Fact of the case
“A” have manufacturing base in Dubai and extract fresh fruit juice from fruits and packs into tin boxes ready for drinking. A sells these to one of their Indian subsidiary “B”, who in turn sells it to various buyers “C” in India on High Sea sell basis,. On tin boxes, the name of manufacturer has been printed as “A” and name of importer has been mentioned as “B”. The problem comes when consignment reaches to India where custom officer insist that tin should have name of importer as “C” .
The question was whether it is justified by the custom officer for insisting the name of importer should be of “C” instead of “B”.
For this we will study the definition of importer:
Rule 2 of Legal & Metrology Act: No definition has been defined for importers
Rule 33 in old act though it has been omitted wef 13-1-2007 but it gives explanation on importer as “An importer is an individual company or firm whose name figures in the bill of lading / import documents as importer”
Rule 6 where it has been mention that every package should have “Name and Address of Importer”. But Explanation III of Rule 6 mention that in respect of packages containing food articles, the provision of this clause shall not apply and instead the requirement of the “Prevention of Food Adulteration Act 1954 (37 of 1954)” and the rule made there under shall apply. Since, no specific definition of importer has been mentioned in “Prevention of Food Adulteration Act 1954 (37 of 1954)”, we will take meaning of importer as per general terms and as per case law decided.
Importer — The individual, firm or legal entity that brings goods, or causes goods to be brought from a foreign country into a customs territory.
This is definition on broader sense. But as per custom law
“Importer of record is term used in customs law for the importer, whether an entity or individual, who is responsible for , ensuring that legal goods are imported in accordance with the law of the place. Importer is responsible for filing legally required documents. Also payment of the assessed import duties and other taxes on the imported goods are to be given by the importer on record.”
High sea sales:
Imports through transfer of documents of title to goods before the goods cross the customs Frontier of India are popularly known as High Sea sales.
As mentioned earlier, we have analyzed facts on the cases as appeared below;
The controversy regarding when the goods cross the Customs Frontier of India as been resolved by the amendment to definition Customs Frontier of India – by clarifying that, goods are deemed to be in the import stream until the goods are cleared from the Customs station – the goods are cleared from the Customs station, when the Bill of entry is made – i.e. when the Customs duty is paid.(Here “C” is supposed to file the Bill of entry and clear the goods after paying duty)
M & M. T. Corpn of India Ltd. V. State of A.P [ 110 STC 394(AP)
Under the explanation, the customs station and customs authorities have the same meaning as in the Customs airport, or land customs stations. Customs port means any port appointed Under Section 7 (a) and includes a place appointed under clause (aa) of that section to be an inland container report. Customs airport means any place appointed Under Section 7 (b). A reading of section 2 (ab) makes it clear that if the goods crosses the area of the customs station, viz., the customs port which is noticed Under Section 7 of the Act, where the goods are kept before clearance and if the transfer is effected by transfer of documents of title then if amount to sale in the course of import. In other words, if the goods are kept in the port before clearance crossing the limits of that port amounts to sale in the course of import.
(Since, the material has been sold by “B” before crossing the custom barrier it loose its significance as importer as the material has never been imported in India.) We have already referred to Section 5 (2), read with Section 2 (ab). The goods will cross the limit of the area of the customs station only on clearance by the customs authorities. Clearance by the customs authorities will be after filing the bill of entry and after the assessment of duty Under Section 28 of the Act. Before the assessment of the duty the goods kept in the customs port cannot cross the limits of the customs port. Therefore irrespective of the fact whether duty is paid or not, when once the bill of entry is filed and the imported duty is assessed, then only the goods can cross the limits of the customs port, therefore, any transfer of documents of title before the clearance of the goods by the customs authorities on making the assessment of goods would amount to a sale in the course of import, as after the assessment is made and on filing of the bill of entry the goods get mingled with the general mass of goods and merchandise of the country, the goods get the eligibility to be declared as local goods after clearance even though they are not physically removed from the harbor premises. They attain the character of local goods and cease to be foreign goods. Therefore, the relevant point of time for determining the name of importer is who files the paper and clears the goods from custom As pointed out after the filing of the bill of entry and the assessment of the duty the import stream dries up and ceases to flow after the Customs Department levies the duty declaring the eligibility of the goods to be cleared and mingles with the general mass of goods and merchandise in the country. Once the duty is levied the import is at an end and the national customs barrier is supposed to have been crossed.” This is stage which decide who is importer “B” or “C”
S.T. Corporation of India Ltd. V. State of Tamil Nadu 129 STC 294(Mad)]
As held by the Supreme Court in the case of Kiran Spining Mills V. Collector of Customs (1999) 113 ELT 753, which arose under the Additional duty of Excise (Textile and Textile Articles) Ordinance, 1978 the taxable event is the crossing of the customs barrier, and not the date when the goods hand landed in India, or had entered the territorial waters. When goods are imported into India even after the goods are unloaded from the ship and even after the goods are assessed to duty subsequent to the filing of a bill of entry the goods cannot be regarded as having crossed the customs barrier until the duty is paid and the goods are brought out of the limits of the customs station.
This case also clearly mention that importer can be only who clears the goods and pays the duty as goods cannot be regarded as having crossed the customs barrier until the duty is paid and the goods are brought out of the limits of the customs station. There is aother case which also clarify the same:
In the case of Kiran Spinning Mills (1999) 113 ELT 753, the apex Court has observed thus: In other words the taxable event occurs when the customs barrier is crossed. In the case of goods which are in the warehouse, the Customs barriers would be crossed when they are sought to be taken out of the customs would be crossed when they are sought to be taken out of the customs and brought to0 the mass of goods in the country.
Until such time as the duty payable on those goods is not paid, the amount of duty payable being determined with determined with reference to the rate at which the duty was levied as on the date of the removal of the goods from the warehouse the goods cannot be regarded as having crossed the customs barrier of India.
Section 47 of the Customs Act refers to clearance of goods for home consumption, while section 68 of the Act deals with clearance of warehoused goods for home consumption. In this case, the goods had been warehouse and the clearance for home consumption was made under Section 68, after the title to the goods had been transferred to the buyers. The duty was paid by the buyers.
The “clearance” referred to in section 2 (in the interest of Justice and Equity.) of the C.S.T. Act, in the absence of any other compelling factor has to be regarded as having reference to the clearance of goods for home consumption Under Section 47 or the clearance of warehoused goods Under Section 68 of Customs Act. The clearance in this case, clearly was after the transfer of document of title and was not earlier. The crossing of the limits of the customs station tool place after the clearance of the goods from the warehouse for home consumption.
Hence, in my opinion the name of importer should be the person who clears the goods from custom duty, pays the custom duty and takes delivery.
Now, if we also consider the object of weight and measurement Act which has been implemented to protect consumers and to enforce the law by specifying the liability on concern person. Since “B” has sold the goods to “C” before the goods have entered into Indian border, for consumer grievances, the authorities for protecting consumer will not be able to prosecute “B” as his transaction was out of border and the pack don’t have name of “C” so it will be difficult who can be caught for any grievances of consumer.
Hence in my opinion and to avoid litigation
1) The Package should declare the name of the importer who is responsible for clearing the goods from custom authorities and paying the duty
2) The subsidiary company “B” of “A” clears the goods in its own name from customs and invoice to buyer “C” after charging local sales tax. “C” can claim the rebate on Sales tax which they have paid to “B”as input tax.