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Karnataka High Court · body

2011 DIGILAW 1023 (KAR)

Parisons Milling v. State of Karnataka

2011-10-20

K.SREEDHAR RAO

body2011
Judgment :- 1. In all these four petitions, the facts and questions of law are same. 2. The petitioner in W.P.No.29819/2010 imported 11000 MTS Australian Premium Wheat from Australia. According to the case of the petitioner, the shipment was lodged at Geraldton, Australia on 22.10.06. The consignment arrived at Mangalore Port on 02.11.2006. 3. When the goods were in transit on high seas, 9000 MTS of Australian Premium Wheat in W.P.No.29818/2010 and 2000 MTS of Australian Premium Wheat was sold in two slots to Australia India Pvt. Ltd. The purchaser by producing bill of lading and other documents, got released 9000 MTS of wheat from the Customs Authority at Mangalore Port. The petitioners in W.P.No.29816/2010 had purchased 5000 MTS of Australian Premium Wheat from Australia at high sea. The petitioner in W.P.No.30712/2010 had purchased 5000 MTS of wheat from Australia on high sea and had purchased 4712.98 MTS of Australian Premium Wheat from M/s. AWB Geneva SA. The goods were stored in the stockyard within the market area. The officials of the third respondent noticed stock, seized goods and demanded payment of market fee. The third respondent passed a resolution vide Annexure-R in W.P.No.29819/2010 stating that there is deliberate attempt of evasion of payment of market fee. The material produced by the assessee does not disclose the exact place where the sale took place in view of the storage of goods in the market yard. It is held that the petitioners have to pay market fee. The petitioners aggrieved by the said resolution at Annexure-R have filed these writ petitions. In the objection statement, the third respondent – society contends that transit goods were sold on high seas, is concocted. The petitioner in W.P.No.29818/2010 is the sister concern of the petitioner herein in W.P.No.29819/10. It is only to avoid levy of market fee, they have contrived the transaction of sale on high seas. The documents of sale have been executed in India, the Registered Office of the petitioner in W.P.No.29819/2010 and 29818/2010 is one and the same. The petitioners have not discharged the burden of proof that the sale has taken place on high seas. In that view, it is strenuously contended that the goods attracts levy of market fee. The goods were seized by the officers of the third respondent. The petitioners filed writ petition challenging the seizure. The petitioners have not discharged the burden of proof that the sale has taken place on high seas. In that view, it is strenuously contended that the goods attracts levy of market fee. The goods were seized by the officers of the third respondent. The petitioners filed writ petition challenging the seizure. This Court directed the third respondent to give opportunity to the petitioners to explain their stand and to deal with the matter in accordance with law. The petitioners in the second round produced the following documents to substantiate their contentions:- 1. True copy of the High Seas Sales Agreement dated 31.10.2006 between AWB India Pvt. Ltd and Parisons Roller Flour Mills Pvt. Ltd 2. True copy of High Seas Sales Invoice dated 31.10.2006 DLH/HS/0602030 issued by AWB India Pvt. Ltd 3. True copy of Bill of Lading No.06 dated 22.10.206. 4. True copy of Bill of Entry 5. True copy of the purchase invoice bearing no.MAN/01/06-07 of MAN/05/06-07 (5 in no.) 6. True copy of the stock register from 01.04.2006 to 31.03.2007 7. True copy of Sales Ledger of Australian Milling Wheat (Mangalore) for the period from 01.04.2006 to 31.03.2007 8. Details of stock transfer from Mangalore to Calicut for the period from 01.04.2006 to 31.03.2007 with delivery note number. 9. Details of Sales Register for the period 01.04.2006 to 31.03.2007 with details of Invoice No., Truck No. and quantity. 10. Details of APMC cess paid for the year 2006-07. The committee rejected the contention of the petitioners and directed payment of market fee. The petitioners aggrieved by the said orders filed a petition before this Court in W.P.No.3404/2007 challenging the levy. This Court set aside the order and directed re-hearing of the matter afresh. The counsel for the petitioners submitted that the petitioner in W.P.No.29818/2010 who is the purchaser of the goods on high seas, has produced the bill of entry to show that the customs officials have cleared the entry and delivered the goods to the purchaser – petitioner. The counsel for the petitioner submitted that the customs authorities under Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, under Rule 3 have wide jurisdiction to enquire into the nature of goods, quantity, price and place where the goods have been sold for imposition to custom duty. The counsel for the petitioner submitted that the customs authorities under Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, under Rule 3 have wide jurisdiction to enquire into the nature of goods, quantity, price and place where the goods have been sold for imposition to custom duty. When once the bill of entry produced at Annexure-H is issued by the Custom Authorities, it corroborates the fact that the sale took place on high seas. The counsel for the petitioners referred to provisions under Article 286 of the Constitution of India to bring home the point that State has no jurisdiction to levy fee or tax on the sale or purchase made outside the territory of India. In the present case, it is submitted that in the first place, the market area under Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966, does not include territorial water muchless the third respondent will have jurisdiction to levy market fee on the goods sold and purchased outside the territorial water of India. The provisions of Section 66(6) of Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966 reads as follows: “Section 66(6):- Where any books of account or other documents are seized from any place and there are entries therein making reference to quality, quotations, rates, receipt or payment of money or sale or purchase of goods, such books of account or other documents shall be admitted ion evidence without witness having to appear to prove the same; and such entries shall be prima facie evidence of the matters, transactions and accounts to be therein recorded.” The above provision makes it clear that the purchaser should produce account books and other documents relating to the quotations, quantity, price, the payment of money and all other documents to show whether the goods attract levy of market fee or otherwise. In the present case, the petitioners have produced all the documents relating to the sale and purchase of the goods at high seas. The bill of entry at Annexure-H in W.P.No.29818/2010 disclose that the petitioner and purchaser had got consignment cleared and took delivery of consignment from the customs authorities. Copies of the high sea agreement and other documents referred to above were produced for scrutiny. The third respondent by resolution at Annexure-R found that the material produced by the petitioners does not disclose the place of sale. Copies of the high sea agreement and other documents referred to above were produced for scrutiny. The third respondent by resolution at Annexure-R found that the material produced by the petitioners does not disclose the place of sale. In other words, does not substantiate the contention of the petitioner that the purchase was made and goods were sold in transit on high seas. The view taken by the third respondent appears to be incorrect. There appears to be no application of mind to the documents produced by the petitioners. In fact in the resolution, there is no reference to any of these documents produced by the petitioners. That apart, the document produced categorically indicates that the shipment was made at Geraldton, Australia on 22.12.2006. The consignment reached Mangalore port on 02.11.2006. The purchaser took clearance and delivery of consignment on 04.11.06. The agreement of sale on high seas is dated 28.10.06. The Supreme Court in the case of Minerals & Metals Trading Corporation of India Vs. Sales Tax Officer reported in AIR 1999 SC 121 in paras 6 and 8 has made the following observations: “6. By reason of the provisions of Article 286(1)(b) no law of State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place in the course of import of the goods into, on export of the goods out of, the territory of India. Section 5 of the Central Sales Act deals with this: “When is sale or purchase of goods said to take place in the course of import or export. “Sub-section (1) thereof details with exports and sub-section (2) with imports. Sub-section (2) reads thus: “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.” The definition in Section 2(ab) of the phrase “crossing the customs frontiers of India” reads thus: “crossing the customs frontiers of India means crossing the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities.” It was inserted by an amendment in 1976. The Objects and Reasons of the amendment were that the phrase had been interpreted to mean, coterminuous with the extent of the terrirorial waters. This had given rise to practical difficulties as it was difficult to determine whether, at the time of the sale or purchase, the goods had entered or crossed the territorial waters. The actual checking of the goods took place in the customs station and not at the edge of the territorial waters. It was, therefore, necessar to so define the expression. A customs station has, by reason of the Explanation to Section 2(ab), the same meaning as in the Customs Act, 1962, and that is: “any customs port, customs air port or land customs station”. A customs port is any port appointed under Clause (a) of Section 7 of the Customs Act to be a customs port. (That Paradeep Port is a customs port is not in dispute.) 8. The judgment of a Constitution Bench of this Court V.Gokal & Co. (Private) Ltd. V. Assistant Collector of Sales Tax (Inspection), 1960(2) SCR 852 (AIR) 1960 Supreme Court 595 has set out legal position of import sales thus (At p.599 of AIR): “The legal position vis-à-vis the import-sale can be summarized thus: (1) The course of import of goods starts at a point when the goods cross the customs barrier of the foreign country and ends at a point in the importing country after the goods cross the customs barrier; (2) the sale which occasions the import is a sale in the course of import; (3) a purchase by an importer of goods when they are on the high seas by payment against shipping documents is also a purchase in the course of import and (4) a sale by an importer of goods, after the property in 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 also a sale in the course of import.” The judgment states that it is well settled in the commercial world that a bill of lading represents the goods and the transfer of it operates as the transfer of goods. The delivery of the bill of lading while the goods are a float is equivalent to the delivery of the goods themselves.” The Supreme Court has held that it is practically impossible to ascertain that sale or purchase of goods had taken place after they enter territorial water or otherwise because the customs authorities verify goods only at the custom station. In the present case, there appears to be no difficulty in ascertaining the correctness of the fact as to whether the sale takes place on high seas and thereafter goods entered into territorial water. The sale agreement is made when the goods were in transit. There was still five days left to reach Mangalore Port. The definition of territorial waters under Marine Zone Act extends upto 12 nautical miles i.e., around 22 kms. When the agreement of sale was entered into, there was still 5 days left for shipment to reach Mangalore Port. Taking into consideration the date on which ship arrived at Mangalore Port, it cannot be said that sale was held after the goods entered territorial waters which is hardly 22 kms. The dates of events mentioned above categorically disclose that the sale is held on high seas by irresistible inference. The provisions of Section 65 of the APMC Act mandates the levy and collection of market fee only when the goods are brought within the market area. When it is categorically established that the sale was held on high seas, the question of levy and collection of market fee does not arise. In that view of the matter, the writ petitions are allowed.