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

The Judgment of the Court was delivered by D DINESH MAHESHWARI, J. Preliminary and brief outline

1Copy pinpoint1. These appeals by special leave are directed against the common judgment and order dated 18.12.2014 in Writ Petition Nos. 2552 of 2013 and 6258 of 2013 whereby, the High Court of Judicature at Hyderabad E for the State of Telangana and the State of Andhra Pradesh1 upheld the assessment orders dated 20.01.2010 and 18.05.2010 passed by the Commercial Tax Officer, Chinawaltair Circle 2 and held that the transactionsin question were not the sales in the course of import but had been inter-State sales, liable to Central Sales Tax; and denied the exemption claimed under Section 5(2) of the Central Sales Tax Act, 19563 while granting time to the appellant to produce the prescribed C-Forms to the assessing authority for availing the benefit of concessional rate of tax.

2Copy pinpoint2. We may usefully observe at the outset that, in all, seven transactions of similar nature form the subject matter of these appeals; one relating to the assessment for the year 2005-06 and others relating

1 Hereinafter referred to as ‘the High Court’ 2 Hereinafter referred to as ‘the CTO’. 3 Hereinafter referred to as ‘the CST Act’. H

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A to the assessment for the year 2006-07. The common salient features of all these transactions had been that they were for supply of timber from a foreign country and were allegedly executed in a similar fashion thus: The supplier (party number 1) sold the goods in question to the first buyer (party number 2) and delivered them at the port of shipment. Thereafter, while the goods were in transit on high seas, party number 2 B transferred the goods to the appellant (who was invariably party number 3 in these transactions) by endorsing the bill of lading in favour of the appellant. Further to this and while the goods were on high seas, the appellant allegedly transferred them to the end-buyer (party number 4) by endorsing the bill of lading in favour of the end-buyer. C 2.1. However, in each of these transactions, when the goods in question reached the port at Visakhapatnam (also known as Vizag), the appellant carried out the proceedings envisaged by the Customs Act, 19624 and filed a bill of entry for warehousing and thereafter, filed another bill of entry for home consumption (ex-bond). Accordingly and on the basis of such bills of entry, the appellant was duly assessed for customs duty. The appellant later on raised debit notes on the end-buyers.

3Copy pinpoint3. With reference to the aforementioned transactions and the high seas sale agreements, the case of appellant had been that it had only acted as an agent of the end-buyers while filing the bills of entry; and the sales of the goods in question to the end-buyers, being the sales taking place in the course of import of goods into the territory of India,were eligible for exemption from payment of sales tax by virtue of Section 5(2) of the CST Act. However, in the assessment orders dated 20.01.2010 and 18.05.2010, the CTO denied the benefit of exemption to the appellant, particularly for the reason that the appellant cleared the goods from the customs after filing the bills of entry and later on raised debit notes, showing sales to the end-buyers. The CTO held that the goods in question had crossed the customs frontiers of India when the bills of entry were filed by the appellant and the goods were assessed to customs duty and hence, the sales effected by the appellant to the end- G buyers could not be said to be high sea sales.

4Copy pinpoint4. The appellant felt aggrieved of the orders so passed by the CTO but, instead of availing the statutory remedy of appeal, chose to challenge the same by way of writ petitions in the High Court. These writ petitions have been considered and dismissed by the High Court by H 4 Hereinafter referred to as ‘the Customs Act’.

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 917 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

way of the impugned judgment and order dated 18.12.2014. The High A Court rejected the contention that the appellant had only acted as an agent of the respective end-buyers while filing the bills of entry at the port of destination with the findings, inter alia, to the effect that customs duty could be assessed only on the importer of goods; that neither in the bill of entry nor in the Import General Manifest5 the name of end-buyer was reflected as the importer; that it was the appellant alone who had imported the goods; and that the sale by the appellant to the end-buyer could have only been effected after the goods were cleared for home consumption. The High Court also rejected the contention that high seas sale to end-buyer had occasioned the import of goods into the territory of India. The appellant has challenged the decision of the High Court by way of these appeals on a variety of grounds as shall be noticed hereafter.

5Copy pinpoint5. As noticed, the transactions involved in the present matters had been of similar nature. For appropriate dealing with the issues involved, we may take note of the facts relating to the assessment order dated 20.01.2010 pertaining to the tax period 2005-06 and the assessment order dated 18.05.2010 pertaining to the tax period 2006-07 in necessary details. Assessment Order dated 20.01.2010: relevant facts and background

6Copy pinpoint6. The appellant M/s. Vellanki Frame Works is said to be a sole proprietary concern, engaged in the business of sale and purchase of logs, timber and wooden batons; and in the course of its business, the appellant also imports timber from other countries.

7Copy pinpoint7. For the tax period 2005-06, in respect of inter-State sales falling within clause (a) of Section 3 of the CST Act, the appellant claimed payment of tax at the concessional rate of 4% covering a turnover of F Rs. 55,23,233/- and in support thereof, furnished 9-Nos. of C-Forms; and also sought exemption from payment of tax on a turnover of Rs. 1,14,86,342/- on the ground that these sales were effected by transfer of title documents before the goods had crossed the customs frontiers of India. Even while accepting the claim of the appellant for concessional G rate of tax on the inter-State sales turnover, the CTO proposed to reject the claim for exemption for want of evidence and to treat the transactions in question as inter-State sales under Section 3(a) of the CST Act. Hence, the CTO issued show-cause notice dated 19.11.2009 to the appellant 5 ‘IGM’ for short. H

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A stating, inter alia, that the appellant had claimed exemption on the ground that the said sales were effected by transfer of the document of title before the goods had crossed customs frontiers of India but had not furnished any evidence in support thereof. 7.1. In response to the said show-cause notice, the appellant B asserted that the transactions in question were covered by Section 5(2) of the CST Act; and furnished seven documents being the sales invoice, bill of lading, two high seas sale agreements, bill of entry for warehousing, bill of entry for ex-bond and the debit note raised on the end-buyer. The CTO, however, found that on filing of the said bills of entry, the appellant alone was assessed to customs duty at both the stages. Hence, the CTO C was of opinion that the import stream dried up on such clearance by the customs authorities and the goods got mixed into the stream of local goods; and any subsequent sale by the appellant would constitute a sale of local goods exigible to tax. In view of this opinion, the CTO proposed to treat the sale by the appellant to the end-buyer as inter-State sale falling under Section 3(a) of the CST Act and issued further show-cause notice dated 02.12.2009 inviting objections, if any, from the appellant.

8Copy pinpoint8. After taking a few adjournments, the appellant filed its letter of objection to the show-cause notice dated 02.12.2009 while giving out the particulars of the transactions in question and the details of its stand which could be usefully noticed as follows: 8.1. The case of the appellant had been that M/s. Radha Industries, Lucknow (Uttar Pradesh)6 was its close business associate; that Radha desired to purchase the subject goods from M/s. World Best Trading Co. (L.L.C.), Dubai (U.A.E.) 7 but, for not having the requisite infrastructure with the Customs Department, approached the appellant for help; that though the appellant had the requisite infrastructure facilities at Visakhapatnam Customs, but was not having the letter of credit facilities for import; that in the given circumstances, the appellant and Radha entered into a quadripartite agreement with the seller and Indus Tropics Ltd.8 whereby, it was agreed that Indus would purchase the goods and during the course of transit of the goods from the port of shipment, would sell them to the appellant; that the appellant would purchase the said goods from Indus as the agent of Radha and transfer the documents 6 The end-buyer, hereinafter also referred to as ‘Radha’. 7 The seller, hereinafter also referred to as ‘WBT’. 8 H The first buyer, hereinafter also referred to as ‘Indus’.

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 919 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

on high seas in favour of Radha for which, Radha would pay the appellant commission of 2% plus bank charges. 8.2. It was asserted by the appellant that pursuant to the said quadripartite agreement, Indus purchased the goods from WBT and the seller sent the consignment from the port of shipment with bill of lading dated 09.12.2005; that on 10.12.2005, Indus caused transfer of the bill of lading on high seas in favour of the appellant; and that on 12.12.2005, another high seas sale agreement was entered into between the appellant and Radha whereby the bill of lading was sold in favour of Radha. It was further asserted by the appellant that on and from 12.12.2005, the appellant did not have control over the bill of lading dated 09.12.2005, as the same had been parted in favour of Radha by then. It was yet further asserted that since Radha did not have the customs facility at Visakhapatnam customs port, the appellant had extended its help by filing the bills of entry in its name for the purpose of customs bonding as well as customs clearance but, it had only been a friendly transaction arranged by the appellant in favour of Radha and the appellant paid the entire amount to Indus without retaining anything as commission. 8.3. The submissions of the appellant had been that the circumstance of its filing the bill of entry had no relevance in determining the nature of transaction which was evidenced by the relevant documents, including (i) quadripartite Master Agreement dated 21.11.2005; and (ii) E High Seas Sale Agreement dated 12.12.2005. According to the appellant, it had transferred the import document on high seas and at any rate, the title in the goods always stood vested in Radha, as the owner of the goods; and that the appellant was merely acting as an agent of Radha at all points of time. The appellant maintained that by reason of transfer of the import document, it could not be said that it had sold the goods to F Radha; on the contrary, as the appellant had acted as the agent of Radha, at all points of time including at the time of purchase,the transactions between the appellant and Radha cannot be treated as between one principal and another. The appellant further maintained that it had charged commission at 2% plus bank charges to Radha and had parted with the G entire amount to Indus, which was the proof that it had only acted as a conduit, as a friendly gesture to Radha. It was also submitted that the transaction was accounted in the books of accounts of the appellant as an agency purchase; that receipt and payment of commission was also accounted in its books of accounts; and the balance sheet for the year H

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

9Copy pinpoint9. The contentions of the appellant were examined by the CTO in the impugned assessment order dated 20.01.2010.For their relevance, the observations and findings in this assessment order could be usefully noticed as follows: 9.1. The CTO summed up the stand of the appellant that the documents of title to the goods were transferred to Radha on high seas by virtue of the High Seas Sale Agreement dated 12.12.2005; that the transaction did not attain the character of an inter-State sale; and that filing of the bill of entry had no relevance in determining the nature of the transaction. The CTO observed that it was not the case of the appellant that the sale or purchase had occasioned the import falling under the first limb of Section 5(2) of the CST Act and the question which necessitated examination was as to whether there was a sale of goods by the appellant, or it had been a commission transaction as stated by the appellant. The CTO examined the computer printout of the Trading Account for the year 2005-2006 where the purchase was shown as purchase trading (high seas), and the relevant sale was shown as sales trading (high seas). After referring to a few other details of the ledger account and debit note etc., the CTO noted the contents of High Seas Sale Agreement dated 10.12.2005 entered into between Indus and the appellant wherein the appellant was described as ‘the buyer’; the contents of second High Seas Sale Agreement dated 12.12.2005 wherein the appellant and Radha were described as ‘the seller’ and ‘the buyer’ respectively; and the letter of the appellant dated 25.11.2009 wherein, while submitting certain documents like the sales invoice, the bill of lading, high seas sale agreement, bill of entry for warehousing and the bill of entry for home consumption, the appellant had stated that exemption from payment of tax was claimed on the ground that the said sales were effected by transfer of documents of title to the goods before the goods had crossed the customs frontiers of India. The CTO, therefore, observed that obviously, the intention of the appellant was to sell the goods and, in fact, there was a sale; and there was no truth in the statement of appellant that it had acted as the agent of Radha.The relevant part of the order reads as follows:

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 921 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

“1)….In the High Sea sale agreement dated 10.12.2005 entered into between M/s Indus Tropics Ld and M/s Vellanki Frame Works the assessee was described as ‘the buyer’. In the 2nd High Sea sale agreement dated 12.12.2005 entered into between the assessee M/s Vellanki frame Works and M/s Radha Industries -the parties were described as ‘the seller’ and ‘the buyer’ respectively. Similarly in the letter dated 25.11.2009…..the assessee stated that they claimed exemption from payment of tax on the ground that the said sales were effected by the transfer of document of title to the goods before the goods have crossed the customs frontiers of India. Therefore, it is obvious that there is intention to sell the goods and infact there was sale. There is no truth in their statement that they acted as an agent to M/s Radha Industries.” 9.2. In regard to the main contention of the appellant that document of title was transferred before the goods had crossed the customs frontier of Indiaand the transaction fell within Section 5(2) of the Act, the CTO examined the documentary evidence placed on record and found the facts that: (i) Indus had imported 324 PCS of Myanmar Hardwood Gurjan Round Logs from Yangon (Myanmar) to Vizag (India) and the bill of lading No. 01/YGN-VZG dated 09.12.2005 was endorsed by the importer in favour of the appellant; (ii) on the strength of such endorsed documents, Sri Sanjiv Kumar Agarwal (sole proprietor of the appellant) presented the bill of entry No. 804116 dated 12.12.2005 for warehousing and customs duty was assessed on the appellant alone on this bill of entry for warehousing; and (iii) subsequently, the appellant filed the bill of entry for home consumption No. 804353 dated 28.12.2005 and customs duty was assessed on the appellant alone on this bill of entry. The CTO also referred to the debit note dated 12.01.2006 raised by the appellant on Radha for a sum of Rs. 1,14,86,342/-and observed that though the intention of the parties in High Seas Sale Agreement dated 12.12.2005 was to effect the transfer before the goods crossed the customs frontiers in India but, in fact, the said agreement did not come into operation and the sale took place on 12.01.2006, as shown in the debit note. 9.3. The CTO further held that the goods must be treated as having crossed the customs frontiers of India when the bill of entry was H

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A made and the goods were assessed to customs duty; and the sale effected by the appellant could not be said to be sale in the course of import or high seas sale inasmuch as the goods had crossed the customs frontiers. The CTO reiterated that the second high seas sale agreement had not come into operation; and there was no case for claiming that the transfer of documents was effected by virtue of the said agreement itself. With B reference to the facts of the case and the relevant case-law, the CTO held that the sale in fact took place only after customs clearance and proceeded to overrule the contentions of the appellant. The CTO, inter alia, observed and held as under: “2)…. In view of the above legal position and the facts of the C case, it is to be treated that the goods had crossed customs frontiers of India when the bill of entry having been made, the goods were assessed to customs duty, Hence the sales effected by the assesees can’t be said to be sales in the course of import or High Sea Sales in as much as the goods had crossed the customs frontiers. D *** *** *** 4) It may not be out of place to mention that as far as the quadripartite agreement to have been entered into on 21.11.05 is concerned, it has not come into operation while the transactionsis taking place. Had there been any nexus in respect thereof the necessity of the subsequent two high sea sale agreements dated 10.12.2005 and 12.12.2005 would not have arose in the scheme. 5) It is to be further noted that obviously the 2nd high sea sale agreement has not come into operation when the sale is taking place. Thus there is no case in claiming that the transfer of documents was effected by virtue of the said agreement itself. As. was held by the Honourable Apex Court in the case of Tata Iron & Steel Co Ltd, Bombay Vs. S.R. Sarkar and others 11 STC 655 – a sale will be reckoned as a sale on completion of such sale and a mere contract of sale is not a sale within the definition of sale in Section 2(a). Therefore, it is to be observed that the sale has not taken place in the manner contemplated in the agreement. The sale in fact took place after-customs clearance only. Thus, there is no nexus to the said agreement.” 9.4. In view of the above, the CTO disallowed the exemptions claimed by the appellant on the turnover of Rs. 1,14,86,342/- while treating H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 923 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

the transactions as inter-State sales falling under Section 3(a) of the A CST Act and carried out assessment accordingly, holding the appellant liable to pay balance tax to the tune of Rs. 14,35,793/-. Assessment Order dated 18.05.2010: relevant facts and background

10Copy pinpoint10. Six other transactions of similar nature formed the subject matter of the assessment order dated 18.05.2010 relating to the tax period 2006-07. The CTO found that the appellant had claimed exemption from payment of tax, in respect of a turnover of Rs. 4,05,09,427/-, while contending that this turnover represented the sales effected by transfer of documents of title before the goods had crossed the customs frontiers of India but, had not filed any evidence to show that the said sales were effected in such a manner. Accordingly, a show-cause notice dated 26.11.2009 was issued. In response thereto, the appellant furnished certain documents relating to these six transactions of similar nature involving four parties, being the seller, the first buyer, the appellant, and the end-buyer respectively. D

10.1. As regards first transaction, Master Agreement dated 01.04.2006 for supply of timber logs was entered into amongst Alkemal Singapore Pte Ltd. (seller), Purbanchal Lumbers Pvt. Ltd. (first buyer), Vellanki Frame Works (appellant) and the said Radha Industries (end- buyer). Purbanchal Lumbers Pvt. Ltd., imported 155 PCS of Myanmar E Hardwood Gurjan Round logs from Yangon (Myanmar) to Vizag (India); the bill of lading No. GCTC/531/06/11 dated 08.04.2016 was endorsed in favour of the appellant on 11.04.2006 pursuant to the High SeasSale Agreement; and on 11.04.2006 itself, bill of lading was endorsed by the appellant in favour of Radha. Thereafter, on 12.04.2006, bill of entry for F warehousing (B/E No. 601744) was filed by the appellant for warehousing of timber and then, on 26.04.2006, bill of entry for home consumption (B/E No. 602044) was filed by the appellant. 10.2. As regards second transaction, Master Agreement dated 01.08.2006 for supply of timber was entered into amongst Wood Craft G International Pte. Ltd. (seller), Alpine Panels Pvt. Ltd. (first buyer), Vellanki Frame Works (appellant) and M/s. Indo Bitumen Products, Rajasthan (end-buyer). M/s. Alpine Panels Pvt. Ltd., imported 273 PCS of Malaysian Round Logs from Singapore to Vizag; the bill of lading No. AMB1106/VIZ-05 dated 20.08.2006 was endorsed in favour of the H

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A appellant on 26.08.2006 and on this very date, the bill of lading was endorsed by the appellant in favour of the end-buyer M/s. Indo Bitumen Products. Thereafter, on 30.08.2006, bill of entry for warehousing (B/E No. 604498) was filed by the appellant for warehousing of timber and then, on 07.09.2006, bill of entry for home consumption (B/E No. 604677) was filed by the appellant. Here again, customs duty was assessed on B Sri Sanjiv Kumar Agarwal, Vellanki Frame Works, Vizag (the appellant). 10.3. The third and fourth transactions in this assessment had been of the same nature wherein two Master Agreements dated 01.10.2006 for supply of timber were asserted involving the said Wood Craft International Pte Ltd. (seller), Purbanchal Lumbers Pvt. Ltd. (first buyer), Vellanki Frame Works (appellant) and M/s. Pine Exporter, New Delhi (end-buyer). These transactions involved two bills of lading, Nos. AMB1306/VIZ-01 and AMB1306/VIZ-02 dated 08.10.2006, which were similarly endorsed by the first buyer in favour of the appellant on 18.10.2006 and on the same date, the appellant endorsed the same in favour of the end-buyer. Thereafter, in a similar fashion, the appellant filed the bills of entry on 19.10.2006 for warehousing and then, on 31.10.2006 for home consumption. 10.4. Again, the fifth and sixth transactions in this assessment had also been of the same nature wherein two Master Agreements dated E 11.12.2006 and 15.12.2006 for supply of timber were asserted involving the said Wood Craft International Pte Ltd. (seller), M/s. G.K. Ganeriwala & Sons (first buyer), Vellanki Frame Works (appellant) and M/s. Esskay Impex, New Delhi (end-buyer). These transactions involved two bills of lading, Nos. CON1206/VIZ-04 and CON1206/VIZ-05 dated 21.12.2006 which were similarly endorsed by the first buyer in favour of the appellant on 04.01.2007 and on the same date, the appellant endorsed the same in favour of the end-buyer. Thereafter, in the similar fashion, the appellant filed the bills of entry on 05.01.2007 for warehousing and then, on 18.01.2007 for home consumption. 10.5. In all these transactions and dealings, after filing of bills of entry, customs duty was assessed on Sri Sanjiv Kumar Agarwal, the proprietor of appellant firm. However, the appellant maintained that the said transactions had been of high seas sales to the respective end- buyers, on whom the debit notes were raised by the appellant later.

11Copy pinpoint11. In the assessment order dated 18.05.2010, the CTO held, inter alia, that on filing the bill of entry for warehousing and the bill of entry

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 925 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

for ex-bond (home consumption), the appellant alone was assessed to customs duty; that the import stream dried upon such clearance by the customs authorities and the goods mixed into the stream of local goods; that any subsequent sale by the appellant, therefore, constituted sale of local goods exigible to tax; and that the transactions, for which the appellant had claimed exemption as high sea sales, were liable to be treated as inter-State sales falling under Section 3(a) of the CST Act. In other words, the assessing authority held that the sales by the appellant to the end-buyers took place only after assessment of customs duty on the appellant upon filing the bills of entry and thus, the said sales attained the character of sale of local goods, for the goods in question having crossed the customs frontiers of India. C 11.1. Apart from the above, the CTO also pointed out that when the letters were addressed to the dealers at the other end (i.e., the end- buyers), one of them, M/s. Pine Exporters, New Delhi, stated that the referred party (i.e., the appellant) was not known to them and that they had never received any Malaysian Round logs from the appellant whereas D the letter sent to M/s. Esskay Impex, New Delhi, was returned with the postal endorsement that no such firm was existing at the given address. These factors were also taken into account by the assessing authority to hold that the claim of the appellant was not genuine; and the transactions, on which the appellant had claimed exemption as high sea sales, should be treated as inter-State sales falling under Section 3(a) of the CST Act. E

11.2. The relevant part of the observations and findings of the CTO in the assessment order dated 18.05.2010 could also be usefully extracted as under:- “When these settled principles are applied to the instant F case, as is ascertainable from the bills of entry for ware-house and the ex-bond of entry-transfer of title deeds has not taken place before filing the bills of entry and the assessment of duty. The sale took place after the assessment is made on the assessee and on filing of the bills of entry. Thus the said sales attained the character of sales of local goods. G Therefore, in view of the above legal position and the facts of the case, it is to be treated that the goods had crossed customs frontiers of India when the bill of entry having been made, the goods were assessed to customs duty. Hence the sales effected by the assessee cant be said to be sales in the course of import or H

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A high sea sales in as much as the goods had crossed the customs frontiers. Further, when addressed the dealers at the other end requesting to confirm the purchase from the assessee- M/s Pine Exporters, New Delhi (sale reported at transaction No.3 B Rs.11057059/- and transaction No.4 Rs.4124375/- total 15581434- 00) the party replied that they do not know the referred party and have never received any Malaysian Round Logs from the said party which shows that the dealer’s claim is not genuine. Further, the letter sent to M/s Esskay Impex, New Delhi C requesting to confirm the purchase from the assessee in transaction No. 5 Rs.8277263 and transaction No.6 Rs.3454968 total = 11732231/-, was returned by the postal authorities with an endorsement “No such firm at this place” which also shows that the dealer’s claim is not genuine. D In view of this position, the transactions on which the assessee has claimed exemption being high sea sales are treated as interstate sales falling under Section 3(a) of CST Act.” Writ Petitions before the High Court

12Copy pinpoint12. As noticed, the assessment orders aforesaid could have been challenged in statutory appeal but the appellant chose to challenge the same by way of writ petitions, being W.P. No. 4552 of 2013 (against the assessment order dated 20.01.2010) and W.P. No. 6258 of 2013 (against the assessment order dated 18.05.2010). Both these writ petitions were taken up for consideration together by the High Court and were dismissed by the common judgment and order dated 18.12.2014.

13Copy pinpoint13. The High Court, in the impugned judgment and order dated 18.12.2014, examined the variety of contentions urged by the parties and took up for determination the issues arising in the matter under different headings while primarily dealing with the facts relating to the assessment order dated 20.01.2010 as involved in W.P. No. 4552 of 2013.The High G Court examined the issues: (i) as to whether the CTO before whom the dealer had filed returns under CST Act was having authority to pass the assessment order in the absence of authorisation from the Deputy Commissioner; (ii) the extent, scope and contours of judicial review of assessment order in the writ jurisdiction; (iii) as to whether the sale by appellant to Radha was an inter-State sale for the appellant having filed

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 927 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

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

14Copy pinpoint14. Having regard to the facts and circumstance of the case, we may briefly summarise the observations and findings of the High Court in relation to these issues. 14.1. As regards the question of the authority of CTO to pass the assessment order in question, the High Court extensively examined the scope of the provisions contained in A.P. Value Added Tax Act, 2005, C A.P. Value Added Tax Rules, 2005 and Section 9(2) of the CST Act and ultimately rejected the contentions urged on behalf of the appellant that the CTO was lacking authority to assess the appellant to tax under the CST Act. 14.2. As regards judicial review of assessment order in writ jurisdiction, the High Court took note of the extensive arguments on behalf of the appellant as regards nature of transaction with reference to quadripartite agreement and endorsement of bill of lading by the importer in favour of the appellant and subsequently by the appellant in favour of Radha (end-buyer) while the goods were on high seas as also the argument that there was no finding against genuineness of the endorsements on the bill of lading. The High Court observed that the appellant had invoked writ jurisdiction against the assessment order without availing the statutory remedy of appeal; and also pointed out that though certiorari was the appropriate remedy in challenge to a quasi- judicial order, the appellant had sought a writ of mandamus. The High F Court further observed that it was not even the case of the appellant that the first respondent had failed to perform a statutory duty or that the appellant’s legal rights were adversely affected and therefore, the appellant was not entitled to a writ of mandamus. The High Court, thereafter, pointed out the limited parameters within which the validity of assessment orders and findings therein could be examined in certiorari G jurisdiction. The High Court took note of the consideration adopted and the findings recorded in the impugned assessment orders and observed that the assessing authority had not taken into consideration the effect of high seas sale agreement and bill of lading etc., but has held the sales by appellant to Radha and other end-buyers outside the State to be inter- H

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A State sales for the reason that those sales could only have been effected after the appellant had filed the bills of entry for home consumption and was assessed to customs duty. The High Court observed that only if those findings were set aside would the matter call for remand with direction to the assessing authority to consider the other documents relied upon by the appellant. The High Court observed thus: B “In passing the impugned assessment orders, and in subjecting the transactions to tax as an inter-state sale under Section 3(a) of the CST Act, the assessing authority has not taken into consideration the effect of the High Sea sales agreements and other agreements, the bill of lading or the provisions of the C Indian Bill of Lading Act. He has held that the sale of goods by the petitioner to Radha Industries (and other outside the State purchasers) was an inter-state sale on the ground that these sales could only have been effected after the petitioner had filed the bill of entry for home consumption, and after he was assessed to customs duty. It is only if these findings are set aside, would the matter necessitate remand, and the assessing authority being directed to consider the other documents relied upon by the petitioner.” 14.3. After having dealt with the aforesaid preliminary aspects, the High Court entered into the core issue involved in the matter i.e., as to whether the sale by appellant to Radha was an inter-State sale for the appellant having filed the bill of entry and having been assessed to customs duty. The High Court took note of the rival submission where, on one hand, it was contended on behalf of the appellant that there was no prohibition under the Customs Act or the Rules/Regulations made thereunder, for clearance of goods by the holder of an authorisation by the endorsee of the bill of lading; that even otherwise, an importer under the Customs Act includes any owner or any person holding himself out to be an importer and, as the bill of lading had been endorsed in his favour, the appellant was entitled to file the bill of entry as an importer; and that the department’s contention, that payment of customs duty by the appellant was conclusive of the import having ended and any sale by the appellant thereafter could only be a domestic sale, was not flowing from the provisions of the Customs Act.On the other hand,it was contended on behalf of the department that the appellant alone was assessed to customs duty by virtue of his filing the bill of entry as the H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 929 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

importer; that the system permitted only the appellant to file the bill of A entry as his name alone was recorded in the Import General Manifest (IGM) as the importer; that the contents of the bill of entry made it clear that there was no high seas sale, subsequent to the high seas sale in favour of the appellant asthe bill of entry was generated on the basis of the IGM; that Radha was not assessed to customs duty and if Radha B was the last buyer during importation, IGM would have reflected the same; that the appellant was assessed to customs duty as being the last buyer/final importer of the goods before the goods got mixed with the general goods and the sale of goods by appellant to Radha was not a sale in the course of import, rather it was an inter-State sale as Radha was located outside the State of Andhra Pradesh; and that if the appellanthad sold the goods to Radha and yet gotitself assessed to customs duty, it could only mean that the appellant and Radha had colluded to evade customs duty on the sale transaction value. 14.4. In view of the rival submissions, the High Court took note of the requirements of Section 5(2) of the CST Act that, for a sale to be ‘in the course of import’, it has to be either the one which has occasioned the import or the one which has been effected by a transfer of document of title to the goods before the goods had crossed the customs frontiers of India. As the claim of the appellant, for treating the sale in question to be in the course of import, was being denied by the department for the reason that the appellant alone had filed the bill of entry for warehousing as also the bill of entry for home consumption, the High Court proceeded to examine the facts of the case vis-a-vis the essential features related with the processes of importation and filing of bill of entry while sub- dividing its consideration with reference to various terms in, and various provisions of, the Customs Act and the CST Act. F 14.4.1. The High Court took note that the expression ‘‘crossing the customs frontiers of India” was defined in Section 2(ab) of the CST Act to mean crossing the limits of the area of a customs station in which the imported goods or exported goods are ordinarily kept before clearance by customs authorities; and as per the Explanation thereto, “customs G station” and “customs authorities” shall have the same meaning as in the Customs Act. The High Court observed that “the customs frontiers”, for the purpose of the CST Act, was equated to the limits of the area of the customs station in which the goods were stored; and crossing of such station being regarded as amounting to crossing the customs frontiers of India. H

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A 14.4.2. As regards connotation of the term “importer”, the High Court examined the definition of “import” in Section 2(23) and of “imported goods” in Section 2(25) of the Customs Act and observed that the moment goods, brought into India from a foreign country, are cleared for home consumption, they get mixed with the local goods and cease to be imported goods thereafter. The High Court also examined the inclusive definition of “importer” in Section 2(26) of the Customs Act and observed that any person who imports goods from a foreign country to India would undoubtedly be an importer; and the owner of the goods and a person holding himself out be an importer would also be an importer, but only during the period between the importation of the goods and the time they are cleared for home consumption, and not prior thereto or thereafter. The High Court observed that the expanded definition of “importer” could not be used to usurp the identity of an importer from the person who has filed the bill of entry; and as the bill of entry showed the goods to have been cleared by the appellant for home consumption, the appellant was the importer of the goods. The High Court also observed that if the appellant had sold the goods on high seas to Radha, it was only Radha who would be the importer and not the appellant and the very fact that the name of Radha was not reflected as the importer in the bill of entry for home consumption belied the contention of the appellant about high seas sale to Radha. The relevant parts of observations and findings of the High Court could be usefully extracted as under:- “Section 2(23) of the Customs Act defines import, with its grammatical variations and cognate expressions, to mean bringing into India from a place outside India. Section 2(25) defines imported goods to mean any goods brought into India from a place outside F India but does not include goods which have been cleared for home consumption. Use of the words does not include in Section 2(25) would mean that the moment goods, brought into India from a foreign country, are cleared for home consumption, they get mixed with the local goods and cease to be imported goods thereafter. Going by the definition of the term ‘import’ under G Section 2(25) of the Act as “to bring into India from a place outside India,” and as he has imported the goods (his name being reflected in the Bill of Entry as the importer), the petitioner has rightly been held to be the importer. *** *** *** H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 931 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

In view of the expanded definition of importer in Section A 2(26), while any person who imports goods from a foreign country to India would undoubtedly be an importer, the owner of the goods and a person holding himself out be an importer would also be an importer, however only during the period between the importation of the goods and the time they are cleared for home consumption, and not prior thereto or thereafter. This period is when the goods are warehoused after importation, and are cleared from such warehouse by a person other than the person who actually imported the goods. That limb of the definition of importer, in Section 2(26) of the Customs Act, is designed to protect the interests of the owner or the exporter where the goods have not been claimed or redeemed by the designated importer in India. The definition cannot be used to usurp the identity of an importer from the person who filed the bill of entry. As Section 2(26) is an inclusive definition, the person in whose name the bill of entry is filed does not cease to be the importer. In other words, the person who has secured the release of the goods from the carrier, who has filed the bill of entry, and who has undertaken the work of clearance, continues to be an importer. The bill of entry shows the goods to have been cleared for home consumption by the petitioner who is, therefore, the importer of the goods. The person who holds himself out to be the importer of the goods must furnish proof of being the importer before the goods are cleared for home consumption. No doubt, Section 2(26) permits any one holding himself out to be the importer between the date of importation and clearance of the goods for home consumption. But here the petitioner, in whose name the goods have been manifested, has, by filing a Bill of Entry, already held himself out to be the importer. As shall be detailed hereinafter, the import manifest has not been amended, the petitioner has filed the Bill of Entry for clearance of the goods for home consumption, and has held himself out to be the importer. …. It is evident, therefore, that, before its importation, it is only the person who imported the goods who would be the importer. If, as contended by the petitioner, they had sold the goods on high seas to Radha, it is only Radha who would be the importer and not the petitioner. The very fact that the name of Radha is not reflected as the importer in the bill H

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A of entry ex-bond (home consumption) belies the petitioners contention of a high sea sale by them to Radha Industries.” 14.4.3. The High Court, thereafter, proceeded to examine the relevance and importance of Import General Manifest required to be delivered prior to the arrival of vessel at the customs station in terms of B Section 30 of the Customs Act; permissibility of its amendment or supplementation under the Levy of Fee (Customs Documents) Regulations, 1970; and its contents in terms of Import Manifest (Vessels) Regulations, 1971. The High Court observed that as per the requirements of IGM, it should have reflected the name of the last high sea sale purchaser as the importer; and otherwise, the IGM would have C necessitated amendment, as it is only the last purchaser of the goods on high seas who would be the importer/consignee. The High Court observed that there was no material on record to show that either the IGM contained the name of Radha as the importer/consignee or that it was subsequently amended in terms of Section 30(3) of the Customs Act; D and hence, held that the contention of high seas sales was raised by the appellant only to avoid the goods being subjected to tax as inter-State sales under the CST Act. The High Court observed and held as under:- “The Import General Manifest contains a cargo declaration wherein, among others, the name of the importer, the importers E code number, IGM number and date are required to be detailed. It is not even the petitioners case that his name is not reflected as the importer in the Import General Manifest. If, as is now contended by him, the goods had been sold on the high seas, the Import General Manifest should have reflected the name of the last high sea sale purchaser as the importer. Otherwise, the Import General F Manifest would have necessitated amendment as it is only the last purchaser of the goods on high seas who would be the importer/consignee. There is no material on record to show that either the Import General Manifest contained the name of Radha as the importer/consignee or that it was subsequently amended in terms of Section 30(3) of the Customs Act. It is evident, therefore, that the contention of high seas sales has been raised by the petitioner only to avoid the goods being subjected to tax as inter- state sales under the CST Act.” 14.4.4. After having found that the appellant was rightly held to be the importer of goods and such a conclusion was fortified by the

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 933 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

contents of IGM, the High Court proceeded to further examine the effect of filing of bill of entry for home consumption by the appellant. In this regard, the High Court examined the scope and requirements of the provisions contained in the Customs Act relating to entry of goods on importation; clearance of goods for home consumption as also the requirements of the Bill of Entry (Electronic Declaration) Regulations, B

1995. The High Court further examined the contents of one of the bills of entry, as placed on the record of W.P. No. 6258 of 2013 where the second party (first buyer) was Purbanchal Lumbers Pvt. Ltd. and found that the said bill of entry made no reference to Radha and held that this omission made it clear that the goods were imported by the appellant on a high seas sale effected in its favour by the said first buyer. The High C Court, accordingly, concluded that the appellant had imported the goods; and the sale of goods by the appellant to Radha could have only been effected after the goods had been cleared for home consumption. The High Court, inter alia, observed and held as under:- “…..It is evident, from the said Bill of Entry, that the goods were D imported by the petitioner, and were cleared from customs with the assistance of the customs house agent M/s.Srinivasa Transports. If, as contended by the petitioner, the goods were sold by them to M/s. Radha Industries on high seas, and before the goods entered the customs port, the name of the importer should have been shown as Radha Industries, and not as Sanjiv E Kumar Agarwal, Vellanki Frameworks. The fact that the name of the importer is shown as Sanjiv Kumar Agarwal, Vellanki Frameworks, and the Bill of Entry makes no reference to Radha Industries, goes to show that the goods were imported by the petitioner on a high sea sale effected in their favour by Purbanchal F Lumbers Private Limited; it is they who had imported the goods; and sale of goods by them to Radha Industries could only have been effected after the goods had been cleared for home consumption.” 14.4.5. The High Court also examined the submissions that the G appellant acted merely as an agent of the end-buyer and rejected the same, again with reference to the contents of the bill of entry where the name of appellant was shown as the importer and there was no reference to Radha. The High Court also observed that customs duty could be assessed only on the importer of goods and not on his agent; and found H

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A that the appellant alone was assessed to customs duty and not Radha. In view of the given facts, the High Court reiterated its findings that the sale of goods by appellant to Radha was not a high seas sale; and such a sale could have been effected only after the appellant was assessed to customs duty and had cleared the goods for home consumption. The High Court observed and held, inter alia, as follows:- B “If, as contended by him, the petitioner was merely acting as an agent, the bill of entry would have reflected the name of the importer as M/s.Radha Industries and the petitioner as their agent instead of M/s. Srinivasa Traders as the clearing house agent; and the petitioners name would have been recorded in the bill of C entry, along with Purbanchal Lumbers Private Limited. The very fact that the name of the importer is shown as Sanjiv Kumar Agarwal, Vellanki Frameworks, and the Bill of Entry makes no reference to Radha Industries, shows that the goods were imported by the petitioner, on the goods being sold to them on high seas by D Purbanchal Lumbers Private Limited. Sale of goods by them to Radha Industries could only have been effected after the goods had been cleared for home consumption. *** *** *** Transfer of title to the goods on high seas would make the person, who purchased the goods on high seas, the importer of the goods and it is he who would be liable to be assessed to customs duty. As the Bill of Entry records the petitioners name as the importer, and as it is not in dispute that it was he who was assessed to customs duty, and not Radha, it is evident that the sale of goods by the petitioner to Radha is not a high seas sale. Such a sale could only have been effected after the petitioner was assessed to customs duty, and he had cleared the goods for home consumption.” 14.4.6. With reference to a Division Bench decision of Andhra G Pradesh High Court in the case of Minerals and Metals Trading Corporation of India Ltd. v. State of Andhra Pradesh: 1999 (106) ELT 23, an argument was advanced on behalf of the appellant that the name on the bill of entry was irrelevant because the name of the importer alone would be recorded in it, even if the transfer of title deeds was effected before filing of the bill of entry and assessment of duty. The H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 935 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

High Court took note of the principal issue involved in the said case of A Minerals and Metals and held that the question, as to whether name on the bill of entry was relevant or not and as to whether the name of importer alone would be recorded therein, even if transfer by title deed was effected before filing of bill of entry and assessment of duty, did not arise for consideration therein. Therefore, the observations occurring in B said decision as regards the relevance of name in the bill of entry were held to be not of a binding declaration of law. 14.5. Having thus held that CTO was justified in holding that sale of goods by appellant to Radha was an inter-State sale liable to tax under the CST Act, the High Court took note of another submission made on behalf of the appellant that the sale in favour of Radha C occasioned the movement of goods into the country. It was contended on behalf of the appellant that the entire import of the goods was occasioned by the ultimate sale by the appellant in favour of Radha and even though the documents executed referred to the sale as a high seas sale, but when the very sale itself occasioned the movement of goods across the customs barrier, it had been a sale in the course of import. It was also submitted on behalf of the appellant that though the case was not presented in this light before the assessing officer, it being a pure question of law, could be considered by the High Court. Per contra, it was submitted on behalf of the department that such submissions were inconsistent and contrary to the earlier stand of the appellant that it had been a high seas sale. It was also submitted, again with reference to bill of entry, that the name of Radha was not reflected there as the last buyer. 14.5.1. The High Court observed that it was for the first time such a plea was taken in the writ proceedings that the sale of goods to F Radha occasioned the import of goods; and the writ Court would be disinclined to entertain this plea, being based on certain clauses of agreements and being a mixed question of facts and law. This apart, the High Court also observed that even otherwise, such a submission was belied by the fact that the name of the appellant, and not Radha, was G reflected in the bill of entry as the importer of the goods. 14.6. Another argument advanced on behalf of the appellant before the High Court had been that the principles enunciated in the said Division Bench decision of Andhra Pradesh High Court in the case of Minerals and Metals and another decision of Madras High Court got tacit approval H

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A in the decision of this Court in the case of Hotel Ashoka (Indian Tourist Development Corporation Ltd.). v. Assistant Commissioner of Commercial Taxes and Anr.: (2012) 3 SCC 204. The High Court distinguished the said decision of this Court while pointing out that it related to the goods sold at duty-free shops which are beyond the customs frontier of India; the goods sold thereat must be said to have been sold before having crossed the customs frontiers of India; and consequently, the sale of goods thereat is in the course of import. 14.7. Having thus held that the sale in question was an inter-State sale, the High Court took note of the alternative prayer made on behalf of the appellant for an opportunity to submit C-Forms from the buyers and granted this prayer with reference to Rule 12(7) of the Central Sales Tax (Registration and Turnover) Rules, 1957. 14.8. With the aforesaid findings and liberty, the High Court proceeded to reject the challenge to the impugned assessment orders while granting three months’ time to the appellant to produce the prescribed D C-Forms. The High Court also commented on the doubts expressed by the assessing officer about existence of some of the dealers and observed that the appellant would be able to procure C-Forms only if such dealers were in existence. The High Court concluded on the writ petitions in the following words:- E “For the reasons aforementioned, the impugned assessment orders do not necessitate interference, and the challenge thereto by the petitioner is rejected. The petitioner is, however, granted three months time from today to produce the prescribed C-Forms. While the assessing authority has expressed his doubts regarding the very existence of some of the dealers outside the State, it is not necessary for us to delve on this aspect any further, as it is only if such dealers are in existence would the petitioner be able to procure C-Forms from them, and furnish it to the assessing authority. While the prescribed concessional rate of tax, payable by the petitioner on the inter-state sale of goods, shall be paid by them forthwith, the respondents shall not take coercive steps for recovery of the balance tax for a period of three months from today. In case the petitioner produces C-Forms within the aforesaid three month period, they shall be extended the benefit of concessional rate of tax to the extent for which C-Forms are produced. It is made clear that, in case the petitioner fails to submit

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 937 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

the C-Forms within three months from today, it is open to the respondents thereafter to proceed and recover the balance tax due from them in accordance with law. Subject to the above observations, both the Writ Petitions fail and are, accordingly, dismissed. The miscellaneous petitions pending, if any, shall also stand automatically dismissed. However, B in the circumstances, without costs.” Rival Submissions and the issues involved

15Copy pinpoint15. The aforesaid decision of the High Court is questioned in these appeals. We may now summarize the principal submissions made on behalf of the parties. C

16Copy pinpoint16. Assailing the impugned judgment, learned counsel for the appellant has made elaborate reference to the quadripartite agreement dated 21.11.2005 involving four parties and stipulating that Indus would raise the purchase order on the foreign exporter i.e., WBT and thereafter, when the goods were on high seas, Indus would transfer the documents D of title (bill of lading) in favour of the appellant; and the appellant would then transfer the documents of title to the goods in favour of Radha before the goods cross the customs frontiers of India. The learned counsel would submit that the intention behind entering into a quadripartite agreement was that Indus enjoyed a 180-day line of credit with WBT E while the appellant had the requisite infrastructure to undertake importation of goods but the agreement specifically identified Radha as final buyer of the goods and stipulated that the goods would move only after inspection and selection by Radha and hence, there was always a privity of contract between WBT (the seller) and Radha (the end-buyer). The learned counsel has further submitted that as per Schedule I to the F agreement, the appellant was to act as an agent of Radha and to clear the goods from customs authorities where delivery of goods was to be completed once the appellant had issued a delivery note to Radha; and the responsibility of carriage of goods, after clearance, from the port to the factory premises in the State of Uttar Pradesh was that of Radha. G 16.1. In the aforesaid backdrop, the learned counsel for the appellant has strenuously contended that the sale in question, being in the nature of “sale in the course of import”, is not taxable under the CST Act; that the sale in question, having not occasioned movement of goods between two States within India, is not an “inter-State sale” under Section H

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A 3(a) of the CST Act and rather, this sale has occasioned movement of goods from outside India into India; and that the department had been unjustified and wrong in ignoring the second high seas sale agreement between the appellant and Radha and by treating the appellant as owner of goods only for having filed the bill of entry and having raised the debit note. B 16.2. Elaborating on the submissions, learned counsel has referred to Article 286 of the Constitution of India while pointing out that it prohibits the State Government from imposing sales tax on sales made in the course of import or export; and the Parliament could formulate the principles to determine as to when a sale takes place in the course of import or export. The learned counsel has referred to Section 5 of the CST Act, laying down as to when a sale is treated to have taken place in the course of import or export and has referred to sub-section (2) thereof, providing that sale of goods is deemed to take place in the course of import of the goods into the territory of India only if the sale occasions such import or is effected by a transfer of document of title to the goods before they have crossed the customs frontiers of India. Learned counsel has also referred to Section 3 of the CST Act and the decision of this Court in the case of State of Maharashtra v. Embee Corporation, Bombay: (1997) 7 SCC 190 to submitthat the terms ‘sale occasioning movement of goods’ and ‘sale occasioning import of goods’ carry the same meaning insofar as Sections 3 and 5 of the CST Act are concerned; and that the words “sale of goods” in Section 3 and the words “contract of sale” in Section 4(2) of the CST Act have been assigned the same meaning, which is wider to the meaning of sale in the general law. While also relying on the decision of this Court in Tata Iron and Steel Co. F Ltd., Bombay v. S.R. Sarkar and Ors.: AIR1961 SC 65, the learned counsel has submitted that in both the situations where sale occasions movement of goods and sale occasions import of goods, the contract of sale or a covenant of a contract of sale triggers the movement from either one State to another or from outside India into India. G 16.3. Learned counsel for the appellant has contended that to qualify under Section 5(2) of the CST Act, the essential ingredients of high sea sales would be of the transfer of document of title and transfer of goods to be made while the goods are on high seas. With reference to the definition of term “crossing the customs frontiers of India”, as occurring in Section 2(ab) of the CST Act, learned counsel has pointed H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 939 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

out that this term means crossing the limits of the area of customs station A in which imported goods or exported goods are ordinarily kept before clearance by customs authorities. Then, with reference to Section 2(4) of the Sale of Goods Act, 19309 and the decisions of this Court in J.V. Gokal& Co. (Private) Ltd. v. Assistant Collector of Sales-Tax (Inspection) and Ors: (1960) 2 SCR 852 and Minerals & Metals B Trading Corporation of India Ltd. v. Sales Tax Officer and Ors: (1998) 7 SCC 1910, learned counsel has submitted that the transfer of bill of lading signifies transfer of title in the goods. As regards transfer before the goods crossing customs frontiers of India, the learned counsel has referred to the decision of this Court in Hotel Ashoka (supra) to submit that when the goods are kept in the bonded warehouse, they cannot be said to have crossed the customs frontiers of India. 16.4. As regards the facts of the case, learned counsel would submit that the endorsement by appellant on the bill of lading in favour of Radha was made on 12.12.2005 when the goods were on the high seas and had not even reached the customs frontiers of India and then, the bill of entry for home consumption was filed on 28.12.2005. Therefore, according to the learned counsel, the title to the goods in question was transferred in favour of Radha before the goods crossed the customs frontiers of India and, accordingly, the transaction between the petitioner and Radha had been a sale in the course of import not liable to be taxed under the CST Act. E

16.5. The learned counsel has also contended that the transaction in question is sought to be taxed as inter-State sale within the ambit of Section 3(a) of the CST Act, for being not covered under Section 5(2) of the CST Act but, for a transaction to be covered under Section 3(a) of the CST Act, the agreement of sale must trigger the movement of goods and the goods must move between one State to another within India as a consequence of such agreement. The learned counsel has referred to the decision of this Court in State of Travancore-Cochin and Ors. v. Shanmugha Vilas Cashewnut Factory, Quilon: AIR 1953 SC 333 and has strenuously argued that in the present case, the goods moved into India from outside as a result of the quadripartite agreement; that 9 Hereinafter referred to as ‘the Sale of Goods Act’. 10 Hereinafter this case of Minerals & Metals has also been referred to as ‘Orissa case’, in order to maintain the distinction with the other decision of Andhra Pradesh High Court carrying the same first name, which was referred to by the High Court in the impugned judgment. H

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A the inter-State movement within India was only a part of one whole integrated transaction of sale; that when a part of integrated import transaction involves movement of goods within India, the department cannot selectively question only one part of the transaction; and that the quadripartite agreement, clearly establishing the privity amongst the parties involved, could not have been ignored in part and the Indian leg B of the transaction could not have been dissected in order to be taxed. 16.6. In another leg of principal submissions, learned counsel has contended that the High Court has fallen in error in using the bill of entry to determine the ownership of goods. Learned counsel would submit that the ownership of goods could only be determined under the Sale of C Goods Act read with the Indian Contract Act; that the customs duty is collected from the person having possession of goods at the time of importation, who need not be the owner of good, as appearing from the definition of “importer” under the Customs Act, which includes “owner and any other person”; that in distinction to the customs duty, sales tax is D a tax on the transaction of sales or purchase when ownership of goods is transferred and the questions as to when does the sale take place and who is the owner of goods would be determined only under the Sale of Goods Act, and not under the Customs Act. With a strong reliance on the decision of this Court in the case of Union of India and Anr. v. Sampat Raj Dugar and Anr.: (1992) 2 SCC 66, learned counsel has submitted that the definition of importer in the Customs Act only indicates the person who is in possession of goods at the time of filing of bill of entry but does not indicate the title to the goods. 16.7. As regards raising of debit note, learned counsel has argued that the respondent has tried to rely upon a subsequent debit note raised by the appellant on Radha to conclude that the sale took place after the goods crossed the customs frontiers of India but, as per the definition contained in Section 2(g) of the CST Act, “sale” includes transfer of property in goods for deferred payment and therefore, issuance of debit note on a later date is of no effect on the passing of title of goods, which had taken place before the goods crossed the customs frontiers of India. According to the learned counsel, endorsement of the bill of lading and its date are the only factors relevant for determination as to whether the sale in question is covered by Section 5(2) of the CST Act or not; and all other factors are irrelevant for determining the core issue regarding point of sale; and the High Court has been in error in proceeding on irrelevant H

M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX 941 OFFICER, VISAKHAPATNAM [DINESH MAHESHWARI, J.]

considerations while ignoring the relevant aspects and the law applicable to the case. 16.8. In the alternative part, learned counsel has contended that the High Court, despite indicating its disinclination to reappreciate the evidence in writ jurisdiction, has proceeded to render findings on fact rather than relegating the matter to the appellate authority. While relying on the decision in the case of Star Paper Mills Ltd. v. Union of India and Ors.: 1995 Supp (4) SCC 674, the learned counsel would submit that the appellant may be allowed to contest the matter in the statutory appeal, particularly in view of the facts involved.

17Copy pinpoint17. Per contra, learned counsel for the respondent has contended that on a conjoint reading of the agreements sought to be relied upon by the appellant and the appellant’s dealing with the goods before the customs frontier at Visakhapatnam, make it clear that the alleged agency agreement between the appellant and Radha was a sham and nominal document, drawn only for the purpose of evasion of tax liability under the CST Act. The learned counsel would submit that the alleged agency agreement played no role at all in the import transaction and it was the appellant alone who was the real importer and was rightly treated so. The learned counsel would further submit that the documents presented by the appellant before the customs frontier at Visakhapatnam could not have shown Radha as the real importer since the high seas sale agreement designated appellant as the buyer; and the customs frontier at Visakhapatnam was not called upon to even consider the agency agreement as the basis for the bill of entry. 17.1. Learned counsel for the respondent has emphatically argued that in the given set of facts and circumstances, while reading the agreements in question and the real intent behind them, coupled with filing of bill of entry by the appellant, the conclusion drawn by the High Court that the appellant alone was the importer remains unexceptionable. Learned counsel would also submit that the import was complete only by and through the appellant and until completion of importation, Radha was nowhere in picture; and the monetary transactions between the appellant and Radha are proof enough of the transaction of sale between them after the goods had crossed the customs frontiers of India. In other words, according to the learned counsel, delivery of goods to Radha by the appellant and their movement from Visakhapatnam (in the State of Andhra Pradesh) on way to Lucknow (in the State of Uttar Pradesh) H

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