SC decides on taxability of sales from bonded warehouses

The sales taxability of transactions relating in the course of import and export has been the subject matter of intense judicial scrutiny, particularly due to exemption from the tax granted to transactions under the Central Sales Tax Act, 1956 (“CST Act”). Section 5 of the CST Act provides that any transaction of sale or purchase that either occasions the import/export of goods into/outside India or is effected by a transfer of documents of title to goods before/after the goods cross the customs frontiers of India qualifies as a sale or purchase in the course of import/export is hence exempt from tax. The expression ‘crossing the customs frontiers of India’ has been defined in Section 2 thereof as crossing the limits of the area of a customs station in which imported goods or exported goods are ordinarily kept before clearance by customs authorities. The explanation to this Section states that ‘customs station’ will be as defined in the Customs Act, 1962, as any customs port, customs airport or land customs station. The above Act further defines ‘customs port’ as any port appointed as such thereunder as well as an inland container depot, appointed as such. The courts in India have repeatedly ruled on the above provisions of law.

Source: Business Standard