Report No. 61
8.2. Meaning of "Customs frontiers".-
The first question relates to the meaning of the expression "customs frontiers". Under sections 5(1) and 5(2) of the Act, the transfer of shipping documents after the outgoing goods have crossed the "customs frontiers of India", is regarded as a sale in the course of export, and conversely, where the sale takes place before the incoming goods have entered the customs frontiers of India, it is regarded as a sale in the course of import. The result is that if the sale takes place after the incoming goods have entered the customs frontiers, it is not a sale in the course of import.
Now it may be noted that the Supreme Court has, in one case1 interpreted the expression 'customs frontiers' as meaning or denoting the customs frontiers as defined2 for the purpose of the Customs law. In that case, the State raised the contention that the sales in question (i.e., sales effected while the goods were in the Madras harbour), were not sales in the course of import, as the documents of title were handed over by the assessee to the buyers after the ship had crossed the 'territorial waters'. According to the State, the expression 'customs frontiers', occurring in section 5(2) of the Central Sales Tax Act, 1956, was coterminous with the extent of the 'territorial waters' of India, as fixed by the Proclamation, dated March 22, 1956 issued by the President of India.
According to the State, the import was complete when the ship carrying the goods from a foreign port entered the territorial waters, and any sale by the importer, by transfer of documents of title to the goods subsequent to such entry, would not amount to sale in the course of import. On the other hand, according to the assessee, 'customs frontiers' in section 5(2) of the Central Sales Tax Act, must be read, to analogous to 'customs barriers'3, and, when it is so read, the position would be that a sale effected by transfer of documents of title before the goods have crossed the 'customs barrier' would not be liable to tax under the Madras Act, even though the goods have entered the territorial waters, and thus crossed the "customs frontiers".
The Supreme Court upheld the contention of the State of Madras and agreed with the former interpretation.
1. State of Madras v. Dauer & Co., AIR 1970 SC 165 (167), para. 7.
2. Defined in section 3A, Sea Customs Act, 1878 (repealed).
3. As to 'customs barriers' see para. 8.6, infra.
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