JUDGMENT Srinivasan, J.

(1) In T. C. No. 151 of 1959, the Deputy Commissioner of Commercial taxes is the petitioner. The turnover is dispute relates to a sum of Rs. 53,874-4-0 relevant to the assessment year 1955-56. In T. C. No. 23 of 1960 also the Deputy Commissioner is the petitioner and the disputed turnover is a sum of Rs. 1,04,296-7-0 relevant to the assessment year 1956-57. In both these cases, the assessee is Messrs. Caltex India Ltd., and the turnovers represent sales of customs bonded stocks of bunker or fuel oil.

(2) In T. C. No. 160 of 1959, the State is the petitioner and the assessee is Messrs. Burmah Shell. The assessment relates to the year 1952-53 and the turnover of Rs. 4,35,381 in dispute is in respect of furnace oil sold by the assessee to ocean-going vessels out of customs bonded stocks.

(3) It will be seen accordingly that in three cases the State is the petitioner, and the dispute relates to the assessability of transactions of sale of fuel oil sold to ocean-going vessels out of what is technically known as customs bonded stocks. In these cases, the Tribunal held that the goods had not crossed the customs frontier in the course of their import into the country, that they had not merged with the general mass of goods of the country and were consequently still in the stream of import. In this view, the Tribunal held that the sales were in the course of import and that the State was incompetent to assess such sales to tax.

(4) In these cases, a common question arises. The following facts are not in dispute. The assesses imported bunker fuel or furnace oil and kept it in the customs bonded warehouses. It was from such stocks that deliveries were made to the ocean-going vessels in pursuance of the sale contracts. The contention of the assessee is that so long as the customs duty had not been paid on the goods imported and these goods were kept in customs bonded warehouses, they cannot be deemed to have merged in the general mass of the goods of this country and that therefore the goods must be deemed to be still in the course of import into the country. If that is so, it is urged, the sale of those goods would be sales in the course of import which would not be taxable by reason of Art. 286(1)(b) of the Constitution. On the other hand, learned counsel for the department argues that in view of the definition of the customs frontier under the Sea Customs Act, the moment the goods cross the frontier as defined under the Act. It must be held that the course of import had been completed, whether or not the duty of customs had been levied or collected.

(5) It seems to us that neither of these contentions can be accepted. We have to determined firstly in order to meet the claim of the assessee whether the goods were still in the course of import into the country when the course of import terminated. We shall deal with the department's contention later. We have to examine the provisions of the Sea Customs Act in order to understand what the course of import in the country signifies. Chapter IX of the Act deals with the "discharge of cargo and entry inwards of goods". Secs 81 and 82 provide that only such goods as are entered in the manifest of the vessels are permitted to be discharged in the customs port. The owner of the goods is required under S. 86 of the Act to present a bill of entry to the Customs Collector and make entry of the goods for home consumption or warehousing. Under S. 87, on the delivery of such a bill "the duty leviable on the goods shall be assessed" and the owner may thereafter proceed to clear the goods either for home consumption or for warehousing. If the owner does not take the steps indicated above within four months from the date of the entry of the vessels, the Collector is authorised by S. 88 to sell the goods in public auction and apply the proceeds towards the payment of freight and other charges and the duty that would be leviable on such goods if they been cleared for home consumption. Clearance for home consumption is permitted in respect of goods assessed on the payment of the import duty so assessed, and such other charges as may be payable.

(6) Warehousing is dealt with in CH. XI. In the case of goods which have been entered for warehousing and assessed under S. 87 the owner can apply for leave to deposit the goods in any warehouse licensed under the Act. He has to execute a bond as required by S. 92. On his application being granted the goods are taken into the custody of customs officers are kept in licensed warehouses. The goods are removable from these warehouses for home consumption only on the payment of duty assessed under S. 87 or in the case where the duty on such goods has been altered, on payment of such altered duty.

In cases, however, where the owner of such warehoused goods seeks to clear such goods for shipment to a foreign port, he is not required to pay the import duty originally assessed, but is only liable to the payment of such warehouse, rent, penalties, interest, export duties and other charges. It is seen from the above that when once the goods have been landed it is the duty of the owner of the goods to present a bill of entry and to have the goods assessed to duty. If he clears the goods for home consumption, the duty is payable immediately. But if he applies for warehousing, though the duty leviable has been assessed, it is not immediately payable nor is the import duty payable in a case where the owner of the goods clears the goods for shipment to a foreign port.

(7) It is in the light of the above provisions that we have to consider whether the presentation of a bill of entry either for clearance for home consumption or for ware-housing and the levy of import duty on the goods completes the course of import or whether so long as the goods remain in the customs bonded warehouses with the duty unpaid, though assessed, the course of import could still be said to continue.

(8) What is noticeable in the scheme of the Act is that when the goods are received at a customs sport, the authorities of the customs levy the duty payable on the goods. In a case where the clearance is for home consumption, the duty is immediately collected. But in a case where warehousing is sought for, though the duty had been levied on the goods, its collection is postponed till the occurrence of a particular event, viz, clearance for home consumption.

(9) Reliance has been placed by the learned counsel for the assessees on a certain observations in the State of Travancore-Cochin v. Shamugha Vilas Cashewnut Factory, . The learned Chief Justice observed, in dealing with Art. 286(1)(b) of the Constitution :

"What is exempted under the clause is the sale or purchase of goods taking place in the course of the import of the goods into or export of the goods out of the territory of India. It is obvious that the words "import into" and "export out of" in this context do not mean the article or commodity imported or exported. The referent to "the goods" and to " the territory of India" makes it clear that the words "export out of" and "import into" mean the exportation out of the country and importation into the country respectively. The word "course" etymologically denotes movement from one point to another, and the expression "in the course of" not only implies a period of time during which the movement is in progress but postulates also a connected relation............A sale in the course of export out of the contrary should similarly be understood in the context of clause (1) (b) as meaning a sale taking place not only during the activities directed to the end of exportation of the goods out of the country but also as part of or connected with such activities."

Again at p. 216 (of STC) : (at p. 338 of AIR) :

"As clause (1) (b) is concerned only with exempting certain sales or purchases from taxation by the States in this country, it is sufficient to determine where the course of export begins and where the course of import ends. In this connection, it is useful to remember that the power to make laws with respect to duties of customs including export duties (Entry 83 of List I) and also with respect to import and export across customs frontiers and the definition of customs frontiers (Entry 41 of List I) is vested exclusively in the Central Legislature and detailed provisions have been made in the Indian Sea Customs Act, 1878, for the levy of customs duties by the officers of the Central Government who are stationed along customs frontier, as defined by the Central Government where, after appraising the goods exported or imported, the duties chargeable, if any, are computed and levied, and it is not until this process is completed that the goods can be shipped for transportation, or cleared by the consignee or his representatives as the case may be. It would seem, therefore, logical to hold that the course of the export out of, or of the import into the territory of India does not commence or terminate until the goods cross the customs frontier."

(10) The argument that the goods have not crossed the customs frontier and that they cannot be deemed to have done so till the duty has actually been paid and the goods have been cleared for home consumption fails to impress us. The customs frontier is only a notional barrier. When once the goods have been landed at a customs port and have been subjected to tax in the sense that levy of tax has been made thereon even though the goods might not have been cleared for home consumption, the proper view to take should be that the goods have ceased to be part of the import stream and have notionally crossed the customs frontier. There is thereafter no objection to the goods being brought into the country and the mere fact that the importer, for the purposes of his own convenience, warehouses and goods and thereby postpones the payment of the duty levied on the goods cannot be taken to indicate that the goods are still beyond the customs frontier.

Numerous cases have dealt with the question of sales in the course of export and have held that when once the goods have been permitted to be exported and are placed on board the ship, the course of export commences, and any sale held thereafter in relation to those goods would be sales in the course of export. The course of export accordingly begins when once the customs authorities have permitted the goods to be exported after levying export duty, if any. On that analogy also, the conclusion is irresistible that when once the goods have been permitted to be imported and the import duty on the goods has been levied by the customs officers, the course of import ends whether or not the goods are immediately cleared for home consumption or are only kept in the bonded warehouses. It would be extremely artificial to hold that solely for the reason that the goods were kept in bonded warehouses after the assessment of the duty on the bill of entry presented by the owner the course of import still continues.

(11) Learned counsel for the assessee relied upon Empress Mills Nagpur v. Municipal Committee, Wardha, . That was a case where the municipality sought to levy terminal tax on goods in transit across the municipal limits without the goods being either loaded or unloaded therein. The question arose whether in the case of such goods, the terminal tax was lawfully leviable as provided in the relevant statute which enabled "a terminal tax on goods or animals imported into or exported from the limits of a municipality" to be levied. The expression "imported into or exported from" came in for examination. Their Lordships observed :

"By giving to the words 'imported into or exported from' their derivative meaning without any reference to the ordinary connotation of these words as used in the commercial sense, the decided cases in India, have ascribed too general a meaning to these words which it appears from the setting, context and history of the clause was not intended."

Later they observe.

"Similarly, the word 'export' has reference to taking out of goods which had become part and parcel of the mass of the property of the local area and will not apply to goods in transit........"

Dealing with import, they stated :

"This supports the contention raised that import is not merely the bringing into but comprises something more, that is incorporating and mixing up of the goods imported with the mass of the property in the local area."

These observations of the Supreme Court have been relied upon by the learned counsel for the assessees who claims, so long as the goods have not been cleared for local consumption, it cannot be said that the goods have been imported into the country. In our opinion, it is not the factual mingling of the imported goods with the mass of the goods of the local area that terminates the course of import. The course of import to our minds come to an end when once the goods have passed the customs frontier in the sense that the customs duty has been levied on the goods and the importer has been permitted to clear the goods. That he merely warehouse the goods does not take away the effect of the relevant provisions of the Sea Custom Act which clearly signify that the course of import has come to an end.

(12) This contention of the assessees has accordingly to be rejected. Though it is not necessary, we may refer to the other extreme contention advanced by the counsel for the department, viz, that the moment the goods cross the geographical frontier, which runs parallel to the coast at a distance of six miles, the course of import must be deemed to have been completed. Under Sec. 3-A of the Sea Custom Act, the Central Government has power to define the customs frontier. In exercise of this power a notification was issued on the 1st April 1950, defining the customs frontier of India as the geographical frontiers, whether one or more than one, whether sea of land, whether exterior of interior of India, and this geographical frontier would, according to the law, include the territorial water-belt of a width of six miles all round the coast line of India, and upto which limit, the sovereignty of the state extends.

While it is true that technically speaking an import might be complete when this geographical frontier is crossed, and such a construction is availed of for the purpose of dealing with cases of smuggling, no authority has held that an export does not take place till the ship carrying the goods crosses this geographical frontier. As we have said earlier, numerous cases have held that the course of exports commences from the moment the goods cross the customs frontier in the sense that it has been permitted to be exported by the customs officers and have been placed on board the ship. It would be exceedingly difficult in any stated case to determine when exactly the import ceases or the export commences, if such import or export is to be determined with regard to the geographical frontier referred to above. It seems to us that such a construction is not in tune with accepted commercial practice which has prevailed and which has been recognised all along.

Our attention has been drawn to a decision of the High Court of Andhra Pradesh in Burma Shell Oil Storage and Distributing Co Ltd v. State of Andhra Pradesh, , wherein such a view seems to have been accepted. That was a case of the sale of furnace oil by the assessee to ocean-going ships directly from bonded warehouses of Vizagapatnam. The same plea as in the case before us was advanced, viz, that it was a sale in the course of import or export. In repelling this contention, the learned judges took the view that when once this imported oil did cross the outer limit of the territorial sea and had entered the territorial water limits of India, the goods must be regarded as having crossed the customs frontier and that any sale effected thereafter, whether in the limits of the territorial sea or of land, from out of the bonded warehouses would not be covered by the exemption under Art. 286(1)(b). The learned Judges purported to construe the customs frontier as the line at a distance of six miles from the coast line. It does not appear to us that the decisions of the Supreme Court in which the customs frontier, has been referred in look upon that expression as indicating the enlarged construction which the learned Judges of the Andhra Pradesh High Court have placed upon it.

It is not necessary for us to express out views upon this question as we have come to the conclusion that even looking upon the expression "customs frontier" in the more limited sense which we have ascribed to it, the present cases are still outside the scope of the exemption contemplated by Art. 286(1)(b).

(13) It follows that the view taken by the Tribunal that the sales were in the course of import cannot be sustained. T. C. Nos. 151 of 1959, 160 of 1959 and 23 of 1960 are allowed with costs. The assessees in T. C. Nos. 151 of 1959 and 23 of 1960 will pay Rs. 50 as counsel's fee (one set) and the assessee in T. C. No. 160 of 1959 will pay a like amount as counsel's fee.

(14) Appeals allowed.