What is High Sea Sales?
Please let me know the Procedure and related rules for High Sea Sales.
16 Replies
Mrs. Raina Shah
(Export Executive )
(136 Points)
Replied 08 January 2013
High Sea sales (HSS) is a sale carried out by the carrier document consignee to another buyer while the goods are yet on high seas or after their dispatch from the port/airport of origin and before their arrival at the port / airport of destination. An HSS contract/ agreement should be signed after dispatch of goods from origin & prior to their arrival at destination. The agreement should be on stamp paper. On concluding the HSS agreement, the bill of lading (B/L) should be endorsed in favor of the new buyer. In respect of air shipment, HSS seller should write to the airline / consol agent informing that an HSS agreement has been established with the HSS buyer and that the carrier document should therefore be considered as endorsed in favor of the HSS buyer and further the Import General Maniface (IGM) should be filed by the carrier in the name of the HSS buyer. If the electronic data interchange (EDI) system allows name of HSS buyer to be entered in the system, then there may not be any need to amend the IGM. In this case, the bill of entry/exchange (B/E) is filed in the name of the original importer as the IGM is in this importer name. However, the B/E shows the name of HSS buyer under a separate head in the B/E format. If the system has no provision for showing the name of HSS buyer on the B/E, then the IGM should be got amended and B/E filed in the name of the HSS buyer. In the case of HSS , the cargo in freight (CIF) value for calculation of duty is taken to be the HSS value. There is a practice followed in customs that in case the HSS transfer takes place at import invoice value only , the custom would add 4% of CIF value as HSS loading factor . There have been cases where HSS sellers have sold at two percent more than import CIF but custom have added 4% of CIF as HSS value addition. Such practice of customs can be challenged at the customs duty is chargeable on genuine transaction value. In HSS contracts, the HSS seller may not like to disclose the import value to the HSS buyer. However, the customs can call for the original import invoice, in which case the HSS seller may have to part with this information. To overcome this, HSS seller should take on the responsibility of custom clearance and site delivery. After custom clearance, the HSS seller could withdraw import invoices and only hand over clearance documents with HSS agreement to the HSS buyer. The custom bill of entry does not indicate original import value and is prepared on HSS value. There is no bar on same goods being sold more than once on high seas. In such cases, the last HSS value is taken by customs for purposes of duty levying. The last HSS agreement should give indication of previous title transfers. The last HSS buyer should also obtain copies of previous HSS agreement as such documents may be called upon by the customs. HSS is considered as a sale carried out outside the territorial jurisdiction of India. Accordingly, no sales tax is levied in respect of HSS. The customs documents (B/E) is either filed in the name of HSS buyer or such B/E has an endorsement indicating HSS buyer's name. The title of goods transfers to HSS buyer prior to entry of goods in territorial jurisdiction of India. The delivery from customs is therefore on account of HSS buyer. The CENVAT credit in respect of CVD paid on import is entitled to HSS buyer. HSS goods are entitled to classification, rates of duty and all notification benefits as would be applicable to similar import goods on normal sale. HSS is also applicable to goods imported by air. Sea appearing in HSS should not be constructed by its grammatical meaning. As long as the sale is formalized after dispatch from airport / port of origin and before arrival at the first port of discharge / airport at destination, such sale is considered as HSS. Sometime HSS buyers buy goods after their arrival. Such sale are not HSS. The stamp paper on which the HSS agreement is executed must not bear the stamp paper purchase date as being post cargo arrival date. Such a case can easily be detected by customs as being a post arrival sale. If the HSS does not mind disclosing original import values to HSS buyer, in such case it is better from custom clearance point of view for the seller to endorse the B/L, invoice , packing list in favour of the HSS buyer. The endorsement should read "Transferred on High Sea Sales basis to M/S -------- for a sales consideration of (currency and amount in that currency) ". Such endorsement should be stamped and signed by the HSS selle
Raunak Goel
(B.Com, CA Final)
(55 Points)
Replied 08 January 2013
High sea sale is nothing but sale of goods before they are cleared for home consumption, it is not nessesary that goods have to be in high seas for such sale. Even if goods are sold after being warehoused u/s 68 of Custom Act but before being cleared for home consumption, such sale will also be termed as high seas sale.
CA Suryakant Dubey
(CA )
(931 Points)
Replied 09 January 2013
high sea sales refer to transfer of ownership of goods,products to another party before it enters in the customs boundary of the country....
CA Sneha Jalan
(CA FINAL)
(73 Points)
Replied 09 January 2013
Dear Raunak,
I thnk For high seas sale..it is required dat bill of entry either for home consumption of for warehoused should not be filled...when goods are sold before filling the bill of entry to other buyer by d endorsement of Bill of entry in favour of d new buyer , den it is called HIGH SEAS Sale.
Hope i m r8...if dere is any wrng statement,kindly inform me....n plz inform me the procedure for the same..........
Thanks & Regards,
Sneha Jalan
Raunak Goel
(B.Com, CA Final)
(55 Points)
Replied 09 January 2013
Dear Sneha,
I beg to differ but as goods sold before occurance of taxable event can also be termed as high seas sales and unless warehoused good are not cleared for HC u/s 68 it is not regarded as taxable event 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. 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. Therefore, sale of warehoused goods can also be called as high seas sale.
And as far as procedure is concerned sale is effected through an agreement of sale between the original importer and the HSS buyer on Rs. 100/- stamp paper, this agreement needs to be produced along with import documents at the time of filing of Bill of Entry of HC u/s 68. The Bill of entry will be filed in the name of the HSS buyer who will be responsible for clearance of the goods including payment of duty.
Further in case of warehoused good the original importer can get his bond cancelled by the custom officer provided the HSS buyer execute his own bond.
Thanks & Regards,
Raunak G.
Rama Krishnan
(MBA)
(571 Points)
Replied 09 January 2013
i AGREE WITH SNEHA, HIGH SEA SALES DONE BEFORE FILING ANY BILL OF ENTRY( EITHER HOME CONSUMPTION OR WAREHOUSING ) ONLY QUALIFIES FOR SALES TAX EXEMPTION UNDER 5(2) OF CST ACT.
SALE DONE AFTER WAREHOSING ATTRACT SALES TAX AND THERE HAS BEEN VARIOUS COURT RULINGS ON THIS CONTEXT.
CA Sneha Jalan
(CA FINAL)
(73 Points)
Replied 09 January 2013
Dear Raunak,
I understand watever u said...bt i m also a little bit differ from u...when goods crossed from custom Barrier..then it is said dat d goods is imported or exported...once the goods come inside the custom barrier den it is said dat the goods has been imported.now it wll b a indian goods which is stored in warehouse.
So i thnk dat once the goods is warehoused...it vll loose dere characteristcs as a imported goods.n sale after warehoused vll b treated as normal sale.
Thanks & Regards,
Sneha Jalan
Raunak Goel
(B.Com, CA Final)
(55 Points)
Replied 09 January 2013
Dear Rama,
You may have certain cases in opposition of what I had said but in case of State Trading Corporation of India Ltd. (129 STC 294) the Madras High Court has held that the sale effected from bonded warehouse is still sale before crossing Customs Frontiers of India and hence duly entitled to exemption. In this case Madras High Court has relied upon judgment in case of Kiran Spinning Mills vs. Collector of Customs (113 ELT 753)(SC). In this Supreme Court judgment the issue was about payment of Custom duty. Supreme Court held that the duty is payable at prevailing rate when goods are cleared from bonded warehouse. As per relevant provisions of Custom Act, Supreme Court held that the duty is payable at the prevailing rate at the time of clearing the goods from bonded warehouse.
In light of above said case and for the benefit of Assesse I can say that HSS of warehoused good wont attract any sales tax.
Regards & Thanks,
Raunak G
Raunak Goel
(B.Com, CA Final)
(55 Points)
Replied 09 January 2013
Dear Sneha,
I request you to first read the defination of Imported Goods mentioned in section 2(25) of Custom Act.
Imported Goods means
"any good brought into India from a place outside India but does not include goods, which have been cleared for home consumption."
From the above defination it is clear that goods will seize to be imported goods only after clearence for HC which can be done u/s 46 as well as u/s 68(warehoused goods) .
Thanks & Regards,
Raunak G
CA Sneha Jalan
(CA FINAL)
(73 Points)
Replied 09 January 2013
Dear Raunak,
I accept..n i let u knw tommorrow after reading custom act..k...bt i thnk u r r8...n thnx fr infrming me...
Thanks & Regards,
Sneha Jalan
CA Sneha Jalan
(CA FINAL)
(73 Points)
Replied 11 January 2013
Dear Raunak,
I agree wth u regardng d difinition of imported goods...i m not agree wth u regardng HIgh SEA SAle till now...i dnt thnk dat the sale of warehused goods vll be treated as high sea sale....
Thanks & Regards,
Sneha Jalan
Rama Krishnan
(MBA)
(571 Points)
Replied 11 January 2013
LOGICALLY I AGREE TO THE POINT THAT SALE FROM CUSTOMS BONDED WAREHOUSES SHOULD ALSO BE TREATED AS SALE BEFORE CROSSING CUSTOMS FRONTIERS, SO SALES TAX EXEMPTION UNDER (5) 2 OF CST ACT SHOULD BE APPLICABLE.
BUT UNFORTUNATELY THE SETTEED LEGAL POSTION AND OPINION OF SALES TAX DEPT ARE DIFFRENT, ITS HIGH TIME THAT A CLARIFICATION IS ISSUED TO SETTLE THE MATTER.
IN THE MATTER OF STATE TRADING CORPORATION VS STATE OF TAMILNADUE, THE FACTS OF THE CASE WE DIFFRENT, THE GOODS WERE WAAREHOUSED WITHIN THE LOCATION OF CUSTOMS STATION, SO COURT RULED IN FAVOUR OF STC.
THERE ARE WAREHOUSING STATION OUTSIDE THE CUSTOMS STATIONS ALSO, SO WHAT WILL HAPPEN IN SUCH CASES.
CUSTOMS CIRCULR 11/2010 DATED 3-6-2010 ISSUED CLARIFICATION ON VALUATION ASPECTS, THE SAME CIRCULR ALSO SAID SALE OF WAREHOUSED GOODS ARE NOT SIMILAR TO HIGH SEA SALES
SO THERE IS AMBIQUITY & ITS HIGH TIME A CLEAR CLARIFICATION IS ISSUED TO SETTLE THE MATTER.
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