Ranjit Shipping P Ltd v. STATE OF WEST BENGAL — 1980 DIGILAW 374 (CAL)

JUDGMENT (1.) IN this Rule the petitioners challenge the imposition of certain levies under the taxes on Entry of Goods into the Calcutta metropolitan Areas Act, 1972 (hereinafter referred to as "the Act") and the Rules framed thereunder. (2.) ACCORDING to the petition, since the year 1971 the petitioner No. 1, of which the petitioner No. 2 is a Director, have been carrying on business in wine, liquors, beer, cigarettes, canned and bottled provisions as an importer for re-export by way of supply to foreign going vessels as various ships' stores and also to the diplomatic personnel and consular staff. Some time in the year 1973, the petitioner imported condensed milk from holland, the C. I. F. Value of which was Rs. 7500/ -. Under a mistake of law, the petitioner made an application in form IV to the assessing Officer Seaport Check Post and was assessed to an Entry Tax of Rs. 455/-under the Act. According to the petitioners, the goods which they imported from the foreign sellers were strictly for the purpose of re-export as ships' stores to foreign-going vessels and it could not be utilised used or consumed within the territorial limits of union of India. They would only be used by the crew and officers of the foreign-going vessels after the vessel had crossed the territorial limits of the country to the next port of call. According to the petition, is terms of Section 46 of the Customs Act, 1962 the petitioner filed a Bill of Entry in the usual course containing all the particulars of the goods to be imported by the petitioners including their county of origin and a further declaration that the goods covered by the Bill of Entry were meant for re-export only and are to be kept in the approved bonded warehouse. In the original petition it is stated/that the goods were kept under the direct supervision and control of the Customs authorities for onward dispatch to foreign-going vessels. In the petition it is stated that after the goods are placed on board the foreign-going vessels the Customs Officers sealed the same and the said goods could not be consumed till such time as the vessels leave the Indian territorial waters. As such it is contended that the act has no application to the entry of these goods into the Calcutta Metropolitan Area. As such it is contended that the act has no application to the entry of these goods into the Calcutta Metropolitan Area. (3.) AT the time of hearing of this application I felt that all the necessary facts with regard to the importation of these goods and their supply to the foreign-going vessels were not specifically stated in the original petition. As such, I granted leave to the petitioner to file a supplementary affidavit stating all the necessary particulars with regard to the impugned transactions. Pursuant to the leave granted by me, a (supplementary affidavit has been filed on behalf of the petitioners affirmed by one reginald Furtado on the 28th January, 1980. According to the deponent of the further, affidavit, he is an Ex-inspector of customs Department, Government of India. Having retired, he joined the petitioner No. 1 as one of its Principal Officers. In the further affidavit of Furtado the procedure for importation and supply of these goods have been specifically stated in the following terms :-" (a) The Master and/or Chief Steward of a foreign-going vessels in Calcutta Port requiring bonded stores for the sole use of officers and crew, places an order with the petitioner company for delivery of the stores on board the ship. The petitioners, on receiving the said order, certified by the master/chief steward process the requisite customs documents for submission before the Customs authorities in the Calcutta customs House. The petitioners also applied for the service of a Customs Officer for the release of the stores from their bonded warehouse. Since the bonded warehouse is under the control of Customs department, a Customs Officer is posted for the release of the stores. The Customs officer and the petitioners' representative proceed to the bonded warehouse. Then after sorting the stores, which are required for the said vessels they are taken out under the supervision of the Customs Officer. " (4.) THE bonded stores are then placed on a transport, belonging to the petitioners and escorted to the vessels by the Customs officer. The Master/chief Steward being intimated of the arrival of the bonded stores verifies the goods with the indent papers and orders the storing of the bonded stores in the locker of the vessel under the direction of the Customs Officer. The Master/chief Steward being intimated of the arrival of the bonded stores verifies the goods with the indent papers and orders the storing of the bonded stores in the locker of the vessel under the direction of the Customs Officer. After all the bonded stores are stored in bond-locker under the control and supervision of the customs Officer the locker is locked with the key in the possession of the Master. The Customs Officers, then places the customs' seal across the door of the locker, to ensure that, during the stay of the vessels at the Port and until it crosses the Indian territorial waters up to Sand-heads, the customs seal is not tampered with. As a results, the Officers of the ship cannot get access to the goods or deal with or dispose of the goods in any, manner until the ship crosses the Sand-heads and goes outside the territorial limits of India. The customs authorities, it was pointed out, have an arrangement of mobile checking of the locker so that it may not be unlocked within the territory of India. The Officers of the ship are allowed to break open the lock and seal after it crosses the territorial waters of India and have access to those goods for consumption. (5.) IT may be mentioned at this stage that with regard to the procedure of dealing with these goods, which I have mentioned above in Some detail, there was no serious dispute raised on behalf of the State of west Bengal. (6.) ON the above state of almost admitted facts, Mr. Gopal Chakraborty who appeared for the petitioner, contended that the Act has no application to the transactions with which we are concerned. Section 6 or the Act provides as follows : "save as otherwise provided in this chapter there shall be levied and collected for the purpose of this Act tax on the entry of several specified foods into the Calcutta metropolitan Area (for consumption, use or sale therein), from any place outside that area at such rates not exceeding the rate specified in the corresponding entry in column 3 of the Schedule as State Government may, by Notification, specify". Neither Mr. Arun Prokash Chatterjee nor Mr. Prabir Majumdar, who followed him on behalf of the respondents seriously contended that there was any question of use, or consumption within the Calcutta metropolitan area in the present case. Neither Mr. Arun Prokash Chatterjee nor Mr. Prabir Majumdar, who followed him on behalf of the respondents seriously contended that there was any question of use, or consumption within the Calcutta metropolitan area in the present case. In other words, the only question involved in the present case was whether there was "sale" within the Calcutta Metropolitan area within the meaning of Section 6 of the Act in the facts and circumstances of the present case. (7.) MR. Gopal Chakravarti appearing on behalf of the petitioners contended that in the facts and circumstances of the present case. Section 6 of the Act can have no manner. of application to the transactions which are the subject-matter of the present application. Since the expression ''sale" is not defined in the Act, Mr. Chakraborti in my view, rightly contended that we have to fall back upon the Sale of Goods Act, 1930 for ascertaining as to what constitutes sale. (8.) BEFORE I probe into this aspect of the matter, certain authorities Were relied upon by both parties which may be dealt with at this stage. Reference was made in this connection to a decision of the Andhra Pradesh High Court in the case of Fairmacs Trading Co.-vs- State of Andhra Pradesh reported in 36 S. T. C, 260. This was also a case of importation of ships' stores from a foreign country which were kept in bonded warehouses of the Customs department without the levy of Customs duty and later on sold, and delivered to ships masters for consumption aboard the ship after crossing the port boundaries. The nature of the transaction in the above mentioned case was very similar to the nature of the transactions in the present case. It may be mentioned at this stage that in 'the above mentioned case the Andhra Pradesh High court was only concerned with the question in the background of Sections 4 (2) and 5 of the Central Sales-Tax Act, 1956 and article 286 (1) (a) and (b) of the Constitution of India G. R. Ekbote, C. J held, inter alia as follows "it is common ground that clause (b) is inapplicable to the instant case. If clause (a) applies then what is to be seen is whether the goods in question were within the State at the time of contract of sale. If clause (a) applies then what is to be seen is whether the goods in question were within the State at the time of contract of sale. That the goods in question were specific or ascertained was not in doubt. The goods in question were stores in the bonded were houses located within the territory of Andhra Pradesh was also not disputed. When the owners of these goods sold the same to the ship's authorities with an intent that they can be consumed during the course of voyage by those who are on the ship, the contract of sale of these goods thus took place when the goods were within the State. What follows is that the requirement of section 4 (2) (a) is fully satisfied. We are therefore clear in our view that since the sales took place within the state of Andhra Pradesh; it cannot be validly contended that the sales took place outside the State within the meaning of article 286 (1) (a). " The Court further went on to observe as follows : "we are not called upon in this revision, to consider whether the sales in question took place in the course of the import of the goods into the territory of India. The argument was that the goods were imported from outside India and were stored in the bonded warehouses as above and goods thereafter were exported in pursuance of the contract of sale and therefore we should hold that the sales occasioned such export and consequently are not eligible to tax. The argument was that although the contract of sale took place and the goods were delivered to ships' authorities and the ships authorities put their locks on the lockers if which such stores were kept, yet the excise authorities had put their seals on those locks. The ships' authorities were permitted to break these seals only when the ship crosses the territory of India. The moment the ships so cross the territory, the transactions amounted to export and even though the liquor may be consumed during the voyage, it would be deemed that it was so consumed only after it reached its destination of export. The ships' authorities were permitted to break these seals only when the ship crosses the territory of India. The moment the ships so cross the territory, the transactions amounted to export and even though the liquor may be consumed during the voyage, it would be deemed that it was so consumed only after it reached its destination of export. It was submitted that since it was not possible to sell the liquor so imported within the territory of India as no excise duty was paid, we should hold that the transactions occasioned export of the liquor and therefore was exempt from sales tax. " (9.) AFTER referring to the Supreme court decision in the case of Burmah Shell oil Storage and Distributing Company of India Ltd, -vs- Commercial Tax Officer, reported in A. I. R. 1961 S. C. 315 where it was held that aviation spirit loaded on board an aircraft for consumption though taken out of the country is not exported since it has no destination where it can be said to be imported, and so long as it does not satisfy this test it cannot be said that the sale was in the course of export, their lordships held that the Supreme Court decision was on all fours with the facts of the case before them. As observed by their lordships "the liquor in the instant case was sold with an intention of parties that it had to be consumed during the voyage. It had, therefore, no destination in any foreign country where they could be received as imports". (10.) ALTHOUGH the facts are almost deceptively similar to the facts of the present case, the ratio of that case appears to be quite different. In the first place, it was held to be a sale in the context of the Central Sales Tax Act, 1956. Secondly, it was held that it was not a sale in course of export for the simple reason that since, the goods were intended to be consumed on board the ship there will be nothing left to be landed at the destination, i.e., the point of import. I do not see how this decision can be of any assistance to either of the parties in the present case. I do not see how this decision can be of any assistance to either of the parties in the present case. The next decision to be considered is a decision of the Madras High court in the case of the same Company in the Madras High Court. The decision in fairmacs Trading Company -vs- State of tamil Nadu, reported in 41 S. T. C. 170, in that case, the same assesses who is a dealer in ships' stores and also doing business as ship chandlers imported goods from abroad for the purpose of supplying them either to foreign going 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 they were sold by the assesses. In respect of supply of specified goods made to certain ships located in the madras harbor 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 assesses 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 is liable to be taxed under the Tamil Nadu General Sales tax Act, 1959. (11.) IT was held by the Madras High court 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 to show that the sale was from one state to another, it was not possible to take the view that the sales were inter-state sales. Therefore, assuming that the territorial waters did not form part. of the State of Tamil Nadu, as there was nothing to show that the sale was from one state to another, it was not possible to take the view that the sales were inter-state sales. (12.) IT was further held and this finding is different from that of the Andhra Pradesh high Court that the assesses 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 in 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 Tamil Nadu General Sales Tax Act, 1959 and were, accordingly, taxable under the Tamil Nadu Act. As Mr. Chakraborty rightly pointed out, this decision is only in the context of the Central Sales Tax Act, 1956 and the Tamil Nadu General Sales Tax Act, 1959 and has really no relevance to the point that has to be decided by me. He further sought to draw inspiration from the observation of the Madras High Court that the sale was not of specific and ascertained goods but had to be appropriated to the contact out of a larger stock. According to Mr. Chakraborty, in the instant case also, the sale can only, if at all, be completed when the goods are appropriated to a particular order out of a larger stock in the bonded warehouses. (13.) REFERENCE was also made to a decision of the Madras High Court in the case of M. M. Mohidden Thumby and Co.-vs-State of Madras reported in 13 S. T. C. 805. There it was held, inter alia, that delivery of the goods by the seller to the buyer passed the property in the goods where the seller does not reserve the right of disposal in most cases payment of price is made against delivery, but it is immaterial whether the time for payment is postponed after delivery. Unless a different intention appears, delivery as such operates to appropriate the goods to the contract and results in the passing of the property in the goods from the seller to the buyer. Mr. Unless a different intention appears, delivery as such operates to appropriate the goods to the contract and results in the passing of the property in the goods from the seller to the buyer. Mr. Chakraborty submitted that the relevant provisions with regard to sale are to be found in Section' 2 (2) of the indian Sale of Goods Act, 1939 which defines 'delivery' as a voluntary transfer of possession from one person to another. Section 4 of the Act provides that a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in the goods to the buyer for a price. It further provides that if the transfer of property in the goods is to take place at a future time or subject to some condition, the contract is an agreement of sale. An agreement to sell means a sale when the time elapses or the conditions are fulfilled. Section 18 of the Act provides that where there is a contract for sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. Section 23 of the Act provides that property in the goods does not pass in the case of sale of unascertained goods unless they are in a deliverable state and unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller. Section 33 of the Act provided that delivery of the goods may be made by doing anything which the parties agreed, shall be treated as delivery or which has the effect of putting the goods in the possession of the buyer or of another person authorised to hold them on his behalf. Section 35 of the Act provides that apart from any express contract, this seller of goods is not bound to deliver them until the buyer applies for delivery. All these provisions of the Act are, according to Mr. Chakraborty relevant for the purpose of this case and were relied upon by him. (14.) MR. Chakraborty referred to a decision of the Supreme Court in the case of the Central India Spinning and Weaving and manufacturing Co. Ltd., the Empress Mills, nagpur -vs- Municipal Committee, Wardha reported in AIR 1958 S. C. 341. Chakraborty relevant for the purpose of this case and were relied upon by him. (14.) MR. Chakraborty referred to a decision of the Supreme Court in the case of the Central India Spinning and Weaving and manufacturing Co. Ltd., the Empress Mills, nagpur -vs- Municipal Committee, Wardha reported in AIR 1958 S. C. 341. In paragraph 22 onwards of the Report, J. L. Kaptur J. deals with the meaning of the expression "importation" and quotes with approval Chief Justice Marshall in the case of Brown -vs- Maryland 6 Law Ed. 678 where it was held that if the object of importation is to re-export it to some other country it is not a sale and as such exempt. from payment of duties. My attention was next drawn to another decision of the Supreme Court in the case of Ben Gormm Niligiri Plantations co-Conoor (Niligiri) -vs- Sales Tax Officer, special Circle, Ernakulam reported in A. I. R. 1964 S. C. 1752. This case is really on article 286 (1) (b) of the Constitution of india and in Paragraph 8 Shah J. On behalf of the Supreme Court deals with what would constitute a sale in the course of export of goods out of the territory of India. We are not really concerned with this question in the present application. (15.) MR. Arun Prokash Chatterjee, who was followed by Mr. Prabir Majumder, strenuously contended that the property in the goods passed when the petitioners pursuant to the order placed by the Ship's master took the goods out of the bonded warehouse and appropriated them to that particular order. Since that took place within the Calcutta Metropolitan Area, it should be held that the sale within the meaning of Section 6 of the Act took place within the Calcutta metropolitan Area and as such the goods are liable to duty under the Act. I may mention that various other authorities were cited by both parties which I do not feel necessary to deal With or discuss. (16.) AFTER giving my anxious consideration to the entire matter, I am of the view that the sale did not take place within the calcutta Metropolitan Area. Apart from authorities, on principle it seems to me that an essential ingredient of sale is that the buyer must have full right of disposal over the goods which form the subject-matter of the sale. Apart from authorities, on principle it seems to me that an essential ingredient of sale is that the buyer must have full right of disposal over the goods which form the subject-matter of the sale. In the facts of the present case, 1he right of disposal does not appear to accrue to the buyer till the ship leaves the Indian territorial waters well outside the Calcutta metropolitan Area. To put it differently, (until, the ship leaves the Indian territorial waters. Although the ships' stores may be stacked with a large number of bottles of beer however thirsty the ship's Mister or a member of the crew may be, he cannot open and drink a single bottle of beer for the simple reason that the receptacle where the beer is stored is not only under the seal of the Customs authorities which is not opened till the ship leaves the Indian territorial waters. For this reason, it seems to me that the property passes and the buyer acquires a right of disposal over the goods in the instant case well outside the Calcutta metropolitan Area. As such, in my view, there is no sale within the area so as to make the goods liable to duty under the act. This contention of Mr. Chakraborty therefore succeeds. Mr. Chakraborty advanced another argument which I merely record and do not propose to come to a conclusion, in view of my finding on the principal contention. According to Mr. Chakraborty, Calcutta metropolitan Area has been defined in Section 2 (a) (b) of the Act which, throws us back to the definition of Calcutta Metropolitan District described in the Schedule to the calcutta Metropolitan Planning Area (Use and Development of land) Control Act, 1965. Section 2 (b) of this Act defines the calcutta Metropolitan Area., According to Mr. Chakraborty, according to the definition, only the lands situated on the West and East banks of the river Hooghly are comprised in that area but not the bed of the river Hooghly. Since the ships are on the bed of the river Hooghly, they are not within the Calcutta Metropolitan Area. As I have said, in view of my finding on the principal point, I do not propose to express any opinion on this aspect of the matter. (17.) MR. Chakraborty also advanced certain contentions with regard to the vires of certain Sections of the Act. As I have said, in view of my finding on the principal point, I do not propose to express any opinion on this aspect of the matter. (17.) MR. Chakraborty also advanced certain contentions with regard to the vires of certain Sections of the Act. Having regard to my finding on the main point, I do not propose to deal with or express any opinion on these contentions of Mr. Chakraborty. This disposes of all the contentions raised on behalf of the parties. In the result, this application succeeds and the Rule is made absolute to the extent indicated below. (18.) THERE will be a Writ in the nature of Mandamus directing the respondents to desist from receiving or collecting any tax or duty under the Act in respect of the goods imported by the petitioners which are meant to be used as ships' stores as fully mentioned above. There will also be a Writ In the nature of Mandamus directing the respondents to forthwith refund all sums which have been assessed in respect of the goods Imported by the petitioners as ships' stores. There will also be a writ in the nature of Certiorari cancelling all previous assessments made by the respondents in respect of the goods which have been imported by the petitioners for export as ships' stores. There will be no order as to costs. Rule made absolute. No costs.