TMI Blog2012 (2) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... he State has not sought to levy sales tax in the present case on the basis that there was a local sale. Having held that the State was not justified in bringing the sale to tax as a sale in the course of interstate trade and commerce, we are not called upon to decide any other hypothetical issue. - SALES TAX REFERENCE NO.15 OF 2003 - - - Dated:- 9-1-2012 - DR.D.Y.CHANDRACHUD, A. A. SAYED, JJ. Mr. Vinay A. Sonpal, A Panel counsel for the Applicant. Mr. B.C. Joshi with Ms. Nikita Badheka and Mr. M.M. Vaidya for the Respondent. ORAL JUDGMENT (PER DR.D.Y.CHANDRACHUD, J.) : 1. The Maharashtra Sales Tax Tribunal, following a decision rendered by it on 7 December 1996 in a batch of second appeals has referred two questions of law for the determination of this Court under subsection (4) of Section 61 of the Bombay Sales Tax Act 1959. The two questions of law which have been referred by the Tribunal for the decision of this Court are as follows : (i) Whether the Tribunal was justified in law in holding that Mumbai High is a foreign destination? (ii)Whether on the facts and circumstances of the case, the Tribunal was justified in law in holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason that Mumbai High falls beyond the territorial waters of India. The case of the assessee therefore was that the sales had occasioned the export of goods to a place outside the territory of India. The assessing authority held, however, that Mumbai High is a part of the territory of India and that the sales had occasioned interstate movement of goods. The sales were assessed by the assessing authority to sales tax at 10% under the CST Act. The appellate authority dismissed the appeals filed by the assessee on 20 August 1994 following which the assessee filed six second appeals. The appeals were disposed of by the Tribunal by its judgment dated 7 December 1996. The Revenue had placed reliance on an earlier decision of the Tribunal in the case of the assessee, rendered on 30 April 1994 in which it was held that Mumbai High formed part of the territory of India and that the sales which occasioned a movement of goods from Maharashtra to Mumbai High were interstate sales liable to tax under the CST Act. This view was, however, not accepted by the Tribunal on the basis of two decisions of this Court and of the Madras High Court holding that Mumbai High fell outside the territory of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here can be no export; vi) In the present case, the goods were present in the State of Maharashtra and when the agreement was arrived at in respect of ascertained goods, the sale has taken place within the State within the meaning of Section 20 of the Sale of Goods Act 1930. But, when the sale occasions a movement from the State to a Union Territory, the sale will be liable to be taxed under the CST Act 1956. Hence, no notification under Section 6(6) of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act 1976 ( Maritime Zones Act ) was required; vii)Under Articles 269 and 286 central legislation can provide for the principles for determining when a sale is in the course of export or, as the case may be, interstate trade. As a result of the extension of the Customs Act 1962, a sale to the continental shelf is not to be treated as export and goods from the continental shelf shall not be liable to duty. When the principles for the determination of the sale in the course of export or interstate trade are left to Parliament to formulate under Articles 269 and 286, any central legislation can provide such principles. Once the Customs Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purposes of sales tax legislation, the movement of goods from the State of Maharashtra to the continental shelf must be treated as a sale occasioned by the movement of goods out of the territory of India. 6. The rival submissions now fall for consideration. 7. Article 297 of the Constitution as it presently stands was substituted by the Constitution 40th Amendment Act 1976. Clause (1) of Article 297 stipulates that all lands, minerals and other things of value underlying the ocean within the territorial waters, or the continental shelf, or the exclusive economic zone, of India shall vest in the Union and be held for the purposes of the Union. Under clause (2) all other resources of the exclusive economic zone of India shall also vest in the Union and be held for the purposes of the Union. Under clause (3) the limits of the territorial waters, the continental shelf, the exclusive economic zone, and other maritime zones of India are to be such as may be specified, from time to time, by or under any law made by Parliament. 8. In pursuance of the provisions of Article 297 Parliament enacted the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enactment so extended shall have effected as if the continental shelf or the part including, as the case may be, any designated area to which it has been extended is a part of the territory of India. The Act also makes provisions for a contiguous zone in Section 5 and for an exclusive economic zone in Section 7. Section 7(7) empowers the Central Government to extend enactments in force in India to the exclusive economic zone which shall then have effect as if the exclusive economic zone to which it has been extended is a part of the territory of India. 9A. The nature and extent of the sovereign rights which India exercises in relation to the continental shelf and the exclusive economic zone does not constitute an absolute or complete territorial sovereignty. The sovereignty which is vested in the Union is for certain specified purposes. A distinction has to be made between the sovereignty which the Union exercises over the territorial waters from the sovereignty that is recognized over the continental shelf and the exclusive economic zone. The decision of the Supreme Court in Aban Loyd Chiles Offshore Limited v. Union of India 2008(227) E.L.T. 24 (S.C.) enunciates certain princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as defined in clause (22) of Section 2 of the Customs Act, 1962 in connection with any of the activities referred to in clause (a). 11. In Aban Loyd (supra) the Supreme Court held that the combined effect of these notifications is to extend the application of the Customs Act and the Customs Tariff Act to the ares declared as designated areas under the Maritime Zones Act 1976. Moreover, according to the Supreme Court the effect of the notifications is that the designated areas of the continental shelf and the exclusive economic zone become a part of the territory of India for limited purposes. The natural consequences of those declarations and the extension of the Customs Act and the Customs Tariff Act to the designated areas is to introduce the customs regime to such areas resulting in the levy and collection of customs duties on goods imported into those areas as if those areas are a part of the territory of India. The Supreme Court held that the object was to ensure that revenue generated from exploration and exploitation should accrue to the coastal state. The area of the exclusive economic zone and continental shelf where the oil rigs are situated are deemed to be a part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusive economic zone and for exploiting its natural resources and does not incorporate a territorial ownership of the coastal state over the area. 14. The submission of the Revenue, however, is that Article 366 (30) defines the expression Union Territory to mean any union territory specified in the First Schedule and to include any other territory comprised within the territory of India, but not specified in that schedule. The submission is fallacious because it proceeds on the basis that the continental shelf and the exclusive economic zone are comprised within the territory of India. Section 6(6) and Section 7(7) empower the Central Government to extend any enactment for the time being in force in India to the continental shelf or exclusive economic zone respectively. Upon being extended the enactment is to have effect as if the continental shelf or, as the case may be, the exclusive economic zone to which it has been extended is a part of the territory of India. The words as if in Section 6(6) and Section 7(7) bring into existence a legal fiction. Under the legal fiction the enactment which is extended has to have effect as if the continental shelf or exclusive econom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtained goods, at the time when the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer. Section 5(1) provides that a sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. Section 5(2) provides that a sale or purchase of goods is deemed to take place in the course of 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. Section 2(ab) has defined the expression crossing the customs frontiers of India to mean crossing in the limits of the area of a customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities. For the purposes of the clause the explanation stipulates that customs stati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e legal position that the provisions of the CST Act 1956 would not stand attracted to a situation such as the present is also adopted in a judgment of a Division Bench of the Gujarat High Court in Larsen and Toubro Limited v. Union of India 2011-VIL-46-Guj.. 18. The Tribunal upheld the objection of the assessee on the ground that the movement of the goods from the State of Maharashtra to Mumbai High was occasioned by a sale in the course of export and on that basis allowed the batch of appeals filed by the assessee. The question which has been referred to this Court for decision involves a determination as to whether the Tribunal was justified in law in holding that Mumbai High is a foreign destination and in concluding that the sale of Helium gas by the assessee to its vendee situated in Mumbai High was a sale in the course of export out of India as contemplated by Section 5(1) of the CST Act 1956. Article 286(1)b provides that no law of a State shall impose or authorise the imposition of tax on the sale or purchase of goods where the sale or purchase takes place in the course of import of goods into or export of goods out of the territory of India. Section 5(1) of the CST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the Union Government, acting as a delegate of a legislature, has extended the provisions of the Customs Act 1962 and of the Customs Tariff Act 1975 to designated areas of the continental shelf or the exclusive economic zone, with effect from 15 January 1987 it would be impossible to hold that a movement of goods from within the territory of India to that territory of the continental shelf or exclusive economic zone constitutes an export of the goods out of the territory of India. To hold that it would constitute an export would be to ignore extension of the customs frontier emanating as it does from the extension of the Customs Act 1962 to the areas so designated. The scheme of the Customs Act 1962 has to be read together with other acts such as the Maritime Zones Act 1976 which are pari materia. This was emphasised in the judgment of the Supreme Court in Aban Loyds. Export for the purposes of Section 5(1) of the CST Act 1956 cannot have a meaning which is divorced from the applicability of the Customs Act 1962 to a territory in pursuance of a notification issued in exercise of the powers conferred upon the Union Government in the Maritime Zones Act 1976. 19. The issue that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion that this meaning cannot be given to the word export in the clause. The word export may conceivably be used in more senses than one. In one sense, export may mean sending or taking out of the country, but in another sense, it may mean sending goods from one country to another. Often, the latter involves a commercial transaction but not necessarily. The country to which the goods are thus sent is said to import them, and the words export and import in this sense are complementary. An illustration will express this difference vividly. Goods cannot be said to be exported if they ware ordered by the health authorities to be destroyed by dumping them in the sea, and for that purpose are taken out of the territories of India and beyond the territorial waters and dumped in the open sea. Conversely, goods put on board steamer bound for a foreign country but jettisoned can still be said to have been exported , even though they do not reach their destination. In the one case, there is no export, and in the other, there is, though in either case the goods go to the bottom of the sea. The first would not be within the exemption even if a sale was involved, while any sale in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another. The movement of goods to Mumbai High does not meet that description. 22. Counsel appearing on behalf of the assessee sought to place reliance on the decisions of the Supreme Court in Collector of Customs, Calcutta v. Sun Industries 1988(35) E.L.T. 241 and in Union of India v. Rajindra Dyeing and Printing Mills Ltd. 2005(180) E.L.T. 433 (S.C.). Sun Industries involved a case where goods were loaded into a vessel which sunk after it had moved out of the territorial waters. The Supreme Court observed that for the purposes of the Drawback Rules 1971 export meant taking out of India to a place outside India and when the ship obtained clearance and moved out of the territorial waters, the export was complete. In the decision in Rajindra Dyeing, the vessel had sunk within the territorial waters of India and the Supreme Court held that since there was no export, the duty drawback was not available. Both these decisions turned upon the relevant provisions of the Drawback Rules. The decisions are distinguishable. For these reasons, we hold that the Tribunal was not justified in coming to the conclusion that the sale of Helium gas by the assessee to its vendee in the Mumbai High ..... X X X X Extracts X X X X X X X X Extracts X X X X
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