Chapter 15

High Sea Sales

The CST Act does not define High Sea Sales. 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.
Section 5(2) of the CST Act is the relevant provision for High Sea Sales, it read as under
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.
A sale or purchase of goods shall be deemed to be take place in the course of Import if the sale
is effected by a transfer of documents of title to the goods before the goods have crossed the
Customs frontiers of India. The High Seas Sales is covered by the second limb of Section 5(2) of
C.S.T. Act. There should be
1)Sale
2) Effected by transfer,
3) Of documents to title to goods and
4) Effected before the goods cross the custom frontiers of India.
In case of High Seas Sales, there is NEVER DELIVERY OF GOODS. What is given is symbolic
delivery of documents of title to goods duly endorsed in favor of the Buyers. The most
important document of title to goods in case of High Seas Sales is bill of Lading.
Features of High Sea Sales
HSS is accepted under the import trade control regulation.
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. If there is no
contract, at least there should be exchange of letters
The Contract must clearly stipulate the rights, duties and obligations of the parties to the
contract.
On concluding the HSS agreement, the 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 a 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 IGM should be filed by the carrier in the name of the HSS buyer.
The High Sea buyer should file the declaration form under rule 10 of the Customs
Valuation Rules, 1998
If the 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 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 CIF value for calculation of duty is taken to be the HSS value.
There is 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 will not be treated as
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 favor of the HSS buyer. The endorsement should read
"Transferred on High Sea Sales basis to M/S -------- for a sales consideration of Rupees
--------". Such endorsement should be stamped and signed by the HSS seller.
Relevant Judgments:
1. Anurag Agencies Pvt. Ltd. (S.A.1506 & 1507 of 99 dt.31-3-2001) (M.S.T.Tribunal)
In this case Hon. M.S.T. Tribunal has held that if the Bill of Entry is presented by the High Seas
buyer it is clear case that the seller has affected sale of goods to him prior to the clearing, as
unless it is so sold buyer will not be in position to present the B/E in his name. Under above
circumstances the claim of seller as sale in course of import is fully justified even if certain
documents are not available. Generally the bill of entry is made in the name of original importer
by the custom authorities but in this case specifically bill of entries were made in the name of the
subsequent purchaser. In other words it can be inferred that the documents of title to the goods;
i.e.bill of lading were handed over or endorsed to the buyers. If it was not the case then the bill of
entry would not been made in the name of buyer by the custom authority. Thus it is immaterial to
draw otherwise inference that there is no transfer of document of title to the goods by the
importer to the buyer.
2. Sanvik Asia Ltd., S. A. No. 1894 of 2004 dt. 8-8-2008 (M.S.T. Tribunal)
In this case the consignment came by Airway bill. Appellant claimed sale in course of import but
it was disallowed on the ground that the Airway bill is not negotiable and hence sale in course of
import cannot take place. Hon. Tribunal found that the bill of entry is in the name of purchaser of
the appellant and hence Tribunal observed that there is indication that the goods are sold before
crossing the custom frontier. Therefore the Tribunal allowed the claim.
3. Minerals & Metals Trading Corporation of India (S. A. No. 181 to 186 of 1999 dt. 10-4-2006)
(M.S.T. Tribunal)
In this case, Hon. Tribunal has held that the burden to prove claim of exemption u/s.5(2) is on
dealer. Even if B/L not available other documents can be relied upon like B/E. Tribunal held that
claim can be allowed based on B/E, unless Dept. has any contrary rebutting evidence to show
that even if B/E in name of buyer there was no sale from appellant to buyer.
Tribunal also held that endorsement on B/L not compulsory and even by delivery transfer can
take place. Tribunal relied upon judgment of B.H.C. in Chhaganlal Savchand (62 ITR 133).

In light of above judgments, it can be said that till the Bill of Entry (B/E) is presented before the
Custom Authorities for clearance of the goods, it can be said that the goods have not crossed
Customs Frontiers of India and sale effected till that point are entitled to exemption. In other
words, once the B/E is presented the Crossing of Customs Frontiers of India take place and no
High Seas Sale can be effected thereafter.