SC: Sale from bonded warehouses to foreign-going ships is taxable—does not qualify as ‘in the course of import’ under CST Act

Case Name: Nirmal Kumar Parsan v. Commissioner of Commercial Taxes & Others (with Parsan Brothers v. Assistant Commissioner of Commercial Taxes & Others)
Date of Judgment: JANUARY 15, 2020
Citation: 2020 INSC 60; Civil Appeal Nos. 7863–7864 of 2009
Bench: Hon’ble Mr. Justice A.M. Khanwilkar, Dinesh Maheshwari J.

Held: The Supreme Court ruled that sales of imported cigarettes stored in bonded warehouses in West Bengal, when supplied to foreign-going ships as ship stores, were local sales taxable under the West Bengal Sales Tax Acts. Such transactions were neither “sales in the course of import” nor “sales in the course of export” within the meaning of Section 5 of the Central Sales Tax Act, 1956.

Summary: The appellants had imported cigarettes and stored them in bonded warehouses without paying customs duty. Portions of these goods were supplied to masters of foreign-going ships as ship stores. The appellants claimed exemption from sales tax, contending the transactions were “in the course of import.” The Assessing Authorities, Tribunal, and High Court rejected the claim, holding the sales took place within West Bengal. On appeal, the Supreme Court reaffirmed that (i) for exemption, the sale must occasion import or export, (ii) appropriation of goods in bonded warehouses within the State amounted to local sale, and (iii) consumption on board ships without a foreign destination cannot be equated with “export.”

Decision: Appeals dismissed. Sales effected from bonded warehouses to foreign-going ships are taxable local sales, not protected as import/export sales under Article 286 of the Constitution or Section 5 of the CST Act.