2020 INSC 0531
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7863 OF 2009
Nirmal Kumar Parsan      … Appellant
Versus
Commissioner of Commercial Taxes & Ors.     …Respondents
WITH
CIVIL APPEAL NO. 7864 OF 2009
Parsan Brothers and Anr.      ... Appellants
Versus
Assistant Commissioner of Commercial Taxes & Ors.   ... Respondents
J U D G M E N T
A. M. KHANWILKAR, J.
1. The  principal  question   involved  in  these  appeals  is  whether  the
subject   sales   (of   goods   imported   from   foreign   country   and   after
unloading   the   same   on   the   land­mass   of   the   State   of   West   Bengal,
kept   in   the   bonded   warehouse   without   payment   of   customs   duty)   to

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foreign   bound   ships   as   “ship   stores”   can   be   regarded   as   sale   within
the   territory   of   the   State   and   amenable   to   sales   tax   under   the   West
Bengal   Sales   Tax   Act,   1954   (for   short,   ‘the   1954   Act’)   or   the   West
Bengal Sales Tax Act, 1994 (for short, ‘the 1994 Act’).  
2. The   admitted   factual   position   in   the   present   cases   is   that   after
importing   foreign   made  cigarettes,  the   appellants  stored  the  same  in
the   customs  bonded  warehouse  within  the  land­mass of  the  State  of
West   Bengal   and   some   of  those  articles  were   sold  to   the   Master  of   a
foreign­going   ship   as   ship   stores,   without   payment   of   customs   duty.
Those goods were escorted to the stated ship under the supervision of
the officials of the Customs authority.
3. These   appeals   take   exception   to   the   judgment   and   order   of   the
High  Court  at  Calcutta  (for   short,  ‘the  High  Court’),  dated  16.8.2007
in   W.P.T.T.   Nos.   5/2007   and   6/2007   respectively,   whereby   it   had
upheld   the  decision  of   the   West   Bengal   Taxation   Tribunal   (for   short,
‘the   Tribunal’)   that   the   stated   sales   were   within   the   territory   of   the
State of West Bengal and amenable to sales tax.
4. Civil   Appeal   No.   7863/2009   emanates   from   the   assessment
order   passed   by   the   Commercial   Tax   Officer,   West   Bengal,   dated
13.3.1985   pertaining   to   assessment   period   –   1.4.1980   to   31.3.1981.

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The   assessing   officer   rejected   the   claim   for   exemption   from   payment
of sales tax in respect of the stated sales of imported cigarettes from
the   stock,   as   the   cigarettes   were   sold   to   outgoing   vessels   from   the
bonded  warehouse  within  the  land­mass of  the State of  West  Bengal
following the decision of the High Court in  M/s. Ranjit Shipping Pvt.
Ltd. & Anr. vs. State of West Bengal & Ors. 1
.  The authority found
that   it   was   not   a   sale   in   the   course   of   import   as   claimed   by   the
assessees   (appellants).     The   appellants   unsuccessfully   carried   the
matter   in   appeal   and   finally   in   revision   before   the   Tribunal,   which
came to be rejected on 30.3.2007.  Before the revisional authority, the
only contention pursued was that there was no sale within the State
of   West   Bengal   or   even   in   India   because   the   buyer   had   no   right   to
consume   the   goods   before   the   ship   crossed   the   territorial   Waters   of
India.   It was  urged by  the appellants before the revisional authority
that the process of import was not complete at the time of sale to the
foreign­going   ship   and   the   transaction   was   a   sale   in   the   course   of
import.     Resultantly,   the   sold   goods   were   not   taxable   under   the
concerned   West   Bengal   Sales   Tax   laws   because   the   goods   never
entered   the   local   area   of   the   State   of   West   Bengal,   crossing   the
customs   frontiers   of   India   as   defined   in   Section   2(ab)   of   the   Central
Sales Tax Act, 1956 (for short, ‘the CST Act’).  The Tribunal, however,
1   1980 SCC Online Cal 141 : (1980) 2 CHN 192

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held   that   the   sale   had   taken   place   on   the   land­mass   of   the   State   of
West Bengal and the sale was neither for import nor for export.   The
Tribunal   essentially   relied   upon   the   exposition   in   Madras   Marine
and   Co.   vs.   State   of   Madras 2
  to   reject   the   revision   filed   by   the
appellants   being   devoid   of   merits.     Feeling   aggrieved,   the   appellants
carried   the   matter   to   the   High   Court   by   way   of   a   writ   petition   being
W.P.T.T.   No.   5/2007,   which   came   to   be   rejected   by   the   Division
Bench   of   the   High   Court   whilst   upholding   the   view   taken   by   the
Tribunal as just and proper.
5. Civil   Appeal   No.   7864/2009   emanates   from   the   order   dated
22.10.2003   passed   by   the   Assistant   Commissioner   of   Commercial
Taxes   under   Section   65   of   the   1994   Act   pertaining   to   assessment
periods – 1.4.1999 to  31.3.2000, 1.4.2000 to  31.3.2001, 1.4.2001 to
31.3.2002   and   1.4.2002   to   31.3.2003.     The   claim   of   the   appellants
that   the  sales  in   question  were  in   the   course   of  import  on   high   seas
and   no   sales   tax   was   payable   thereon   came   to   be   rejected.     The
authority answered the claim as follows:­
“…..  
All the judicial edicts relevant and referred to were perused
and the documents produced by the dealer were examined.
His   Lordship   Hon’ble   West   Bengal   Taxation   Tribunal
passed   the   judgment   after   considering   all   the   grounds
taken by the dealer including the one for the position of the
2   (1986) 3 SCC 552

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law   after  introduction  of  the  section  2(ab)  in Central Sales
Tax   Act.     His   Lordship   Honourable   High   Court   of   Kolkata
did   not   express   even   a   mite  of  doubt   in   the   correctness   of
the impugned order of the Hon’ble Tribunal.  The order was
remanded   for   quantification   of   sales   in   dispute.     It   was
observed that, of the total goods imported and stored only a
portion   was   taken   out   for   sale   to   master   of   a   particular
ship.     From   the   same   warehouse   goods   for   sales   to   local
persons also were taken.  So the sold goods could not have
been   ascertained   and   appropriate   before   those   were   taken
out   of   the   bonded   warehouse.     The   risk   in   the   goods   was
transferred   at   that   time   and   at   that   place   only.     It   might
have so happened that the Customs authority took custody
of   the   goods   for   preventing   loss   of   its   own   revenue .     No
such   sale   could   have   been   one   in   the   course   of   import
because the sale did not occasion the import.   None of
those was export because the goods were not supposed
to   enter   into   the   territory   of   another   country   in   the
form those were dispatched.   The analogy of sales from
duty­free   shops   was   irrelevant.     For,   it   always   remains
on   the   other   side   customs   frontier   and   so   the   risk   is
transferred before crossing of the frontier .
Thus there was no gainsay that sales of goods to masters of
ships were sales in the state and were taxable.   The dealer
was   asked   to   pay   tax   on   such   sales   and   revise   the   return
for   the   years   yet   to   be   assessed.     The   assessing   authority
was   requested   to   revise   if   necessary,   assessments   not
impugned.     The   appellate   and   revisional   authorities   were
requested to treat the tax payable on such sale as admitted
one.
…..”
(emphasis supplied)
6. Feeling   aggrieved,   the   appellants   resorted   to   revision   before   the
Tribunal,   which   came   to   be   rejected   following   the   decision   of   the
Tribunal   passed   on   the   same   date   i.e.   30.3.2007   in   case   of   the
companion appeal.  The appellant carried the matter by way of a writ
petition   being   W.P.T.T.   No.   6/2007   before   the   High   Court,   which
came   to   be   dismissed   by   the   High   Court,   upholding   the   decision   of

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the   authority,   which   had   held   that   the   sales   in   question   would   be
amenable to sales tax under the 1994 Act.
7. The thrust of the argument of the appellants in these appeals is
that the process of import was not complete at the time of sale of the
goods in question to the foreign­going ship and the transaction of sale
was “in the course of import”, for which reason it was not amenable to
sales tax and in fact, the State would have no authority to levy such
tax.   To buttress this submission, reliance was placed on Article 286
of the Constitution of India providing for restrictions as to imposition
of  tax on  the sale or  purchase of goods and on  Section  5 of  the CST
Act, in particular sub­Section (2) thereof, to contend that the sales in
question shall be deemed to have taken place in the course of import
of   goods   in   the   territory   of   India.     Reliance   was   placed   on   the
Constitution   Bench   decision   of   this   Court   in   J.V.   Gokal   &   Co.
(Private)   Ltd.   vs.   Assistant   Collector   of   Sales­Tax   (Inspection)   &
Ors. 3
,   which   had   followed   the   exposition   in   State   of   Travancore­
Cochin & Ors. vs. Shanmugha Vilas Cashew Nut Factory, Quilon
&   Ors. 4
.     Relying   on   the   definition   of   expression   “crossing   the
customs   frontiers   of   India”   in   Section   2(ab)   of   the   CST   Act,   of
“customs   area”   in   Section   2(11)   and   of   “customs   station”   in   Section
3   (1960) 2 SCR 852 : AIR 1960 SC 595
4   (1954) SCR 53 : AIR 1953 SC 333

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2(13)  of   the  Customs  Act,   1962  (for   short,  ‘the   Customs   Act’),   it  was
urged that crossing the customs frontiers means crossing the limits of
the   customs   station   including   crossing   the   area   in   which   imported
goods   or   exported   goods   are   ordinarily   kept   before   the   clearance   by
the Customs authorities.  Reliance was also placed on the decision in
Minerals   &   Metals   Trading   Corporation   of   India   Ltd.   vs.   Sales
Tax Officer & Ors. 5
, which has had occasion to construe Section 5 of
the CST Act.   It was then urged that the goods in question were kept
for   warehousing   and   a   declaration   was   given   by   the   appellants   that
the   said   goods   would   be   exported   to   foreign­going   vessels   as   ship
stores   in   terms   of   Section   88   of   the   Customs   Act.     The   appellants
have   adverted   to   Sections   69,   85   and   88   of   the   Customs   Act   to
contend   that   the   stated   goods   could   be   exported   to   a   place   outside
India without payment of import duty and until import duty was paid,
the import thereof cannot be said to be complete.   Reliance was then
placed on the decision in  Indian Tourist Development Corporation
Limited   vs.   Assistant   Commissioner   of   Commercial   Taxes   &
Anr. 6
, which according to the appellants, applied on all fours, as even
in that case, the goods were kept in the bonded warehouses and then
supplied   to   duty­free   shops,   which   transaction   has   been   extricated
5   (1998) 7 SCC 19
6   (2012) 3 SCC 204

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from the applicability of sales tax payable to the State on the ground
that the goods had not crossed the customs frontiers and the sale was
deemed to have taken place in the course of import of goods into the
territory of India.  According to the appellants, the finding recorded by
the   authorities   below   which   commended   to   the   High   Court,   was
completely in the teeth of the aforesaid decision.  The appellants have
distinguished the decision in   Madras Marine   (supra) on the premise
that   in   that   case   the   goods   were   intended   for   re­export   only   and   in
that context, it was held that there was a necessity of a destination in
a foreign country.  Moreover, the said decision has not considered the
efficacy of Section 2(ab) of the CST Act nor noticed the dictum in  J.V.
Gokal   (supra),   which   dealt   with   the   case   of   import/‘in   the   course   of
import’.     It   was   urged   that   the   decision   in   J.V.   Gokal   (supra)   had
been followed in a recent decision in   State of Kerala & Ors. vs. Fr.
William Fernandez & Ors. 7
.  It was further urged that the dictum in
Coffee   Board,   Bangalore   vs.   Joint   Commercial   Tax   Officer,
Madras   &   Anr. 8
  is   distinguishable   and   inapplicable   to   the   fact
situation of the present case and more so, may have no bearing after
the   amendment   of   1976   to   Section   5   by   insertion   of   sub­Section   (3)
therein,  which  opens  with   non­obstante   clause  and  provides that  the
7   2017 SCC Online SC 1291 : (2017) 12 SCALE 463
8   (1969) 3 SCC 349

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last   sale   or   purchase   of   any   goods   preceding   the   sale   or   purchase
occasioning   the   export   of   those   goods   out   of   the   territory   of   India,
shall  also  be  deemed to  be  in  the course of  such export,  if such  last
sale   or   purchase   took   place   after   and   was   for   the   purpose   of
complying   with   the   agreement   or   order   for   or   in   relation   to   such
export.     Emphasis   was   placed   on   the   objects   and   reasons   of   the
Amendment   Act.     In   substance,   it   was   urged   that   the   stated   sales
were   in   the   course   of   import   and   could   not   be   subjected   to   levy   of
sales tax by the State under the State legislation.
8. Per contra, the respondents would urge that the authorities had
considered   all   aspects   of   the   matter   and   after   due   evaluation   of   the
evidence before it, justly concluded that the stated sales were neither
in the course of import nor export and had taken place on the land­
mass   of   the   State   of   West   Bengal   and   thus,   amenable   to   sales   tax
under   the   1954   Act   and   the   1994   Act,   as   the   case   may   be.     It   was
urged   that   it   is   an   admitted   position   that   the   goods   were   kept   in
bonded warehouses on the land­mass of the State of West Bengal and
were sold to the Master of a foreign­going ship as ship stores thereat.
It   was   urged   that   the   expression   “crossing   the   customs   frontiers   of
India”   has   already   been   defined   in   the   CST   Act   and   limits   its
application to area of a “customs station”, as defined in the Customs

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Act   to   mean   any   customs   port,   customs   airport   or   land   customs
station.     In   other   words,   the   expression   “crossing   the   customs
frontiers   of   India”   is   exhaustive   and   would   not   include   the   bonded
warehouses,   where   the   stated   goods   were   kept   to   be   sold   to   the
Master of a foreign­going ship as ship stores.  It was urged that being
a   taxation   statute,   strict   interpretation   should   be   offered   to   this
definition   as   expounded   in   Commissioner   of   Customs   (Import),
Mumbai   vs.   Dileep   Kumar   and   Company   &   Ors. 9
.     It   was   further
urged that the stated sales of goods by no stretch of imagination can
qualify   the   expression   “in   the   course   of   import   of   goods   into   the
territory   of   India”,   as   is   contended   by   the   appellants.     For   that,   the
goods   must   actually   be   imported   into   the   territory   of   India   and   sale
must   be   a   single   sale,   which   itself   causes   the   import   or   is   in   the
progress or process of import.   It was urged that the authorities had
rightly   opined   that   there   was   sale   within   the   State   of   West   Bengal;
whilst   rejecting   the   claim   of   the   appellant(s)   that   merely   because
buyer had no right to consume the goods in question before the ship
had   crossed   the   territorial   Waters   of   India,   that   would   make   no
difference   because   the   sale   was   complete   by   appropriation   of   the
goods   in   the   bonded   warehouse   itself.     Similarly,   the   fact   that
customs   duty   was   not   paid   on   the   stated   goods   would   be   of   no
9   (2018) 9 SCC 1

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consequence.  It was urged that the appellants have, for the first time,
raised a  new  plea that they  had filed declaration.    No such plea was
taken   before   the   concerned   authority   nor   any   document   or   evidence
was   produced   in   support   thereof   for   the   relevant   assessment
period(s).     The   appellants,   therefore,   cannot   be   permitted   to   pursue
this   contention.     Thus,   the   appeals   be   confined   to   the   plea   taken
before   the   authorities   below   that   the   stated   sales   were   not   effected
within   the   territory   of   the   State   of   West   Bengal   or   in   India.     The
respondents have placed reliance on the decisions in   Burmah Shell
Oil   Storage   and   Distributing   Co.   of   India   Ltd.   &   Anr.   vs.
Commercial   Tax   Officer   &   Ors. 10
,   Coffee   Board   (supra)   and
Madras Marine  (supra) to contend that the issue is answered against
the   appellants.     The   respondents   have   distinguished   the   decision
relied   upon   by   the   appellants   in   Indian   Tourist   Development
Corporation   (supra).     It   was   urged   that   the   doctrine   of   Unbroken
Package   evolved   by   American   Courts   has   no   application   in   India,   as
expounded   in   Fr.   William   Fernandez   (supra).     It   was   thus   urged
that the taxable event had occurred on the appropriation of goods at
the   bonded   warehouse   itself,   which   was   within   the   territory   of   the
State   of   West   Bengal.     To   buttress   this   submission,   reliance   was
10   (1961) 1 SCR 902 : AIR 1961 SC 315

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placed on  Kiran Spinning Mills vs. Collector of Customs 11
, wherein
it has been held that the taxable event would be the day of crossing of
customs barrier  and  not the date  when  the goods  landed in  India or
had entered the territorial Waters.   The respondents would urge that
the appeals are devoid of merits and be accordingly dismissed.
9. We have heard Mr. Siddharth Bhatnagar, learned senior counsel
and   Mr.   Joydeep   Mazumdar,   learned   counsel   appearing   for   the
appellants   and   Ms.   Madhumita   Bhattacharjee,   learned   counsel
appearing for the respondents.  
10. As noticed from the finding of fact recorded by the authorities, it
is not in dispute that after importing the stated goods, the appellants
stored the same in the bonded warehouse within the land­mass of the
State   of   West   Bengal   and   some   of   the   articles   were   then   sold   to   the
Master   of   a   foreign­going   ship   as   ship   stores,   without   payment   of
customs duty thereon.  The question is: whether the sales in question
would   qualify   the   expression   “sale   in   the   course   of   import”?     The
phrase “sale in the course of import” would constitute three essential
features – (i) that there must be a sale; (ii) that goods must actually be
imported and (iii) that the sale must be part and parcel of the import.
The factual matrix in the present case clearly depicts that the sales in
11   (2000) 10 SCC 228

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question   would   not   cause   import   of   the   stated   goods.     Instead,   it
would   result   in   taking   away   the   goods   (after   being   unloaded   on   the
land­mass   of   the   State   of   West   Bengal)   on   the   ongoing   ship   as   ship
stores   outside   the   territory   of   Indian   Waters   for   being   consumed   on
the   ship   and   not   for   export   to   another   destination   as   such.     The
appellants   have   advisedly   not   pursued   the   argument   that   the   stated
sales   would   result   in   an   export   or   would   be   in   the   course   of   export.
For,   such   argument   has   been   rejected   by   this   Court   in   Madras
Marine  (supra).  
11. Concededly, the principle underlying the exposition in the above
referred   reported   decision   would   apply   proprio   vigore   for   considering
the argument as to whether the stated sales can be regarded as sale
in   the   course   of   import   as   such.     The   two­Judge   Bench   in   Madras
Marine   (supra) had considered the decision of Constitution Bench in
Burmah   Shell   (supra).     The   Court   noted   the   dictum   of   the
Constitution Bench to the effect that in order to exclude the taxation
by   the   State,   the   appellants   had   to   prove   that   there   was   some   other
State,   where   the   goods   could   be   said   to   have   been   delivered   as   a
direct result of the sale for the purpose of consumption in that other
State   and   as   they   failed   to   do   so,   the   goods   loaded   on   board   of   an

14
aircraft   for   consumption   though   taken   out   of   India,   was   not   export
since   it   had   no   destination,   where   it   can   be   said   to   have   been
imported   and   so   long   as   it   did   not   satisfy   that   test,   it   could   not   be
said that  the sale was in the course of export.   Besides noticing  this
dictum   of   the   Constitution   Bench,   the   Court   also   adverted   to   the
decision   in   State   of   Kerala   &   Ors.   vs.   Cochin   Coal   Company
Ltd. 12
, wherein it was held that the concept of export in Article 286(1)
(b) of the Constitution postulates the existence of two termini as those
between   which   the   goods   were   intended   to   move   or   between   which
they   were   intended   to   be   transported   and   not   a   mere   movement   of
goods  out   of  the  country  without  any  intention  of  their  being   landed
in specie  in some foreign port.  Additionally, the Court also extensively
adverted   to   the   decision   of   the   Andhra   Pradesh   High   Court   in
Fairmacs   Trading   Co.   vs.   The   State   of   Andhra   Pradesh 13
  and
approved the same dealing with the similar argument.  The Court also
noted   and   approved   the   decision   of   the   Madras   High   Court   in
Fairmacs  Trading  Co.  vs.   The  State  of  Tamil  Nadu 14
.   The Court
in paragraphs 19 to 21 and 25 to 28 observed as under:­
“19.     The   correct   position,   so   far   as   the   facts   of   the   present
case   are   concerned,   in   our   opinion,   has   been   laid   in   the
decision of Burmah Shell Oil Storage and Distributing Co. of
12  (1961) 2 SCR 219 : AIR 1961 SC 408
13   (!975) 36 STC 260 (AP)
14   (1978) 41 STC 157 (Mad)

15
India   Ltd.   v.   C.T.O.   This   Court   observed   at   page   781   as
follows:
“ While   all   exports   involved   a   taking   out   of   the
country,   all   goods   taken   out   of   the   country   cannot
be   said   to   be   exported.   The   test   is   that   the   goods
must   have   a   foreign   destination   where   they   can   be
said   to   be   imported .   It   matters   not   that   there   is   no
valuable   consideration   from   the   receiver   at   the
destination   end.   If   the   goods   are   exported   and   there
is   sale   or   purchase   in   the   course   of   that  export   and
the   sale   or   purchase   occasions   the   export   to   a
foreign   destination,   the   exemption   is   earned .
Purchases   made   by   philanthropists   of   goods   in   the
course of export to foreign countries to alleviate distress
there, may still be exempted, even though the sending of
the   goods   was   not   a   commercial   venture   but   a
charitable one.   The  crucial   fact  is  the   sending   of  the
goods   to   a   foreign   destination   where   they   would   be
received as imports .”
20.     The   appellants   in   that   case   dealt   in   petroleum   and
petroleum   products   and   carried   on   business   at   Calcutta.
They   had   maintained   supply   depots   at   Dum   Dum   Airport
from   which   aviation   spirit   was   sold   and   delivered   to   aircraft
proceeding   abroad   for   their   consumption.   The   question   was
whether   these   supplies   to   the   aircraft   which   proceeded   to
foreign   countries   were   liable   to   sales   tax   under   the   Bengal
Motor   Spirit   Sales   Taxation  Act,   1941.   The   contention   of   the
appellants in that case was that such sales were made in the
course of export  of such aviation spirit out  of the territory of
India,  that  they   took  place  outside  the State  of  West  Bengal,
that   inasmuch   as   aviation   spirit   was   delivered   for
consumption   outside   West   Bengal,   the   sales   could   not   fall
within   the   Explanation   to   clause   (1)( a )   of   Article   286   as   it
then stood. It was held by this Court that in order to exclude
the taxation by  the State  of West  Bengal,  the  appellants had
to   prove   that   there   was   some   other   State   where   the   goods
could be said to have been delivered as a direct result of the
sale   for   the   purpose   of   consumption   in   that   other   State   and
that   as   they   failed   to   do   so,   the   aviation   spirit   loaded   on
board an aircraft for consumption though taken out of India,
was  not   exported  since   it   had   no   destination,   where   it   could
be   said   to   be   imported   and   so   long   as   it   did   not   satisfy   that
test,   it   could   not   be   said   that   the   sale   was   in   the   course   of
export. It was further held that aviation spirit was sold for the
use   of   aircraft   and   the   sale   was   not   even   for   the   purpose   of
export   and   all   the   elements   of   sale   including   delivery   and
payment   of   price   took   place   within   the   State   of   West   Bengal
and the sales were complete within the territory of that State.

16
The   customs   barrier   did   not   set   a   terminal   limit   to   the
territory   of   West   Bengal   for   sales   tax   purpose.   The   sale
beyond the customs barrier was still a sale in fact in the State
of West Bengal.
21.       The   ratio   of   this   decision   would   be   applicable   to   the
facts and circumstances of this case. It was rightly urged that
the   appropriation   of   goods   took   place   in   the   State   of   Tamil
Nadu   when   the   goods   were   segregated   in   the   bonded
warehouse to be delivered to the foreign going vessels. It was
not a case of export as there was no destination for the goods
to   a   foreign   country.   The   sale   was   for   the   purpose   of
consumption   on   board   the   ship.   It   was   not   as   if   only   on
delivery   on   board   the   vessel   that   the   sale   took   place.   The
mere   fact   that   shipping   bill   was   prepared   for   sending   it   for
custom   formalities   which   were   designed   to  effectively   control
smuggling   activities   could   not   determine   the   nature   of   the
transaction   for   the   purpose   of   sales   tax   nor   does   the
circumstances   that   delivery   was  to  the   captain   on   board  the
ship   within   the   territorial   waters   make   it   a   sale   outside   the
State of Tamil Nadu.
xxx xxx xxx
25.       In   the   case   before   the   Andhra   Pradesh   High   Court   in
Fairmacs   Trading   Company   v.   State   of   A.P.,   the   petitioner
imported   ship­stores   from   foreign   countries,   kept   these   in
bonded   warehouses   of   the   customs   department   without   the
levy of customs duty and later on sold and delivered to ships'
masters   for   consumption   abroad   the   ship   after   crossing   the
port   boundaries.   On   the   question   whether   the   sales   were
outside the State or in the course of export and therefore not
liable   to   tax   under   the   Andhra   Pradesh   General   Sales   Tax
Act, 1957, it was observed by the Andhra Pradesh High Court
that the goods were specific and ascertained and were within
the   State   when   the   contract   of   sale   took   place   and   therefore
the   requirements   of   Section   4(2)(a)   of   the   Central   Sales   Tax
Act,   1956   were   fully   satisfied   and   the   sales   must   be   said   to
have taken place inside the State; but as the goods sold were
meant   for   consumption   during   voyage   and   they   had   no
destination   in   any   foreign   country   where   they   could   be
received as imports, the sales were not sales in the course of
exports. It was further held that mere movement of goods out
of the country following a sale would not render the sale, one
in   the   course   of   export   within   Article   286(1)(b)   of   the
Constitution of India. Before a sale can be said to be a sale in
the   course   of   export,   the   existence   of   two   termini   between
which the goods are intended to move or to be transported is
necessary.
26.      The Madras High Court in the case of   Fairmacs Trading
Co.   v.   State   of   T.N.   was   dealing   with   an   assessee,   who   was   a

17
dealer   in   ship's   stores   and   was   also   doing   business   as   ship
chandlers   and   who   imported  goods  from   abroad  for  the   pur ­
pose   of   supplying   them   either   to   foreign­going   vessels   or   to
diplomatic personnel. These goods were received and kept  in
the   customs   bonded   warehouse   and   were   cleared   under   the
supervision   of   the   customs   authorities   whenever   these   were
sold   by   the   assessee.   In   respect   of   supplies   of   specific   goods
made   to   certain   ships   located   in   the   Madras   harbour,   pur ­
suant to orders placed by the Master of the ship or other offi ­
cers   working   in   the   ship,   the   transportation   of   the   goods   to
the ship was effected in such a manner as to ensure that the
bonded goods, which had not paid any duty, did not enter the
local   market.   The   delivery   receipt   sent   along   with   the   goods
by the assessee was signed by an officer of the ship in token
of  having   received  the  goods  in good  condition.  The  question
that   arose  for   consideration  was  whether   the   sale  took  place
within   the   State   of   Tamil   Nadu   and   liable   to   be   taxed   under
the   Tamil   Nadu   General   Sales   Tax   Act,   1959.   It   was   held   ( i )
that   there  was  nothing   to  show   in  the   communications   from
the ship that the goods had necessarily to be supplied only in
the   ship.   It   was   open   to   the   officers   working   in   the   ship   to
come   and   take   delivery   of   the   goods   in   which   event   the   sale
would be a local sale. Therefore, assuming that the territorial
waters did not form part of the State of Tamil Nadu, as there
was   nothing   in   the   contemplation   of   the   contracting   parties
that the goods were to be moved from one State to another, it
was   held   that   it   was   not   possible   to   take   the   view   that   the
sales were inter­State sales; and ( ii ) that the assessee was not
selling   specific   or   ascertained   goods,   because   the   goods
formed   part   of   a   larger   stock   within   the   bonded   warehouse
and   had,   therefore   to   be   separated   and   appropriated   to   the
contract as and when orders were placed by the officers of the
ship   by   description.   Therefore,   the   sales   were   local   sales   in
view of the specific provision of Section 4(2)( b ) of the Central
Sales Tax Act, 1956, read with Section 2( n ), Explanation 3 of
the   Act   (Tamil  Nadu   General   Sales   Tax  Act,   1959),   and   were
accordingly   taxable   under   the   Act.   The   court   did   not   find   it
necessary to consider the question whether the territory cov ­
ered by the territorial waters formed part of the State of Tamil
Nadu or not.    
27.       Attention   of   the   Madras   High   Court   was   drawn   to   the
decision   of   Andhra   Pradesh   High   Court   in   Fairmacs   Trading
Co.   v.   State   of   A.P.     The   Madras   High   Court   did   not   examine
the question in detail in the view it took.  
28.   In   so   far   as   the   High   Courts   of   Andhra   Pradesh   and
Madras   in   the   said   two   decisions   held   that   sales   took   place
within the State, we are in agreement.”
(emphasis supplied)

18
The Court finally concluded in paragraphs 36 and 37 as follows:­
“36. The short question, therefore, that arises in all these
matters   is   whether   sale   of   the   goods   in   question   took   place
within   the   territory   of   Tamil   Nadu.   In   these   cases   sale   took
place   by   appropriation   of   goods.   Such   appropriation   took
place   in   bonded   warehouse.   Such   bonded   warehouses   were
within   the   territory   of   State   of   Tamil   Nadu.   Therefore,   under
sub­section   (2),   sub­clauses   (a)   and   (b)   of   section   4   of   the
Central   Sales­Tax   Act,   1956,   the   sale   of   goods   in   question
shall be deemed to have taken place inside the State because
the contract of sale of ascertained goods was made within the
territory   of   Tamil   Nadu   and   furthermore   in   case   of   unascer ­
tained   goods   appropriation   had   taken   place   in   that   State   in
terms  of  clause  (b) of sub­section (2)  of   section 4   of  the  Cen ­
tral   Sales   Tax  Act,   1956.   There   is   no  question   of   sale   tak ­
ing place in course of export or import under   section 5   in
this case. From  that  point of view  the amendment intro ­
duced by Act 103 of 1976 by incorporating in clause (ab)
of   section   2   of   the   Central   Sales   Tax   Act,   1956   does   not
affect   the   position .   In   this   connection   reference   may   be
made from the observations of this Court in Burmah   Shell Oil
Storage   Ltd.,   where   it   has   been   held   that   customs   barrier
does   not   set   a   terminal   limit   to   the   territory   of   the   State   for
sales­tax purposes. Sale,  therefore, beyond  the  customs bar ­
rier   is   still   a   sale   within   the   State.   The   amendment   intro ­
duced in   section 2   by the Act 103 of 1976 does not affect
the   position   because   the   custom   station   is   within   the
State of Tamil Nadu. That question might have been rele ­
vant if we were considering the case of sale by the trans ­
fer   of   documents   of   title   to   the   goods   as   contemplated
by   section   5   of   the   Central   Sales­Tax  Act.   In  the  premises
we   are   unable   to   accept   the   contentions   urged   on   behalf   of
the   appellants   in   the   civil   appeals   and   also   the   contentions
urged in the writ petition.
37. In the view  we  have taken,  it  is not  necessary  to ex ­
press   our   opinion   on   the   arguments   whether   introduction   of
clause (ab) of section 2 of Central Sales Tax Act by Act 103 of
1976 is prospective or not. We have, however, noted the sub ­
missions. That question, in the light of our aforesaid views, is
not material for the present controversy.”
(emphasis supplied)
12. Applying   the   principle   underlying   the   said   decision,   it   is   clear
that   the   sale   to   be   in   the   course   of   import,   must   be   a   sale   of   goods

19
and   as   a   consequence   of   such   sale,   the   goods   must   actually   be
imported   within   the   territory   of   India   and   further,   the   sale   must   be
part   and   parcel   of   the   import   so   as   to   occasion   import   thereof.
Indeed,   for   the   purposes   of   Customs   Act,   only   upon   payment   of
customs   duty   the   goods   are   cleared   by   the   Customs   authorities
whence   import   thereof   can   be   regarded   as   complete.     However,   that
would be no impediment for levy  of sales tax by the State concerned
in whose territory the goods had already landed/unloaded and kept in
the   bonded   warehouse.     For   seeking   exemption,   it   is   necessary   that
the   goods   must   be   in   the   process   of   being   imported   when   the   sale
occurs   or   the   sale   must   occasion   the   import   thereof   within   the
territory of India.   The word “occasion” is used to mean “to cause” or
“to be the immediate cause of”.   In the present case, the stated sales
in   no   way   occasioned   import   of   the   goods   into   the   territory   of   India.
For,   the   goods   were   taken   away   by   the   foreign­going   ship   as   ship
stores   for   being   consumed   after   the   goods   had   crossed   the   customs
frontiers/Indian Waters.  
13. Indubitably,   the   sale   which   is   to   be   regarded   as   exempt   from
payment of sales tax, is a sale which causes the import to take place
or   is   the   immediate   cause   of   the   import   of   goods.     The   appellants
having   failed   to   establish   that   the   stated   goods   would   be   actually

20
imported   within   the   territory   of   India   and   had   not   crossed   the
customs   station,   cannot   contend   that   the   sale   was   in   the   course   of
import   as   such   within   the   meaning   of   Section   5   read   with   Section
2(ab) of the CST Act.  Moreover, there is no direct linkage between the
import of the goods and the sale in question to qualify as having been
made in the process or progress of import.  We may usefully advert to
Section 5 of the CST Act, which reads thus: ­
“ 5. When  is  a  sale   or  purchase  of  goods  said   to
take place in the course of import or export .­(1)  A
sale   or   purchase   of   goods   shall   be   deemed   to   take
place  in  the  course  of  the   export   of   the   goods   out   of
the   territory   of   India   only   if   the   sale   or   purchase
either   occasions   such   export   or   is   effected   by   a
transfer   of   documents   of   title   to   the   goods   after   the
goods have crossed the customs frontiers of India.
(2) A sale or purchase of goods shall be deemed
to   take   place   in   the   course   of   the   import   of   the
goods into the territory of India only if the sale or
purchase   either   occasions   such   import   or   is
effected by a transfer of documents of title to the
goods before the goods have crossed the customs
frontiers of India.
(3) Notwithstanding   anything   contained   in   sub­
section   (1),   the   last   sale   or   purchase   of   any   goods
preceding   the   sale   or   purchase   occasioning   the
export   of   those   goods   out   of   the   territory   of   India
shall   also   be   deemed   to   be   in   the   course   of   such
export, if such last sale or purchase took place after,
and   was   for   the   purpose   of   complying   with,   the
agreement or order for or in relation to such export.”
(emphasis supplied)
14. The crucial question is whether the stated sales can be deemed
to   have   taken   place   in   the   course   of   import   of   the   goods   into   the
territory   of  India  before  the   goods  had   crossed   the  customs  frontiers

21
of India, which is the core requirement of Section 5(2) of the CST Act.
The   expression   “crossing   the   customs   frontiers   of   India”   has   been
defined in Section 2(ab) of the CST Act, which reads thus:­
“2. Definitions.­   In   this   Act,   unless   the   context   otherwise
requires,­
xxx xxx xxx
(ab) “crossing   the   customs   frontiers   of   India”   means
crossing   the   limits   of   the   area   of   a   customs   station   in
which   imported   goods   or   export   goods   are   ordinarily
kept before clearance by customs authorities.
Explanation.­     For   the   purposes   of   this   clause,
“customs station” and “customs authorities” shall have
the same meanings as in the Customs Act, 1962 (52 of
1962).”
This   definition   refers   to   the   expression   “customs   station”,   which   in
turn,   refers   to   “customs   port”,   “customs   airport”   and   “land   customs
station”,   as   defined   in   the   Customs   Act.     We   may   usefully   refer   to
Sections   2(10),   2(11),   2(12),   2(13)   and   2(29)   of   the   Customs   Act,   as
applicable for the present cases, which read thus:­
“2. Definitions.­   In   this   Act,   unless   the   context   otherwise
requires.­
(10) “customs   airport”   means   any   airport   appointed
under clause (a) of section 7 to be a customs airport;
(11) “customs  area” means the area  of a  customs station
and   includes   any   area   in   which   imported   goods   or   export
goods   are   ordinarily   kept   before   clearance   by   Customs
Authorities;
(12) “customs   port”   means   any   port   appointed   under
clause (a) of section 7 to be a customs port   15
[, and includes a
15   Inserted by Act 11 of 1983, sec. 46 (w.e.f. 13-5-1983) – applicable to C.A. No. 7864/2009

22
place   appointed   under   clause   (aa)   of   that   section   to   be   an
inland container depot];
(13) “customs station” means any customs port, customs
airport or land customs station;
xxx xxx xxx
(29) “land   customs   station”   means   any   place   appointed
under clause (b) of section 7 to be a land customs station;”
In addition, we may also refer to Section 7 of the Customs Act, which
postulates   appointment   of   customs   ports,   airports   etc.     The   same
reads thus:­
“7. Appointment   of   customs   ports,   airports,   etc.­   The
Central   Government   may,   by   notification   in   the   Official
Gazette, appoint­
(a) the   ports   and   airports   which   alone   shall   be
customs   ports   or   customs   airports   for   the
unloading of imported goods and the loading of
export goods or any class of such goods;
16
[(aa) the   places   which   alone   shall   be   inland
container depots for the unloading of imported
goods   and   the   loading   of   export   goods   or   any
class of such goods];
(b) the   places   which   alone   shall   be   land   customs
stations for the clearance of goods imported or
to   be   exported   by   land   or   inland   water   or   any
class of such goods;
(c) the routes by which alone goods or any class of
goods specified in the notification may pass by
land or inland water  into or out of India, or to
or   from   any   land   customs   station   from   or   to
any land frontier;
(d) the ports which alone shall be coastal ports for
the carrying on of trade in coastal goods or any
class   of   such   goods   with   all   or   any   specified
ports in India.”
16   Inserted by Act 11 of 1983, sec. 47 (w.e.f. 13-5-1983) – applicable to C.A. No. 7864/2009

23
We  have  no hesitation  in  accepting  the  argument  of the respondents
that being a taxation statute, strict interpretation of these provisions
is   inevitable.     Going   by   the   definition   of   “customs   port”   or   “land
customs station” as applicable in the present cases, it is customs port
or land customs station area appointed by the Central Government in
terms   of   notification   under   Section   7.     It   is   not   the   case   of   the
appellants   that   the   bonded   warehouses,   where   the   goods   were   kept
and the stated sales took place by appropriation of the goods thereat,
were   within   the   area   notified   as   customs   port   and/or   land   customs
station under Section 7 of the Customs Act.  As the stated goods had
travelled   beyond   the   customs   port/land   customs   station   at   the
relevant   time,   in   law,   it   would   mean   that   the   goods   had   crossed   the
customs   frontiers   of   India   for   the   purposes   of   the   CST   Act.
Resultantly, the legal fiction created in Section 5(2) of the CST Act will
have no application.  
15. Notably,   the   expressions   “warehouse”   and   “warehoused   goods”
have   been   defined   in   the   Customs   Act   in   Sections   2(43)   and   2(44)
respectively.     As   per   the   applicable   provisions   at   the   relevant   time,
“Warehouse”  means  a   public  warehouse   appointed   under   Section   57
or   a   private   warehouse   licensed   under   Section   58.     “Warehoused
goods” means goods deposited in a warehouse.   As aforesaid, there is

24
nothing   to   indicate   that   the   bonded   warehouse,   where   the   stated
goods were kept by the appellants and eventually sold, formed part of
the customs port/land customs station.  If so, the legal fiction of sale
being deemed to have taken place in the course of import of the goods
into  the  territory  of  India  would  have  no  bearing  and  applicability  to
the present cases.
16. To get over  this position, emphasis was placed by  the appellant
on   the   exposition   in   the   Indian   Tourist   Development   Corporation
(supra),   which   had   considered   the   situation   where   the   goods   were
kept in  the  bonded warehouse and  were  made available  in the  duty­
free   shops   for   sale.     This   Court   opined   that   since   the   goods   were
supplied to  the  duty­free  shops situated  at  the International  Airport,
Bengaluru for sale, it cannot be said that the said goods had crossed
the customs frontiers of India.   We fail to understand as to how this
decision will be of any avail to the appellants.  For, the Court was not
dealing   with   a   situation   as   in   the   present   cases,   in   which   the   goods
had crossed the customs port/land customs station area and kept in
the  bonded warehouse, where the  sale by  appropriation  of the goods
was   effected.     Indeed,   in   paragraph   17   of   the   reported   decision,   the
Court in the facts of that case, has observed that when the goods are
kept in the bonded warehouse, it cannot be said that the said goods

25
had   crossed   customs   frontiers   of   India.     However,   the   Court   finally
answered   the   claim   of   the   appellants   therein   on   the   finding   that   the
liquor,   cigarettes,   perfumes   and   food   articles   were   sold   “at   the   duty­
free  shops”  at   the  International  Airport, Bengaluru,  for  which  no   tax
was   payable   by   the   appellants   as   the   goods   sold   at   the   duty­free
shops   were   sold   directly   to   the   passengers   and   even   the   delivery   of
goods took place at the duty­free shops before importing the goods or
before   the   goods   had   crossed   the   customs   frontiers   of   India.     The
issue considered in the said decision, therefore, was whether the sale
at the duty­free shops situated at the Bengaluru International Airport
would   attract   levy   of   sales   tax.     As   noticed   earlier,   the   definition   of
“customs   station”   clearly   refers   to   customs   airport   as   defined   in
Section 2(10) of the Customs Act.  As the duty­free shop is situated in
airport   area,   it   would   mean   that   the   sale   of   goods   at   the   duty­free
shops was deemed to have taken place in the course of import of the
goods   into   the   territory   of   India.     Thus   understood,   the   reported
decision under consideration is of no avail to the appellants.  
17. Even   the   exposition   of   the   Constitution   Bench   in   J.V.   Gokal
(supra)   that   a   sale   by   an   importer   of   goods   after   the   property   of   the
goods passed to him, either after the receipt of the documents of title
against payment or otherwise, to a third party by a similar process is

26
also a sale in the course of import, would equally have no bearing on
the   present   cases.     Inasmuch   as,   the   sale   of   goods   must   take   place
before   the   goods   had   crossed   the   customs   frontiers   of   India,   which
means   it   was   within   the   customs   port/land   customs   station   area.
Nothing   is   shown   by   the   appellants   herein   to   substantiate   that   the
subject   bonded   warehouse   came   within   the   customs   port/land
customs station area and moreso the  stated sales occasioned import
of the goods within the territory of India.  If so, the finding of fact and
conclusion   recorded   by   the   authorities   below,   which   commended   to
the High Court, is unexceptionable.
18. This   Court   in   K.   Gopinathan   Nair   and   Ors.   vs.   State   of
Kerala 17
  has   expounded   the   factors   to   be   reckoned   for   determining
whether   the   concerned   sale   or   purchase   of   goods   can   be   deemed   to
have taken place in the course of import. The relevant portion of the
aforesaid judgment reads thus:
“14. In   the   light   of   the   aforesaid   settled   legal   position
emerging from the Constitution Bench decisions of this Court
the   following   propositions   clearly   get   projected   for   deciding
whether   the   concerned   sale   or   purchase   of   goods   can   be
deemed to take place in the course of import as laid down by
Section 5(2) of the Central Sales Tax Act:
(1)  The sale or the purchase, as the case may be, must
actually take 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.
17 (1997) 10 SCC 1

27
(3) The   goods   must   have   entered   the   import   stream
when they are subjected to sale or purchase.
(4)  The import of the concerned goods must be effected
as   a   direct   result   of   the   sale   or   purchase   transaction
concerned.
(5)  The   course   of   import   can   be   taken   to   have
continued   till   the   imported   goods   reach   the   local   users
only   if   the   import   has   commenced   through   the
agreement   between   foreign   exporter   and   an
intermediary   who   does   not   act   on   his   own   in   the
transaction   with   the   foreign   exporter   and   who   in   his
turn does not sell as principal the imported goods to the
local users.
(6)  There   must   be   either   a   single   sale   which   itself
causes   the   import   or   is   in   the   progress   or   process   of
import   or   though   there   may   appear   to   be   two   sale
transactions   they   are   so   integrally   inter­connected   that
they   almost   resemble   one   transaction   so   that   the
movement   of   goods   from   a   foreign   country   to  India  can
be   ascribed   to   such   a   composite   well   integrated
transaction   consisting   of   two   transactions   dovetailing
into each other.
(7)  A   sale   or   purchase   can   be   treated   to   be   in   the
course   of   import   if   there   is   a   direct   privity   of   contract
between   the   Indian   importer   and   the   foreign   exporter
and   the   intermediary   through   which   such   import   is
effected merely acts as an agent or a contractor for and
on behalf of Indian importer.
(8)  The   transaction   in   substance   must   be   such   that
the   canalizing   agency   or   the   intermediary   agency
through  which  the  imports are  effected into India  so as
to reach the ultimate local users appears only as a mere
name lender through whom it is the local importer­cum­
local user who masquerades.”
19. It will also be useful to advert to paragraph 6 of  Kiran Spinning
Mills  (supra), which reads thus:
“6.     Attractive, as the argument is, we are afraid that we do
not find any merit in the same. It has now been held by this
Court in Hyderabad Industries Ltd. v. Union of India that for
the   purpose   of   levy   of   additional   duty   Section   3   of   the   Tariff
Act is a charging section. Section 3 sub­section (6) makes the
provisions   of   the   Customs   Act   applicable.   This   would   bring
into   play   the   provisions   of   Section   15   of   the   Customs   Act
which, inter alia, provides that the rate of duty which will be

28
payable  would  be   (sic   the   rate  in  force)  on   the   day   when   the
goods   are   removed   from   the   bonded   warehouse.   That   apart,
this Court  has held in Sea  Customs Act, SCR at  p. 803 that
in the case of duty of customs the taxable event is the import
of   goods   within   the   customs   barriers.   In   other   words,   the
taxable event occurs when the customs barrier is crossed. In
the   case   of   goods   which   are   in   the   warehouse   the   customs
barriers   would   be  crossed   when   they   are  sought   to   be   taken
out   of   the   customs   and   brought   to  the   mass   of   goods   in   the
country.   Admittedly   this   was   done   after   4­10­1978.   As   on
that   day   when  the  goods  were  so  removed  additional  duty  of
excise   under   the   said   Ordinance   was   payable   on   goods
manufactured   after   4­10­1978.   We   are   unable   to   accept   the
contention of Mr Ramachandran that  what has to be seen is
whether   additional   duty   of   excise   was   payable   at   the   time
when   the   goods   landed   in   India   or,   as   he   strenuously
contended,   they   had   crossed   into   the   territorial   waters.
Import being complete when the goods entered the territorial
waters   is   the   contention   which   has   already   been   rejected   by
this Court in Union of India v. Apar (P) Ltd. decided on 22­7­
1999.   The   import   would   be   completed   only   when   the
goods   are   to   cross   the   customs   barriers   and   that   is   the
time when the import duty has to be paid  and that is what
has been termed by this Court in Sea Customs case (SCR at
p.   823)   as   being   the   taxable   event.   The   taxable   event,
therefore,   being   the   day   of   crossing   of   customs   barrier,
and   not   on   the   date   when   the   goods   had   landed   in   India
or   had   entered   the   territorial   waters ,   we   find   that   on   the
date   of   the   taxable   event   the   additional   duty   of   excise   was
leviable   under   the   said   Ordinance   and,   therefore,   additional
duty   under   Section   3   of   the   Tariff   Act   was   rightly  demanded
from the appellants.”
(emphasis supplied)
20. A priori, for a sale or purchase to qualify as a sale or purchase in
course   of   import,   the   essential   conditions   are   that   such   sale   shall
occur before the goods had crossed the customs frontiers of India and
the   import   of   the   goods   must   be   effected   or   the   import   is   occasioned
due   to   such   sale   or   purchase.     In   the   present   case,   the   sales   in
question did not occasion import.

29
21. Arguendo , for sale or purchase of goods to be regarded as sale or
purchase in course of export, Section 5(1) of the CST Act provides for
the  following  conditions:  (i) the  sale or  purchase shall   occasion  such
export   or   (ii)   the   sale   or   purchase   shall   be   effected   by   a   transfer   of
documents   of   title   to   the   goods   after   the   goods   have   crossed   the
customs frontiers of India.
22. A Constitution Bench of this Court in   Md.   Serajuddin and Ors.
vs. State of Orissa 18
  has held that expression 'in the course' implies
not   only   a   period   of   time   during   which   the   movement   is   in   progress
but   postulates   a   connected   relation.     The   relevant   portion   of   the
judgment is extracted as under:
“18. …..   A   sale   in   the   course   of   export   predicates   a
connection between the sale and export. No single test can be
laid   as   decisive   for   determining   that   question.   Each   case
must   depend   upon   its   facts.   But   it   does   not   mean   that
distinction   between   transactions   which   may   be   called   sales
for export and sales in the course of export is not real.  Where
the   sale   is   effected   by   the   seller   and   the   seller   is   not
connected   with   the   export   which   actually   takes   place,   it
is a sale for export. Where the export is the result of sale,
the   export   being   inextricably  linked   up   with   sale   so   that
the   bond   cannot   be   dissociated   without   a   breach   of   the
obligations   arising   by   statute,   contract,   or   mutual
understanding   between   the   parties   arising   from   the
nature   of   the   transaction   the   sale   is   in   the   course   of
export.   In   the   Nilgiri   Plantations   case   (supra)   this   Court
found   that   the   sales   by   the   appellants   were   intended   to   be
complete without the export and as such it could not be said
18  (1975) 2 SCC 47

30
that   the   sales   occasioned   export.   The   sales   were   for   export
and not in the course of export.”
(emphasis supplied)
23. It   is   relevant   to   advert   to   the   definition   of   export   here.   Section
2(18) of the Customs Act defines export as follows:
“2.   Definitions.­   In   this   Act,   unless   the   context   otherwise
requires,­
xxx xxx xxx
(18)   ­   “export”,   with   its   grammatical   variations   and   cognate
expressions,   means   taking   out   of   India   to   a   place   outside
India .”
 (emphasis supplied)
24. In   the   present   case,   it   is   not   the   case   of   the   appellant   that   the
goods   in   question   were   being   exported.   Since   the   goods   are   to   be
consumed on the board of the foreign going ship and the same would
be consumed before reaching a destination, it does not fall under the
definition   of   ‘export’.     The   sale   cannot   qualify   as   a   sale   occasioning
export unless the goods reach a destination which is a place outside
India.   Further,   since   the   goods   have   been   sold   from   the   bonded
warehouse   and   had   crossed   the   customs   port/land   customs   station
prior   to   their   sale,   it   cannot   qualify   as   a   sale   in   course   of   export
within the meaning of Section 5(1) read with Section 2(ab) of the CST
Act.
25. In regard to the contention that declaration under Section 69 of
the   Customs   Act   was   made   by   the   appellant,   there   is   nothing   on

31
record   to   show   that   such   declaration   was   made   in   respect   of   the
goods   pertaining   to   subject   sale(s).     Even   otherwise,   the   benefit
extended under the Customs Act of waiver of customs duty cannot be
taken as waiver of sales tax under the relevant state and central laws.
Similarly,   insertion   of   sub­Section   (3)   in   Section   5   of   the   CST   Act   in
1976   does   not   affect   these   cases   because   the   bonded   warehouse
where   the   stated   sales   or   appropriation   of   the   goods   occurred   is
within the land­mass of the State of West Bengal and not shown to be
within the customs station area.
26. A priori, it must be held that the stated sales or appropriation of
goods   kept   in   bonded   warehouse   within   the   land­mass/territory   of
the State of West Bengal are neither in the course of import or export
and   more   so,   were   effected   beyond   the   customs   port/land   customs
station area.  Therefore, in law, it was a sale amenable to levy of sales
tax   under   the   1954   Act   and   the  1994   Act,  as   the   case   may   be,   read
with Section 4 of the CST Act.  As a result, these appeals must fail, as
we   find   no   infirmity   in   the   view   taken   by   the   authorities   below   and
which had justly commended to the High Court.

32
27. In view of the above, these appeals are dismissed with no order
as   to   costs.     Pending   interlocutory   applications,   if   any,   shall   stand
disposed of. 
................................., J.
     (A.M. Khanwilkar)      
................................., J.
      (Dinesh Maheshwari)   
New Delhi;
January 21, 2020.