MADRAS MARINE & CO. versus STATE OF MADRAS

Citation: [1986] 3 S.C.R. 236 · Decided: 16-07-1986 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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B 
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MADRAS MARINE & CO. 
v. 
STATE OF MADRAS 
JULY 16, 1986 
IR.S. PATHAK AND SABYASACHI MUKHARJI, JJ.] 
Tamil Nadu General Sales Tax Act, 1959-Goods-Segregated in 
bonded ware houses-Sale of goods for consumption on board foreign 
·going ships-Liability for sales tax. 
Central Sales Tax Act !956, s. 4(2) (a) and (b)-Goo'ds-Segre-
gated in bonded ware houses for delivery to foreign going vessels--Sale 
of such goods for consumption on board the ships-Whether case of 
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export of goods-Whether liable to levy of State Sales Tax. 
Constitution of India, A rt. 286( ! ) (b )-Concept of export--Defi-
nition of. 
The appeliant•company in Civil Appeal No. 642 llf 1974 was doing 
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the business as ship chandler. It imported the goods from foreign 
cotintries and after receipt of' the goods, kept them in a bonded ware-
house under the relevant. provisions of the Customs Act, 1962. The 
ware-house was under dual control of the Customs Department and the 
Importers like the appellant so that it could not he opened by one 
without the presence of the other. On receipt of order from the Captain 
,.,1= 
·of the Ship requiring ship stores, the appellant supplied the goods on 
board after observing certain formalities imposed by the Customs Act, 
the rules and regulations made thereunder. 
Fot the Assessment year 1964·65 a question arose whether 
Rs.3,51,438.08 which was the taxable tumover, determined by the 
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assessing ·authority, was subject to the tax under the Tamil Nadu ·Gene-
tal Sales 'Tax Act, 1959. The appellant objected lo the assessment on 
such turnover on the ground that the goods relating lo such turnover 
were imported from abroad, stored in the customs ware house and were 
not btou·ght to the country across the customs frontiers. The Sales Tax 
Ol'l'icer .assessed the turnover and the Appellate Assistant Commis-
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Sioner 'dlnfinned the assessment on the hasis that sales were effected 
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MADRAS MARINE & CO. v. STATE OF MADRAS 
237 
within the State of Tamil N adu. However, the Tribunal, in appeal by 
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.. 
the appellant, held that the sales did not take place within the State of 
Tamil Nadu since the import of goods in question had not become 
complete and as the goods were sold to the foreign going vessels, the 
sales in question could not be deemed to be within the State of Madras. 
On revision, the High Court relying on the decision of the Supreme 
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Court in the State of Madras v. Davar and Co., 24 STC 481, held that 
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the sales took place in the State of Madras and assessment to tax was 
valid. The facts in all the other connected appeals, writ petitions and the 
special leave petitions being identical, a similar question of law also 
arose in them. 
' 
In appeal to the Supreme Court by the appellant/petitioners, it 
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was contended on their behalf: (i) that the property in the goods, did not 
pass in the territory of Tamil Nadu and the sales were therefore, in the 
course of export because goods were to be on board the ship and were 
exported outside the country and could not be consumed before they 
reached the high seas; (ii) that the sale of goods took place in the 
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territorial water of India and not within the State of Tamil Nadu; (iii) 
that the legislative competence of the State of Tamil Nadu as regards 
levying of the sales-tax was confined to the territories of the State as 
specified in item No. 7 of the First Schedule to the Constitution. That 
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legisiative competence did not extend to any territorial waters simply , 
because these were abutting the land mass of the State of Tamil Nadu; 
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(iv) that the Sovereignty over the limits of territorial waters extended 
and always extended to the entire territorial waters of India. The limits 
and extent of the said territorial waters had not been altered by any 
notification of the Central Government. The territorial waters extended 
) 
to a distance of 12 nautical miles from the sea shore adjacent to the land 
mass of the State; and (v) that there was no definition at all of "Customs 
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Frontiers" in the Central Sales Tax Act, 1956. The definition inserted 
in the Act ins. 2(ab) by the Amending Act 103 of 1976 must be read as 
declaratory or explanatory and no questions of prospective operations 
Would arise. On the other hand, it was argued on behalf of the 
respondent-State that the appellant's godowns and bonded Ware-houses 
were within the State of Tamil Nadu. When orders were received, the 
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appellants/petitioners suppli

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