The Supreme Court in the case of Hotel Ashoka Vs ACCT (2012 -TMI – 209720) held that VAT is not payable on sale of goods by duty free shops at international airports since such transactions take place beyond/outside the custom frontiers of India. It is to be noted that Section 5 of Central Sales Tax Act exempts the sale of goods by transfer of document to title to goods before the goods have crossed the customs frontiers of India.
The authorities contended that such sales can only be claimed to be VAT exempt, if it is effected by transfer of documents of title to goods and not by giving physical possession of goods to customers. The apex court did not agree to this proposition and held otherwise. The decision comes as a relief to several such duty free shops as it puts the issue, which was being picked up by several States, to rest.