TMI Blog2016 (1) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... re the goods were appropriated to the contract. Therefore, it cannot be said that the goods in question were within the State of Gujarat at the time of their appropriation to the contract of sale so as to fall within the ambit of clause (b) of section 4(2) of the Central Sales Tax Act, 1956. The transactions in question are, therefore, not amenable to tax under the provisions of the Gujarat Sales Tax Act, 1969. Merely because the Natural Gas upon being delivered at the Delivery Point was commingled with other gases, does not mean that it was not in a deliverable state because having regard to its unique physical properties, large volumes of Natural Gas can be transported only in a continuous stream and once delivered in the pipeline for transportation, it becomes commingled with other natural gas. Individual molecules are not separately indentified and cannot be accurately tracked or traced. As a result, natural gas is sold and purchased on a “quality and quantity” basis. The act of sweetening of natural gas, having taken place post appropriation, after the goods were delivered and the title had passed to the Buyer outside the State of Gujarat, merely because post appropriati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I) 1. All these petitions involve similar questions of fact and law and the parties are also common, and hence, the same were taken up for hearing together and are decided by this common judgment. In all, there are three petitioners, viz. British Gas Exploration and Production India Limited, Reliance Industries Limited, and the Oil and Natural Gas Corporation Limited, who are collectively known as the Contractor . All the three petitioners have filed individual petitions challenging orders passed by the Sales Tax Department against them. For the sake of convenience, reference is made to the facts as stated in Special Civil Application No.2084/2004 which has been filed by British Gas Exploration and Production India Limited. Wherever the facts are different, reference shall be made to the same at an appropriate stage. 2. The petitioner - British Gas Exploration and Production India Limited (hereinafter referred to as BGEPIL ) is engaged in the business of exploration and production of oil and gas. On 22nd December, 1994, the Government of India, BGEPIL, Reliance Industries Limited (hereinafter referred to as RIL ) and Oil and Natural Gas Corporation Limited (hereinafter r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of India. The PSC, therefore, is a contract arrived at for acquisition and disposal of minerals by the Government of India, who in public interest and the interest of consumers, controls the production, prices and distribution of natural gas. 5. The Government of India appointed Gas Authority of India Limited (hereinafter referred to as GAIL ) as its nominee to take over the natural gas produced by the Contractor on behalf of the Government of India. The Contractor delivered the natural gas to ONGCL for transportation and re-delivery of the same to GAIL. Natural Gas is separated from condensates at the oil fields and also measured under sophisticated equipment at the oil fields itself. The delivery is thereafter taken by ONGCL from the Contractor at the off-shore tie-in point into the ONGCL pipeline itself for and on behalf of GAIL in terms of the final delivery point in the said PSC. ONGCL, therefore, takes delivery on behalf of GAIL and undertakes to transport the said Natural Gas to Hazira for handing over to GAIL. It is the case of the petitioners that in the nature of the peculiar transport arrangement under sea water and commercial expediency, ONGCL transports the Nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner of Sales Tax (Enforcement), Surat called upon the petitioner BGEPIL to explain why the sales should not be taxed, pursuant to which, the said petitioner submitted a detailed reply explaining as to why such sales should not be taxed. The Additional Commissioner, however, issued a notice purporting to be a show-cause notice calling upon the said petitioner to show cause why supply of Natural Gas from Panna-Mukta oil/gas fields to GAIL, should not be taxed. The petitioner submitted its reply by letters dated 28th January, 2002 and 4th March, 2002. It is alleged in the petition that the second respondent Commissioner has, notwithstanding the clear position of law, adopted a resolute attitude to tax these transactions of the Joint Venture and has directed the respective assessing authorities to impose tax on these transactions by resorting to reassessments or provisional assessments as the case may be in case of each respective constituent of the Joint Venture. Pursuant to these directions, the fifth and sixth respondents issued notice for reassessment under section 44 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as the GST Act ). Similar notices also came to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent No.3 for the F.Y. 2005-06. Special Civil Application No.9871/2008 (a) this Hon ble Court may be pleased to issue an appropriate writ, direction or order under Article 226 of the Constitution quashing and setting aside the assessment order dated 3rd July 2008 passed by the Respondent No.3 for the F.Y.2003-04; Special Civil Application No.11677/2007 (a) this Hon ble Court may be pleased to issue an appropriate writ, direction or order under Article 226 of the Constitution quashing and setting aside the assessment order dated 30-3-2007 passed by the respondent no.3 for the F.Y.2002-03. Special Civil Application No.3119/2004 (a) that this Hon ble Court be pleased to declare that in respect of sale of Natural Gas effected by the Petitioner and the other Joint Venture Partners under the Production Sharing Contract dated 22nd December, 1994 with Government of India to Government of India and or its nominee GAIL, in view of sale of such Natural Gas taking place outside State of Gujarat, no Sales Tax is leviable or recoverable under the provisions of the Gujarat Sales Tax Act, from the Petitioner. (b) That this Hon ble Court be pleased to issue W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion quashing and setting aside impugned orders dated 15.1.2004 (Annexure-F collectively) and the consequent impugned demand notices for payment of tax (Annexure-G collectively); C. Your Lordships be pleased to issue a writ of prohibition or a writ in nature of prohibition or any other appropriate writ, order or direction commanding the respondents not to levy/demand/collect any tax by treating the transaction between the petitioner and GAIL as sale eligible for payment of sales tax under the provisions of Gujarat Sales Tax Act, 1969. Special Civil Application No.4022/2009 [a] this Hon ble Court may be pleased to issue an appropriate writ, direction or order under Article 226 of the Constitution quashing and setting aside the assessment order dated 30th March, 2009 passed by the Respondent No.3 for the F.Y. 2004-05. 9. Mr. P. Chidambaram, Senior Advocate, learned counsel for the petitioner - BG Exploration and Production India Ltd. assailed the impugned orders by submitting that such orders had been passed without any authority in law as the sales in question have not taken place within the State of Gujarat and, therefore, are not amenable to tax under the GST Act. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or future goods, the only relevant factor is the situs of the goods when they are appropriated to the contract of sale by the seller or by the buyer. 9.2 It was submitted that in the facts of the present case, the sale of the goods, namely, Natural Gas under the PSC took place outside the State of Gujarat since none of the conditions under section 4(2) of the CST Act are satisfied. It was pointed out that the territory of India has been defined in the Constitution of India in Article 1(3) which states that the territory of India shall comprise of States and Union Territories and such other territories as may be acquired. There is, however, no reference to the territorial waters in Article 1. State has been defined under Article 1(2) of the Constitution of India to mean the territories that are specified in the First Schedule of the Constitution of India. The territory of Gujarat is stated to be the territories specified in section 3(1) of the Bombay State Reorganization Act, 1960 under Entry 4 of the First Schedule. When read with section 3(1) of the Bombay State Reorganization Act, 1960, the territory of the State of Gujarat is extended to cover the following territories:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the buyer has agreed to take and purchase, on a daily basis, 100% of the Deliverability of ANG and NANG. Accordingly, the gas was delivered at the delivery point in terms of Article 21.5.13(b). It was further submitted that Article 1.27 and Article 21.5.13(a)(iv) define Delivery Point as the upstream weld at the underwater connection between the seller's pipeline and ONGC's underwater gas transmission line or lines which transport gas from Bassein field to the Hazira area. Actually, gas is delivered to one of the two parallel pipelines laid down by ONGC from the Bassein field to Hazira which is entirely consistent with Article 1.27 of the PSC. It was submitted that for the purpose of Article 21.5.13(c), the gas is measured at the Offshore Processing Platform belonging to the petitioner. By virtue of Article 27.2, title passes to the Government of India or its nominee at the delivery point. The price of gas is payable for each MMBTU of gas delivered. Under Article 21.5.13(a)(vi), MMBTU means one million BTUs on a net heating value basis. The unit is based on 'heat energy'. There is a standard formula to convert a certain volume of' gas into the equivalen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the PSC cannot be amended, modified, varied or supplemented in any respect except by an instrument in writing signed by all the parties. It was submitted that GAIL is not a party to the contract and under Article 21.5.14, any document between the contractor and GAIL shall not abrogate the obligation of the Government of India under the PSC. Hence, the Interim Sales Purchase Agreement (ISPA) cannot amount to an amendment or modification or variation of the PSC. Reliance was placed upon the decision of the Supreme Court in the case of Hindustan Shipyard v. State of Andhra Pradesh, (2006) 6 SCC 579, for the proposition that it is not the meaning of an individual recital or the inference flowing from any term or condition of the contract read in isolation, but an overview of the contract wherefrom the nature of the transaction covered thereby has to be determined. It was submitted that no long term Gas Sales Contract was entered into between the Contractor and the Government of India or its nominee till 2008. For the intervening period, on 5th February, 1998, the sellers (ONGC, RIL and the petitioner) and GAIL entered into an Interim Sales and Purchase Agreement (ISPA) witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the seller to the buyer (Government of India or its nominee) at the delivery point as defined. The PSC is the sole contract between the seller and the Government. The goods were always specific or ascertained goods because the volume of gas to be produced, sold and delivered is captured in the word Deliverability as defined in Article 21.5.13(a)(iii) of the PSC and that all the gas that falls within Deliverability must be sold on a daily basis to the Government of India or its nominee under Article 21.5.13(b). It was submitted that applying section 4(2)(a) of the CST Act, the goods were outside the State of Gujarat (gas wells or Offshore Platform) when the contract of sale was made. Alternatively, it was submitted that assuming that the goods (gas) were unascertained or future goods, they were appropriated to the contract, on a daily basis, when they were delivered at the delivery point to ONGC's Bassein Hazira pipeline. There was appropriation on a daily basis and the seller and buyer assented to such appropriation. The goods were outside the State of Gujarat at the time of appropriation (at the delivery point). Therefore, whether section 4(2)(a) or section 4(2)(b) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ka v. West Coast Paper Mills, 1985 ILR Karnataka 3857, was relied upon and more particularly paragraphs 13 and 14 thereof. It was submitted that in the light of the principles laid down in the above decisions, the State of Gujarat is not competent to levy sales tax on the sale of Natural Gas to GAIL. 9.5 Alternatively, Mr. Chidambaram submitted that the sales in the present case are sales of goods in the course of import into the territory of India. Article 1(3) of the Constitution defines the territory of India. The gas wells and the Offshore Platform are located at places outside the territory of India. Article 297(3) of the Constitution enables Parliament to specify the limits of the territorial waters, the continental shelf, the exclusive economic zone and other maritime zones. Parliament has made the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (Maritime Zones Act). Section 3 thereof declares that the sovereignty of India extends and has always extended to the territorial waters of India. Section 5 defines 'Contiguous Zone'. Section 6 defines 'Continental Shelf' and section 7 defines 'the Exclusive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 5(2) of the CST Act is squarely attracted and hence, the sale of gas under the PSC shall be deemed to take place in the course of the import of the goods into the territory of India within the meaning of section 5(2) of the CST Act. According to the learned counsel, since the phrase territory of India is not defined in the CST Act, the meaning must be consistent with the Constitution of India and hence, the meaning of the phrase will be the same as in Article 1(3) of the Constitution. Since the CST Act has not been extended to any area beyond the territorial waters, there is no question of a deemed territory of India for the purpose of the CST Act. Consequently, the State of Gujarat would not have jurisdiction to levy sales tax on the transaction which is a sale in the course of import into the territory of India. It was submitted that the gas wells, Offshore Platform and delivery point are located outside the territory of India. Any movement of goods from a place outside the territory of India (Gas Wells, Offshore Platform and delivery point) to a place within the territory of India (Hazira) will indeed be a movement in the course of import of the goods into the terri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NG are synonyms. The contract is for the sale of 100% of the Deliverability of ANG and NANG which is nothing but 100% of the Deliverability of Natural Gas. It is, these goods (Natural Gas) which are delivered at the delivery point and the title passes to the Government or its nominee at the delivery point and all costs and risks after the delivery point become the responsibility of the Government or its nominee. It was pointed out that the impugned assessment orders have assessed the goods as Natural Gas. The rate of sales tax is levied under Item (7) of part B of Schedule II to the GST Act which is Natural and Associated Gas and hence, the respondent State cannot now contend that the goods are anything other than Natural Gas. 9.8 As regards the validity of the reopening of assessment, it was submitted that the show-cause notices are under section 44 of the GST Act to reopen the assessment and the consequent reassessment orders are without jurisdiction and are void ab initio . Referring to the record of the case, it was pointed out that in respect of five years, viz., 1997-98 to 2001-02, the original assessment was a nil assessment so far as Panna-Mukta Gas was concerned. Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of his submission, the learned counsel placed reliance upon the decisions of the Supreme Court in Calcutta Discount v. ITO, AIR (1961) 41 ITR 191 , Ganga Saran v. ITO, 1981 (3) SCC 143 , CIT v. Kelvinator, (2010) 320 ITR 561, Phoolchand Bajranglal v. ITO, (1993) 4 SCC 77 , State of Maharahstra v. Ketan Enterprises, 2010-(ST1)-GJX-0125-Bom , an unreported decision of this court in the case of Krishak Bharati Cooperative Limited v. State of Gujarat rendered in Special Civil Application No.3708/2012 as well as the decision in the case of Niko Resources v. Assistant Director of Income Tax, 2014-TIOL-1679-HC-AHM-IT . Referring to the impugned order, it was submitted that the reassessment orders proceed on the basis that since sweetened gas is delivered at Hazira, the State is competent to levy sales tax. It was submitted that for the reasons already submitted, the basis of the reassessment is erroneous and perverse. Moreover, it is merely a change of opinion and hence, does not furnish any ground to reopen the nil assessment insofar as Panna-Mukta Gas is concerned. 9.9 Next, it was submitted that assuming that the petitioner is liable to pay sales tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(c) of the GST Act, penalty is levied only if there is concealment or deliberately furnishing inaccurate particulars . In the present case, there was neither concealment nor deliberate furnishing of inaccurate particulars. This is a case where the issue is a constitutional and legal issue namely, whether the sale is a local sale within the State of Gujarat or not and hence, in such a case, section 45(2)(c) of the GST Act is not attracted and no penalty can be levied thereunder. It was submitted that under section 45(6) of the GST Act, penalty is leviable if the reassessed amount of tax exceeds the original amount of tax by 25%. In the present case, the original assessment was made only in respect of Tapti gas. If sales tax is leviable on Panna-Mukta Gas also, the reassessed amount will naturally exceed the original assessed amount. If the difference exceeds 25%, the assessee is, under section 45(5), deemed to have failed to pay tax. Based on such a deeming provision, another penalty is leviable under section 45(6) of the GST Act. It was urged that in the present case, the failure to pay the tax on the Panna-Mukta gas is solely because of the dispute whether the sale of Panna-M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Balabhagas Hulaschand v. State of Orissa, (1976) 2 SCC 44 . 10.1 It was submitted in the case of Reliance Industries Limited, all the assessments are provisional and in case of ONGC barring one, all are provisional assessments and that this is not a fit case where provisional assessments can be made. It was argued that the impugned assessment orders are passed without jurisdiction and are void ab initio , inasmuch, as an order can be passed under section 41(b) of the GST Act where the Commissioner has reason to believe that the dealer has evaded tax. In the instant case, at no point of time, the Assessing Officer had any reason to believe that the dealer had evaded tax and that there did not exist any facts, circumstances or grounds, for the Assessing Officer to invoke the power of making provisional assessment under section 41(b) of the Act. It was contended that apart from the fact that there is no evasion of tax, the impugned order is not passed on the premise that the dealer has evaded the tax. Reliance was placed upon the decision of this court in the case of Batliboy v. Sales Tax Officer, 2000 (111 or 119) STC 583, wherein the court has held that under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t taken place within the State of Gujarat and secondly, that the sale has taken place in the course of import into the territory of India. Dealing with the second limb of submissions advanced by the learned counsel for the petitioners, it was contended that the sales in question have not taken place in the course of import into the territory of India. The attention of the court was invited to the provisions of sub-section (2) of section 5 of the CST Act to submit that the word 'import' is not defined under the said Act. 'Customs frontier' is not defined under the CST Act and, therefore, section 2(22) of the Customs Act has to be imported into section 5(2) of the CST Act. It was submitted that section 5(2) of the CST Act is not applicable because the sale does not occasion import from a foreign destination. According to the learned counsel, in view of the provisions of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1956 and notification issued thereunder, the customs frontier is extended. The provisions of the Customs Act are imported into the provisions of the CST Act for determining whether the sale is in the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (3) sale in the course of import. It was submitted that since the sale in question is neither in the course of import nor is an inter-State sale, it would fall within the category of local sale as any sale has to fall within any one of the above three categories. 11.1 Mr. Shelat next submitted that it is the case of the Contractor that the sale is of specific/ascertained goods; however, such contention is not borne out from the Production Sharing Contract which is for future goods, that is, unascertained goods. It was submitted that when the Contractor entered into the production sharing contract, they were not aware while undertaking petroleum operations in the contract area, as to what quantity/quality of natural gas could be received. Moreover, the contracting parties are not ad idem about the delivery point for the appropriation to the contract of sale. The attention of the court was invited to the provisions of section 4 of the CST Act to submit that clause (b) of subsection (2) thereof provides that in case of unascertained or future goods, a sale of goods is deemed to be inside a State if the goods are within the State at the time of their appropriation to the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntents of Article 21.5.13(e) where it is categorically asserted that GAIL, nominee of Union of India will receive gas at Hazira downstream of the separation and sweetening facility owned and operated by ONGC. It was submitted that, therefore, no assent is given for appropriation by the Union of India or its nominee. The delivery point, according to the Union of India and its nominee is onshore Hazira in view of Articles 21.5.13(iii), 21.5.13(c) and 21.5.13(e). Therefore, in view of the provisions of clause (b) of sub-section (2) of section 4 of the CST Act, the sale of goods in the instant case is deemed to have taken place inside the State of Gujarat. 11.3 It was submitted that when Article 21.3 of the PSC refers to the domestic market, the Government of India has contemplated domestic market to serve through its nominee GAIL and GAIL has to comply with the directions of the Union of India. Article 21.3, therefore, has to be read conjointly with other clauses. According to the learned counsel, reliance placed by the petitioners upon the decision of the Supreme Court in Reliance Natural Resources v. Reliance Industries (supra) is not justified because in the facts of the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the State of Gujarat. Reference was made to Halsbury's Laws of England, Fourth Edition 2005 Reissue Volume 41 paragraph 109, wherein it has been stated that Like all contracts, a contract of sale must be construed as a whole. Accordingly, the property in the goods passes where the terms of the contract show a clear intention that it will pass notwithstanding that there may be an express provision in the contract to the contrary . Reference was also made to Halsbury's Laws of England Volume 13 paragraph 174, wherein it has been stated that It is a rule of construction applicable to all written instruments that the instrument must be constructed as a whole in order to ascertain the true meaning of several clauses. The best construction of deeds is to make one part of the deed expound the other so as to make all other parts agree. Effect must, as far as possible, be given to every word and every clause. It has been said that the court in a case of patent satisfaction (though the dictum may have a more general application) must adopt a purposive construction rather than a purely literal one derived from applying to it the kind of meticulous verbal analysis in which lawye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d or purchased. 11.9 Reference was made to the decision of the Allahabad High Court in the case of Pyare Lal - Kishan Prasad v. Diwan Singh Ganesh Lal, AIR 1930 Allahabad 661, wherein it has been held thus:- There is a distinction between a case where something remains to be done by the vendor to the goods for the purpose of putting them into a state in which the vendee is to take them and a case where the vendee for his own satisfaction wants to get the goods weighed for the purpose of ascertaining the amount of the price. This distinction has been recognized in a number of cases and appears to be well founded: Annan v. Dubar Sheikh A.I.R. 1923 Oudh 15 (at p. 41 of 26 O.C.) and Abdul Aziz v. Jogendra Krishna Roy [1917] 44 Cal. 98 (at p. 115). Two rules of civil law appear to have been incorporated both in the Sale of Goods Act and in the Indian Statute with which we are concerned. These rules have been stated by Blackburn, J, to be as follows (Contract of Sale, third edition, 1910, P. 184): They are two fold: the first is that where, by the agreement, the seller is to do anything to the goods for the purpose of putting them into that state in which the buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. It is a condition precedent to the passing of property under a contract of sale that the goods are ascertained. The condition is not fulfilled where there is a contract for sale of a portion of a specified larger stock. Till the portion is identified and appropriated to the contract, no property passes to the buyer. Mr. Shelat submitted that appropriation is essentially a question of fact when parties are not ad idem and when the buyer contends that it is not appropriated on the delivery point as understood by the Contractor, this court is required to consider the totality of the circumstances under which the Production Sharing Contract has been executed and implemented. 11.12 On the question as to whether the sweetening of gas is a process leading to new marketable gas, the learned counsel submitted that what has been agreed upon by the Production Sharing Agreement is delivery of sweetened gas onshore at Hazira. It was submitted that the petitioners have contended that under the Production Sharing Contract, the sale is of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or otherwise processing, treating or adapting any goods; but does not include such manufacturers or manufacturing processes as may be prescribed.: It was submitted that the court in the said case has held that the definition of 'manufacture' in section 2(e)(i) of the U.P. Trade Tax Act is very wide which includes processing, treating or adapting any goods. The court was of the opinion that the expression 'manufacture' covers within its sweep not only such activities which bring into existence a new commercial commodity different from the articles on which that activity was carried on, but also such activities which do not necessarily result in bringing into existence an article different from the articles on which such activity was carried on. The decision of the Supreme Court in the case of Commissioner of Income Tax v. M/s. Oracle Software India Ltd. JT 2010 (6) SC 369 was cited wherein the court held as under:- The term manufacture implies a change, but, every change is not a manufacture, despite the fact that every change in an article is the result of a treatment of labour and manipulation. However, this test of manufacture needs to be seen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was submitted that the said decision is not relevant for interpreting the Production Sharing Contract between the Government of India and the Contractor. It was submitted that in the facts of the said case, the Production Sharing Agreement was of a different nature. In the present Production Sharing Contract, there is a mechanism for determination of price rate with price share agreement. In the Reliance case, the contractor was to sell gas to a third party with the approval of the Government. In the facts of the present case, the buyer is already nominated by the Government of India and the gas in the sweetened form is to be delivered as already indicated. Price is also fixed and hence, such decision would be of no assistance to the petitioners. 12. Vehemently opposing the petitions, Mr. P.K. Jani, learned Additional Advocate General for the respondent State authorities submitted that the question as to whether the goods are sold and manufactured within the State of Gujarat has to be dealt with in the light of section 4(2)(b) of the CST Act, viz., that the goods were within the State of Gujarat when the sale took place so as to attract the GST Act and that the said goods were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the sale has to be considered in the context of ISPA dated 1st June, 1998. 12.1 It was submitted that under the Contract Act, the agreements are between the parties and are required to be entered into with the consent of the parties on specific issues. Reference was made to the affidavit-in-reply dated 15th April, 2004 filed on behalf of the Government of India who is a signatory to the PSC, to point out that it has been stated therein that according to the Union of India, insofar as interpretation of the PSCs and Interim Gas Sales and Purchase Contract is concerned, its stand is that in the facts and circumstances of the present case, the delivery point is onshore at Hazira and the contention of the petitioners that the delivery point is off-shore at Panna-Mukta oil fields has been denied. In view of the specific terms of the PSCs executed between the petitioner No.1 RIL and ONGC and the Union of India and the Interim Gas Sales and Purchase Agreement executed between the petitioner No.1 RIL and ONGC and GAIL respondent No.7 as also the fact that the gas produced at Panna-Mukta oil fields is incapable of being consumed till it is subjected to a sweetening process on- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no facility with the petitioners to sweeten the gas from sour gas off-shore and that the petitioners have not shown or asserted that they have any facility off-shore to sweeten the gas. It was submitted that after bringing the sour gas at Hazira, the petitioners have processed/manufactured the goods at Hazira. By the said process of manufacture, a different and distinct product in the form of sweetened gas has emerged which is liable to be taxed under the provisions of section 3 of the Gujarat Sales Tax read with rule 3 of the Gujarat Sales Tax Rules, 1990. It was, accordingly, submitted that the say of the petitioners that the goods are appropriated by the purchasers, that is, GAIL is contrary to the provisions of the Contract Act, the Sale of Goods Act as well as terms of the PSC and the ISPA. 12.2 Next, it was submitted that in terms of the expression delivery point , the terms upstream or downstream are of great significance. The term upstream is that stage of the production process that involves searching for and extracting raw materials. This part of the production process does not do anything with the material, such as processing it. It only deals with the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing gas and condensate which would also include crude oil. Thereafter, they are separated and then measured and again recombined. This would mean that the goods would not be ascertainable. Thus, from Panna platform after the gas and condensate are measured, they are recombined and it is this recombined gas and condensate which reaches the T-Junction. Therefore at the T-Junction in the ONGC pipeline both NANG and ANG is in a combined state. Mr. Jani further submitted that the contention that the title of goods passes at T-Junction because the goods in question acquire the characteristic of ascertained goods is incorrect and that reliance placed upon clause 21.5.13(a)(ii) has no relevance and in fact, the Production Sharing Contract refers to 100% deliverability. Referring to clause 21.5.13(e), it was submitted that the parties have acknowledged that Gas Authority of India shall receive the Gas at Hazira. Simultaneously, clause 3 of the ISPA also is very clear on the situs. Thus, it is clear that the parties have time and again acknowledged that the delivery point shall be Hazira. 12.4 Mr. Jani next contended that the sale has not taken place in the course of import into the terri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o appreciate the fact that the processing which takes place at the ONGC plant at Hazira does not merely involve removal of impurities as contended by the petitioners. The processing makes the Gas a domestically marketable commodity. It was submitted that natural gas from wells contains significant amounts of Sulphur, Carbon Dioxide and other organic compounds. The natural gas, due to the presence of high content of Hydrogen Sulphide has a rotten smell and is commonly known as sour gas. The presence of Hydrogen Sulphide is undesirable because it makes the gas extremely harmful and lethal to breathe and can be extremely corrosive. The gas is considered sour if the content of Hydrogen Sulphide exceeds 5.7 mg per cubic metre of natural gas. The process of removing Hydrogen Sulphide and other organic compounds from sour gas is commonly referred to as sweetening and the gas is known as sweetened gas. The attention of the court was invited to the process known as Amine Process or alternatively, Girdler Process whereby Hydrogen Sulphide is removed from natural gas. It was submitted that in the present case, it is only after the completion of the said process of converting the natural g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a processing platform be termed to be ascertainment for the reason that on exploration of gas and condensate, though they are separately measured, they are recombined and sent to the T-Junction for further transport. Therefore also, it cannot be said that ascertainment takes place at the off-shore processing Panna platform. It was emphatically argued that the most important word which requires due consideration is the word recombine used in clause 21.5.13(c) which means reunite . Therefore, on recombining, it loses the characteristic of being ascertained even if it were to be assumed that the contention of the petitioner is accepted. It was submitted that it is thus relevant to consider the provisions of section 22 of the Sale of Goods Act which clearly mention that where there is a contract of ascertained goods in the deliverable state, but the seller is bound to weigh, measure, test or do something for the purpose of ascertaining the price, the title of the goods shall not pass, till the time such act is done. Therefore, if all the three provisions as well as Articles 21.5.13(e) and clause 3 of ISPA are read in a conjoint manner and applied to the present case, it would simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing officer s belief is not justiciable though the belief can be questioned by the assessee on the ground of lack of bona fides and irrelevancy. 12.8 Lastly, it was submitted that it would be necessary for the court to first deal with the preliminary contention that the petitions are not maintainable as the petitioners have an efficacious alternative remedy by way of appeal before the appellate authority and in the facts of the present case, the petitioners have already availed of such alternative statutory remedy under section 65 of the Gujarat Sales Tax Act by preferring appeals before the appellate authority, which are pending for final adjudication. It was submitted that the petitioners have simultaneously preferred these petitions by challenging the very jurisdiction of the Sales Tax authorities in levying sales tax on the ground that the sales have taken place beyond the territorial waters of India and thus, the State of Gujarat has no jurisdiction to levy sales tax as delivery of natural gas in the light of clause 21.5.13(a)(iv) has taken place at upstream-weld underwater connection. Therefore, the court may first deal with the primary objection as regards the mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the PSC read with ISPA and the sale thereof to GAIL cannot be said to be a sale of goods in the course of any such trade or commerce and it cannot be said that the sale or purchase has occasioned the movement of goods from one State to another as envisaged in section 3 of the CST Act. Consequently, Article 286 of the Constitution of India does not prohibit tax authorities under the GST Act to impose tax on the sale transaction between the petitioner and GAIL provided the sale takes place in Gujarat. It was submitted that in view of the above propositions, the decisions cited by Mr. Chidambaram and Mr. Soparkar on the interpretation of the phrase occasions such import under section 5 of the CST Act and occasions the movement of goods from one State to another under section 3 of the CST Act are irrelevant. It was submitted that in view of the fact that neither has the sale of gas taken place in the course of import of goods into the territory of India nor has such sale been occasioned by the movement of goods from one State to another, the decisions cited by the learned counsel on the issue as to what is manufacture and whether sweetened natural gas is different from sour nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... each of such places. It was submitted that this section has to be interpreted in the light of the provisions of section 23 of the Sale of Goods Act. The PSC read with ISPA as well as the subsequent Gas Sales Contract clearly provide that what has to be delivered is sweetened gas. Irrespective of the fact whether sweetened gas and sour gas are different commodities or not under the Sales Tax Act and irrespective of the fact whether sweetening of gas is manufacturing or not, what is agreed to be sold is sweetened gas and consequently, the sale of such goods would be deemed to take place at the time of their appropriation to the contract of sale by the seller or the buyer. Such appropriation would be feasible only when the goods as agreed to be sold come into existence which is possible only after sweetening. The appropriation, therefore, takes place post sweetening. The appropriation of future goods would only take place when the goods are completed and ready for delivery. In view of section 4(2)(b) of the CST Act, the sale of gas is deemed to take place inside the State of Gujarat and consequently, such sales is liable to sales tax under the GST Act. 13.3 Elaborating upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ods Act which deal with relation between the buyer and seller only lay down the principles for determining when the title in property in goods passes. The CST Act on the other hand deals with the issue as to who can levy sales tax on a transaction of sale. Referring to sub-section (2) of section 4 of the CST Act, it was submitted that unlike the provisions of the Sale of Goods Act, for the purpose of section 4(2) of the CST Act, it is irrelevant where the title of the property in goods passes or has already passed or will pass. It was submitted that to illustrate, suppose specific goods such as a motorcar is situated in Ahmedabad. The owner of the motorcar agrees to sell his motorcar to the purchaser under a written contract signed by the owner vendor and the purchaser at Calcutta on 10th October, 2014 when the Car was at Ahmedabad. The terms of contract provide that the property in car will pass to the purchaser when the full payment is made. The payment will be made in installments within six months. The title in the property would pass on the last instalment being paid on 1st July, 2014. By then the car is stationed in Calcutta. So far as the Sale of Goods Act is concerned, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amil Nadu General Sales Tax Act or section 4(2) of the Central Sales Tax Act. For, these rules are special and overriding rules for fixing the taxable event as between the public exchequer, on the one hand, and the taxpayers, on the other. While the sales tax law takes up sales or purchases as taxable events, and to that extent, goes along with the general law governing such transactions, the legislature has not thereby lost the prerogative of bending the common law to the service of the revenue. The legislature has laid down in the sales tax statutes clear-cut principles of determining the situs of sales and purchase in order to bring about uniformity, certainty, economy in collection, and efficiency in tax management, all of which are desiderata in all fiscal measures. These provisions, if they should serve their purpose at all, must, in reason, override any special terms in private contracts to the contrary. Reliance was also placed upon the decision of the Supreme Court in the case of Madras Marine and Co. v. State of Madras, (1986) 3 SCC 552 . 13.6 Dealing with the contention raised by the petitioners that the sale of goods took place outside the State of Gujarat, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; (b) goods which are to become, or may become, the property of the seller, whether by purchase, gift, succession, occupation or otherwise; (c) goods expected to come into existence as the property of the seller in the ordinary course of nature, e.g. the young to be borne of his livestock, or the milk to be produced by his cows; (d) things attached to or forming part of land (whether belonging to the seller or another) which are to be severed in the future, e.g. minerals to be won, timber to be cut, fixtures to be detached; and (e) crops in the category fructus industriales to be grown by the seller in future. 13.7 Dealing with the submission made on behalf of the petitioners relying on the definition of Deliverability that since all that gas that falls within the deliverability must be sold on daily basis to the Government of India or its nominee under Article 21.5.13(b), the goods are specific or ascertained goods, it was submitted that the same completely ignores the definition of future goods given under the Sale of Goods Act or in common law. It was submitted that the goods which are yet to be produced or extracted can never be specific goods or ascertained goods. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re necessary namely, (i) where were the future goods situated at the time of their appropriation to the contract of sale; and (2) whether both the parties assented to such appropriation. It was submitted that irrespective of where the title passes and where the risk passes, GAIL was not bound to accept under the contract, sour gas. The assent which GAIL had given or for that matter, GAIL s principal Union of India had given was for sweetened gas. There is no scope, therefore, of appropriation with assent of the parties till the gas is sweetened. It is in these circumstances that the goods were situated factually in the State of Gujarat on the date of its appropriation, which necessarily would take place post sweetening, at Hazira in Gujarat and, therefore, the sale is deemed to have taken place within the State of Gujarat. In support of such contention, the learned counsel placed reliance upon the following decisions:- (1) Wilkinds v. Bromhed and Hutton, (1844) 6 M G 963 134 ER 1182-1189 (2) Atkinson v. Bell, (1828) 8 B C 277 108 ER 1046-1049 (3) Mucklow v. Mangles, (1808) 1 Taunt 318 127 ER 856 (4) Bellamy v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the goods as specific goods to be delivered under the contract of sale and does not signify an appropriation carrying with it the idea of passing of property. 13.11 Mr. Thakore further submitted that insofar as the decision of the Delhi High Court in the case of K.G. Khosla v. Chief Commissioner, Union Territory of Delhi (supra) is concerned, the said judgment while being primarily concerned with section 3 of the CST Act also interprets section 4(2)(b) of the said Act. Referring to the following passage of the judgment, it was submitted that it is evident that the provisions of the contract regarding passing of risks or property are completely irrelevant for determining situs of sale and the question of appropriation has to be decided irrespective of passing of property:- It is to be borne in mind that the term appropriation may be used in two senses. It may either mean simply the identification of the goods by agreement of parties as the goods to which the contract of sale relates or it may mean the passing of the property in the goods from the seller to the buyer by such means as delivery to the carrier etc. The scheme of the Act shows that the element of passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained goods which could have no bearing on the interpretation of section 4(2)(a) and 4(2)(b) of the CST Act. 13.12 Dealing with the alternative submission that the sale in question is a sale in the course of import into the territory of India, it was submitted that such submission is based on the proposition that since the CST Act is not extended under section 7 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 to the designated area under the notification, the gas which comes to the mainland, has to be considered to be imported into the territory of India. It was submitted that the CST Act does not define the term import nor is the said term defined in the General Clauses Act. Reference was made to section 2(ab) of the CST Act which defines crossing the customs frontiers of India to mean crossing in the limits of the area of the customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities and the Explanation thereto says that for the purposes of that clause, customs station and customs authorities shall have the same meanings as in the Customs Act, 1962. Referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale can fall in only one of the three categories, in the present case, the Court must hold that it is either inter-State sale or a local sale since the contention that it was an export sale has not been pressed. It was submitted that the only issue arising in Larsen Toubro (supra) is whether the sale was in the course of inter- State sale in which context, the Gujarat High Court has observed that the Bombay High does not form part of any State of the Union of India and, therefore, movement of goods does not get covered within the expression from one State to another as contained in section 3 of the CST Act. It was submitted that the decisions of the Supreme Court in the case of K.G. Khosla v. Deputy Commissioner, Commercial Taxes, Indian Tourist Development Corporation v. Assistant Commissioner , State of Maharashtra v. Embee Corporation, Indure Ltd. v. CTO, State of Travancore, Cochin v. Bombay Company (supra) are of no relevance as there is no import of gas in its movement from Panna-Mukta to Hazira. 13.13 Dealing with the contention that the contract was for the sale and purchase of all the natural gas discovered and produced in the contract area as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2004 filed on behalf of the respondent. The attention of the court was invited to the averments made in paragraph A(iii) of the petition to submit that insofar as the interpretation of the Production Sharing Contract and the Interim Gas Sales and Purchase Agreement is concerned, the stand of the Union of India is that in the facts and circumstances of the present case, the delivery point is on-shore at Hazira and the contention of the petitioner that the delivery point is off-shore at the Panna- Mukta oil fields is denied. It was submitted that is further the case of Union of India that the two PSCs executed between the constituents of the contractor and the Union of India and the Interim Gas Sales and Purchase Agreement executed between the contractor and the respondent No.7 GAIL, as also the fact that the gas produced at Panna-Mukta oil fields is incapable of being consumed till it is subjected to a sweetening process onshore at Hazira and the quantity of gas becomes unascertainable at Hazira, the delivery point is on-shore at Hazira and the liability of sales tax, if any, has to be determined on the above basis. 15. In rejoinder, Mr. P. Chidambaram, learned counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclusive Economic Zone are deemed to be a part of India for the purpose of such enactments which are extended to those areas. 15.1 Mr. Chidambaram further submitted that the judgment that would be of relevance to the present case is the judgment of this court in Larsen Toubro v. Union of India (supra) wherein the court correctly noticed that the CST Act has not been extended by notification to the Continental Shelf or the Exclusive Economic Zone. It was submitted that since the CST Act has not been extended to the area where the gas wells, Offshore Platform and the delivery point are located, the CST Act must be read and applied as it stands without the deeming fiction that any extended area is part of the territory of India. Similarly, since the GST Act has not been extended to the areas in question, no tax can be levied or demanded under the GST Act. It was submitted that, therefore, the gas wells, Offshore Platform and delivery point being located outside the territory of India, any movement of goods from a place outside the territory of India to a place within the territory of India will indeed be a movement in the course of import of goods into the territory of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Corporation through Hotel Ashoka v. Assistant Commissioner of Commercial Taxes (supra). 15.3 It was further submitted that at the bar, counsel for the respondents have made a number of statements and assertions that are not supported by pleadings or documents which are inter alia as under:- Customs frontiers have been extended to the exclusive economic zone. The words export/import are not defined in the CST Act. Hence, for the purpose of sale in the course of import under section 5(2) of the CST Act, exclusive economic zone is a part of the territory of India. The PSC is not a contract of sale. The parties to the PSC, by their conduct, have agreed to replace the PSC with ISPA. The word delivered used in paragraph 3 of ISPA should be read as Delivery Point . The PSC is a contract for the sale of sweetened gas. GAIL can refuse to take the Gas if it is not according to specifications required by it. Hence, the Gas has to be put into a deliverable state . The petitioner lacks bona fides because it has not produced the ISPA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase takes place- (a) in the course of inter-State trade or commerce, or (b) outside the State, or (c) in the course of import of the goods into the territory of India or export of goods out of such territory, shall be determined in accordance with the principles specified in section 3, 4 and 5 of the Central Sales Tax Act, 1956. 18. On a plain reading of section 87 of the GST Act, it is clear that the same provides that it is not permissible for the State to impose any tax on sale or purchase of goods in three eventualities. Firstly, if such sale is in the course of inter-State trade or commerce; secondly, if such sale has taken place outside the State; and thirdly, if such sale has taken place in the course of import of goods into the territory of India or export of goods out of such territory. As to whether such sale has taken place in any of the above eventualities, has to be determined in accordance with the principles specified in section 3, 4 and 5 of the CST Act. 19. For the purpose of ascertaining as to whether a sale has taken place in the course of inter-State trade or commerce, one has to refer to the principles specified in section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shall be deemed to have taken place outside all States. Therefore, for the purpose of determining whether the sale of goods in the instant case has taken place within the State of Gujarat, it would be necessary to examine the facts of the case in the light of sub-section (2) of section 4 of the Act. 21. In essence and substance, what has to be seen under sub-section (2) of section 4 of the CST Act is the situs of the goods, in the case of ascertained goods, at the time of the contract of sale and in the case of unascertained or future goods, at the time of their appropriation to the contract of sale. 22. On behalf of the petitioners, it has been contended that the goods in question were ascertained goods at the time of the contract of sale. According to the petitioners, the goods were always specific or ascertained goods because the volume of Gas to be produced, sold and delivered is captured in the word Deliverability as defined in Article 21.5.13(a)(iii). All gas that falls within Deliverability must be sold on a daily basis to the Government of India or its nominee under Article 21.5.13(b) and that the goods were outside the State of Gujarat at the time when the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch unascertained goods is sold or purchased. In the instant case, the Company was permitted to remove bamboos from certain areas in Yellapur Forest Division. Under the agreement, the Company had a standing licence to enter into specified forest area to cut and severe bamboos which it wanted to appropriate towards the contract. The Company s servants had to go around the specified areas in the forest, select the bamboos for its use, extract and appropriate the same towards the agreement. In other words, unless and until the Company chooses to severe and separate the bamboos standing on the forest land, the goods are not ascertained. When the Company actually cuts and extricates the bamboos, the goods being ascertained and also being in deliverable state, the property in goods passes to the Company. 14. ... ... It will be seen from Clause-8 that the bamboos extracted would remain at the sole risk of the Company and the company had to make its own arrangement for preserving or protecting the same from accidental fire. Even if the extracted bamboos were destroyed by fire, the Company would still be liable to pay the price and the sales tax in addition to fine that may be impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court held thus:- 4. But the true nature of the transaction appears to me to be a sale of future unascertained goods. Reference may now be made to some of the provisions of the Indian Sale of Goods Act. Under Section 2(6), future goods means goods to be manufactured or produced or acquired by the seller after the making of the contract of sale. Under Section 6(1), the goods which form the subject of a contact of sale may be either existing goods, owned or possessed by the seller, or future goods. Under Section 6(2) there may be a contract for the sale of goods the acquisition of which by the seller depends upon a contingency which may or may not happen. Section 6(3) lays down that where by a contract of sale, the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods. As per Section 23, in the case of a sale of unascertained or future goods, the property in the goods passes to the buyer only when the goods are in a deliverable state and are unconditionally appropriated to the contract either by the seller with the consent of the buyer or by the buyer with the consent of the seller. Under Section 26, the goods remain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government exercises its option to purchase the Excess ANG and NANG, that resort would be required to be made to clause 21.5.13 of the PSC, which contains the clause about 100% deliverability. Therefore, at the time when the PSC was executed, not only were the goods, future goods, it was not certain whether the Government would purchase all the Excess ANG and NANG. Under the circumstances, the goods in question, viz. Natural Gas, cannot be said to be ascertained goods at the time when the contract was made, as claimed by the petitioners. Clause (a) of subsection (2) of section 4 of the CST Act, therefore, would not be attracted. Having regard to the factual position as narrated hereinabove, it is not necessary to enter into any discussion in respect of the principles enunciated in the above decisions and their applicability or otherwise to the facts of the present case. 25. The next question that arises for consideration is as to whether the goods in question were within the State of Gujarat at the time of their appropriation to the contract of sale by the seller or by the buyer, whether the assent of the other party was prior or subsequent to such appropriation, so as to fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable event to the exclusion of the latter. Therefore where the Explanation applies the difficulty about the situs is resolved but in a case like the present one the difficulty still remains because the Explanation does not operate in the sense that the rival States claiming to tax the same taxable event are not the States of delivery for consumption in that State and those where the title in the goods passes. In somewhat similar circumstances this court in Indian Copper Corporation Ltd. v. State of Bihar, (1961) 2 SCR 276 held by a majority decision that the opening words of Article 286(1) which speak of a sale or purchase taking place and the nonobstante clause in the Explanation which refers to the general law relating to the sale of goods, indicated that it was the passing of property within the State that was intended to be fastened on, for the purpose of determining, whether the sale in question was inside or outside the State and therefore subject to the operation of the Explanation , the State in which property passed would be the only State which would have the power to levy a tax on the sale. At p. 286 it was observed: The conclusion reached therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adu (supra), the Madras High Court held that the special term in the contract cannot bind the fiscal statute or bind the tax department, whatever may be its binding force or merit as between the parties, as a term in the contract. The rules laid down by sections 20 to 24 of the Sale of Goods Act, 1930 for ascertaining when the property in goods passes in a given transaction are to be applied only in cases where the intention of the parties cannot be clearly spelt out from the terms of their bargain. Under the Sale of Goods Act, therefore, the parties intention, if clearly expressed, will always prevail over the statute, for the very purpose of that Act is to regulate the inter se relationship between the sellers and the purchasers of the goods. Not so the rules laid down in explanation 3 to section 2(n) of the Tamil Nadu General Sales Tax Act, 1949 or section 4(2) of the Central Sales tax Act. For, these rules are special and overriding rules for fixing the taxable event, as between the public exchequer, on the one hand and the taxpayers, on the other. While the sales tax law taxes up sales or purchases as taxable events, and to that extent, goes along with the general law gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such appropriation. There was an appropriation on the one side, and an assent to such appropriation on the other; which, I think, was quite sufficient to pass the property to the plaintiff. It may be, that the original contract did not pass the property; but the parties may be said to have entered into a new contract. I cannot conceive why, under the circumstances of this case, the property in an article made to order should not pass upon its completion, as it would have done if it had been in existence at the time of the original contract. The objections raised upon this point were mainly founded upon Atkinson v. Bell (8 B. C. 277, 2 Mann. Ryl. 292). But, if that case be examined, it will be found not to apply. The decision there turned entirely on the absence of assent on the part of the purchases to the appropriation of the machines by the vendor. It is said, by Bayley J., These were Sleddon's goods, although they were intended for the defendants, and he had written to tell them so. If they had expressed their assent, then this case would have been within Rohde v. Thwaites (6 B. C. 388, 9 Dowl. Ryl. 293), and there would have been a complete appropriation, vesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also fails. Consequently, the rule must be discharged. ERSKINE J. I also think that this rule should be discharged. With respect to the first point, I am of opinion, on the authority of the cases relied upon for the defendants, that the property in this greenhouse passed to the plaintiff. It is conceded, on all hands, that the rule laid down in Mucklow v. Mangles (1 Taunt, 318. Vide post, 979 (a), is the correct one, viz. that, while the article remains unfinished, no property in it passes, notwithstanding the vendor may intend it for the purchaser, or may put his name upon it, or otherwise show an intention to appropriate it, and that a payment of money on account makes no difference. Here, however, the greenhouse was completed, and after it was so completed the makers appropriated it to the purchaser. The latter, before paying for it, might have required to see it; but, instead of doing so, he transmitted the price. But that is not all; he also requested the bankrupts to keep the greenhouse for him, thereby assenting to the appropriation which they had made. When the latter deposited it with Wait, they gave notice that it was the plaintiff's property, and requested Wait ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtaining the price. There is no such requirement in this case. On the contrary, there are in the rules of the Bristol Channel West of England Corn Trade Association, which are made part of this contract, somewhat elaborate provisions such as those in Rules 16, 17 and 18, for there being an excess or a deficiency in the quantity delivered. It seems to me that ascertainment might take place by any method which is satisfactory to the parties concerned. If the Dock Committee and the bank of Messrs Redlers chose to deal with this matter by measurement instead of by weight there would be nothing to prevent them. 26.6 In K.G. Khosla v. Chief Commissioner, Union Territory of India (supra) the Delhi High Court was of the view that the term appropriation may be used in two senses. It may either mean simply the identification of the goods by an agreement of parties as the goods to which the contract of sale relates or it may mean the passing of the property in the goods from the seller to the buyer by such means as delivery to the carrier, etc. The court observed that the scheme of the Act shows that the element of passing of property is not of relevance in determining the situs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart of goods as specific goods to be delivered under the contract of sale and not an appropriation linked with passing of property. The court held that the term unconditional appropriation existed in the Sale of Goods Act, years before the enactment of the Central Sales Tax Act, and if the Parliament intended to convey the same idea, the Parliament would not have omitted the word unconditionally in section 4(2)(b). 26.8 In Re Goldcorp Exchange Ltd (in receivership) , (1994) 2 All ER 806 , the Privy Council held thus:- It is common ground that the contracts in question were for the sale of unascertained goods. For present purposes, two species of unascertained goods may be distinguished. First, there are 'generic goods'. These are sold on terms which preserve the seller's freedom to decide for himself how and from what source he will obtain goods answering the contractual description. Secondly, there are 'goods sold ex-bulk'. By this expression their Lordships denote goods which are by express stipulation to be supplied from a fixed and a predetermined source, from within which the seller may make his own choice (unless the contract requires it to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporated both in the Sale of Goods Act and in the Indian Statute with which we are concerned. These rules have been stated by Blackburn, J, to be as follows (Contract of Sale, third edition, 1910, p. 184): They are two fold : the first is that where, by the agreement, the seller is to do anything to the goods for the purpose of putting them into that state in which the buyer is to be bound to accept them, or, as it is sometimes worded, into a deliverable state, the performance of those things shall (in the absence of circumstances indicating a contrary intention) be taken to be a condition precedent to the vesting of the property. The second is, that where anything remains to be done to the goods for the purpose of ascertaining the price, as by weighing, measuring, or testing the goods where the price is to depend on the quantify or quality of the goods; the performance of these things, also shall be a condition precedent to the transfer of the property, although the individual goods be ascertained, and they are in the state in which they ought to be accepted. In Simmons v. Swift (5) (at p. 862) the rule has been enunciated as follows: Generally speaking, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not pass in law to the holders of the pucca delivery orders till the goods are actually appropriated to the particular order; therefore, as in that case it was not in dispute that no goods were actually appropriated towards the pucca delivery orders concerned, the property in the goods did not pass to the holders thereof but was still in the mills. Reliance in this connection was placed on Section 18 of the Indian Sale of Goods Act, 3 of 1930. That section lays down that where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. The Supreme Court held that in the said case, it was not in dispute that the goods covered by the pucca delivery orders were not ascertained at the time such orders were issued and ascertainment would take place in the shape of appropriation when the goods were actually delivered in compliance therewith. Therefore, till appropriation takes place and goods were actually delivered, they are not ascertained. The contract therefore represented by the pucca delivery orders was a contract for the sale of unascertained goods and no property in the goods was trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act; and the third category is the decisions as regards how the contracts are required to be construed. 28. The principles enunciated in the above decisions can be briefly culled out thus: CATEGORY I (i) Under the Sale of Goods Act, the parties intention, if clearly expressed, will always prevail over the statute, for the very purpose of that Act is to regulate the inter se relationship between the sellers and the purchasers of the goods. Not so the rules laid down in the relevant State Sales Tax Act or section 4(2) of the Central Sales tax Act. For, these rules are special and overriding rules for fixing the taxable event, as between the public exchequer, on the one hand and the taxpayers, on the other. In all the Sales Tax Acts, passing of property is not regarded as a nexus but the locale of the goods within the State either at the time of the contract of sale or later at the time of appropriation. (ii) The scheme of the Sales Tax Act shows that the element of passing of property is not of relevance in determining the situs of the sale. The question of appropriation of goods has to be decided, therefore, irrespective of passing of the property. In other words, app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to determine the ultimate purpose of a contract primarily by the joint intent of the parties at the time the contract so formed. It is not the intent of a single party; it is the joint intent of both parties and the joint intent of the parties is to be discovered from the entirety of the contract and the circumstances surrounding its formation. (ii) If the transaction is contained in more than one document between the same parties, they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document. (iii) Where several deeds form a part of a transaction and are contemporaneously executed, they have the same effect for all purposes such as are relevant to that case as if they were one deed. 29. The vexed question that arises is as regards the situs of the goods at the time of appropriation to the contract. The sale of natural gas to GAIL is governed by two contracts, firstly the Production Sharing Contract between the Government of India and the Contractor, viz. ONGCL, RIL and BGEPIL and the Interim Sales Purchase Agreement (ISPA) between the Contractor and GAIL. For the purpose of deciding the situs of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government or its nominee in accordance with the terms of the contract. 21.4.4 If the Government exercises its option to purchase the Excess ANG as provided in Article 21.4.3: (a) The Government shall indicate in the notice exercising the option, a date, within two (2) years of the date of the Contractor s offer, for commencement of purchase of the Excess ANG.; (b) within six (6) months of the date of notification of the exercise of the Government s option pursuant to Article 21.4.3., the Contractor and the Government (or its nominee) shall agree on the terms of the sale to the Government (or its nominee) of Excess ANG . Therefore, by virtue of clause (b) of Article 21.4.4, the terms of sale are to be agreed after the Government (or its nominee) exercises its option to purchase the Excess ANG. If the Government does not exercise its option, the contractor is free to explore markets for commercial exploitation of Excess ANG. If the excess ANG cannot be commercially exploited or the Contractor is not able to find a market, the Government is entitled to take and utilize such Excess ANG. If the Government elects to take the Excess ANG, the Contractor is required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elivered therewith, provided, however, that Seller, at the Sellers s sole discretion, subject to generally accepted operator practices in the international petroleum industry, may adjust deliveries to provide for necessary maintenance, service and testing. Buyer may request that Seller vary deliveries to accommodate similar circumstances in the Buyer s operation and Seller s approval shall not be unreasonably withheld. Communications procedures shall be mutually agreed in the Gas sales contract in accordance with internationally accepted industry standards. 32.5 Thus, by virtue of clause (b) of Article 21.5.13 the parties, viz. the Government of India and the Contractor have agreed that the Seller shall produce and deliver, on a daily basis 100% of the Deliverability of ANG and NANG and Condensate to the Buyer at the Delivery Point. The Buyer, namely the Government of India and its nominee has agreed to take and purchase, on a daily basis 100% of the Deliverability of ANG and NANG and Condensate, provided the Seller makes available the Gas and Condensate and tenders the same for delivery. On a plain reading of the above clause, the Seller has to produce and deliver 100% of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on all the Parties. 32.9 Article 34.2 of the PSC provides that this Contract shall not be amended, modified, varied or supplemented in any respect except by an instrument in writing signed by all the Parties, which shall state the date upon which the amendment or modification shall become effective. Thus, the PSC can be amended, modified or varied only by an instrument in writing by the parties to the PSC. 33. At the outset, it may be apposite to note that reference to GAIL in Clause (e) of Article 21.5.13 of the PSC is not in its capacity as a nominee of the Government of India, inasmuch as, at the stage when the PSC came to be executed, GAIL was not named as a nominee of the Government of India. What the clause provides is that the parties acknowledge that Gas is to be received by GAIL at Hazira downstream of ONGC s sweetening and separation facility. It may also be pertinent to note that the expression used is acknowledge and not agree and Gas is to be received by GAIL and not delivered to it. Though the term received may be synonymous with the term delivered , in the context in which the expression received is used, there is a clear distinction between the two, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sweetening process at Hazira. Under Article 21.5.13(b), the JV has to sell 100% of its gas deliverability to GAIL who is nominee of the Government of India. When the gas is handed over to the carrier, ONGCL for the purpose of transmission to the buyer, the JV does not reserve the right of disposal as the gas is fully appropriated for the sale to GAIL. In paragraph 14 of the said letter, it is stated that the sale of natural gas at Panna-Mukta oil/gas fields was as per agreement, and the goods were ascertained on and when measured at the offshore platform s measuring unit called LACT (Lease Automated Custody Transfer Point). It was further the case of the petitioner that the contract is for sale of Natural Gas, its sweetening when the sale has taken place outside India is of no consequence. The sweetening process means the removal of some sediment or some non-hydrocarbons (sulphur) which does not change the character of gas. Sweetening is done by ONGC and it is by way of operational reasons, business expediency and goodwill that they bear the cost thereof. This in no way affects the relevant fact of the matter, which is that it is only the natural gas, which is sold in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipeline at which point the title of the goods also passes to the Government or its nominee. Thus, the contract envisages delivery of goods as well as passing of title to the goods at the Delivery Point. Having regard to the nature of goods which cannot be delivered like ordinary goods, delivery of Natural Gas to GAIL is by injecting the Gas into the pipeline of the carrier ONGC, which then emerges at ONGC s separation and sweetening facility at Hazira, where it is received by GAIL which has its pipeline at that point. As noticed earlier, reference to GAIL in the PSC is not as the nominee of the Government but as a recipient of the Gas which is injected into ONGC s pipeline. The expression deliver and receive may be synonymous as contended by Mr. Shelat for the respondent State Government. However, there is a distinction between the two expressions insofar as delivery and receipt of Gas is concerned, inasmuch as, the Gas which is delivered at one point is by the very nature of things received at another point. 36. According to the respondents, appropriation does not take place at the Delivery Point mentioned in Article 21.5.13 (a)(iv), because at that stage the goods, viz. Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the general provisions of the PSC. 37. In the aforesaid backdrop, what arises for determination is as to what were the goods that the parties had agreed to buy and sell and where were the goods required to be delivered. In this regard on reading the PSC as well as the ISPA in their entirety, it can be seen that there is no reference to sweetened gas or for that matter sour gas in either of the two agreements. Reference is made to the goods as Natural Gas, ANG and NANG and Condensate. The contention that what was agreed upon was sweetened gas is based upon the fact that in the PSC, the parties have acknowledged that GAIL would receive the Gas at the downstream of ONGC s Separation and Sweetening facilities and in clause 3 of ISPA, it is provided that the Buyer shall pay to the Sellers at the rate of 90% of gas price specified in Article 21.5.13(d) of the PSC for the net MMBtu of gas delivered at the downstream of ONGC processing facility at Hazira (on account basis as directed by the Ministry of Petroleum and Natural Gas). The payment shall be made by the Buyer within thirty days after receipt of each monthly invoice from sellers to be raised on the basis of quantity of gas de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to Purchase and Sell: Sellers agree to sell, and the Buyer agrees to purchase natural gas from Sellers for the period and upon the terms set forth herein. 2. Term: This Agreement shall be and remain in effect until 1st June 1998, unless mutually extended in writing by all parties to the Agreement. 3. Price: The Buyer shall pay to Seller at the rate of 90% of Gas price specified in Article 21.5.13(d) of the PSC for the net MMBtu of gas delivered at the downstream of ONGC processing facility at Hazira (on account basis as directed by the Ministry to Petroleum and Gas). The payment shall be made by the Buyer within thirty days after receipt of each monthly invoice from Sellers to be raised on the basis of quantity of gas delivered to the buyer at downstream of separation and sweetening facilities owned and operated by ONGC as certified by ONGC. 4. Sales Tax: The Buyer shall pay any and all sales tax payable on the sale of gas, in addition to the price of gas. 5. Good Faith Negotiations: xxxx 6. Law and Resolution of Disputes: xxx 7. Neither the signing of the agreement or any action taken with regard hereto shall (i) create a precedent with respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract unless the same is delivered as sweetened gas. It may be noted at this stage that, the Supreme Court in Reliance Natural Resources Limited v. Reliance Industries Limited (supra) was dealing with a different question, however, the same involved a Product Sharing Contract which had been entered into between the Government of India and the contractor and a contract of supply of gas between RIL and RNRL. The court observed that the PSC overrides any other contract which may be entered into for the supply of gas. A perusal of the clauses contained in Article 21.5.13 of the PSC shows that under clause (b) thereof, the Seller has agreed to produce and deliver on a daily basis to the Buyer 100% of the Deliverability of ANG and NANG and Condensate at the Delivery Point, and the Buyer has agreed to take and purchase, on a daily basis, 100% of the Deliverability of ANG and NANG and Condensate so delivered. Thus, under the PSC the parties have agreed that 100% Deliverability of ANG and NANG and Condensate has to be produced and delivered by the Seller at the Delivery Point and correspondingly, the Buyer shall take and purchase the ANG and NANG and Condensate so delivered. Buyer under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have agreed anything to the contrary. On a plain reading of the ISPA, the relevant part whereof has been reproduced hereinabove, it is abundantly clear that the same does not provide for any delivery point, nor is there even a whisper about sweetened gas. The entire fulcrum of the respondents case hinges upon the price clause as contained in the ISPA for contending that the delivery point is downstream of ONGC s sweetening and separation facilities at Hazira and that, therefore, what GAIL had agreed to purchase was sweetened gas. In the opinion of this court, clause 3 of the ISPA is merely a price clause and just because it provides for payment of the price based on the net MMBtu of gas delivered at downstream of ONGC processing facility at Hazira and the invoice is to be raised on the basis of quantity of gas delivered to the buyer at downstream and sweetening facilities owned and operated by ONGC at Hazira, it cannot be so construed as to override the specific provisions of the PSC which provide for delivery of the Natural Gas at the Delivery Point. Much emphasis is also laid on clause (e) of Article 21.5.13 of the PSC whereby the parties have acknowledged that Gas is to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State of Gujarat, it cannot be said that the sale of goods has taken place within the State of Gujarat merely because, post appropriation, the goods are subjected to some process within the State of Gujarat. 43. In other words, the parties agreed to sell and purchase Natural Gas and there is no express or implied agreement to purchase sweetened Gas. The Natural Gas, which is in the nature of ascertained goods, is appropriated to the contract when it is separated and measured at the Offshore Processing Facility and is thereafter delivered at the Delivery Point, viz. the Offshore T-Junction and the title to the goods also passes there. Thus, appropriation, delivery and passing of title of the goods all take place Offshore, outside the State of Gujarat. Indubitably, under the Sales Tax Act, it is the situs of the goods at the time of their appropriation to the contract which is relevant and not the passing of property, nonetheless, in the present case apart from the fact that the goods were appropriated to the contract at the Offshore Processing Facility and delivered at the Delivery Point, viz. the Offshore T-Junction, the title to the goods also passed to the Buyer at the Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NGC s sweetening and separating facility at Hazira would not detract from the fact that the gas was appropriated to the contract at the offshore Processing Facility and delivered at the delivery point as envisaged in Article 21.5.13(a)(iv) of the PSC. 45. This court is of the view that merely because the sellers have decided to charge on the basis of what is ultimately received by the Buyer cannot be determinative of the fact as to where the sale takes place. The price clause contained in the ISPA is only a mechanism by which the parties have decided the price of the goods and the same cannot decide the situs of the sale. Moreover, the ISPA cannot be relegated to the status of an agreement modifying the PSC or superseding the PSC to the extent of Delivery Point, inasmuch as, the ISPA is in continuation and not in derogation of the PSC. Besides, in terms of Article 34.2 of the PSC, the contract cannot be amended, modified, varied or supplemented in any respect except by an instrument in writing signed by all the parties, which shall state the date upon which the amendment or modification shall become effective. Therefore, if at all any term of the PSC is to be amended, modified o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f commingling of gas or the title of the gas being transferred at the delivery point itself, the petitioner shall not be answerable to any alleged post sale processing of gas. It was contended on behalf of the State that transportation of gas in common pipeline belongs to different buyers, hence, it becomes unascertained goods and as such, the sale shall be deemed to take place at Orai in the State of U.P. and not in Gadimoga of Andhra Pradesh. It was further submitted that the gas of different buyers gets mixed with each other, becomes unascertained goods and hence, it cannot be an incidence of inter-state sale. The gas while moving in the common pipeline is in co-mingled form, hence it is not known as to which portion of gas belongs to whom and thus, it becomes ascertained goods only at Orai at the delivery point where appropriation takes place. The court observed that if the above argument advanced by the learned counsel for the State of U.P. was to be accepted, then the seller or buyer of natural gas, who does not possess his own pipeline, shall be prevented from transporting his gas and everyone would have to install his own pipeline which is neither feasible nor practical. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case before it, held that the situs of sale shall be at Gadimoga where the property of goods passes to the buyer s realm. The court held that in terms of the GSPA and GTA, the lean gas passes to the buyer in terms of GSPA and sale consideration at Gadimoga and not at Orai in the State of U.P. Hence, the situs of sale shall be Gadimoga and not Orai in the State of U.P. The court further observed that though the Sale of Goods Act regulates the contractual obligations but when the question relates to inter-State sale, then primacy should be given to the construction of different provisions of the Central Sales Tax Act and not the Sale of Goods Act. CST Act is a special enactment to regulate the inter- State sale whereas the Sale of Goods Act is the general law. On the question as to whether the Natural Gas supplied to shipper (buyer) was unascertained, the court observed that in view of the nature and definition of gas, whenever Lean or Natural Gas is transported through a container or pipeline, it shall occupy the whole of its space irrespective of its quantity. Accordingly, supply of natural gas to two or more buyers or shippers shall always be in commingled form. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the buyer s territory and that the buyer (not the seller) is importing gas, which may be important to either or both parties for tax reasons. That risk remains with the seller up to the delivery point, rather than also transferring at the border point, is a commercial point for the benefit of the buyer but it could jeopardise the intended operation of the earlier title transfer. In the light of the above international practice with regard to delivery point, the court held that Gadimoga shall be the delivery point not only in terms of GSPA but in terms of international practice and all rights and liabilities and risk shall be transferred to the shipper at Gadimoga. The court, accordingly, held that keeping in view the recent technological development in the measurement of gas and its supply, the Natural Gas supplied to buyers at Gadimoga may not be termed as unascertained goods. The court referred to various decisions wherein the controversy with regard to fungible goods and co-mingling of gas was subject matter of consideration. Reference was made to Complete Auto Transit v. Brady, (1977) 430 US 274, wherein it was held that as a general rule, where fungible goods bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip of the Canadian natural gas during its transit through the U.S. and the commingling of Canadian and American gas on the American part of the pipeline are not relevant to determine the purpose of the delivery from one place in Canada to another place in Canada. These facts form an intrinsic part of the economic reality of transporting natural gas via pipeline through the United States. This economic reality was very much in the mind of the drafter of the legislation and found its way in the terms used by Parliament. 47. From the submissions made on behalf of the petitioners as well as the averments made in the memorandum of petition and the documents annexed therewith as well as from the above referred decision of the Allahabad High Court, it is apparent that due to its unique physical properties, large volumes of Natural Gas can only be transported in a continuous stream. Once delivered into a pipeline for transportation, it becomes co-mingled with other natural gas. Individual molecules are not separately identifiable and cannot be accurately tracked or traced. As a result, natural gas is sold and purchased on a quality and quantity basis , and treated as a fungible good ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Aban Lloyd Chiles Offshore Limited and Another v. Union of India (supra), the decision of the Bombay High Court in the case of Pride Foramer v. Union of India (supra), the decision of the Bombay High Court in the case of Commissioner of Sales Tax, Maharashtra State, Mumbai v. Pure Helium (India) Limited (supra) and the decision of a Division Bench of this court in the case of Larsen Toubro Limited v. Union of India (supra). For the purpose of appreciating the controversy in issue, it may be germane to refer to the above decisions. 49.1 In Pride Foramer v. Union of India (supra), the Bombay High Court was considering a case where the levy of customs duty on goods imported by the petitioner for being transhipped for their use as spares and stores at the Oil Rig which carried on operation in designated areas of the country as defined under the Act with the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 had been called in question. The petitioner company was importing goods including stores, spares, consumables and other articles required for use on the Oil Rig. As such imported goods/stores could not la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequently the Oil Rigs, proceeding to such areas or operating therein are not foreign going vessels under section 2(21) of the Customs Act and, therefore, the petitioner was not entitled to the benefit of section 53 read with section 54 and/or of section 86 read with section 87 of the Customs Act. 49.2 In Aban Lloyd Chiles Offshore Limited v. Union of India (supra), the issue which had fallen for consideration by the Supreme Court was whether the oil rigs engaged in operations in the exclusive economic zone/continental shelf of India, falling outside the territorial waters of India are foreign going vessels as defined by section 2(21) of the Customs Act, 1962, and are entitled to consume imported stores thereon without payment of customs duty in terms of section 87 of the Customs Act, 1962? The court affirmed the view adopted by the Bombay High Court in Pride Foramer (supra) and held thus:- 73. A combined reading of Sections 3, 6 and 7 of the Maritime Zones Act, 1976 shows that territorial waters, the seabed and sub-soil underlying therein and the air space over such territorial waters form part of the territory of India. Sovereignty of India extends over the terr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of the territory of India for limited purposes. The natural consequence of such declarations and the extension of the Customs Act and the Customs Tariff Act to these designated areas is to introduce the customs regime to such areas resulting in the levy and collection of customs duties on goods imported into these areas as if these areas are a part of the territory of India. In these circumstances, the definition of India as given in Section 2(27) of the Customs Act gets extended by these provisions to cover areas declared as designated areas beyond the territorial waters and located the continental shelf and the exclusive economic zone of India. If one reads the Customs Act without reading the Maritime Zones Act, 1976, then the oil rig located in the notified areas/designated areas constitute place outside India . On the other hand, the very purpose of Sections 5, 6 and 7 of the Maritime Zones Act, 1976 is to declare an area of the contiguous zone/continental shelf/exclusive economic zone as a designated area so that exploration, exploitation and protection of resources belonging to India could be carried out. Under the said Act, the Central Government can create artificial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Act, 1962 stands extended to a designated area of the continental shelf, then the Act has to have effect as if the area of the continental shelf forms part of the territory of India. The deeming fiction is for that purpose. On behalf of the revenue, it was contended that the sale in the said case was an inter-State sale on the ground that the sale was occasioned by a movement of goods from one State to another. The court held that the continental shelf and the exclusive economic zone do not constitute a part of the territory of India. As a matter of fact, it was in recognition of this position that section 6(6) and section 7(7) of the Maritime Zones Act, 1976 empowered the Union Government to extend the provisions of any enactment in force in India to a designated area or to the continental shelf or the exclusive economic zone as if the territory to which it is extended is a part of the territory of India. The court held that the movement of goods from the State of Maharashtra to Mumbai High does not constitute a movement from one State to another State. Mumbai High does not form part of any State in the Union of India. It was, accordingly, held that the basis on which the revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extension of the customs frontier emanating as it does from the extension of the Customs Act, 1962 to the areas so designated. The court held that 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. 49.4 In Larsen Toubro Limited v. Union of India (supra), this High Court was considering a case where the authority of the respondents to demand and levy any sales tax under the CST Act with respect to the sale transactions between the petitioners and Oil and Natural Gas Corporation, which sales had taken place at Bombay High was subject matter of challenge. The court looked into the question as to whether Bombay High which is situated in the exclusive economic zone is part of the territory of India. The court observed that under section 3 of the CST Act, the sale and purchase of goods is deemed to take place in the course of inter-State trade or commerce if the sale and purchase occasions movement of goods from one State to another. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied and for that limited purpose Exclusive Economic Zone shall be deemed to be a part of the territory of India. It is not the same thing as to suggest that Exclusive Economic Zone becomes part of the territory of India. It is not even the case of the respondents that the Exclusive Economic Zone is part of the territory of India as provided in Article 1 of the Constitution of India. There is no claim of sovereignty over such an area, it is sovereign rights which are extended to such area by virtue of formation of Exclusive Economic Zone for the limited purposes envisaged under the statute. By virtue of clause (b) of sub-Section (7) of Section 7 of the Maritime Zones Act it becomes further clear that as and when Union of India issues notification extending any enactment over the Exclusive Economic Zone or part thereof such enactment extended is applicable as if the Exclusive Economic Zone or part thereof to which it has been extended is a part of the territory of India. 35. In view of the above discussion, it clearly emerges that when the sale of goods took place at Bombay High, for which the goods moved from Hazira to Bombay High, such movement does not get covered within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50. On behalf of the respondents, strong reliance had been placed upon the decision of the Bombay High Court in the case of Commissioner of Sales Tax v. Pure Helium (supra) for contending that once the customs frontier has been extended to a territory, there can be no import from such territory which falls within the customs frontier. The movement of goods from the Panna-Mukta oil fields, therefore, cannot be said to be in the course of import of goods into the territory of India, inasmuch as, Panna-Mukta oil fields also stand included within the designated area to which provisions of the Customs Act have been extended. On behalf of the petitioners, strong reliance is placed upon the decision of this court in the case of Larsen Toubro Limited v. Union of India (supra) for the purpose of contending that the court in the said case after considering the decision of the Supreme Court in the case of Aban Lloyd Chiles Offshore Limited (supra) has observed that in the said case on extending the Customs Act and Central Excise Act, by virtue of notifications, the Apex Court held that any movement of goods to such exclusive economic zone would not be an export and no expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the territory of India under the Central Government notifications issued pursuant to the provisions of the Maritime Zones Act, 1976. It was further held that the supply of imported spares or goods or equipments to the rigs by a ship will attract import duty and the ship employed for transhipment of goods for that purpose would not be a foreign going vessel under section 2(21) of the Customs Act. The Customs Act stands extended to the designated area by virtue of the Maritime Zones Act, 1976. The oil rig carrying on operations in the designated area is not a foreign going vessel as the same would be deemed to be a part of the Indian territory that is going from the territory of India to an area which is also deemed to be a part of the territory of India. The above decision of the Supreme Court was rendered in the context of the applicability of the provisions of the Customs Act to the designated area to which the provisions of the Customs Act had been extended by virtue of the notification issued by the Central Government. It is an admitted position that no notification has been issued by the Central Government extending the applicability of the provisions of the Central Sales Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 7 of the Maritime Zones Act, has declared the areas in the continental shelf or, as the case may be, in the exclusive economic zone of India where the installations, structures and platforms, the coordinates of which are given in the Schedule below the same, are situated and the areas extending up to five hundred metres from the said installations, structures and platforms as designated areas for the purposes of the said sections. As per Notification No. 11/87-CUSTOMS dated 14th January, 1987, issued in exercise of powers conferred by clause (a) of subsection (5) of section 6 of and clause (a) of sub-section (6) of section 7 of the Maritime Zones Act, the provisions of the Customs Act, 1962 were extended to the areas in the continental shelf and the exclusive economic zones of India. By Notification No.S.O.643(E) dated 19th September, 1996, the Central Government in exercise of powers conferred by clause (a) of sub-section (5) of section 6 of and clause (a) of subsection (6) of section 7 of the Maritime Zones Act, has declared the areas in the continental shelf or, as the case may be, in the exclusive economic zone of India where the installations, structures and platforms, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ones Act, 1976 empower the Central Government by notification to extend any enactment in force in India with such restrictions and modifications which it thinks fit to the continental shelf and the exclusive economic zone and further provides that an enactment so extended shall have effect as if the continental shelf or the exclusive economic zone to which the enactment has been extended is a part of the territory of India. Thus, sub-section (6) of Section 6 and sub-section (7) of Section 7 create a fiction by which the continental shelf and the exclusive economic zone are deemed to be a part of India for the purposes of such en - actments which are extended to those areas by the Central Government by issuing a notification. 75. In exercise of the powers vested in the Central Government under sub-section (6) of Section 6 and sub-section (7) of Section 7 of the Maritime Zones Act, 1976, the Government extended the Customs Act, 1962 and the Customs Tariff Act, 1976 to the designated areas of the continental shelf and the exclusive economic zone by notification published in the Official Gazette referred to and reproduced in paras 29 to 32. 85. Reading of Sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be leviable on such mineral oils. Likewise, the goods supplied from the mainland to a place in EEZ or continental shelf of India in connection with any activity related to mineral oil extraction or production shall not be treated as export under the Customs Act, 1962 and consequently, no export benefits can be availed of on such supplies. Another implication of the said notification is that bringing of any goods from any other country to any place in EEZ or continental shelf of India in connection with any activity related to extraction or production of mineral oils shall be treated as import under the Customs Act, 1962 and would be charged to duty accordingly. 97. The combined effect of these notifications is to extend the application of the Customs Act and the Customs Tariff Act to the aforesaid areas declared as designated areas under the Maritime Zones Act, 1976. The further effect of these 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 consequence of such declarations and the extension of the Customs Act and the Customs Tariff Act to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations dated 18th July, 1986 and 19th September, 1996 issued under clause (a) of subsection (5) of section 6 and clause (a) of sub-section (6) of section 7 of the Maritime Zones Act, the Central Government has declared certain areas in the continental shelf or, in the exclusive economic zone of India, where certain installations, structures and platforms of certain coordinates given in the Schedule are situated and the areas extending upto 500 metres from such installations, structures and platforms as designated areas for the purposes of sections 6 and 7 of the Maritime Zones Act, 1976. In view of the above notifications, the designated areas of the continental shelf and the exclusive economic zone become part of the territory of India for limited purposes and the definition of India as given in section 2(27) of the Customs Act gets extended to cover areas declared as designated areas beyond the territorial waters and located in the continental shelf and the exclusive economic zone of India. Undisputedly, the provisions of the Central Sales Tax Act have not been made applicable to the continental shelf and the exclusive economic zone and having regard to the fact that these ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sub-section (2) of section 5, which says that a sale or purchase of goods shall be deemed to take place in the course of import of 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. The expression crossing the customs frontiers of India has been defined under clause (ab) of section 2 of the CST Act to mean crossing in the limits of the area of a customs station in which the imported goods or export goods are ordinarily kept before clearance by customs authorities. The explanation says that for the purpose of this clause, customs station and customs authorities shall have the same meaning as in the Customs Act, 1962. Therefore, the import of sub-section (2) of section 5 of the CST Act would be that for the purpose of falling within the ambit of the expression import the goods have to cross the customs frontier so as to fall with the purview of the expression in the course of import into the territory of India . In the present case, the provisions of the Customs Act have been made applicable to the designate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question cannot be said to be in the course of inter-State trade. In Commissioner of Sales Tax v. Pure Helium (India) Limited (supra), the Bombay High Court was seized with the question as to whether the sale of goods to the vendee situated in the Mumbai High region can be said to be a sale in the course of export outside India as contemplated under section 5(1) of the CST Act. In the present case, the situation is converse namely, as to whether the sale of goods from the vendor situated at Panna-Mukta oil fields are sales in the course of import into the territory of India as contemplated by section 5(2) of the Central Sales Tax Act. This court is in respectful agreement with the view adopted in the above decision of the Bombay High Court whereby it is held that once the customs frontiers of India stand extended to the designated area, there can be no export of goods to a territory which falls within the customs frontiers. An export of goods involves movement of goods from within the customs frontier to a point beyond. Similarly, the import of goods involves a movement of goods from a point which lies outside the customs frontiers to a point within. The above decision would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, and according to the respondents, the sale would not fall within the category of a sale in the course of import of goods into the territory of India and hence, the sale can only fall within the third category, that is, within the State of Gujarat. 58. In this regard, it may be apposite to refer to the decision of this court in the case of Larsen and Toubro Ltd. v. Union of India (supra) wherein on behalf of the State it was contended that since the sale can fall in only one of the three categories and that in the said case, the court must hold that it is either inter-State sale or a local sale since the contention that the sale was an export sale had not been pressed. In support of such contention, reliance was placed upon the decision of the Supreme Court in the case of Murli Manohar Co. and Another v. State of Haryana and Another, (1991) 1 SCC 377 wherein the court had held thus: 8. Shri Rajaram Agarwal, learned counsel for the assessees raised a new contention before us, which we have already referred to as an alternative contention. This contention which really seems to be unanswerable appears to have been missed at the stage of the High Court but this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequent to and independent of the sale made by him, then, for the purpose of that transport, the assessee would only be an agent of the purchaser and the movement of the goods in pursuance of the contract of sale entered into by the purchaser and would be one in the course of export within the meaning of Section 5(1) of the C.S.T. Act. As pointed out by Shri Agarwal, even in Mohd. Sirajuddin case, although the exemption claimed for the sales are export sales was denied, the conclusion of the High Court that the sales to STC were inter-State sales chargeable under Section 5(1) of the C.S.T. Act was upheld. We are, therefore, of the opinion that this alternative contention urged by the learned counsel for the assessee has to be accepted and it has to be held that, since the sales effected by the assessees fall within one of the three exempted categories set out in Section 9(1)(b), there can be no levy of purchase tax under Section 9(1) of the Act. This court, after considering the above decision, held thus: We are, however, unable to accept the contention. The observations of the apex court cannot be seen in isolation and it is well settled that it is not observation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 9th January, 2004 and for others, on 20th January, 2004. It has been submitted that on 30th September, 1999, the petitioner had written to the Additional Commissioner of Sales Tax enclosing a copy of the PSC and relying upon several Articles thereof. On 7th January, 2002, the Additional Commissioner of Sales Tax had issued a show-cause notice for the year 2001-02 with reference to the letter dated 30th September, 1999 wherein he had dealt with various aspects of the PSC according to his interpretation. On 28th January, 2002, the petitioner submitted a reply relying on various clauses of the PSC and in paragraph 7 thereof, a specific reference was made to ISPA. On 4th March, 2002, the petitioner filed a supplementary reply clarifying some issues such as delivery point, etc. and explained the difference between sour gas and sweetened gas and maintained that they continue to remain the same commercial commodity. Thus, the Assessing Officer had before him the PSC and the ISPA as well as detailed submissions made by the petitioners on various clauses of the PSC. After considering all the above material, the Assessing Officer passed a nil assessment order (so far as Panna-Mukta gas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A bare perusal of the abovequoted provision would go to show that resort to provisional assessment can be made by the Commissioner or his delegate as assessing authority only if he has reason to believe that a dealer has evaded the tax . 19. Neither in its show cause notice issued prior to making a provisional assessment nor in the assessment orders, the assessing authority has recorded reasons or grounds for coming to the conclusion that dealer has evaded the tax. As has been mentioned above is the order effecting the seizure of its account books, the assessing authority found that certain works contracts were liable to be taxed under the Central Sales Tax Act which were in the nature of branch transfers. In the orders of assessment, the assessing authority has reproduced the stand taken on behalf of the assessee that such branch transfers were made for completing the works in accordance with the orders and specification of customers outside the State and were not sales but were merely transactions in the course of works contract . The assessing officer has also in the order of assessment, rejected the contention advanced on behalf of the petitioner that the branch tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, a perusal of one of the show cause notices issued under section 44 of the GST Act reveals that according to the Commissioner the petitioner had not being paying sales tax on the sale of natural gas pursuant to the PSC because the delivery point was offshore underline connection at ONGC s existing pipeline and title of goods passed to GAIL at the same point, however, a sale of ascertained goods cannot be deemed to take place in the state of origin because the commingled and unsweetened gas is unascertained or future goods and it is only at the time of their appropriation as sweetened gas to the contract of sale by them to GAIL at Hazira, where actual physical delivery and sales takes place. In this regard, it may be noted that similar objections were raised by the Commissioner in the year 1999, pursuant to which Enron, the predecessor of the petitioner - BG Exploration had given its reply dated 3rd September, 1999. Thereafter, the Additional Commissioner had addressed a communication dated 15th September, 1999 calling for further details, in response to which the said petitioner had given a detailed reply dated 23rd September, 1999. On 7th January, 2002, the Additional Commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s passed to GAIL at the same point. Hence movement of goods from Panna-Mukta gas fields to Hazira is in pursuance of productions sharing contract, falling u/s 3 or 5 of Central Sales Act. Therefore it is exempted from Sales Tax in Gujarat State. But looking to the facts and legal position, a sale of ascertained goods can not be deemed to take place in the stage of origin becauses the commingled and unsweetened gas is unascertained or future goods and it is only at the time of their appropriation as sweetened gas to the contract of sale by you to GAIL. at Hazira, Where actual physical delivery and sales takes place. Hence, you are liable to any Sales Tax in Gujarat State on the sales of Panna-Mukta Gas fields as per Gujarat Sales Tax 1969. Your assessment for the Year ______98-99____ is finalised on dt. ______5-5-2000___ under Section 41(3) of GUJARAT SALES TAX ACT. is proposed to Re-assessment. Therefore you are required to remain present at above mentioned address on dt. 10-11-2003 with your explanation that why Sales Tax, penalty and interest should not be levied on said transactions as per Gujarat Sales Tax Act 1969, Failure of which may result in to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Department, then, in the garb of reopening the assessment, review would take place. 63. On a plain reading of the above show cause notice, it is apparent that the same does not disclose the formation of any opinion on the part of the Commissioner based on any new material on record. The re-assessment is, therefore, sought to be made on a mere change of opinion. As held by the Supreme Court in Kelvinator of India Ltd . (supra) a mere change of opinion cannot be per se reason to reopen an assessment. Therefore, the show cause notices which form the basis of the impugned assessment orders are without jurisdiction as the same have been issued without formation of the requisite opinion as required under the provisions of section 41 and 44 of the GST Act. Consequently, the assessment orders based upon such show cause notices cannot be sustained. 64. On behalf of the respondents, a preliminary objection has been raised with regard to the very maintainability of the petitions on the ground that the petitioners have an alternative statutory remedy by way of appeal available under the provisions of the GST Act and the petitioners have also resorted to such remedy. 65. On behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had availed the alternative remedy available under the Rajasthan Public Trusts Act, 1959 and cannot be permitted to avail two remedies simultaneously. The decision of the Supreme Court in Kanaiyalal Lalchand Sachdev v. State of Maharashtra , (2011) 2 SCC 782, was cited for the proposition that it is well-settled that ordinarily relief under Articles 226 and 227 of the Constitution of India is not available to any aggrieved person when the statute itself contemplates an efficacious remedy. Reliance was also placed upon the decision of the Supreme Court in State of Goa v. Leukoplast India Limited , AIR 1997 SC 1875 , wherein the court, after observing that the controversy involved therein related basically to questions of facts held that there was no reason for the assessee to bypass the statutory remedy and come to the court with a writ petition. It was argued that the present case also involves disputed questions of facts and therefore, there is no warrant for intervention by this court. It was, accordingly, urged that the petitioners be relegated to pursue the statutory remedy under the GST Act. On the other hand, on behalf of the petitioners, the learned counsel had sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent State authorities on the ground that the sales in question having been made outside the State of Gujarat, are not amenable to levy of tax under the Gujarat Sales Tax Act. Thus, the petitioners have challenged the very jurisdiction of the respondent State authorities to levy the tax in question. The Supreme Court in Raza Textiles v. ITO (supra) has held thus:- The Appellate Bench appears to have been under the impression that the Income Tax Officer was the sole Judge of the fact whether the firm in question was resident or non-resident. This conclusion in, our opinion, is wholly wrong. No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly. The question whether the jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of certiorari. If the High Court comes to the conclusion, as the learned Single Judge has done in this case, that the Income Tax Officer had clutched at the jurisdiction by deciding a jurisdictional fact erroneously, then the assessee was entitled for the writ of certiorari prayed for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive statutory remedy when the entire proceedings are without jurisdiction. 70. As regard the contention raised by the learned Additional Advocate General that the petitions involve disputed questions of fact, such contention must be stated, only to be rejected. These petitions as discussed hereinabove raise neat questions of law, which are required to be decided on a construction of the provisions of the agreements between the parties and the relevant statutory provisions. While deciding the questions arising in these petitions, this court has not been called upon to touch any issue involving a disputed question of fact. 71. Thus, in the light of the above decisions, it is apparent that where the very jurisdiction of the concerned authority is called in question and the petitions do not involve any disputed questions of fact, the validity of an alternative remedy would not be a bar to entertaining a writ petition under Article 226 of the Constitution of India. Moreover, the present petitions have been filed way back in the years 2004 to 2010. At the relevant time, the court had admitted the petitions and had granted interim relief after bipartite hearing. The decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tituents of the Contractor and the GAIL cannot amend, modify, vary or supplement the PSC. The price clause as contained in the ISPA which provides for payment at the rate of 90% of the Gas price specified in Article 21.5.13(d) of the PSC for the net MMBtu of gas delivered at the downstream of ONGC facility at Hazira, would not modify the principal agreement between the parties, namely that the Gas is to be delivered at the Delivery Point as contemplated in clause (a)(iv) of Article 21.5.13 of the PSC nor can the same be read to mean that the parties had agreed to sell and purchase sweetened Gas. v. The price clause contained in the ISPA is only a mechanism by which the parties have decided the price of the goods and cannot be relied upon to decide the situs of the sale. Merely because the Sellers have decided to charge on the basis of what is ultimately received by the Buyer cannot be determinative of the fact as to where the sale takes place. vi. The goods, viz., Natural Gas were ascertained goods at the time when they came to be separated and measured at the Offshore Processing Facility. The ascertained goods upon being separated and measured came to be appropriated to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facility at Hazira, whereby the sour gas is converted into sweetened gas, amounts to manufacture. xi. The show cause notices which form the basis of the impugned assessment orders are without jurisdiction as the same have been issued without formation of the requisite opinion as required under the provisions of section 41 and 44 of the Gujarat Sales Tax Act, 1969 and are based on a mere change of opinion. xii. As the controversy involved in the present case goes to the very root of the jurisdiction of the Sales Tax Officer to levy sales tax under the provisions of the Gujarat Sales Tax Act, 1969, the availability of an alternative statutory remedy would not preclude the petitioners from invoking the extraordinary jurisdiction of this court under Article 226 of the Constitution of India. 73. In the light of the above discussion, the petitions succeed and are accordingly allowed. Having regard to the fact that this court has held that the sales in question have not taken place within the State of Gujarat, the State of Gujarat has no authority to levy the sales tax under the provisions of the GST Act on the transactions in question. Consequently, all the assessment orders whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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