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Nirmal Kumar Parsan v. Commissioner of Commercial Taxes & Ors.

Civil Appeal · 2020 INSC 60Decided 21 Jan 2020
Civil Appeal No. 7863 of 2009
Justice A.M. Khanwilkar · Justice Dinesh Maheshwari

Background

The appellants imported foreign-made cigarettes and stored them in a customs bonded warehouse in West Bengal without paying customs duty, then sold some of this stock to the masters of foreign-bound ships as "ship stores." The West Bengal tax authorities treated these sales as taxable local sales under state sales tax law, while the appellants argued the sales were part of the import/export process and therefore exempt from state sales tax. The Tribunal and the Calcutta High Court both ruled against the appellants, who then appealed to the Supreme Court.

Decision Breakdown

The Supreme Court dismissed the appeals, holding that the sales did not qualify as being "in the course of import" or "in the course of export" under Section 5 of the Central Sales Tax Act. The Court explained that for a sale to be exempt as being in the course of import, the sale itself must cause or occasion the import, and the goods must not yet have crossed the "customs frontiers of India" (i.e., left the customs port/station area) at the time of sale. Here, the goods had already been unloaded, cleared beyond the customs station, and stored in a bonded warehouse within West Bengal before being sold, so the sale happened after the goods had effectively crossed the customs frontier, making it a local, taxable sale. The Court also rejected the export argument since the goods were meant for consumption on board the ship, not delivery to a foreign destination.

Lesson Learnt

Goods kept in a bonded customs warehouse (even without customs duty paid) can still be subject to state sales tax once sold, because for tax-exemption purposes what matters is whether the goods have crossed the customs station area, not whether duty has actually been paid: a useful distinction for anyone dealing in imported/bonded goods.

Official source (sci.gov.in)View Judgment (PDF)

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