STATE OF MADRAS versus DAVAR AND COMPANY ETC.

Citation: [1970] 1 S.C.R. 572 · Decided: 20-05-1969 · Supreme Court of India · Bench: M. HIDAYATULLAH · Disposal: Appeal(s) allowed

Judgment (excerpt)

STATE OF MADRAS 
A 
V, 
DAVAR AND COMPANY ETC. 
Ma,v 20, 1969 
[M. HIDAYATULLAH, C.J., J. M. SHF.LAT, C. A. VAIDIALil>'GAM, 
B 
K. S. HEGDE AND A. N. GROVER, JJ.J 
Central Sales Tax Act 
(74 of 1956) s. 5(2)-Customs Frontiers, 
nieaning of. 
The assesscc entered into contr~cts for ~ale of timber to be imported 
from Burma, to buyers, in the State of Madras. 
After the ships carrying 
the goods arrived in the Madras harbour in the State of Madras, the sales 
were effected by the asscssee hy tfansfcrring the documents of title to the 
buyers. 
On the question, \\'hether the sales took place before the goods 
crossed the customs frontiers of India and therefore were in the course 
of import of the goods into the tcrritof) of India and were thus not liable 
to sales-tax under Art. 286( I) of the Constitution, 
HELD: Under s. 5(2) of the Central Sales Tax Act, 1956, a sale 
or purchase shall be deemed to take place in the course of the import of 
the goods into the territory of India, if the sale or purchase occasions such 
import or is effected by a transfer of documents of title before the goods 
crossed the cu.stonis frontiers of India. 
By a notification issued under 
s. JA of the Sr.:a Customs Act, 1878, the Central Government defined 
'customs fron1icrs of India' as the boundadcs of the territory, including 
lcrritonal ,., .. atcrs. of India; and the extent of territorial waters of India, 
at the relevant time, v.·as declared by a Proclamation of the President of 
India, dated :'vlarch 22, 1956, to be, a distance of six. nautical miles into 
the sea measured from the appropriate base line. Therefore, in the present 
case, the 
s~1les by transfer of documents of title after the ships carrying 
the goods arrived in the Madras ha'rbour, were effected after the goods 
had crossed the customs frontiers of India, and hence, the claim of the 
asses.sees that the sales v.·ere in the course of import and not liable to sales-
tax should be rejected. [577 A-B, D-E, H; 578 A-CJ 
CIVIL APPELLATE JURJSDICTION ; Civil Appeals Nos. 1462 to 
1465 of 1967. 
Appeals by special leave from the judgment and order dated 
July 17. I 963 of the Madras High Court in Tax Cases Nos: 19, 
47. 132 and 160 of 1961 (Revision Nos. 16. 28, 81 and 98 of 
1961). 
A. K. Sen and A. V. Rangam, for the appellant. 
R. Thiagarajan, for th~ respondents (in C.A. No. 1464/1967). 
K. Jayaram, for the respondmts (in C.A. No. 1465.11967). 
The Judgment of the Court was delivered by 
\'aidialingam, J. 
Th~sc appeal>, by special leave, 
hy 
the 
Stale of Madras, are directed against the c.Jmm0n j:.:Jgmcnt dated 
J~:y 17, 1963 of Ihc ~!~dras Hi~h Coun. 
c 
D 
E 
F 
G 
H 
J
''i! 
MADRAS v. DAVAR & CO, (Va1dialingam, J.) 
573 
A 
The short question, that arises for consideration in these 
appeals, is as to whether the turnover, which was the subject of 
consideration by the High Court, was liable for sales-tax, under 
the Madras General Sales Tax Act, 1959 (I of 1959) (herein-
after called the Madras Act). 
The assessees claimed that the 
turnover in question represented sales in the course of import and, 
B as such, not liable to tax under the Madras Act. The State of 
Madras claimed that in all these cases the sale had been effected 
by a transfer of documents of title to the respective buyers after 
the ships had crossed the. territorial waters and hence they were 
liable to tax under the Madras Act. The contention of the 
assessees was negatived by the Assistant Commercial Tax Officer, 
C as also by the Appellate Assistant Commissioner of Commercial 
Taxes. 
But, on further appeal by the assessees, the Sales Tax 
Appellate Tribunal accepted their contention and held that _the 
dispnted turnovers were not liable to tax under the Madras Act. 
The revisions filed by the State against the orders of the Sales 
Tax Appellate Tribunal were dismissed by the High Court. Hence 
D these appeals. 
Thongh each of the respondents in these appeals is an im-
porter of a different CO!pmOdity, the pattern adopted by each 
of them in the matter of importing the goods concerned from 
foreign countries and in t)le matter of transferring title to the res-
E pective buyers, is more or Jess the same. 
We shall, therefore, 
re.fer only to the facts relating to the dealings adopted by Davar 
and Company (hereinafter called the assessee), the respondent 
in Civil Appeal No. 1462 of 1967. 
The assessee was ass~ssed by the Assistant Commercial Tax 
Officer, South Madras and Chingleput, under 

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