TMI Blog2015 (10) TMI 2406X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturers as also the refineries are very much within the State of Maharashtra viz. at Mumbai. The Petitioners are at Mumbai. Meaning thereby, their place of business is at Mumbai. It is from that place that the Petitioner requests the oil companies to supply to it the high speed diesel. It is received by the Petitioner from the oil companies at Mumbai. It may be that the Petitioner treats this as a contract on which they paid the sales tax as a component of the price. However, it is that very high speed diesel and supplied to the Petitioner at Mumbai which is carried from Mumbai in furtherance of a contract with parties like M/s. Leighton, which contract is also placed and finalised from Mumbai, through the barges of the Petitioner to the vessels of M/s Leighton and which may be stationed in territorial waters. There is sufficient territorial nexus for the Maharashtra Value Added Tax Act to apply and to be invoked to the later sale by the Petitioner of the same goods to M/s. Leighton and other entities similarly placed. We do not see how the Petitioner can escape compliance with this legislation and by contending that the contract of M/s. Leighton being a distinct contract, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1956 (for short the CST Act ) for the purpose of discharging its VAT liability and is holding valid TIN 27420008932V/C. The Petitioner has regularly filed its VAT returns for the Financial years 200708 till date. The Petitioner has duly discharged its tax liability under the MVAT Act and CST Act as per the original returns filed by the Petitioner. 4) The Petitioner submits that it has already filed Writ Petition No. 4057 of 2015 in this Court challenging the legality and validity of recovery notices issued by Respondent No. 4 to the bankers and debtors of the petitioner on account of alleged tax liability on sales of motor spirits by the Petitioner during the years 200708 to 201415. The Court, vide order dated 21st April, 2015 has directed the parties to maintain status quo. 5) Respondent No. 4 has also issued recovery notices in Form 318 dated 17th April, 2015 to Respondent Nos. 6 to 10 for the purpose of recovery of alleged tax liability. Also, subsequent to the above High Court order dated 21st April, 2015, the Petitioner has received assessment order for the period 200708 on 30th April, 2015 which has been claimed to be passed by Respondent No. 4 on 30th March, 2015. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nominated vessel. 13) After reaching the anchorage point of the nominated vessel, the HSD is pumped out of the barge into the fuel tank or bunker of the nominated vessel. Once the supply is complete, master or the authorised officer of the vessel acknowledges the receipt of the ordered quantity of HSD on the Bunker Delivery Note (BDN) and the shipping bill. 14) The barges go beyond 1.5 nautical miles from the base line to deliver the HSD to the vessels anchored therein. 15) After the delivery of the HSD to the nominated vessel is complete, the Petitioner raises an invoice on the shipping line, based on the BDN. 16) There is no dispute about the fact that the bunker supplies made by the Petitioner to the shipping lines are for their own consumption and use. This is further fortified by the fact that the said bunker supplies are cleared under the Customs Act, 1962 under a bona fide shipping bill for supply of ship stores. 17) The Petitioner has regularly filed returns and paid taxes under the MVAT Act and complied with all the provisions of MVAT Act. The Petitioner has discharged the tax liability due under the MVAT Act after claiming available exemptions under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date of Revision Revised Under Section Remarks 1 20072008 24/12/2014 20 (4) (c) Under Protest 2 20082009 30/12/2014 20 (4) (b) Under Protest 3 20092010 24/12/2014 20 (4) (b) Under Protest 4 20102011 24/12/2014 20 (4) (b) Under Protest 5 20112012 25/12/2014 20 (4) (b) Under Protest 6 20122013 30/12/2014 20 (4) (c) Under Protest 7 20132014 30/12/2014 20 (4) (a) Under Protest 8 April 2014 September 2014 30/12/2014 20 (4) (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kotak Mahindra Bank account of the Petitioner. 28) Despite there not being any confirmed assessment order against the Petitioner for the alleged dues, the Petitioner, on 11th February 2015, paid an amount of ₹ 2,50,00,000 and requested the department to release the bank accounts vide their letter dated 11th February 2015. The Department then subsequently released one of the Bank Account of the Petitioner. 29) On receipt of the above submission of the Petitioner dated 11th February 2015, the Petitioner received an installment order dated 4th March 2015 to pay the balance, alleged tax dues. Again the Petitioner received the Form 318 for Kotak Mahindra Bank Account for the period April September 2014. 30) Again the petitioner paid a sum of ₹ 2,00,00,000 on 10th March 2015 to show its good conduct and cooperation. They also requested to lift the above attachment for Kotak Mahindra Bank Account. The investigating officers then revoked their notice of recovery in respect of Kotak Mahindra Bank Account on 18th March 2015. 31) Aggrieved by the attachment of bank accounts, the Petitioner thereafter wrote letters dated 30th March 2015 and 4th April 2015 addressed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently, the Respondent No. 4 served the Petitioners with Assessment Order No.ASO/MUM/INVD039/ 1415/7443308 for the period 200708 under section 23(4) of the MVAT Act which was received by the petitioner on 30 April 2015. The Assessment Order also imposed interest under section 30(3) of the MVAT Act and penalty u/s 29(3) of the MVAT Act, 2002 which has resulted in the tax dues to the tune of ₹ 1,27,50,383. The said order has been claimed to be passed by the Respondent No. 4 on 30th March 2015. The same order was served on the petitioner on 30th April 2015. 36) In view of the above, the Petitioner is forced and constrained to file the present Writ Petition against the said assessment order dated 30th March 2015 as being arbitrary, unreasonable and in violation of Articles 14 and 19(1)(g) of the Constitution of India. 37) Mr. Sridharan, learned Senior Counsel appearing for the Petitioner has divided his submissions into three parts. 38) Firstly, our attention is invited to the grounds in the Writ Petition, particularly under the head that the assessment order which is claimed to have been made is illegal, arbitrary and without jurisdiction. It is submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of high speed diesel read with the above Notification dated 30th November, 2006. The contention of the investigating officers under the MVAT Act, each sale is liable to tax at every stage is exfacie erroneous and without any legal basis. Section 41(4) granting exemption to sales of motor spirits at retail outlets was introduced by Maharashtra Act No. 32 of 2006 with retrospective effect from 1st April, 2005 with an intention to levy VAT on sale of motor spirit at a single stage. Reliance is placed on the statement of objects and reasons for the amendment of section 41. Therefore, read with the substantive provision, the statement of objects and reasons so also the Notification in question, it is apparent that there is an exemption with regard to sales at retail outlets of motor spirit. This exemption is subject to the conditions set out in this Notification all of which have been fulfilled by the Petitioner. For this reason as well, it is submitted that sales of high speed diesel were always taxed as a single point levy under the erstwhile Bombay Sales of Motor Spirit Taxation Act, 1958. If the Petitioner is retail trader within the meaning of that Act and there is nothing contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, whether a sale or purchase takes place( i) outside the State shall be determined in accordance with the principles specified in sections xxx , 4 and xxx of the Central Sales Tax Act, 1956 (74 of 1956); (Emphasis Supplied) 43.5) Thus, Section 8 further clarifies that no sale taking place outside the State of Maharashtra (as per definition given in Section 4 of CST Act, 1956) would be liable to tax under the MVAT Act. 43.6) Assuming, without admitting that the State of Maharashtra has the necessary competence to tax sale transactions taking place outside its territory, Sections 2(24) and 2(28) of the MVAT Act, 2002 clearly do not provide for any such artificial extension. Therefore the MVAT Act only applies to the ordinary territorial limits of the State of Maharashtra. 44) Under common law, realm of a country does not extend to the territorial waters. 44.1) Under Common Law, the realm of a State (to be understood as Country or a NationState ) extends only upto the low water mark. This is so clarified in the commentary Law relating to waters by Coulson and Forbes, chapter titled Of the Sea and Rights Therein vide the 6th Edition of the book. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Vol. V) None of the foregoing cases, nor others which we have decided are sufficient to declare that California owns or has paramount rights in or power over the threemile belt under the ocean. The question of who owned the bed of the sea only became of great potential importance at the beginning of this century when oil was discovered there. As a consequence of this discovery, California passed an Act in 1921 authorizing the granting of permits to California residents to prospect for oil and gas on blocks of land off its coast under the ocean. This state statute and others which followed it, together with the leasing practices under them, have precipitated this extremely important controversy, and more pointedly raised this statefederal conflict for the first time. Now that the question is here, we decide for the reasons we have stated that California is not the owner of the threemile marginal belt along its coast, and that the federal government rather than the state has paramount rights in and power over that belt, an incident to which is full dominion over the resources of the soil under that water area, including oil. (Emphasis Supplied) 46) Decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make the conceded portion liable to the common law, or to vest the soil of the bed in the crown. This must be done by the act of the Legislature. (Emphasis Supplied) It is Canada which is recognized by international law as having rights in the territorial sea adjacent to the Province of British Columbia. The sovereign state which has the property in the bed of the territorial sea adjacent to British Columbia is Canada. At no time has British Columbia, either as a colony or a province has property in these lands. It is the sovereign state of Canada that has the rights, as between Canada and British Columbia to explore and exploit these lands and Canada has the exclusive legislative jurisdiction in respect of them either under s. 91 (1) (a) of the British North America Act or under the residual power in S. 91. British Columbia has no legislative jurisdiction since the lands in question are outside its boundaries. We answer Questions and 1(c) in favor of Canada. 46.2) The Supreme Court of Canada thus held that the territorial waters (referred to as lands including seabed, seaward from the low water mark ) were not within the legislative competence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which currently is 12 nautical miles. 48) In International Law, it is a nationstate or a country alone that has any identity: 48.1) The Convention on the Rights and Duties of States 1934 signed at Montevideo, which is considered to be one of the earliest representatives of the international law on the subject of statehood. 48.2) Article 1 and 2 of the convention clearly provides that it is the nationstate or country (referred in that context as state ) which is a sole person in the eyes of international law. 48.3) The relevant extract of the same is as follows: ARTICLE 1 The state as a person of international law should possess the following qualifications: a ) a permanent population; b ) a defined territory; c ) government; and d) capacity to enter into relations with the other states. ARTICLE 2 The federal state shall constitute a sole person in the eyes of international law. (Emphasis Supplied) 48.4) Most learned authorities on international law such as in 1 Lassa Oppenheim, International Law: A Treatise (Hersch Lauterpacht 8th ed. 1955) consider the principles enumerated in this Convention as form of codification of the customary inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the constitution that when any Maritime State joins Indian Union, the territorial waters of that Maritime State will go to the Central Government. This kind of question shall never be subject to any kind of dispute or adjudication. That is the reason why we want to make this provision in article 271A (Emphasis supplied) 49.2) Thus, it cannot be disputed that the territorial waters vest with the Union alone and no State can assert its right or ownership over the same. This question has been elaborately answered by Dr. B. R Ambedkar in the constituent assembly debates referred to above. Therefore, the Petitioners submits that the territorial waters abutting the State of Maharashtra cannot be said to be a part of the territory of the State of Maharashtra. 50) Under the Constitution of India and in particular in view of Article 366(30) the territorial waters belong to the Union of India and cannot be construed to be part of the territory of any State They will be part of unspecified union territory: 50.1) Article 1 of the Constitution of India provides for the Name and territory of the Union. Article 1 of the Constitution is extracted and reproduced below: 1. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, and other maritime zones, of India shall be such as may be specified, from time to time, by or under any law made by Parliament (Emphasis Supplied) 50.7) The Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 vide Section 3 thereof provides that the sovereignty of India has always extended to territorial waters, sea bed and subsoil underlying air space over such waters. The section is extracted and reproduced below: 3. Sovereignty over, and limits of, territorial waters (1) The sovereignty of India extends and has always extended to the territorial waters of India (hereinafter referred to as territorial waters) and to be seabed and subsoil underlying, and the air space over, such waters. (2) The limit of the territorial waters is the line every point of which is at a distance of twelve nautical miles from the nearest point of the appropriate baseline 51) Definition of General Clauses Act, 1897 and Bombay General Clause Act also establish the same position vide Section 3(62A): 51.1) In the General Clauses Act, 1897 the term State has been defined under Section 3(58) as follows: State As respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Madras reported in (1953) 4 STC 188. He read out several portions of this Judgment and to eventually urge that ordinary meaning of the expression sale within a State absent any special definition of a situs of a sale, will only be the state in which property passes. Mr. Sridharan then invited our attention to sections 3, 4 and 5 of the Central Sales Tax Act, 1956 and submitted that: 53.1) Section 4(2(b)) of the CST Act, 1956 makes certain deviations from the exact terms of Section 23 of the Sale of Goods Act, 1930. 53.2) Section 23 of the Act provides as follows: 23. Sale of unascertained goods and appropriation.- (1)Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. (Emphasis Supplied) 53.3) The requirements of unconditionally appropriated , and delivera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the goods, the property in the same does not pass until such measurement or weighment is completed. As stated in Atiyah (supra) and Benjamin (supra), the same principle will be equally applicable in relation to sale of unascertained or future goods. 55.2) Therefore, for purposes of Section 4(2)(b) of CST Act, 1956 appropriation in case of unascertained goods can be said to have taken place when all of the following aspects are satisfied: 5. The goods are first ascertained by the seller. This will constitute mere setting apart of the goods and not an act of appropriation. 6. The goods are appropriated to effect a passing in property. 7. Where the last important obligation of the seller like self transportation by seller to customer s premises. (as in Carlos (supra)), is performed. 8. Where the seller is bound to measure/weigh the goods in question, when such obligation is performed. 56) Both Atiyah and Benjamin, refer to Section 18(2) of English Sale Of Goods Act, 1893, being delivery of specific or ascertained goods, to a common courier, as a statutory illustration of appropriation. Similar provision is contained in Section 23(2) of Indian Sale of Goods Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales of motor spirits and petroleum products made by an oil company to another oil company; (b)on sales at retail outlets of motor spirits, other than aviation turbine fuel and aviation gasoline. ... Explanation.-For the purposes of this subsection, motor spirits and petroleum products shall mean such products as the State Government may, notify from time to time, in the Official Gazette. 61.3) In exercise of this power contained in Section 41(4) above, Respondent No. 1 issued Notification No. VAT1505/ C.R. 135/Taxation1 dated 30th November 2006. The relevant portion of the notification has been extracted below: In exercise of the powers conferred by the Explanation to subsection (4) of Section 41 of the Maharashtra Value Added Tax Act 2002 (Mah. IX of 2005) and in supersession of the Government Notification Finance Department No. VAT 1505/CR124/ Taxation 1 dated the 1st April 2005, the Government of Maharashtra hereby with effect from 1st December 2006 notifies the following products to be the motor spirit and petroleum products for the purposes of the subsection : Product (Central Excise Tariff Code No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch tax shall not be levied on any sale or purchase at more than one stage. (Emphasis Supplied) 61.7) The following rule of the erstwhile Bombay Sale of Motor Spirit Taxation Rules 1958 further effected the abovementioned provision: Rule 15. Liability of Trader to Pay Tax 1) Subject to the provisions of subrules (2) (3) every trader shall pay tax at the relevant date specified in rule 14 on the sales or purchases of motor spirit effected by him during each calendar month. 2) (a) No tax shall be payable by a trader not being a company mentioned in clause (b) on sales made by him of motor spirit- (ii) which was purchased by him after the commencement of the Act from a trader holding or deemed to be holding a license under the Act or before such commencement from a trader who was liable to pay tax in respect of the sale of such motor spirit to the first mentioned trader under the Bombay Sales of Motor Spirit Taxation Act 1946, or the Bombay Sales of Motor Spirit Taxation Act 1946 as extended to the Kutch Area of the State of Bombay and (iii) which has not been processed or altered by him in any manner whether by admixture or otherwise after such purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which to 1967 were omitted. Thus exemption from incometax was allowed beyond the year 1967. In the year 1975, it was felt that the exemption from incometax on income from poultry business is capable of being abused by unscrupulous people by showing income which would otherwise be chargeable to tax, as exempt income. It was in this background that the mischief was sought to be remedied by omitting Section 10(27) of the Act and reenacting Section 80JJ providing restricted exemption to thirty three and on one third percent of gross total income from livestock breeding, poultry and dairy farming. This is also evident from the Budget Speech of the then Finance Minister in the Parliament which runs as under: At present income from livestock breeding and poultry and dairy farming is exempt from Income tax. This exemption is prone to abuse by showing income which would otherwise be chargeable to tax as exempt income. I accordingly propose to restrict the exemption to ₹ 10,000 in a year. 61.12) Clearly as can be seen, the Hon ble Court placed reliance on the speeches of the Finance Minister in Parliament to interpret the scope of the various provisions in the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Maharashtra VAT Act 2002. Moreover, the Order of 1999 is one that is issued under a Central legislation by the Central Government whereas the Notification No. VAT1506/ CR 135B/ Taxation 1 dated 30th November 2006 along with Notification No. VAT1505/ C.R. 135/Taxation1 dated 30th November 2006 is one issued by the Respondent under the Maharashtra VAT Act 2002 a state legislation. 62.6) Therefore, it is submitted by the Petitioners that reliance cannot be placed on the meaning of the term retail in the Petroleum Control Order 1999, for the purpose of deciding the availability of exemption under the Maharashtra VAT Act, 2002. In ordinary terms, since the sales made by the Petitioners are made for consumption by its customers, these would constitute retail sales, and the Petitioners barge would therefore constitute retail outlets for the purpose of the notifications. The impugned orders in denying the benefit of the notifications are therefore bad in law and run contrary to the decisions and settled principles of interpretation applied by the Hon ble Supreme Court. The impugned assessment orders must therefore be set aside. 63) Mr. Sridharan has relied upon the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to challenge the assessment order. They can very well raise these objections and this Court should not therefore go into the same. 67) As far as the contention of the Petitioners that the sale in this case is in the territorial waters and not within the state of Maharashtra, Mr. Sonpal, placing heavy reliance upon the Judgment of the High Court of Karnataka in the case of Grate Eastern Shipping Company Limited vs. State of Karnataka and Ors., urges that the issue of chargeability of tax is legal. In the present context irrespective of the claim that the territorial water is part of or abutting State of Maharashtra or not, the issue of chargeability is independent of where the delivery is given. In other words, even if the goods are ultimately delivered to buyer in territorial waters, the chargeability is independent of location of delivery and not based on the location of delivery. 68) Firstly, the Karnataka High Court in case of Great Eastern Shipping Company (supra) based on sales tax laws only has decided the issue that the territorial water is part of abutting State of Karnataka and therefore the issue is no more res integra. Moreover, the said judgment is before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trary. If the principles of the section 4 of the CST Act are applied to the facts of the case, irrespective of the delivery having been given in the territorial waters or irrespective of the contract or custom or usage to the contrary, or whether territorial waters form part of Maharashtra or not, and even assuming while not admitting that territorial waters are not part of Maharashtra, the sale in the present case is exigible to sales tax and there can be no other legal conclusion. This is elaborately explained in the ensuing paragraphs. 72) It is irrelevant when the property passes in the goods to the buyer or situs thereof for attracting tax liability. The issue of taxability of transaction is strictly governed by the provisions of statute and in the present case by the provisions of section 4 of the CST Act. In the present case, while placing order to the oil company, the goods are in bulk with oil companies and from where required quantity is to be separated and delivered. So the goods at the time of entering into contract that is to say placing order by the Petitioner and acceptance of the said order by the oil company, to execute the contract or placing indent to the stor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales are not capable of being taxed by the State of Maharashtra. Once the sale is within the State of Maharashtra and no embargo is attracted of Article 286 and 269 item 92A of List I of VIIth Schedule, and section 8 of MVAT Act, the sale is exigible to tax. This position is well explained in the Judgment of this Court in the case of Gerogopolus vs. SOM and by Apex Court in Onkarlal Nandlal s case. 75) The Petitioner has all through out claimed exemption under Notification and now cannot be allowed to take a stand that the sale is in territorial waters which is not part of Maharashtra and beyond taxing powers for that reason. 76) So far as the applicability of exemption Notification is concerned, least to say is that the Notification is not at all applicable to the transactions of the Petitioner. The Notification is issued for exemption of sale from taxation when high speed diesel is sold from retail outlet. To say that high speed diesel is sold from retail outlet cannot be said to be same as saying sold in retail. The argument that Notification should mean to apply to the sale in retail in any manner is misplaced. High speed diesel is not only used in filling as fuel b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the proper rates, set off has been correctly claimed and the deemed tax in respect of the said period has been admitted to be payable and has been paid is the correct position or assertion. If the position is otherwise, then, appropriate corrective action was contemplated. 79) The partner of the Petitioner M/s. Raj Shipping Agency attended the hearing on certain dates and what has been found by the Assessing Officer is that the returns filed by the dealer are not correct, complete and the dealer has erred in calculating taxable turnover. That part of order from the paper book at page 54 reads as under: ..... Total Tax payable comes at ₹ 178627469/. Dealer has paid tax at ₹ 13707390/setoff is allowed at ₹ 169617594/. Interest u/s 30(3) for late payment is levied at ₹ 8635243/. I am of the opinion that, returns filed by the dealer are not correct complete and selfconsistent as, dealer has erred in calculating taxable turnover. Thus, this act of the dealer is resulted in evasion of tax due to him. Hence, said act of the dealer is squarely covered under the ambit of provisions u/s 29(3) of MVAT Act, 2002, as the dealer has concealed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er book is one of the illustrative copy of such an agreement. Pages 86 to 89 of the paper book read as under:- Leighton Contractors, (India) Pvt. Ltd. 302303, Wineser Building, 3rd floor, C.S.T. Road, Vidhyanagari Marg, Kalina, Santacruz (E), Mumbai 400 008, India, T: 912267190000 F:+912267190199 October 21, 2008 Our Ref: L0333/October OE/10182/12.4.1.2/TSH/... Raj Shipping Agencies Banaji Mansion, 17, Banaji Street, Fort, Mumbai 400 023 Tel: 91 22 2288 4720/21 Fax: 91 22 2287 3986 Email: rajship@vsnl.com Kind Attn: Mr. Pervez Mehta Dear Sir, Pipeline Replacement Project II for ONGC Subcontract 10182/PRP2/SC018 Bunkering Services Supply of Fuel Oil Notice of Award We refer to your proposal dated April 18, 2008 sent via email and subsequent discussions and clarifications you had with Mr. Albert Jacob (Sr. Manager Operation Logistics) and Mr. Ajay Goenka (General Manager Contract). We Leighton Contractors (India) Pvt. Ltd. (hereinafter called Leighton) are pleased to award the Bunkering Service Supply of Fuel Oil contract for the Pipelines Replacement Project II, for Oil and Natural Gas Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto a formal contract agreement as per mutually agreed terms and conditions. b) Leighton shall raise a Formal Purchase Order for every requirement. However, in case of any Urgent requirement an email confirmation by nominated representative could be sent, which would be followed by Formal PO. c) Supply will be made at the location indicated in the Purchase Order (email request), and at the date/time requested for. d) In the event of any delays, we reserve our right to order an other alternative source at your risk and cost. e) Leighton reserves the right to reject any supply if Raj Shipping fails to meet the delivery schedule or the supply is of inferior quality. f) All PPE for Raj Shipping personnel shall be provided by Raj Shipping. TERMINATION Leighton may at its sole discretion cancel this NOA and all or any portion of the intended contract agreement with or without cause at any time by giving written Notice of Cancellation to Raj Shipping. Termination by Leighton shall not constitute a breach of this NOA nor entitle Raj Shipping to any damage or claims except as expressly provided under this Article. Raj Shipping shall receive as compensation tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase order/nomination is also at page 90 of the paper book. It is on receipt of the purchase order/nomination from the shipping vessel that the Petitioner, in turn, places a purchase order on any of the oil marketing companies such as M/s. Indian Oil Company Limited, M/s. Bharat Petroleum Corporation Limited etc. Thereafter, the further documents are prepared, including the shipping bill and once they are ready, the oil marketing company loads the required quantity of high speed diesel in the tank lorries, which then come to the barge loading point at Mallet Bunder along with the invoice copy of the oil marketing company. 82) The sister concern of the Petitioner owns selfpropelled barges having large cargo tanks (below deck) ranging from 40 thousand liters (40KL) to 200 thousand liters (200KL). The barges have pumps fitted on them with a flow meter in order to pump out the HSD to the vessel. These are similar to petrol pumps where petrol is sold to the regular customers. At the Mallet Bunder, the HSD supplied by the oil marketing company is decanted into the cargo tanks of the barges owned by the Petitioner. The entire activity of decanting is done under the supervision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of the terms business appearing in section 2(4), dealer appearing in section 2(8), non resident dealer appearing in section 2(16), petroleum products appearing in section 2(17A), place of business appearing in section 2(18) and sales appearing in section 2(24) of the Maharashtra Value Added Tax Act, 2002 read as under: 2(4) business includes, (a) any service; (b) any trade, commerce or manufacture; (c) any adventure or concern in the nature of service, trade, commerce or manufacture, whether or not the engagement in such service, trade, commerce, manufacture, adventure or concern is which a motive to make gain or profit and whether or not any gain or profit accrues from such service, trade, commerce, manufacture, adventure or concern. Explanation. for the purpose of this clause (i) the activity of raising of manmade forest or rearing of seedlings or plants shall be deemed to be business; (ii) any transaction of sale or purchase of capital assets pertaining to such service, trade, commerce, manufacture, adventure of concern shall be deemed to be a transaction comprised in business; (iii) sale or purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usts; (iva) Public Charitable Trust; (v) Railway Administration as defined under the Indian Railways Act, 1989 (24 of 1989) and Konkan Railway Corporation Limited; (vi) Incorporated or unincorporated societies, clubs or other associations of persons; (vii) Insurance and Financial Corporations, institutions or companies and Banks included in the Second Schedule to the Reserve Bank of India Act, 1934; (II of 1934) (viii) Maharashtra State Road Transport Corporation constituted under the Road Transport Corporation Act, 1950; (LXIV of 1950) (ix) Shipping and construction companies, Air Transport Companies, Airlines and advertising agencies; (x) any other corporation, company, body or authority owned or constituted by, or subject to administrative control, of the Central Government, any State Government or any local authority: Exception I. An agriculturist who sells exclusively agricultural produce grown on land cultivated by him personally, shall not be deemed to be a dealer within the meaning of this clause. Exception II. an educational institution carrying on the activity of manufacturing, buying or selling goods, in the performance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by instalments; (iv) the transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; (v) the supply of goods by any association or body of persons incorporated or not, to a member thereof for cash, deferred payment or other valuable consideration; (vi) the supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is made or given for cash, deferred payment or other valuable consideration; 87) A perusal of these definitions together with the section 1(2) would denote as to how the Maharashtra Value Added Tax Act extends to the whole of Maharashtra. It is an Act to consolidate and amend the laws relating to the levy and collection of tax on the sale or purchase of certain goods in the State of Maharashtra. 88) Therefore, it would not be proper to proceed on any assumptions straightaway. One cannot presume that merely because the tax in this case is sought to be levied, assessed and collected from the Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods in the State, then, it cannot escape the tax. The only question is whether the above business is in the State. The Petitioner cannot and does not dispute that Sales Tax is leviable on the sale of motor spirit, which the goods are in question. In other words, sections 3, 4 and 6 together with its subsections signify the tax on HSD. That the Petitioner in the alternative urges that the sale in this case is outside the State and within the meaning of Chapter II of the Central Sales Tax Act, 1956 and further alternatively pleads that it is exempted from MVAT would denote as to how the levy is understood. It is only the transaction or deal with the shipping lines and undertaken by the Petitioner is claimed as not occurring within the State. That is because the HSD is supplied by barges to the ships or vessels located beyond 1 or 1.5 nautical miles in the high seas that it is urged that so long as the barge carrying the HSD does not reach the vessel, unload the same, obtains a certificate from the Master of the vessel, that there is no sale and in any event all this takes place in the high seas, therefore, it is not a sale within the State of Maharashtra. The further contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of sales tax, it is not necessary that the sale or purchase should take place within the territorial limits of the State in the sense that all the ingredients of sale like the agreement to sell, the passing of title, delivery of goods etc. should have a territorial connection. Broadly speaking, local activity of buying or selling carried out in the State in relation to local goods should be sufficient basis to sustain the taxing power of the State, provided of course, such activity ultimately resulted in a concluded sale or purchase to be taxed. This principle has been enunciated in the decision reported in the case of The State of Bombay Anr. v. The United Motors (India) Limited Ors., AIR 1953, SC, 252. The majority in this case held as under : (9) Before considering whether the appellant State has made a law imposing, or authorising the imposition of a tax on sales or purchases of goods in disregard of constitutional restrictions on its legislative power in that behalf, it is necessary to ascertain the scope of such power and the nature and extent of the restrictions placed upon it by Art. 286. The power is conferred by Art. 246(3) read with Entry 54 of List II of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in AIR 1968 SC 1286, this is what is held by the Hon ble Supreme Court : 5. We proceed to consider the next, and more important question, arising in these appeals, namely, whether the deeming provision contained in Section 2(h) Explanation II (ii) of the Act was ultra vires the Government of India Act, 1935. It was argued by Mr. Chagla that the doctrine of nexus was not applicable to salestax legislation, because such legislation was concerned with the tax on the transaction of sale, that is to say, a completed sale and to break up a sale into its component parts and to take one or more such parts and to apply the theory to it would mean that the State would be entitled to impose tax on one or more of the ingredients of constituent elements of the transaction of sale which by itself will not amount to a sale. An identical question has been the subjectmatter of consideration by this Court in The Tata Iron and Steel Co. Ltd. v. The State of Bihar, 1958 SCR 1355= (AIR 1958 SC 452). It was held in that case that the provisions of Section 4(1) read with Section 2(g) second proviso, of the Bihar Sales Tax Act, 1947 as amended by the Bihar Sales Tax Amendment Act,1949 were within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty in those goods passes outside the State the ultimate sale relates to those very goods. In the second case the goods, wherein the title passes eventually outside the State, are produced or manufactured in Bihar and the sale wherever that takes place is by the same person who produced or manufactured the same in Bihar. The producer or manufacturer gets his sale price in respect of goods which were in Bihar at the date when the important event of agreement for sale was made or which were produced or manufactured in Bihar. These are relevant facts on which the State could well fasten its tax. The principle of this decision was reiterated by this Court in a subsequent case Bharat Sugar Mills Ltd. v State of Bihar, (1960) 11 STC 793 = (AIR 1961 SC 1183). In 1958 SCR 1355 = (AIR 1958 SC 452) the course of dealing between the manufacturers and the purchasers was described as follows: The intending purchaser has to apply for a permit to the Iron and Steel Controller at Calcutta, who forwards the requisition to the Chief Sales Officer of the assessee working in Calcutta. The Chief Sales Officer thereafter makes a works order and forward it to Jamshedpur. The works order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tractual obligation of M/s. ONGC. It is for that obligation to be discharged that they have deployed the vessels. It is these vessels which require the bunker supplies and which supplies are met by the Petitioner. The subject matter of the contract with M/s. Leighton is this high speed diesel or motor spirit which is taken and carried from Mumbai. Therefore, there is sufficient territorial nexus for the Maharashtra Value Added Tax Act to apply and to be invoked to the later sale by the Petitioner of the same goods to M/s. Leighton and other entities similarly placed. We do not see how the Petitioner can escape compliance with this legislation and by contending that the contract of M/s. Leighton being a distinct contract, the sale taking place in territorial waters that the sales tax legislation or the VAT legislation of the Maharashtra State would be applicable. Its applicability has to be tested by applying the above principles and particularly the nexus theory. After having found sufficient territorial connection, namely, between the back to back transaction and the taxing authority that we are not in a position to agree with Mr. Sridharan that MVAT Act is inapplicable. 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court reported as 1967 SCR 792. While it may be true that some of these decisions may make a reference to the taxing power of the State but having found that the ambit and scope of taxing power can be interpreted with the aid of nexus theory and that can be invoked that we do not deem it fit and proper to dwell on this aspect any further. 99) It is also then not necessary to make a reference to the judgment of the Hon ble Supreme Court in the case of Gramaphone Company Limited vs. Union of India 1984 (2) SCC 534. We are also not required then to refer to the principles of international law, particularly as to how a State or a country has been identified. 100) For the aforesaid reasons, we also need not refer to the Constituent Assembly debates with reference to the territorial waters and Article 297 of the Constitution of India or Article 366(30) of the Indian Constitution. 101) For the very same reasons the definition of the term State as appearing in General Clauses Act, 1897 and the Bombay General Clauses Act,1904 also need not be referred. 102) As far as the Division Bench judgment in the case of Commissioner of Customs (Preventive) Mumbai vs. Noble Asset Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellant under the agreement attracted tax under section 5C of the KST Act. The appellant negatived this claim on the ground that there was no transfer of right to use the goods by it to NMPT. The possession and custody of the tug in question, even after the agreement was entered into, continued with the appellant. However, this reply was not found to be convincing and the Assistant Commissioner proceeded to inform the appellant that since it has failed to register itself as a dealer that would be taken to be a violation of the Act and for which appropriate steps, including prosecution, would be initiated. It is aggrieved by such action that the Writ Petition was filed and in which a declaration was claimed that the provisions of the KST Act do not extend to the territorial waters of India situate adjacent to the landmass to the State of Karnataka and, therefore, the appellant is not liable to get itself registered under section 10 of the KST Act and also not liable to tax on the hire charges received from the NMPT. The learned single Judge took the view that the tug in question was in the State of Karnataka, though in territorial waters which forms the territory of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sridharan, however, has not disputed the fact that for the purposes of determining the applicability of the two provisions viz. sections 3 and 4 of the CST Act, it will have to be determined firstly whether a sale or purchase of goods in the present case has taken place in the course of InterState trade or commerce. Section 3 of the CST Act falling in Chapter II deals with this aspect and enacts a deeming fiction. For that deeming fiction to apply there are two conditions and which are set out in clauses (a) and (b) of section 3 and there are explanations. It is thus upon fulfillment of these conditions and as set out that it could be said to be a sale in the course of InterState trade or commerce. 110) Section 4 subsection (1) opens with the words Subject to the provisions contained in Section 3 . Section 4 deals with a situation and when is a sale or purchase of goods said to take place outside a State. Therefore, it is subject to section 3 and when a sale or purchase of goods is determined in accordance with subsection (2) of section 4 to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. By subsection (2) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons are concerned, they are also capable of being raised, dealt with and considered in proceedings under the BST Act. While challenging the assessment orders, it would be open for the Petitioners to raise the contentions of applicability of the CST Act and equally in the alternative and without prejudice that assuming those contentions are turned down and the BST Act is applicable and attracted, still the particular goods are exempt from tax. The construction and interpretation of the exemption Notification relied upon is an issue which can always be gone into and decided in the proceedings under the Act. Thus, on both counts, namely, whether jurisdictional facts or pre conditions attracting the levy are satisfied and even if these are satisfied and the levy is attracted, the particular goods are exempt from such levy, the matters can be resolved by the forums under the Act. In the absence of any favourable adjudication, there are always the higher courts available to the Petitioners. Therefore, without expressing any opinion on the rival contentions as far as the exemption Notification is concerned, we would leave the Petitioners to pursue their remedies under the Act. 113) As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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