READ :-1) Appeal petition 225/15-16 filed on 20-09-2013 by M/s L G Polymers Pvt Ltd holder

of TIN No : 27450000137V against assessment order dated 18-07=2013 passed by

Dy.Commissioner of Sales Tax (E-640), LTU-4. Mumbai for the period 01-04-2007
to 31-03-2008 under MVAT Act 2002.
2) Assessment record submitted by assessing authority
Heard : Shri. Berlene Verghese, Deputy Manager

ORDER
(U/s 26 of MVAT Act, 2002)

No JC/ App /V/ VAT-225/15-16/ Mumbai Date:

This is an appeal filed by M/ M/s L G Polymers Pvt Ltd holder of TIN No :

27450000137V against assessment order dated 18-07=2013 passed by Dy.Commissioner of Sales
Tax (E-640), LTU-4. Mumbai for the period 01-04-2007 to 31-03-2008 under MVAT Act 2002,
raising demand of Rs.21195709/-
Being aggrieved by his said order, the appellant filed this present appeal. The appeal was
filed in time and hence admitted and posted for hearing.
Appellant raised following Grounds of appeal in his appeal petition memo.

Grounds of Appeal

i) The Deputy Commissioner of Sales Tax (E-638) Large Tax Payers Unit-4,Mumbai
has erred in not allowing the claim of High Seas sales worth 259168600/-. The
appellants submit that they had imported styrene monomer in bulk and had also
obtained a separate bills of lading for parts of the consignment. They had sold parts
of the total consignment to various purchasers to whom separate bill of lading is
transferred duly endorsed. They have also entered into proper agreements with the
parties for affecting such sales on high seas basis. The bills of entry are also in the
names of the high sea purchasers which lead to the conclusion that the goods are
deemed to have been transferred in the name of the purchasers. The honourable
MSTT has already decided the issue of High Seas sales in part out of the bulk
imports in the case of M/s Tata Iron Steel Company Limited. (S A number 713 and
714 of 2000 dated 09-10-2001) and M/S Adani Exports Ltd (Appeal number 169

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of 2003 dated to 3-03-2003) and M/s Raj Petroleum Products Ltd (S A number 670
and 671 of 2006 dated to 6-03-2012) and held that such sales are allowable. The
assessing officer has disallowed the high seas sales only on the grounds that the
Department has filed a reference application before the honourable Bombay High
Court against the judgement of M/S Adani Exports (cited supra) and M/S Raj M
Products Ltd (cited supra). The appellants pray that the legal issues already decoded
by the honourable tribunal and the high sea sales ought to have been allowed by the
assessing officer. The appellant therefore prays that the exemption in respect of
high sea sales under section 5 (2) may be allowed fully.

The appellant is further submitted that the taxable turnover of High Seas sales is
also not determined correctly by the assessing officer since he has added custom
duty is paid by the high sea purchasers to arrive at the taxable sales. The appellant
is alternatively also submitted that the taxable turnover of High Seas sales may be
computed correctly without prejudice to the contention that the sales are not liable
to any tax.

Alternatively, the appellant is also submit that the assessing officer has disallowed
the sales on the grounds that goods were not ascertained at the time of sale as
required by the Sale of Goods Act ,1930. They submitted that the facts of the
present case are different than those under Tisco’s case (cited supra). In Tisco’s
case case, the goods were cleared by the respect to buyers by filling bill of entry for
home consumption. Thus, the goods were allegedly segregated after they crossed
the customs frontiers of India. In the present case, the goods are always cleared by
filing bill of entry by the respect to buyer either for bonded warehouse or for home
consumption depending upon the payment of duty. When the custom duty is paid
by the respect to buyer, the goods stored in such customer bonded warehouse are
segregated there itself. Thus, the ascertainment of the goods takes place necessarily
in the bonded warehouse itself where the tankage for storing such liquid material is
located. Therefore, it can be safely concluded that the sale takes place before the
goods cross the customs frontiers in India. The documents relating to some sample
transactions consisting of sales invoices declaring them as high seas sales, letter

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from the customer to the Asst Commissioner of Customs, Nhava Sheva declaring
the purchase as on high sea basis, similar letter from the dealer to the customs
authorities, high sea sale agreement, bill of lading duly endorsed in favour of the
buyer and the bill of entry for exbond/home consumption also indicate the stand
taken by the appellants. Such bill of entry for clearing the goods clearly shows that
the goods were first transferred to the tank situated in the customs bonded
warehouse where they are segregated and allocated to the respect to buyer. The
documentation, thus, prose that the goods are sold from the bonded warehouse only
after ascertainment thereof within the limits of such warehouse under the
supervision of the Customs Authorities.

The appellants submit that the recent Supreme Court judgement in case of M/S
Hotel Ashoka (Indian Tourism Development Corporation Limited) v/s Assistant
Commissioner of Commercial Taxes (48 VST 443) (S C) can be relied in this
respect. In this case, the sales made to the passengers at the duty free shops located
at the airports have been held as sales in the course of import since they take place
before the goods cross the customs frontiers of India. It is held that when the goods
were kept in the bonded warehouse, it could not be said that the goods have crossed
the customs frontiers. The goods were not cleared from the customs till they were
brought in India by crossing the customs frontiers. When the goods were lying in
the bonded warehouse, they were deemed to have been kept outside the customs
frontiers of India and the dealer was selling the goods from the duty free shops
owned by it at airport before the goods have crossed the customs frontiers. The
Supreme Court has said at rest all the controversies relating to the sale from bonded
warehouse which no unequivocally qualify as sale in the course of import.
Considering the procedure of clearance followed by the present appellants, it can
be inferred that the sale of a certain goods takes place before the crossing the
customs frontiers of India. The honourable MSTT has also taken the same view in
the case of M/S Indian Tourism Development Corporation Limited (As A number
489 of 1997 and 587 2000 dated 23/7/2004) even before the above referred
Supreme Court judgement was pronounced in respect of sales from duty free shops.

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Therefore, the appellants pray that the high sea sales may be allowed fully
considering both the stands of the appellant’s.

The appellant is further submitted that the special additional duty (SAD) is paid by
them on the imports which are not claimed by way of refund by them on the ground
that VAT/CST is not paid by them on the subsequent sales of the imported goods.
Such sales are claimed by them as sales in the course of import is and hence,
exempt. They therefore, point out that the levy of VAT/CST on the sales would
increase the burden on the sale price since they cannot claim the refund of SAD
paid by them. Thus, the levy of VAT/CST on the sales in the given facts and
circumstances of the case would be inconsistent with the policy of the Central and
State government in this respect.

The Deputy Commissioner of Sales Tax (E--640), Large Tax payers Unit-4,
Mumbai has erred in subjecting the interstate sales supported with C forms to CST
at 4%. The appellant submits that the rate of CST was 3% during the year 2007-08.
Therefore they pray that the rate of CST may be reduced to 3% on the interstate
sales supported with C forms.

The Deputy Commissioner of Sales Tax (E-640), Large Tax payers Unit-4, Mumbai
has erred in levying interest under section 30 (3) of the MVAT act at ₹ 1 2360183/-
. The appellant submits that the differential dues have arisen and only on account
of disallowance of high sea sales and the appellant’s are confident that the claim
will be allowed fully. The appellant is therefore, pray that the interest may be
deleted in toto.

The Deputy Commissioner of Sales Tax (E-638), Large Tax payers Unit-4, Mumbai
has erred in levying interest U/s 30 (3) of the MVAT act at 8349825/-. The appellant
submitted that the differential dues have arisen and only on account of disallowance
of high seas sales and the appellant’s are confident that the claim will be allowed
fully. The appellant is therefore, pray that the interest may be deleted in toto.

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 .
ii) The appellant craves leave to add or alter any ground or grounds of appeal if
necessary.

Shri Smt Sujata Ranganekar CA, with books of accounts and other relevant documents
pertaining to grounds of appeal.

The main issue involved in this case is of not allowing the claim of High Seas sales worth
Rs. 259168600/-. The assessing officer in his order has mentioned that the material is in a
comingled state while being transported to the C from foreign country. This makes clear that the
goods are in un-ascertained state when they cross the customs frontiers of India. In order to
complete the sale, the goods need to be ascertained as per section 18 of the Sale of Goods Act
1930. Goods are involved and same are segregated after crossing customs frontiers of India as per
sales to different parties hence these sales are not allowed as claimed by the dealer and taxed
accordingly.

Moreover, the Department has filed a reference in similar matter before the honourable
Bombay High Court against the judgement of M/S Adani Exports (cited supra) and M/S Raj M
Products Ltd (cited supra). Considering this, the view taken by the assessing officer regarding
disallowance of high seas sale is confirmed

ORDER
The order passed by assessing authority is confirmed.. Assessing Authority is directed
to proceed as per the provisions of law.

(Shrikant Beley)
Joint Commissioner of State Tax,
Appeal-V, Mumbai

No JC/ App /V/ VAT-225/15-16/B- Mumbai Date:

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Copy to :

1. M/s L G Polymers Pvt Ltd

OBEROI GARDEN EST A WING,CHANDIVALI,
SAKINAKA,MUMBAI,
MUMBAI SUBURBAN-400072
2. The Deputy Commissioner of Sales Tax (E-638),
LTU-4, Mumbai along with Assessment records
3. Office copy.