5 to expressly cover aClocal sale following import.

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49. Now, if we apply this test of inseverable link between thelocal sale and import to the transaction in the present case, it isclear that the local sale which is between the assessees and theCashew Corporation of India is inextricably linked with the importDof cashewnuts by the Cashew Corporation of India….

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56. However, since there is a direct and inseverable link betweenthe transaction of sale and the import of goods on account of thenature of the understanding between the parties as also by reasonEof the canalising scheme pertaining to the import of cashewnuts,the sales in question cannot be taxed under the Kerala GeneralSales Tax Act or the Karnataka General Sales Tax Act, as thecase may be….”

36.3. The case of the present appellant, as regards the effect ofFquadripartite agreement and the suggestion about the sale havingoccasioned import is, at best, the one as would appear in the minorityview in the case of K.Gopinathan Nair (supra). The said minority viewbeing not the dictum of this Court and rather, the contra view being thelaw declared, the contentions of the appellant must fail.

GThese had been inter-State sales

37. The effect of raising of debit notes by the appellant on theend-buyers has its own bearing in the present case. The appellant hadadmittedly raised such debit notes on the end-buyers but only after havingcleared the goods by filing the bill of entry for home consumption. Once H

the suggestion about the second high seas sales is not accepted and it isfound that the appellant had been the importer of goods and had clearedthem for home consumption, the natural consequence of raising of suchdebit notes on the end-buyers situated in different States and movementof goods to such end-buyers would be to take these transactions in thecategory of inter-State sales in terms of Section 3(a) of the CST Act.The appellant was not entitled to the exemption of Section 5(2) of theCST Actand has rightly been held liable for tax over inter-State sales.

38. After the appellant got the goods released by filing bill of entryfor home consumption, indisputably, the goods were ultimately receivedby Radha at Lucknow in the State of Uttar Pradesh (and other end-buyers in different States) and appellant raised debit notes from theState of Andhra Pradesh. These facts are sufficient to establish that themovement of goods inside the country from one State to another hadbeen on account of the sale by appellant to the end-buyers; and suchsales took place only after the appellant obtained the goods from thebonded warehouse for home consumption.

39. In our view, the High Court was right in observing that oncethe appellant got released the goods after filing the bill of entry for homeconsumption, the import stream dried up and the goods got mixed in thelocal goods. Any movement of the goods thereafter was bound to be asale under Section 3(a) of the CST Act; and such movement being fromthe State of Andhra Pradesh to other State, it had been a matter of inter-State sale. The principle that actual sale may not necessarily precedethe movement of goods, in its true effect, operates rather against theappellant in relation to the sale to end-buyers after the goods were clearedfor home consumption.

If any case for relegating the appellant to the remedy ofappeal made out

40. This takes us to the alternative submission on behalf of theappellant that in view of the disputed questions of fact involved, theappellant may be relegated to the remedy of appeal. These submissionsfail to impress even a bit.

40.1. The appellant, despite being aware of the availability ofremedy of statutory appeal, consciously chose to file writ petitions againstthe assessment orders aforesaid and consciously contested theentirematter in the High Court. The High Court, even after noticing the ABC

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Aframework of certiorari jurisdiction, examined the merits of the casethoroughly and even examined the submission made for the first time inwrit petitions that the import of goods was occasioned by the sales inquestion. Of course, in that regard, the High Court pointed out that itwas not a pure question of law but in any case, such submission wasbelied by the fact that the name of the appellant was reflected in the billBof entry as the importer and not that of the end-buyer. We are unable tofind any error or fault in the approach of High Court in this case.

40.2. The prayer that the appellant may now be allowed to contestthe matter in statutory appeal has only been noted to be rejected. Afterhaving consciously invoked the writ jurisdiction of the High Court andChaving contested the matter on merits, the appellant cannot now beallowed to re-open the matter in appeal. Reference to the decision ofthis Court in the case of Star Paper Mills Ltd. (supra) is entirelyinapposite. In that case, by a format order dated 23.11.1987, the HighCourt of Delhi remitted the matter pending before it in a writ petition toDthe Assistant Collector who, accordingly, made an adjudication on30.05.1988. This order of the Assistant Collector was permitted to bebrought on record in the pending writ petition and the petition wasultimately disposed of on 05.07.1993. The contentions in the writ petitionby the petitioner related to the deductions as post-manufacturing expensestowards freight subsidies, additional trade discounts and cost of specialEpacking.Though the High Court observed that the claims involvedinvestigation into disputed question of fact but, in effect, declined therelief claimed under those heads of the alleged post-manufacturing costson the ground that sufficient material was not placed by the petitioner insupport of the claims for deductions. In those circumstances, this CourtFextended liberty of appeal to the petitionerwhile observing as under:- “4. On a consideration of the matter, we are of the viewthat against the adjudication made by the Assistant Collector, thepetitioner should have one effective opportunity of an appeal. TheHigh Court could have declined to interfere with the matter underGArticle 226 if, in its view, the matter involved investigation ofdisputed facts and relegated the petitioner to the statutory records.But it rejected the claim on the ground of insufficiency of material-a situation which might be susceptible of an irreconcilability withits view that disputed questions of fact could not be investigatedin these proceedings.

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5. We, therefore, permit the petitioner to lodge an appealagainst the order of the Assistant Collector dated 30-5-1988 withthe CEGAT insofar as and confined to the three ‘Heads’ of thedeductions for the alleged post-manufacturing expenses, namely:(a) freight subsidy; (b) additional trade discount; and (c) cost ofspecial packing.”

40.3. The observations aforesaid and the course permitted in thegiven set of facts of the case of Star Paper Mills Ltd. (supra) cannotbe employed in the present case because the findings against the appellantare not on the ground of insufficiency of material but are essentially theresult of analysis of the material placed on record with reference to thelaw applicable. In our view, the extraordinary writ jurisdiction cannot beutilised by a litigant only to take chance and then to seek recourse to theother remedy after failing in its attempt on the basic merits of the casebefore the High Court. A litigation cannot be allowed to be unendinglykeptalive at the choice of a litigant.

Another feature of the case

Another feature of the case

41. Before parting, we may also point out that suggestions of theappellant about such transactions with involvement of multiple partieshad undergone thorough scrutiny by the concerned CTO and significantly,the suggestions about such quadripartite agreements and arrangementswere found to be rather false in relation to at least two of the allegedend-buyers, where one of the end-buyer firm[21] denied having receivedthe goods in question or even knowing the appellant; and the other end-buyer firm[22] was not even found at the given address. As noticedhereinbefore, the overall dealings indicate that the attempt on the part ofthe appellant had only been to distort the facts and by alleging multipletransactions, to somehow avoid the operation of law relating to CentralSales Tax. Such attempt has rightly met with its disapproval at the handsof the CTO and the High Court. We have no hesitation in endorsing theirviews.

21 M/s. Pine Exporters, New Delhi, the alleged end-buyer in third and fourth transactionsin the assessment order dated 18.05.2010 (vide paragraphs 10.3, 11.1 and 11.2 supra)22 M/s. Esskay Impex, New Delhi, the alleged end-buyer in fifth and sixth transactionsin the assessment order dated 18.05.2010 (vide paragraphs 10.4, 11.1 and 11.2 supra)

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AConclusion and directions

42. For what has been discussed hereinabove, we are clearly ofthe view that the claimed exemption under Section 5(2) of the CST Acthas rightly been denied to the appellant and the High Court has beenjustified in dismissing the writ petitions filed by the appellant. The HighBCourt has yet been considerate and gave time to the appellant to submitC-Forms for availing the benefit of concessional rate of tax. No case forinterference is made out.

43. Lastly, we may observe that in terms of the orders passed inthese appeals, the appellant has deposited an amount of Rs. 7,07,325/-C(rupees seven lakhs seven thousand three hundred and twentyfive) withthe respondent.As these appeals are being dismissed, the respondentshall be entitled to adjust the same against the dues of the appellant.

44. In the result, these appeals fail and are dismissed with costsand with the observations foregoing.

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Devika Gujral

Appeals dismissed.

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