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 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’). ? 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. 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. .Apex court held that

1
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
    2
    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.
    3
    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
    4
    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 Madras2
    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
    5
    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
    6
    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 TravancoreCochin & 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
    7
    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
    8
    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
    9
    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 landmass 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
    10
    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
    11
    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
    12
    placed on Kiran Spinning Mills vs. Collector of Customs11, 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
    13
    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 Pradesh13 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 Nadu14. 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.”
  12. 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.
  13. 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
  14. 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.
  15. 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 purpose 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, pursuant to orders placed by the Master of the ship or other officers 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 covered by the territorial waters formed part of the State of Tamil
    Nadu or not.
  16. 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.
  17. 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 unascertained goods appropriation had taken place in that State in
    terms of clause (b) of sub­section (2) of section 4 of the Central Sales Tax Act, 1956. There is no question of sale taking place in course of export or import under section 5 in
    this case. From that point of view the amendment introduced 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 barrier is still a sale within the State. The amendment introduced 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 relevant if we were considering the case of sale by the transfer 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.
  18. In the view we have taken, it is not necessary to express 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 submissions. That question, in the light of our aforesaid views, is
    not material for the present controversy.”
    (emphasis supplied)
  19. 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.
  20. 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 subsection (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)
  21. 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.
  22. 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.
  23. 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 dutyfree 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 dutyfree 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.
  24. 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.
  25. This Court in K. Gopinathan Nair and Ors. vs. State of
    Kerala17 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 importer­cumlocal user who masquerades.”
  26. 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
  27. 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)
  28. 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
  29. 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.
  30. A Constitution Bench of this Court in Md. Serajuddin and Ors.
    vs. State of Orissa18 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)
  31. 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)
  32. 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.
  33. 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.
  34. 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
  35. 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.