SEZ vs. SALE IN THE COURSE OF EXPORT & IMPORT

SEZ vs. SALE OF GOODS IN THE COURSE OF EXPORT OR IMPORT

Clause (1) of Article 286 of the Constitution of India prohibits States from imposing or authorizing imposition of tax on sale or purchase of goods where such sale or purchase is-

in the course of the import of the goods into, or export of the goods out of, the territory of India.

Clause (2) of the same Article of the Constitution cast duty on the Parliament for formulating principles by law for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (a) and (b) above. Here I am going to limit myself to sale or purchase which takes place either in the course of export of goods out of the territory of India or in the course of import of goods into the territory of India.

Words "export" and "import" have not been defined in the Constitution. So these words are to be understood as per there common meaning or usage. Dictionary meaning of word "import" is "bring (goods, ideas, etc.) from a foreign country into ones own country". Dictionary meaning of word "export" is "send (goods) to another country". In reference to goods and services, word "import" has been defined on the Web Site http://wordnetweb.princeton.edu/perl/webwn as "commodities (goods or services) bought from a foreign country". Similar definitions are also available on other Web Sites. Similarly, in reference to goods and services, the word "export" has been defined on the said Web Site as "commodities (goods or services) sold to a foreign country". Therefore, expressions "import of goods into" and "export of goods out of ", used in the said Article of the Constitution, are to be understood in the same sense. Another expression used in sub-clause (b) of clause (1) of Article 286 is "the territory of India". Expression "The territory of India" has been defined in clause (3) of Article 1 of the Constitution as under:

"(3) The territory of India shall comprise-

This makes clear beyond any doubt that clause (2) of Article 286 of the Constitution required the Parliament to formulate principles for determining when a sale or purchase shall be deemed-

in the course of export of goods from any place within the territory of India to any place outside the territory of India; and

in the course of import of the goods from any place outside the territory of India to any place within the territory of India,

and words "import" and "export" have been used in reference to international trade or commerce. These words have not been used in reference to trade or commerce within a State or in between two States (State includes Union Territory).

Now we can look at the "Statement of Objects and Reasons" and Preamble of the Central Sales Tax Act, 1956. Paragraphs 1 to 3 of the said Statement of Objects and Reasons run as follows:

taxes on sales or purchases of goods in the course of inter-state trade or commerce were brought expressly within the purview of the legislative jurisdiction of Parliament.

restrictions could be imposed on the powers of State legislatures with respect to the levy of taxes on the sale or purchase of goods within the state where the goods are of special importance in interstate trade or commerce.

An Act to formulate principals for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and distributions of taxes on sales of goods in the course of inter-State trade or commerce and to declared certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which laws imposing taxes on the sale or purchase of such goods of special importance shall be subject."

A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.

Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.

The provisions of sub-section (3) shall not apply to any sale or purchase of goods unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filed and signed by the exporter to whom the goods are sold in a prescribed form obtained from the prescribed authority.

This establishes that provisions of section 5 of the central Sales Tax Act, 1956 have been enacted by the Parliament for formulating principles for determining when a sale or purchase shall be deemed to take place in the Course of import of the goods into, or export of the goods out of, the territory of India. This clarifies that words "import" and export", in section 5 of the Central sales Tax Act, 1956, have been used in their common meanings or usage. In sales covered by sub-section (3) of section 5 of the Act where goods are delivered to exporter within India, the exporter, on Form H, has to certify that such purchased goods have been exported and he has also to give details of Bill of lading /consignment note.

Export and Import defined in Special Economic Zones, Act 2005

What has been defined in the Special Economic Zones Act, 2005 are the words "import" and "export" and not the expressions "the sale or purchase which takes place in the course of export of the goods out of, or import of the goods into, the territory of India. Secondly, definitions of words "import" and "export" in the Special Economic Zones Act, 2005 are only for the purpose of the said Act.

In the Special Economic Zones Act, 2005, expression "Domestic Tariff Area" has been defined as under:

“Domestic Tariff Area” means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones.

Here we see that Domestic Tariff Area is an area within India and whole of India includes within it the areas covered by Special Economic Zones and the Domestic Tariff Area. Therefore, supply of goods from Domestic Tariff Area into any Special Economic Zone will not amount to a sale in the course of export of the goods out of the territory of India as defined in section 5 of the Central Sales Tax Act, 1956. Moreover that no Act can go beyond the Constitution. For the purpose of the Constitution itself, definition given in the Constitution cannot be changed by any Act of the Parliament or by an Act of any State Legislature . That can be done by only constitutional amendment.

The Central Sales Tax Act, 1956 and the Special Economic Zones Act, 2005, both Acts, have been enacted by the Parliament. In the Central Sales Tax Act, 1956, in sub-section (6) of section 8 of the Central Sales Tax Act, 1956, the Parliament has exempted a sale made by any dealer in the course of inter-State trade or commerce to a registered developer or a registered unit of any special economic zone. Had the special economic zone been a foreign territory, then any sale, occasioning the movement, from any place within domestic tariff area would have been in the course of export of the goods out of the territory of India. In that case, there would have been no necessity for enacting sub-section (6) of section 8 in the Central Sales Tax Act, 1956. For reference, I am reproducing sub-section (6) of section 8 of the Central Sales Tax Act, 1956 hereunder .

"(6) Notwithstanding anything contained in this section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-state trade or commerce to a registered dealer for the purpose of setting up, operation, maintenance, manufacture, trading, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as packing material or packing accessories in an unit located in any special economic zone or for development, operation and maintenance of special economic zone by the developer of the special economic zone, if such registered dealer has been authoirsed to establish such unit or to develop, operate and maintain such special economic zone by the authority specified by the Central Government in this behalf."

Here one can notice that in sub-section (6) above, under the sale, goods can move from any place outside the State of purchaser and such place of sale includes a place within a special economic zone. Therefore, it can be concluded that in sub-section (6) of section 8 of the Central Sales Tax Act, 1956, following sales are covered:

Inter-state sale from one special economic zone to another special economic zone; and

Inter-state sale from domestic tariff area to special economic zone.

As it relates to sale in the course of import of the goods into the territory of India, it can be argued and concluded that a sale from any special economic zone to domestic tariff area is not a sale in the course of such import for the purpose of the Central Sales Tax Act, 1956 and Clause (1) (b) of Article 286 of the Constitution.

Disclaimer: Views expressed above are my personal views and I myself or the Web administration takes no responsibility for any loss or damage that may occur on account of use of the material. Readers are advised to consult their legal advisors before using the material.

SEZ vs. SALE OF GOODS IN THE COURSE OF EXPORT OR IMPORT
Clause (1) of Article 286 of the Constitution of India prohibits States from imposing or authorizing imposition of tax on sale or purchase of goods where such sale or purchase is-
(a)	outside the State; or
(b)	in the course of the import of the goods into, or export of the goods out of, the territory of India.
Clause (2) of the same Article of the Constitution cast duty on the Parliament for formulating principles by law for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (a) and (b) above. Here I am going to limit myself to sale or purchase which takes place either in the course of export of goods out of the territory of India or in the course of import of goods into the territory of India.
Words "export" and "import" have not been defined in the Constitution. So these words are to be understood as per there common meaning or usage. Dictionary meaning of word "import" is "bring (goods, ideas, etc.) from a foreign country into ones own country". Dictionary meaning of word "export" is "send (goods) to another country". In reference to goods and services, word "import" has been defined on the Web Site http://wordnetweb.princeton.edu/perl/webwn as "commodities (goods or services) bought from a foreign country". Similar definitions are also available on other Web Sites. Similarly, in reference to goods and services, the word "export" has been defined on the said Web Site as "commodities (goods or services) sold to a foreign country". Therefore, expressions "import of goods into" and "export of goods out of ", used in the said Article of the Constitution, are to be understood in the same sense. Another expression used in sub-clause (b) of clause (1) of Article 286 is "the territory of India". Expression "The territory of India" has been defined in clause (3) of Article 1 of the Constitution as under:
"(3) The territory of India shall comprise-
(a)	the territories of the States;
(b)	the Union territories specified in the First Schedule; and
(c)	such other territories as may be acquired."
This makes clear beyond any doubt that clause (2) of Article 286 of the Constitution required the Parliament to formulate principles for determining when a sale or purchase shall be deemed-
(i)	in the course of export of goods from any place within the territory of India to any place outside the territory of India; and
	in the course of import of the goods from any place outside the territory of India to any place within the territory of India,
and words "import" and "export" have been used in reference to international trade or commerce. These words have not been used in reference to trade or commerce within a State or in between two States (State includes Union Territory).
Now we can look at the "Statement of Objects and Reasons" and Preamble of the Central Sales Tax Act, 1956. Paragraphs 1 to 3 of the said Statement of Objects and Reasons run as follows:

In the interest of the national economy of India certain amendments were undertaken in the Constitution by the Constitution (Sixth Amendment) Act’1956, whereby – taxes on sales or purchases of goods in the course of inter-state trade or commerce were brought expressly within the purview of the legislative jurisdiction of Parliament. restrictions could be imposed on the powers of State legislatures with respect to the levy of taxes on the sale or purchase of goods within the state where the goods are of special importance in interstate trade or commerce. The amendments at the same time authorized Parliament to formulate principles for determining when a sale or purchase takes place in the course of interstate trade or commerce or in the course of export or import or outside a state in order that the legislative spheres of parliament and the State legislatures become clearly demarcated. In the case of goods of special importance in interstate trade or commerce, a law of Parliament is to lay down the restrictions and conditions subject to which any State law may regulate the tax on sales or purchases of such goods in the state.
2. This Bill seeks to provide for the legislation authorised by the Constitution as amended above with a view to enabling the State Governments to raise additional revenues by levying tax on interstate transactions which are at present immune from tax under their respective sales tax laws. After taking into account the recommendations of the Taxation Enquiry Commission and in consultation with the States the Government of India were of the view that the following principles should govern the scheme of the detailed legislation on the three inter-related subjects; (i) The Central Government should authorise the State Government to impose on behalf of the Central Government tax on the sale or purchase of goods in the course of interstate trade or commerce. The Central legislation should also delegate to the states the Central Government’s power to levy and collect the tax and for this purpose prescribe the same system of registration, assessment, etc., as prevails in the States concerned under their own sales tax system. (ii) An important aspect of the Central legislation will be concerned with the definition of the locale of sales for the purpose of defining in detail the relative jurisdiction, firstly of the Union and the States, and secondly, of the State inter se. It is therefore, necessary that the law should define clearly, with specific reference to sales tax the circumstances in which a sale or purchase becomes taxable by a particular state and no other. It should also define for the purpose of the Constitutional restrictions on the State’s power to impose a tax under Item 54 of the State list, when a sale or purchase of goods may be said to take place: in the course of export out of India, in the course of import into India and in the course of inter-state trade or commerce. (iii) The Central legislation should provide for the declaration of certain commodities which are in the nature of raw materials and of special importance in inter-state trade or commerce and lay down the restrictions and conditions as to the rate, system of levy and other incidents of tax subject to which the States may impose tax on the sale or purchase thereof. 3. Necessary provisions have, therefore, been made in the different Chapters of this Bill incorporating the principles stated above."
Preamble of the Central Sales Tax Act, 1956 runs as follows:
An Act to formulate principals for determining when a sale or purchase of goods takes place in the course of inter-State trade or commerce or outside a State or in the course of import into or export from India, to provide for the levy, collection and distributions of taxes on sales of goods in the course of inter-State trade or commerce and to declared certain goods to be of special importance in inter-State trade or commerce and specify the restrictions and conditions to which laws imposing taxes on the sale or purchase of such goods of special importance shall be subject."
Heading of Chapter II of the Central Sales Tax runs as follows:
"Formulation of principles for determining when a sale or purchase of goods takes place in the course of inter-state trade or commerce or outside a state or in the course of import or export"
Section 5 of the Central Sales Tax Act, 1956 runs as follows:
5.	When is a sale or purchase of goods said to take place in the course of import or export.-
1.	A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India.
2.	A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India.
3.	Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the export of those goods out of the territory of India shall also be deemed to be in the course of such export, if such last sale or purchase took place after, and was for the purpose of complying with, the agreement or order for or in relation to such export.
4.	The provisions of sub-section (3) shall not apply to any sale or purchase of goods unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner a declaration duly filed and signed by the exporter to whom the goods are sold in a prescribed form obtained from the prescribed authority.
5.	Notwithstanding anything contained in sub-section (1), if any designated carrier purchases Aviation Turbine Fuel for the purpose of its international flight, such purchase shall be deemed to take place in the course of the export of goods out of the territory of India. Explanation.-For the purpose of this sub-section, 'designated Indian carrier' means any carrier which the Central Government may, by notification in the Official Gazette, specify in this behalf.
This establishes that provisions of section 5 of the central Sales Tax Act, 1956 have been enacted by the Parliament for formulating principles for determining when a sale or purchase shall be deemed to take place in the Course of import of the goods into, or export of the goods out of, the territory of India. This clarifies that words "import" and export", in section 5 of the Central sales Tax Act, 1956, have been used in their common meanings or usage. In sales covered by sub-section (3) of section 5 of the Act where goods are delivered to exporter within India, the exporter, on Form H, has to certify that such purchased goods have been exported and he has also to give details of Bill of lading /consignment note.
Export and Import defined in Special Economic Zones, Act 2005
What has been defined in the Special Economic Zones Act, 2005 are the words "import" and "export" and not the expressions "the sale or purchase which takes place in the course of export of the goods out of, or import of the goods into, the territory of India. Secondly, definitions of words "import" and "export" in the Special Economic Zones Act, 2005 are only for the purpose of the said Act.
In the Special Economic Zones Act, 2005, expression "Domestic Tariff Area" has been defined as under:
“Domestic Tariff Area” means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones.
Here we see that Domestic Tariff Area is an area within India and whole of India includes within it the areas covered by Special Economic Zones and the Domestic Tariff Area. Therefore, supply of goods from Domestic Tariff Area into any Special Economic Zone will not amount to a sale in the course of export of the goods out of the territory of India as defined in section 5 of the Central Sales Tax Act, 1956. Moreover that no Act can go beyond the Constitution. For the purpose of the Constitution itself, definition given in the Constitution cannot be changed by any Act of the Parliament or by an Act of any State Legislature . That can be done by only constitutional amendment.
The Central Sales Tax Act, 1956 and the Special Economic Zones Act, 2005, both Acts, have been enacted by the Parliament. In the Central Sales Tax Act, 1956, in sub-section (6) of section 8 of the Central Sales Tax Act, 1956, the Parliament has exempted a sale made by any dealer in the course of inter-State trade or commerce to a registered developer or a registered unit of any special economic zone. Had the special economic zone been a foreign territory, then any sale, occasioning the movement, from any place within domestic tariff area would have been in the course of export of the goods out of the territory of India. In that case, there would have been no necessity for enacting sub-section (6) of section 8 in the Central Sales Tax Act, 1956. For reference, I am reproducing sub-section (6) of section 8 of the Central Sales Tax Act, 1956 hereunder .
"(6) Notwithstanding anything contained in this section, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-state trade or commerce to a registered dealer for the purpose of setting up, operation, maintenance, manufacture, trading, production, processing, assembling, repairing, reconditioning, re-engineering, packaging or for use as packing material or packing accessories in an unit located in any special economic zone or for development, operation and maintenance of special economic zone by the developer of the special economic zone, if such registered dealer has been authoirsed to establish such unit or to develop, operate and maintain such special economic zone by the authority specified by the Central Government in this behalf."
Here one can notice that in sub-section (6) above, under the sale, goods can move from any place outside the State of purchaser and such place of sale includes a place within a special economic zone. Therefore, it can be concluded that in sub-section (6) of section 8 of the Central Sales Tax Act, 1956, following sales are covered:
(i)	Inter-state sale from one special economic zone to another special economic zone; and
(ii)	Inter-state sale from domestic tariff area to special economic zone.
As it relates to sale in the course of import of the goods into the territory of India, it can be argued and concluded that a sale from any special economic zone to domestic tariff area is not a sale in the course of such import for the purpose of the Central Sales Tax Act, 1956 and Clause (1) (b) of Article 286 of the Constitution.
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Disclaimer: Views expressed above are my personal views and I myself or the Web administration takes no responsibility for any loss or damage that may occur on account of use of the material. Readers are advised to consult their legal advisors before using the material.