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

- **Citation:** [2021] 3 S.C.R. 903
- **Court:** Supreme Court of India
- **Decided:** 2021
- **Case number:** Civil Appeal Nos. 1322-1323 of 2019
- **Bench:** A. M. Khanwilkar, Dinesh Maheshwari
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-vellanki-frame-works-v-the-commercial-tax-officer-visakhapatnam-35037
- **Pages:** 80

## Headnote

Central Sales Tax Act, 1956: s.5(2) - 'sale in the course of
import' - Essential features - The basic principles for determining
as to when a sale or purchase of goods takes place in the course of
import or export are contained in s.5 of the CST Act - Under subsection (2), 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 phrase
'sale in the course of import' carries three essential features - (i)
that there must be a sale; (ii) that goods must actually be imported
into the territory of India; and (iii) that the sale must be part and
parcel of the import - A sale would become part and parcel of import
if it either occasions such import or if it occurs by way of a transfer
of document of title to the goods before the goods cross the customs
frontiers of India.
Customs Act, 1962: s.2(26) - Importer, who is - Sale on High
Seas - Appellant's case was that there was a quadripartite agreement
whereby the supplier sold the goods in question to the first-buyer
and delivered them at the port of shipment - Thereafter, while the
goods were on high seas, first buyer transferred them to the appellant
by endorsing the bill of lading in favour of the appellant - Further
to this and while the goods were yet on high seas, appellant
allegedly transferred them to the end-buyer by endorsing the bill of
lading in favour of the end-buyer - Appellant also suggested that
since the end-buyer did not have 'the requisite infrastructure' to
undertake importation of goods whereas the appellant had the
requisite infrastructure for importation, therefore, appellant was to
act as an agent of the end-buyer and to clear the goods from customs
authorities - Held: The inclusive definition of "importer" in s.2(26)
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[2021] 3 S.C.R.
of the Customs Act cannot be used to usurp the identity of an importer
from the person who filed the bill of entry; and the person in whose
name the bill of entry is filed, does not cease to be an importer - In
this case, the name of the appellant was reflected as importer in the
Import General Manifest (IGM) of the vessel/s that brought the goods
in question to the port at Visakhapatnam - High Court observed
that if the alleged second high seas sale had taken place, the IGM
would have reflected the name of the last high seas sale purchaser
as the importer and if there was any bonafide omission, the IGM
would have necessitated amendment because only the last purchaser
of the goods on high seas could have been the importer/consignee
- It is but apparent that that while bringing anything into India
from a place outside India is generally regarded as "import" but,
when the goods are cleared for home consumption, they are no
longer imported goods for the purpose of the Customs Act -
Significantly, in the process of importation, the importer, in relation
to any goods, includes any owner or any other person holding
himself to be the importer but, only between the time of their
importation and their clearance for home consumption - In other
words, the net result of the expanded definition of the expression
"importer" is that while any person who imports goods into India
would be an importer but, the owner of the goods or a person holding
himself to be an importer would also be regarded as an importer
during the period between importation of goods and their clearance
for home consumption - This crucial period would generally be
that period when the goods have been warehoused after importation
and are cleared from warehouse by a person other than the person
who actually imported the goods - That being the position, High
Court rightly held that this definition of importer cannot be used to
usurp the identity of an importer from the person who f

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[2021] 3 S.C.R. 903
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M/S VELLANKI FRAME WORKS
v.
THE COMMERCIAL TAX OFFICER, VISAKHAPATNAM
(Civil Appeal Nos. 1322-1323 of 2019)
JANUARY, 13 2021
[A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]
Central Sales Tax Act, 1956: s.5(2) - 'sale in the course of
import' - Essential features - The basic principles for determining
as to when a sale or purchase of goods takes place in the course of
import or export are contained in s.5 of the CST Act - Under subsection (2), 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 phrase
'sale in the course of import' carries three essential features - (i)
that there must be a sale; (ii) that goods must actually be imported
into the territory of India; and (iii) that the sale must be part and
parcel of the import - A sale would become part and parcel of import
if it either occasions such import or if it occurs by way of a transfer
of document of title to the goods before the goods cross the customs
frontiers of India.
Customs Act, 1962: s.2(26) - Importer, who is - Sale on High
Seas - Appellant's case was that there was a quadripartite agreement
whereby the supplier sold the goods in question to the first-buyer
and delivered them at the port of shipment - Thereafter, while the
goods were on high seas, first buyer transferred them to the appellant
by endorsing the bill of lading in favour of the appellant - Further
to this and while the goods were yet on high seas, appellant
allegedly transferred them to the end-buyer by endorsing the bill of
lading in favour of the end-buyer - Appellant also suggested that
since the end-buyer did not have 'the requisite infrastructure' to
undertake importation of goods whereas the appellant had the
requisite infrastructure for importation, therefore, appellant was to
act as an agent of the end-buyer and to clear the goods from customs
authorities - Held: The inclusive definition of "importer" in s.2(26)
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of the Customs Act cannot be used to usurp the identity of an importer
from the person who filed the bill of entry; and the person in whose
name the bill of entry is filed, does not cease to be an importer - In
this case, the name of the appellant was reflected as importer in the
Import General Manifest (IGM) of the vessel/s that brought the goods
in question to the port at Visakhapatnam - High Court observed
that if the alleged second high seas sale had taken place, the IGM
would have reflected the name of the last high seas sale purchaser
as the importer and if there was any bonafide omission, the IGM
would have necessitated amendment because only the last purchaser
of the goods on high seas could have been the importer/consignee
- It is but apparent that that while bringing anything into India
from a place outside India is generally regarded as "import" but,
when the goods are cleared for home consumption, they are no
longer imported goods for the purpose of the Customs Act -
Significantly, in the process of importation, the importer, in relation
to any goods, includes any owner or any other person holding
himself to be the importer but, only between the time of their
importation and their clearance for home consumption - In other
words, the net result of the expanded definition of the expression
"importer" is that while any person who imports goods into India
would be an importer but, the owner of the goods or a person holding
himself to be an importer would also be regarded as an importer
during the period between importation of goods and their clearance
for home consumption - This crucial period would generally be
that period when the goods have been warehoused after importation
and are cleared from warehouse by a person other than the person
who actually imported the goods - That being the position, High
Court rightly held that this definition of importer cannot be used to
usurp the identity of an importer from the person who filed the bill
of entry - In other words, the person in whose name the bill of entry
is filed does not cease to be an importer and, if that person claims
to be not the owner or importer, the onus would be heavy on him to
establish that someone else is the owner or importer of goods -
Further, if the appellant was merely acting as an agent, then bill of
entry would have reflected the name of end-buyer as the importer
and the appellant as an agent of the importer; and further to that,
the said end-buyer would have been assessed for customs duty - It
was not so - Thus, when all official documents as also dealings of
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the appellant clearly establish that the appellant had been the
importer, the consequences are bound to follow - It gets perforce
reiterated that when the bills of entry recorded the name of the
appellant as importer and the appellant alone was assessed to
customs duty, the so called second high seas sale agreements never
came into operation - Central Sales Tax Act, 1956 - s.5(2).
Central Sales Tax Act, 1956: s.5(2) - Claim for exemption
under - Raising of debit notes by the appellant on the end-buyers -
Effect of - Inter State Sales - Appellant had admittedly raised debit
notes on the end-buyers but only after having cleared the goods by
filing the bill of entry for home consumption - Once the suggestion
about the second high seas sales is not accepted and it is found
that the appellant had been the importer of goods and had cleared
them for home consumption, the natural consequence of raising of
such debit notes on the end-buyers situated in different States and
movement of goods to such end-buyers would be to take these
transactions in the category of inter-State sales in terms of s.3(a) of
the CST Act - Appellant was not entitled to the exemption of s.5(2)
of the CST Act and rightly been held liable for tax over inter-State
sales - After the appellant got the goods released by filing bill of
entry for home consumption, indisputably, the goods were ultimately
received by various end-buyers in different States and appellant
raised debit notes from the State of Andhra Pradesh - These facts
were sufficient to establish that the movement of goods inside the
country from one State to another had been on account of the sale
by appellant to the end-buyers; and such sales took place only
after the appellant obtained the goods from the bonded warehouse
for home consumption - High Court was right in observing that
once the appellant got released the goods after filing the bill of
entry for home consumption, the import stream dried up and the
goods got mixed in the local goods - Any movement of the goods
thereafter was bound to be a sale under s.3(a) of the CST Act; and
such movement being from the State of Andhra Pradesh to other
State, it had been a matter of inter-State sale - The principle that
actual sale may not necessarily precede the movement of goods, in
its true effect, operates rather against the appellant in relation to
the sale to end-buyers after the goods were cleared for home
consumption - The claimed exemption under s.5(2) of the CST Act
was rightly denied to the appellant and the High Court was justified
M/S VELLANKI FRAME WORKS v. THE COMMERCIAL TAX
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in dismissing the writ petitions filed by the appellant - No case for
interference is made out.
Central Sales Tax Act, 1956: s.5(2) - Whether any case for
relegating the appellant to the remedy of appeal made out -
Appellant, despite being aware of the availability of remedy of
statutory appeal, consciously chose to file writ petitions against the
assessment orders and consciously contested the entire matter in
the High Court - High Court, even after noticing the framework of
certiorari jurisdiction, examined the merits of the case thoroughly
and even examined the submission made for the first time in writ
petitions that the import of goods was occasioned by the sales in
question - Of course, in that regard, the High Court pointed out
that it was not a pure question of law but in any case, such
submission was belied by the fact that the name of the appellant
was reflected in the bill of entry as the importer and not that of the
end-buyer - There is no error or fault in the approach of High
Court in this case - After having consciously invoked the writ
jurisdiction of the High Court and having contested the matter on
merits, the appellant cannot now be allowed to re-open the matter
in appeal - The extraordinary writ jurisdiction cannot be utilised
by a litigant only to take chance and then to seek recourse to the
other remedy after failing in its attempt on the basic merits of the
case before the High Court - A litigation cannot be allowed to be
unendingly kept alive at the choice of a litigant - Writ jurisdiction.
Dismissing the appeals, the Court
HELD: 1.1 In exercise of its powers under Clause (2) of
Article 286, the Parliament has enacted the Central Sales Tax
Act, 1956. In Section 3, thereof, it is laid down that a sale or
purchase of goods shall be deemed to take place in the course of
inter-State trade or commerce if the sale or purchase-(a)
occasions the movement of goods from one State to another; or
(b) is effected by a transfer of documents of title to the goods
during their movement from one State to another. [Para 20.2][943E-F]
1.2 The basic principles for determining as to when a sale
or purchase of goods takes place in the course of import or export
are contained in Section 5 of the CST Act. Under sub-section (2),
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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. [Para 20.3][944-DF]
Hotel Ashoka (Indian Tourist Development Corporation
Ltd.). v. Assistant Commissioner of Commercial Taxes
and Anr. (2012) 3 SCC 204 : [2012] 1 SCR 808 - held
inapplicable.
Tata Iron and Steel Co. Ltd., Bombay v. S.R. Sarkar
and Ors. AIR 1961 SC 65 : [1961] 1 SCR 379; Minerals
& Metals Trading Corporation of India Ltd. v. Sales
Tax Officer and Ors. (1998) 7 SCC 19 : [1998] 2 Suppl.
SCR 112 - distinguished.
K. Gopinathan Nair and Ors. v. State of Kerala (1997)
10 SCC 1 : [1997] 3 SCR 226 - relied on.
J.V. Gokal & Co. (Private) Ltd. v. Assistant Collector of
Sales-Tax (Inspection) and Ors. [1960] 2 SCR 852; State
of Maharashtra v. Embee Corporation, Bombay (1997)
7 SCC 190 : [1997] 3 Suppl. SCR 497 - referred to.
2.1 The appellant has suggested existence of quadripartite
agreement whereby and whereunder, 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 on high seas, party number 2 transferred them to the
appellant (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 yet 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. The appellant
has also suggested that though the goods were being purchased
by the end-buyer and were to move only after inspection and
selection by the end-buyer but the methodology of such
quadripartite agreement was adopted because of the reasons that
the end-buyer was not having 'the requisite infrastructure' to
undertake importation of goods whereas the appellant was having
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the requisite infrastructure for importation and the first-buyer
was having the credit facility with the seller. It has, therefore,
been suggested that there was always a privity of contract between
the seller and the end-buyer; and that the appellant was to act as
an agent of the end-buyer and to clear the goods from customs
authorities. The appellant has also suggested that in each of the
transactions, the process was carried out as envisaged in the
quadripartite agreement and in the manner that the first-buyer
endorsed the bill of lading in favour of the appellant when the
goods were on high seas; and while the goods continued to be on
high seas and had not crossed the customs frontiers of India, the
appellant endorsed the bill of lading in favour of the end-buyer.
According to these suggestions, the appellant only acted as an
agent of the end-buyer while getting the goods cleared from the
customs port at Visakhapatnam. [Para 26][962-F-H; 963-A-D]
2.2 However, the suggestions by the appellant do not remain
as innocuous and over-simplified as projected, for the reason that
in each of these transactions, when the goods in question reached
the port at Visakhapatnam, the appellant carried out the
proceedings envisaged by the Customs Act and filed a bill of entry
for warehousing and thereafter, filed another bill of entry for home
consumption (ex-bond); and on the basis of such bills of entry,
the appellant was duly assessed for customs duty. Admittedly,
after the goods were cleared for home consumption, they moved
from the State of Andhra Pradesh to different States where the
respective end-buyers were situated; and the appellant raised
debit notes on the end-buyers.In these transactions, the goods
in question, upon reaching the port of destination, were not
cleared by the end-buyers after paying the requisite customs
duties.[Para 26.1][963-D-G]
3. Filing of bill of entry for home consumption by the
appellant: Implication
3.1 The High Court has observed that the inclusive
definition of "importer" in Section 2(26) of the Customs Act cannot
be used to usurp the identity of an importer from the person who
filed the bill of entry; and the person in whose name the bill of
entry is filed, does not cease to be an importer. In this case, the
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name of the appellant was reflected as importer in the Import
General Manifest of the vessel/s that brought the goods in
question to the port at Visakhapatnam. The High Court has
meticulously examined the entire process relating to the arrival
of goods as cargo in a vessel; and filing of IGM as also the contents
of the bill of entry and has pointed out that the cargo declaration
form, an essential part of IGM, was required to carry, amongst
others, the particulars of bill of lading and the name of consignee/
importer. After finding that the name of the appellant was reflected
as importer in IGM, the High Court has observed that if the
alleged second high seas sale had taken place, the IGM would
have reflected the name of the last high seas sale purchaser as
the importer and if there was any bonafide omission, the IGM
would have necessitated amendment because only the last
purchaser of the goods on high seas could have been the importer/
consignee. The High Court has also observed that there was no
material on record to show that either the IGM contained the
name of end-buyer as the importer/consignee or that the same
was subsequently amended in terms of Section 30(3) of the
Customs Act. These had been the pivotal reasons for which the
High Court rejected the suggestion of second high seas sales in
favour of the end-buyers and held that the only attempt of the
appellant had been to avoid inter-State sales under the CST Act.
In the given facts, the High Court specifically recorded the
findings that the sale of goods by appellant to the end-buyers had
not been high seas sales; and such sales could have been effected
only after the appellant was assessed to customs duty and had
cleared the goods for home consumption. [Para 27.1][964-D-H;
965-A-C]
3.2 It is but apparent that that while bringing anything into
India from a place outside India is generally regarded as "import"
and the imported goods are those goods which are brought into
India from a place outside but, when the goods are cleared for
home consumption, they are no longer imported goods for the
purpose of the Customs Act. Significantly, in the process of
importation, the importer, in relation to any goods, includes any
owner or any other person holding himself to be the importer
but, only between the time of their importation and their clearance
for home consumption. In other words, the net result of the
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expanded definition of the expression "importer" is that while
any person who imports goods into India would be an importer
but, the owner of the goods or a person holding himself to be an
importer would also be regarded as an importer during the period
between importation of goods and their clearance for home
consumption. This crucial period would generally be that period
when the goods have been warehoused after importation and are
cleared from warehouse by a person other than the person who
actually imported the goods. That being the position, the High
Court has rightly said that this definition of importer cannot be
used to usurp the identity of an importer from the person who
filed the bill of entry. In other words, the person in whose name
the bill of entry is filed does not cease to be an importer and, if
that person claims to be not the owner or importer, the onus
would be heavy on him to establish that someone else is the owner
or importer of goods. [Para 30][967-B-C; 968-A-C]
Union of India and Anr. v. Sampat Raj Dugar and Anr.
(1992) 2 SCC 66 : [1992] 1 SCR 269 - held
inapplicable.
3.3 The definition of "importer" in Section 2(26) of the
Customs Act, even if not directly decisive of the question of title,
has its implications on the facts of the present case for the reason
that the appellant alone filed the bills of entry for warehousing as
also for home consumption. Yet further, the requirements of filing
import manifest, as per Section 30 of the Customs Act, have their
own bearing on the present case. It remains indisputable that
the name of the appellant was reflected as importer in IGM. If,
as asserted by the appellant, the goods had been sold on the high
seas, the cargo declaration of IGM would have reflected the name
of last high seas purchaser as importer and in other event, the
IGM would have necessitated amendment because only the last
purchaser of the goods on high seas would have been declared
as consignee/importer in IGM. The fact that the name of Radha
(and other end-buyers) was not mentioned in IGM as the
importer/consignee nor the relevant IGM was amended, the
suggestion about second high seas sale in favour of Radha (and
other end-buyers) turns out to be only a self-serving suggestion
of the appellant, which has no corroboration on the record; rather
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the official records totally belie the suggestion of the appellant.
[Para 32][973-D-G; 974-A]
3.4 The fact of the matter remains that even though the
appellant has suggested that the bills of lading were endorsed in
favour of Radha (and other end-buyers) when goods were on high
seas but this bald assertion is not corroborated by any of the
official documents which form the part of the process of
importation, warehousing and clearance of goods. On the contrary,
the High Court has pointed out as illustration the details of one
of the bills of entry, which distinctively gave out all the particulars
of IGM, the invoice, the value of cargo, etc. and the High Court
has found that in the bill of entry, the name of appellant alone was
shown as the importer who cleared the goods from customs with
the assistance of the Customs House Agent. In the given set of
facts, if the goods were at all sold to Radha (and other end-buyers)
on high seas, the name of such end-buyer would have appeared
as importer and not that of the appellant. The same considerations
operate against the assertion that the appellant was only acting
as an agent of the end-buyers. The High Court has rightly pointed
out that the Customs House Agent is an entirely different person
who acts only to present papers for clearance of the imported
goods under a bill of entry. Of course, under Section 147 of the
Customs Act, a person could act on behalf of importer or owner
but such a person cannot be treated as owner of the goods nor
could be made liable for customs duty. If the appellant was merely
acting as an agent, then bill of entry would have reflected the
name of end-buyer as the importer and the appellant as an agent
of the importer; and further to that, the said end-buyer would
have been assessed for customs duty. It were not so. [Paras 32.1,
33][974-A-F]
3.5 Though the definition of importer includes owner or
any person holding out himself as the importer; and this definition
of importer is not really relevant to the question of title but, that
does not mean that a person who holds out himself to be the
importer; and who files the bill of entry for home consumption;
and who is assessed for customs duty; and whose suggestion
about transfer of title to a third person is not established by any
reference to any official record, the transfer on high seas may be
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presumed on mere suggestion about the alleged endorsement of
bill of lading.When all other official documents as also dealings of
the appellant clearly establish that the appellant had been the
importer, the consequences are bound to follow. It gets perforce
reiterated that when the bills of entry recorded the name of the
appellant as importer and the appellant alone was assessed to
customs duty, the so called second high seas sale agreements
never came into operation. [Paras 34, 34.1][974-F-H; 975-A-B]
4. Whether sale in question occasioned import of goods:
The CTO specifically observed that it had not been the
case of the appellant that the sale in question occasioned the
import of goods into the country. However, an attempt was made
before the High Court to suggest that the entire import was
occasioned by ultimate sale in favour of Radha and, therefore,
the matter would also be covered in the first part of sub-section
(2) of Section 5 of the CST Act. The High Court noticed that such
a plea could not have been raised for the first time in the writ
petition for being a mixed question of facts and law. The High
Court also observed that even such suggestion was belied by
the fact that only the name of the appellant was reflected in the
bill of entry as importer and not of Radha. The argument was
made that the quadripartite agreement triggered the movement
of goods from foreign country to India and not merely from Andhra
Pradesh to other States; that, in fact, the sales in question had
not been inter-State sales but these sales had occasioned the
movement of goods from outside India into India; and that the
Indian leg of the integrated transaction cannot be segregated so
as to be taxed as inter-State sale under the CST Act. These
suggestions also remain totally baseless. [Para 35][975-B-F]
5. These had been inter-State sales
5.1 The effect of raising of debit notes by the appellant on
the end-buyers has its own bearing in the present case.The
appellant had admittedly raised such debit notes on the end-buyers
but only after having cleared the goods by filing the bill of entry
for home consumption. Once the suggestion about the second
high seas sales is not accepted and it is found that the appellant
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had been the importer of goods and had cleared them for home
consumption, the natural consequence of raising of such debit
notes on the end-buyers situated in different States and movement
of goods to such end-buyers would be to take these transactions
in the category of inter-State sales in terms of Section 3(a) of the
CST Act. The appellant was not entitled to the exemption of
Section 5(2) of the CST Act and has rightly been held liable for
tax over inter-State sales. [Para 37][978-G-H; 979-A-B]
5.2 After the appellant got the goods released by filing bill
of entry for home consumption, indisputably, the goods were
ultimately received by Radha at Lucknow in the State of Uttar
Pradesh (and other end-buyers in different States) and appellant
raised debit notes from the State of Andhra Pradesh. These facts
are sufficient to establish that the movement of goods inside the
country from one State to another had been on account of the
sale by appellant to the end-buyers; and such sales took place
only after the appellant obtained the goods from the bonded
warehouse for home consumption. [Para 38][979-B-D]
5.3 The High Court was right in observing that once the
appellant got released the goods after filing the bill of entry for
home consumption, the import stream dried up and the goods
got mixed in the local goods. Any movement of the goods
thereafter was bound to be a sale under Section 3(a) of the CST
Act; and such movement being from the State of Andhra Pradesh
to other State, it had been a matter of inter-State sale. The
principle that actual sale may not necessarily precede the
movement of goods, in its true effect, operates rather against
the appellant in relation to the sale to end-buyers after the goods
were cleared for home consumption. [Para 39][979-D-F]
6. If any case for relegating the appellant to the remedy of
appeal made out
The appellant, despite being aware of the availability of
remedy of statutory appeal, consciously chose to file writ petitions
against the assessment orders aforesaid and consciously
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contested the entire matter in the High Court. The High Court,
even after noticing the framework of certiorari jurisdiction,
examined the merits of the case thoroughly and even examined
the submission made for the first time in writ petitions that the
import of goods was occasioned by the sales in question. Of
course, in that regard, the High Court pointed out that it was not
a pure question of law but in any case, such submission was belied
by the fact that the name of the appellant was reflected in the bill
of entry as the importer and not that of the end-buyer. There is
no error or fault in the approach of High Court in this case. After
having consciously invoked the writ jurisdiction of the High Court
and having contested the matter on merits, the appellant cannot
now be allowed to re-open the matter in appeal. The extraordinary
writ jurisdiction cannot be utilised by a litigant only to take chance
and then to seek recourse to the other remedy after failing in its
attempt on the basic merits of the case before the High Court. A
litigation cannot be allowed to be unendingly kept alive at the
choice of a litigant. [Paras 40.1, 40.2, 40.3][979-G-H; 980-A-C;
981-C-D]
Star Paper Mills Ltd. v. Union of India and Ors. (1995)
4 Suppl. SCC 674 - held inapplicable.
Minerals and Metals Trading Corporation of India Ltd.
v. State of Andhra Pradesh 1999 (106) ELT 23; State
of Travancore-Cochin and Ors. v. Shanmugha Vilas
Cashewnut Factory, Quilon AIR 1953 SC 333 : [1954]
SCR 53 - referred to.
Case Law Reference
[2012] 1 SCR 808
held inapplicable
Para 14.6
[1997] 3 Suppl. SCR 497
referred to
Para 16.2
[1961] 1 SCR 379
distinguished
Para 16.2
[1960] 2 SCR 852
referred to
Para 16.3
[1998] 2 Suppl. SCR 112
distinguished
Para 16.3
[1954] SCR 53
referred to
Para 16.5
[1992] 1 SCR 66
referred to
Para 16.6
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(1995) 4 Suppl. SCC 674
held inapplicable
Para 16.8
[1997] 3 SCR 226
referred to
Para 24
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 13221323 of 2019.
From the Judgment and Order dated 18.12.2014 of the High Court
of Judicature at Hyderabad for the State of Telangana and the State of
Andhra Pradesh in Writ Petition Nos. 4552 of 2013 and 6258 of 2013.
Siddharth Bhatnagar, R. Venkataramani, Sr. Advs., Ms. Charanya
Lakshmikumaran, Aaditya Bhattacharya, Ms. Apeksha Mehta, Ms. Ishita
Mathur, Dhruv Surana, Aditya Sidhra, Joydeep Mazumdar, Ashish
Choudhary, Ms. Shalini Kaul, Rohit Dutta, Ms. Priyata Chakraborty,
Ms. Sujatha Bagadhi, Praveen Vignesh, T. Vijaya Bhaskar Reddy, G. N.
Reddy, Ms. Urmila Kar Purkayastha, Sandeep, Ms. Madhumita
Bhattacharjee, Advs. for the appearing parties.
The Judgment of the Court was delivered by
DINESH MAHESHWARI, J.
Preliminary and brief outline
1. 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
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 Circle2 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.
2. 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'.
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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
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.
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.
3. 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 endbuyers could not be said to be high sea sales.
4. 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
4 Hereinafter referred to as 'the Customs Act'.
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way of the impugned judgment and order dated 18.12.2014. The High
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.
5. 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
6. 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.
7. 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
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
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.
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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
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
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.
8. 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 The first buyer, hereinafter also referred to as 'Indus'.
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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)
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.