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2016 (1) TMI 870 - GUJARAT HIGH COURT

2016 (1) TMI 870 - GUJARAT HIGH COURT - [2015] 84 VST 1 (Guj) - Levy of VAT / Sales Tax - protected transactions by Article 286 of the Constitution - supply of Natural Gas from Panna-Mukta oil/gas fields to GAIL - Production Sharing Contracts for development and exploration of Panna- Mukta and Mid-South Tapti Oil and Gas fields, in the west-coast off shore, India. Under the terms of the Production Sharing Contract (hereinafter referred to as “the PSC”) - Held that:- On a conjoint reading of the .....

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also passed to the Buyer at the Delivery Point. The situs of the sale is the Offshore Processing Facility where 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 Guja .....

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rately 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 appropriation the goods were subjected to the process of sweetening within the State of Gujarat it cannot be said that the sale of goods has taken place within the State of Gujarat.

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State of Gujarat, the question as to whether or not subjecting the Natural Gas to the process of sweetening amounts to manufacture becomes redundant, and hence, it not necessary to enter into the merits of the question as to whether or not the processing of the Natural Gas at ONGC’s sweetening and separation facility at Hazira, whereby the sour gas is converted into sweetened gas, amounts to manufacture.

The show cause notices which form the basis of the impugned assessment orders are .....

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n favor of assessee. - SPECIAL CIVIL APPLICATION NO.5159 of 2010, 9871 of 2008, 11677 of 2007, 3119, 2084, 2071 of 2004, 4022 of 2009 - Dated:- 8-5-2015 - MS. HARSHA DEVANI AND MS. SONIA GOKANI, JJ. For The Appellant : P. Chidambaram, S. N. Soparkar, Vikram Nankani, Sr. Advocates, Naresh Thacker, Cudappa Nandgopal, Hardik P. Modh, Amit Laddha and Ms. Megha Jani For The Respondent : Pratik Khupchandani, Ms. Maithili Mehta, Jaimin Gandhi, Asstt. Govt. Pleaders, P.K. Jani, Addl. Adv. General, Mih .....

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uction 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, ref .....

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elopment and exploration of Panna- Mukta and Mid-South Tapti Oil and Gas fields, in the west-coast off shore, India. Under the terms of the Production Sharing Contract (hereinafter referred to as the PSC ), ONGCL, RIL and BGEPIL are collectively called the Contractor . The Panna- Mukta gas production started from February, 1998 onwards. 3. In accordance with the terms and conditions of the Production Sharing Contract for pursuing activities relating to exploration and exploiting oil and gas in P .....

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tal Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (hereinafter referred to as the Maritime Act ). Thus, the location of the said oil/gas fields is beyond the territorial waters of India. 4. It is the case of the petitioners that under the PSC, the Contractor or any constituent thereof has no right to dispose of the natural gas produced by them. The entire production is the property of the Union of India, but, for the sake of providing adequate compensation to the Contractor, .....

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overnment as more specifically set out therein. The entire production of natural gas goes to the Government of India and the Contractor or any constituent thereof have no control and no independence or volition to dispose of any mineral and are bound to hand over the production of natural gas to the Government 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 t .....

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tself. 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 .....

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other way of physical transfer of gas by ONGCL to GAIL, the said pipeline passes through the processing plant of ONGCL at Hazira. The said processing plant functions to remove Sulphur and other impurities from Natural Gas. GAIL, therefore, takes possession of the Natural Gas as processed in the processing plant of ONGCL from its transporter ONGCL. The pricing of the Natural Gas produced at the oil fields and delivered to GAIL depends on the international market of gas and oil and is a specialis .....

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ta also was separately recorded in a statement. It is the case of the petitioner - BGEPIL that though sales of Natural Gas produced from Panna-Mukta were disclosed by the petitioner, since the same were not amenable to sales tax, the petitioner had not shown the figures in the respective returns, but had submitted separately complete data in the course of assessment proceedings, which had been appreciated and no tax was levied. It is the case of the petitioner - BGEPIL that the respondent Commis .....

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s 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 s .....

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arat Sales Tax Act, 1969 (hereinafter referred to as the GST Act ). Similar notices also came to be issued to RIL and ONGCL. In response to the notices, the first petitioner gave very specific and detailed reply and also pointed out that the sale of Gas under the GST was liable to tax at the last stage, that is, when the Gas is distributed to the actual consumer. Therefore, the supply to GAIL which is the sole distributor of the Gas cannot be taxed. The first petitioner also appeared before the .....

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came to learn that the authorities were directed not to grant any stay or pass any order on the stay application that had been filed by the said petitioner. Convinced that the appellate authority had no discretion to decide against the directions of the Commissioner to assess the disputed transactions, the said petitioner approached the Commissioner of Sales Tax, Ahmedabad and requested him not to enforce the demand. The petitioner thereafter learnt that its bank account with the State Bank of .....

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rvants or agents from in any way levying tax on the transaction of supply of Natural Gas to the Government of India in terms of the provisions of the PSC. 8. The following substantive reliefs have been claimed in the individual petitions:- Special Civil Application No.5159/2010 (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 25th March, 2010 passed by the Respondent .....

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e 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 Sal .....

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other Joint Venture Partners under the Production Sharing Contract dated 22nd December, 1994 with Government of India, in view of sale of such Natural Gas taking place outside the territorial waters of India and outside State of Gujarat. (ii) To refrain in any manner taking any steps against the Petitioners for recovery of Sales Tax either by coercive methods or otherwise in respect of sale of Natural Gas effected by the Petitioner and the other Joint Venture Partners under the Production Shari .....

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, 2003 and five orders dated 15th January, 2004 imposing penalty (ii) notice dated 3rd March 2004 issued by Additional Commissioner and (ii) after examining the validity, legality and propriety thereof, the same be quashed and/or set aside. Special Civil Application No.2071/2004 A. Your Lordships may be pleased to issue a writ of mandamus or a writ in nature of mandamus or any other appropriate writ or order holding and declaring that the impugned action of the respondents of levying, demanding .....

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appropriate writ, order or direction 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 .....

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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 was submitted that there are limitations on the power of a State Government to impose sales tax. Under Article 286 of the Constitution, a State cannot impose sales tax where the sale takes place - (a) outside the State; or (b) in the course of import of goods into the territory o .....

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and section 87 of the GST Act also reflects the above position. Inviting attention to the Explanation to section 87 of the GST Act, it was pointed out that the same requires that for the purpose of the section, whether a sale takes place in the course of any inter-State trade or commerce, or outside the State of Gujarat or in the course of import of the goods into the territory of India or export of goods outside such territory shall be determined in accordance with the principles specified in s .....

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ract of sale by the seller or by the buyer, whether assent of the other party is prior upon subsequent to such appropriation. It was submitted that it is this position that is reflected in the Explanation 1 to sub-section (28) of section 2 of the GST Act which defines 'sale . The learned counsel further submitted that the principles contained in sub-section (2) of section 4 of the CST Act are very simple principles, namely: (a) in case of specific or ascertained goods, the only relevant fact .....

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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 t .....

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gaontaluka of Thana district, the villages in Nawapur and Nandurbartalukas of West Khandesh district and villages in Akkalkuwa and Talodatalukas of West Khandesh district, respectively specified in Parts I, II and III of the First Schedule. It was submitted that the Panna-Mukta Gas Wells Offshore Platform and the location on the High Seas where the petitioners' pipeline from the Offshore Platform meets ONGC's pipeline (laid from Bassein to Hazira) are not included within the territory of .....

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hall first be offered for sale to the Government of India or its nominee and under Article 21.4.4, the Government of India may exercise its option to purchase the Excess ANG, and the contractor and the Government of India or its nominee shall agree on the terms for the sale. The price of ANG is governed by Article 21.5.13. The price shall be specified in the Gas Sales Contract, which shall be in accordance with the provisions of Article 21.5.13. It was pointed out that Article 21.5.13(a)(iii) de .....

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e seller has agreed to produce and deliver, on a daily basis, to the buyer 100% of the Deliverability of ANG and Non Associated Natural Gas (NANG) 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. 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 co .....

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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 equivalent heat energy . Article 21.5.13(d) sets out the formula for calculating the price that will be paid by the buyer to the seller for the g .....

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of gas and not the nominee of the Government of India because when the PSC was entered into, the Government of India had not appointed GAIL as its nominee. The Government of India could very well have appointed someone other than GAIL as its nominee and that GAIL is named as the recipient because it has the largest network of pipelines to transport gas. Hence, it was convenient to name GAIL as the recipient of gas at Hazira. It was, accordingly, submitted that the contract of sale is the PSC; t .....

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r to the buyer. The attention of the court was invited to Article 27.2 of the PSC to submit that the same makes it absolutely clear that the title to gas sold to the Government of India or its nominee shall pass to the Government of India or its nominee at the delivery point. It was submitted that the succeeding sentence, viz. Contractor shall be responsible for all costs and risks prior to the delivery point and each party shall be responsible for all costs and risks associated with such party& .....

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e 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 r .....

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positions. This ISPA was renewed every year until 2005. According to the learned counsel, the only purpose of ISPA was to ensure that 90% of the price specified in Article 21.5.13(d) of the PSC is paid to the sellers (on account basis) upon GAIL receiving the gas at Hazira. The attention of the court was invited to clause 3 of ISPA which deals with 'price' and the price stipulated thereunder is 90% of the gas price specified in Article 21.5.13(d) of the PSC for the net MMBTU of gas deli .....

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rticle 21.5.13(e). It was submitted that in any event, GAIL not being a party to the PSC cannot, through a document entered into between the sellers and GAIL, purport to amend the PSC. The attention of the court was invited to clause 7 of the ISPA to submit that in view of the provisions thereof, it is beyond doubt that the signing of ISPA does not create a precedent, nor can it be deemed an admission by any party to the proper interpretation of the PSC or the rights and obligations of any party .....

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sal of gas, with any nominee of the Government, shall in any manner abrogate the obligation of the Government contained therein. It was submitted that ISPA, therefore, cannot in any manner amend or abridge or affect the PSC which is the sole contract between the parties. 9.4 According to the learned counsel, the title to the goods passed from 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 Gove .....

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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 .....

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tax. It was submitted that by no stretch of imagination can it be said that the petitioner had retained title to the property beyond the delivery point and hence, no property passes in the State of Gujarat and hence, no sales tax can be levied on the said transaction. Reliance was also placed upon the decision of the Madras High Court in the case of Bengal Corporation v. State of Madras, (1965) 16 STC 62. The decision of the Delhi High Court in the case of K.G. Khosla and Company Pvt. Ltd. vs. .....

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erty is not of relevance in determining the situs of sale. The question of appropriation of goods has to be decided, therefore, irrespective of passing of property. In other words, appropriation referred to in section 4(2)(b) connotes the setting apart of goods as specified goods to be delivered under the contract of sale and not an appropriation linked with the passing of property. Reliance was placed upon the decision of the Supreme Court in the case of Indian Tourist Development Corporation L .....

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rly 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 .....

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iguous Zone'. Section 6 defines 'Continental Shelf' and section 7 defines 'the Exclusive Economic Zone . Under section 5(5), section 6(6) and section 7(7) of the Maritime Zones Act, the Central Government, by notification, may extend any enactment for the time being in force in India to the Contiguous Zone or Continental Shelf or Exclusive Economic Zone respectively. When so extended, the enactment concerned shall have effect as if the area to which the enactment was extended is .....

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nd the exclusive economic zone deemed to be a part of India for the purpose of such enactments which are extended to those areas by the Central Government by issuing a notification. [Emphasis supplied] It was submitted that the gas wells where the gas originated, the Offshore Platform where the water and oil were separated from the gas and the delivery point are all beyond the territorial waters of India. Neither the CST Act nor the GST Act has been extended by notification to any area beyond th .....

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t the delivery point outside India is eventually brought through a pipeline to the mainland (Hazira), in other words, the gas is imported into the territory of India. The sale of gas has, therefore, occasioned such import. Alternatively, by applying the principles contained in section 4(2) of the CST Act, the title to the gas has been transferred at or before the delivery point, well before the Gas via the pipeline, entered the territorial waters of India. Looked at in any way, section 5(2) of t .....

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as 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 .....

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AIR 1966 SC 1216, Indian Tourist Development Corporation (supra), State of Maharashtra v. Embee Corporation, Bombay, (1997) 7 SCC 190 and more particularly paragraphs 5, 6 and 7 thereof, Indure Ltd. v. Commercial Tax Officer, (2010) 9 SCC 461, as well as State of Travancore, Cochin v. Bombay Company Ltd., AIR 1952 SCC 366. 9.7 Mr. Chidambaram next submitted that the contract was for the sale and purchase of all the Natural Gas discovered and produced in the contract area as defined in the PSC. U .....

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ct entered into by the Contractor. It was submitted that if the Government does not opt to take all the gas or if the Government directs the Contractor to sell the gas to more than one nominee, the Contractor may enter into several Gas Sales Contracts and in each Gas Sales Contract there could be a different delivery point. This would be consistent with Article 1.27 which contemplates different delivery points for the purposes of sales to the Government, export or domestic sales. It was submitte .....

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d that Natural Gas, ANG and NANG and Excess ANG 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 as .....

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urisdiction 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. Notice of reassessment in respect of each of these five years was issued on 20th October, 2003 and the petitioner filed its reply thereto on 12th December, 2003. The reassessment orders were passed for one year on 9th January, 2004 and for the other four years on 2 .....

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bmitted a reply relying on various clauses of the PSC wherein the petitioner specifically made reference to the ISPA. On 4th March, 2002, the petitioner filed a supplementary reply clarifying some of the issues such as delivery point and also explaining the difference between sour gas and sweet gas and maintained that sour gas and sweet gas continue to remain the same commercial commodity. It was pointed out that, therefore, the Assessing Officer had before him, the PSC and the ISPA as well as d .....

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had escaped assessment so as to invoke section 44 of the GST Act on 20th October, 2003. It was submitted that between 30th June, 2003 and 20th October, 2003, the Assessing Officer had no new material before him nor had he discovered any new fact that was unknown to him earlier. The show-cause notice simply refers to the PSC and, without any disclosure of the reason to believe that turnover had escaped assessment, holds that the petitioner was liable to pay sales tax on sale of Panna-Mukta gas. T .....

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ision 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 subm .....

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f the parties, it was pointed out that the petitioner in its reply dated 28th January, 2002 to the show-cause notice and in its pleadings has consistently stated that the tax on goods (Natural Gas) purchased from the petitioner, if any, has to be paid by GAIL. GAIL in its affidavit-in-reply to Special Civil Application No.2084/2004 has not denied the petitioner's averment that tax on sale of goods is payable by GAIL. Reference was made to Article 21.5.15 of the PSC to submit that it is clear .....

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It is only if the petitioner is held to be liable to pay sales tax, the liability would be crystallized and the tax would be payable. It is at that point of time alone that the petitioner can demand that the Government of India or its nominee should bear the burden of the tax and reimburse the petitioner. It was urged that since all the parties including the Government of India, GAIL and the State Government are before this court, in the event of the petitioner being held liable to pay sales tax .....

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tions 12 and 13 of the GST Act. Lastly, it was submitted that even assuming that sales tax is payable, the imposition of penalty and interest is wholly unjustified. It was submitted that under section 45(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 name .....

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ll 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-Mukta Gas is a local sale within the State of Gujarat. Since the question is purely a constitutional .....

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s in this batch of petitions is as to whether the sale has taken place within the State of Gujarat. In addition to the submissions advanced by Mr. Chidambaram, Mr. Soparkar submitted that section 5(2) of the CST Act provides that a sale or purchase of goods shall be deemed to take place in the course of the import of goods into the territory of India in two independent situations: (i) if the sale or purchase occasions such import; or (ii) if the sale or purchase is effected by a transfer of docu .....

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ase has occasioned the import, viz., bringing of goods into India from a place outside India, section 5(2) of the CST Act would apply even if it is held that sale took place at Hazira, within the State of Gujarat. It was submitted that the State where the title has passed is irrelevant; the only relevant consideration being that the sale must have occasioned movement of goods from one State to another (from outside India into India). The GST Act, under the circumstances, would not apply to such .....

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isional 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 a .....

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visional 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 tax . In the facts of the said case, neither in the show cause notice issued prior to making the provisional assessment nor in the assessment orders, had the assessing authority recorded reasons or grounds for coming to the conclusion that the dealer had evaded tax. The court held that the expression evasion of tax conveys mens rea on the part of th .....

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es not give such forms, the petitioners will have to pay additional tax and GAIL will be liable to reimburse the same. In conclusion, it was submitted that the sale in the present case is outside the State of Gujarat and hence, the State of Gujarat has no jurisdiction to levy sales tax thereon. Alternatively, the sale is in the course of import. The State of Gujarat, therefore, has no legislative competence to levy tax on the transaction in question. The only basis for levying sales tax is that .....

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for first respondent - State of Gujarat, submitted that the sale in question has taken place within the State of Gujarat and hence, the provisions of the GST Act would be applicable to the sale of Natural Gas by the petitioners to GAIL. It was submitted that on behalf of the petitioners two-fold submissions have been made. Firstly, that the sale of goods has not taken place within the State of Gujarat and secondly, that the sale has taken place in the course of import into the territory of Indi .....

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ms 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 .....

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the point is concluded against the petitioner in paragraph 77 of the said decision. Reference was also made to the decision of this court in Larsen and Toubro Ltd. v. Union of India, 2012 (1) GLH 55, and more particularly paragraphs 39, 40, 41 and 42, wherein the above decision of the Supreme Court has been extensively quoted. It was submitted that the Gujarat judgment proceeds on the basis that the sale has been effected at Bombay High and not at Hazira. The question, therefore, of applicabili .....

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of the Customs Act, 1962 has to be read together with other Acts such as Maritime Zones Act, 1976 which are in pari materia. 'Export' for the purposes of section 5(1) of the CST Act 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 under the Maritime Zones Act. It was submitted that in view of the above, the provisions of section 5(2) o .....

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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 Contrac .....

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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 contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. It was pointed out that according to the Union of India and GAIL, appropriation takes place at Hazira downstream of the separation and sweetening facility owned and operated by ONGC when the sweetened gas is received by the buyer (delivery t .....

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n that the delivery point is at onshore Hazira for the purpose of appropriation. It was submitted that the constituents of the Contractor rely on Article 21.5.13(a)(iv) read with Articles 21.5.13(c) and 27.2 to hold that appropriation is effected offshore; however, the above clauses in Article 21.5.13 cannot be read in compartment and in isolation. The terms of the agreement have to be read as a whole to find out the delivery point where the goods are appropriated. It was submitted that Articles .....

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ation to the contract as is being contended by the Contractor. 11.2 As regards the contention of the Contractor that assent is given in the agreement under Article 27.2, the learned counsel submitted that this contention is wholly erroneous in view of the fact that: (a) in view of section 4(2)(b), the article dealing with passing of title, that is, Article 27.2 is not decisive, and (b) Article 27.2 refers to delivery point. It was submitted that Article 27.2 refers to the delivery point offshore .....

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refore, 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 c .....

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ubmitted that it is in this context that the Apex Court had held that natural resources belonged to the people of India and Union of India was holding the same in trust and, therefore, reference to domestic market was given a meaning which cannot be given in the present contract where gas is not to be sold in the market to contractors but to the Government nominee. 11.4 According to the learned counsel, the normal understanding of the term 'appropriation' would require the following elem .....

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comingled with other gases. (ii) The gas is transmitted to the ONGC Underwater Gas Transmission Line which transports gas from Bassein to Hazira onshore. (iii) It is only ascertained after the condensed gas is separated and sweetened at Hazira onshore and it is at this stage that there is an appropriation by the buyer. Unilateral appropriation by the seller at the upstream-weld would not render valid the appropriation unless subsequent assent is given by the buyer. It was urged that the above in .....

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e liability to pay tax, though under the Sales Tax Act, it is the seller who has to pay the tax to 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 provisi .....

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d 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 lawyers are so often tempted by their training to indulge. The fact that a particular construction leads to a very unreasonable result is a relevant consideration. 11.6 In support of his submissions, the learned co .....

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.7 The next submission advanced by Mr. Shelat was that Article 21.3 of the Production Sharing Contract refers to Gas Sale Contract between the contractor and GAIL. The contracts are separate, one by the Contractor and Union of India and another by the Contractor and GAIL, but the Union of India has nominated GAIL for serving the domestic market. The subsequent price agreement is complimentary to the Production Sharing Contract and has to be projected while construing the appropriation of goods b .....

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eliver' in the Great Dictionary English Language as well as the Chambers Dictionary. 11.8 Reliance was also placed upon the decision of the Karnataka High Court in the case of State of Karnataka v. West Coast Paper Mills Ltd, AIR 1986 Karnataka 103, wherein it has been held thus:- Section 18 of the Sale of Goods Act provides that where there is a contract for sale of unascertained goods, no property in goods is transferred to the buyer unless and until the goods are ascertained. That would b .....

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ate 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 th .....

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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 quantity 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 .....

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ontract. On appropriation, the goods become ascertained. If the identity of the contract goods is not established by appropriating it towards the contract, the contract remains in respect of unascertained goods. Reliance was placed upon the decision of the Privy Council in the case of Re Goldcorp Exchange Ltd (In receivership), (1994) 2 All ER 806, wherein it has been held thus:- Approaching these situations a priori common sense dictates that the buyer cannot acquire title until it is known to .....

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. S. N. S. Ambalavana Chettiar and Co. Ltd. v. Indian Express Newspapers Ltd. Bombay, AIR 1968 SC 741, for the proposition that section 18 of the Sale of Goods Act provides 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. 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 con .....

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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 natural gas delivered at the upstream weld, but such gas delivered at the upstream weld is not the same as agreed by the Uni .....

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t has been observed that to obtain a marketable product, the raw material gas flowing from gas or oil wells must be processed to remove water vapour, inert or poisonous constituents and condensable hydrocarbons. The processed gas is principally methane, with small amounts of ethane, propane, butane, pentane, carbon dioxide and nitrogen. This gas can easily be transported from the producing areas to the market in underground pipelines under pressure or liquefied at low temperatures and transporte .....

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se of Sonebhadra Fuels v. Commissioner, Trade Tax, U.P. Lucknow, (2006) 7 SCC 322, wherein the court had extracted the definition of 'manufacture' as under:- 2.(e-i) manufacture means producing, making, mining, collecting, extracting, altering, ornamenting, finishing 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 above definition of 'manufacture' is similar .....

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tion 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 wa .....

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dity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word manufacture. After examining various decisions, the court in paragraph 22 of the decision held as under:- 22. We may mention that, as noted above, decisions construing the word manufacture in other statutes are not necessarily applicable when interpreting Section 2(e-1) of the U.P. Trade Tax Act. As stated above, the definition of manufacture in Section 2(e-1) of the U.P. Tra .....

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the principles laid down by the Apex Court have to be applied to the facts of the present case. The apex court has held that if an operation/process renders a commodity or article fit for use for which it was otherwise not fit, the operation/process falls within the meaning of the word 'manufacture'. It was pointed out that the Apex Court has approved of the decision in United States v. International Paint Company, 35 C.C.P.A. 87, C.A.D. 76. It was, accordingly, submitted that in view of .....

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d not be a resultant new product but the article must be made fit for use. 11.15 As regards the decision of the Supreme Court in the case of Reliance Natural Resources v. Reliance Industries Ltd. (supra), on which reliance had been placed by the learned counsel for the petitioners, it 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 Pro .....

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ld 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 future unascertain .....

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ide the State of Gujarat would not hold good. It was submitted that the Production Sharing Contract is between the Government of India and three petitioners. The PSC is executed on 22nd December, 1994 at which point of time the Government of India had authorised the petitioners to carry out petroleum operations in the area off-shore identified as Panna-Mukta fields. Therefore, the relevant clauses in the PSC insofar as the same pertain to the delivery point for the goods are for future and unasc .....

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nt, the petitioners were required to supply the gas of such nature and category which may be utilised by consumers or buyer. The consumers of GAIL would require sweetened gas only. It was submitted that the different definitions of 'delivery point' have to be read in a harmonious way and the delivery point referred to in different clauses of the Articles of PSC are for different purposes. It was emphatically argued that the PSC is not an agreement for sale of goods but is only a declarat .....

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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 ci .....

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is incapable of being consumed till it is subjected to a sweetening process on-shore at Hazira and the quantity of gas becomes ascertainable on-shore at Hazira, the delivery point is on-shore at Hazira. The liability of sales tax, if any, has to be determined on the above basis. It was submitted that when the Government of India, who is a signatory to the PSC, has specifically stated that the sale has taken place on-shore, that is, at Hazira, a unilateral assertion made by the petitioners that .....

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ponsibility of transporting the goods from off-shore, that is, the T-Junction to the Hazira plant and there is no clause in the PSC which puts this liability upon the petitioners to transport the goods for the buyer (GAIL, the nominee of Government of India) from TJunction to ONGC's Hazira plant at Surat. The petitioners have been paying transportation charges to ONGC and the petitioners take the risk of the goods. The petitioners also pay the conversion charges to ONGC's Hazira plant fo .....

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ers get co-mingled with Tapti gas at TJunction and, therefore, remain unascertained and are not in a deliverable state and, therefore, incapable of being appropriated at T-Junction i.e. off-shore. It was contended that the Government of India s nominee GAIL has not appropriated the goods at T- Junction i.e. off-shore and there is no implied or express act or consent by Government of India s nominee GAIL to have appropriated the goods at off-shore. It was submitted that there is no facility with .....

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h 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 s .....

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e downstream process also has a direct contact with the customers through the finished product. In the present case, in terms of the PSC and the ISPA, GAIL is to be given sweetened gas and not sour gas which is processed on-shore at Hazira, Surat and thus, falls within the purview of the term downstream . It was submitted that the Production Sharing Contract is a combined contract amongst the constituents of the Contractor for exploration, supply and sale of gas and thus, contains other terms wh .....

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by the petitioners at the offshore processing where it is separated from oil. At the off-shore facility, the gas is removed from water to make the gas suitable for pipeline conditions. It was submitted that this contention of the petitioners is wholly incorrect in view of the provisions of clause 21.5.13(c) which reads as under:- The gas and condensate sold herein shall be separated into gas and condensate at the off-shore processing facility, measured separately and recombined and delivered at .....

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component which is explored is combined in nature, being 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 .....

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he 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 territory of India. According to the learned counsel, the provisions of the Customs Act have been made applicable to the area of Panna and Mukta and by virtue of the notification issued by the Union of India, the customs frontiers have been extended to P .....

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oramar v. Union of India (supra) and the decision of the Supreme Court in the case of Aban Lloyd Chiles Offshore Limited v. Union of India (supra), the goods which are brought from Panna-Mukta are deemed to be goods from a part of India. Therefore, the goods which are brought from Panna- Mukta cannot be said to have been imported into India. In support of his submissions, the learned counsel placed reliance upon the following decisions:- (i) M/s. Mahadev Rambali v. State of Bihar, AIR 1959 Patna .....

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645, (vii) Burmashell v. Commercial Tax Officer, 1961 SCR 902, paragraphs 22, 23, 27, 28, 29, (viii) Mod. Seraiuddin v. State of Orissa, AIR 1975 SC 1564, paragraphs 22-24, 27-37, (ix) Deputy Commissioner of Agriculture, Income Tax & Sales Tax v. Indian Explosive Ltd., 1985 (4) SCC 119, paragraphs 4 and 6, (x) Commissioner of Sales Tax v. Pure Helium, 49 VST 14 (Bom.) 12.5 The next submission advanced by Mr. Jani was that it is necessary to consider the definition of manufacture under secti .....

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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 p .....

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detailed and complex procedure. Once the product is processed and manufactured, a new product comes into existence. Therefore, what is in essence sold by the petitioners to the Government s nominee is sweetened gas, processing of which is done at Hazira and, therefore, a new product is sold at Hazira. In support of his submissions, the learned counsel placed reliance upon the following decisions:- (i) M/s. AIR Liquid North India Pvt. Ltd. v. Commissioner, Central Excise, 2011 (9) SCALE 506, par .....

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tract. Reference was made to the provisions of sections 18, 19, 21 and 22 of the Sale of Goods Act to submit that where there is a contract for sale of ascertained goods, what has to be first considered under section 19 of the said Act is the intention of the parties. Thus, the intention of the parties can be very clearly understood from clause 21.5.13(e) of the PSC as well as clause 3 of the ISPA. The second provision which has to be taken into consideration is section 21 of the Sale of Goods A .....

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ch ascertains the goods at the off-shore T-Junction nor can the act which is done at Panna 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 considerat .....

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ng 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 mean that Hazira, Surat is the place where ascertainment of goods takes place and on ascertaining only, the price gets fixed which is the specific intention of the parties to the contract. Therefore, the definitio .....

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R 1958 SC 560, paragraphs 16, 24, 26, 33, 44-47 (5) Union of India v. Binod Kumar Agarwal, AIR 2013 Calcutta 52, paragraphs 14-17, 19, 20, 21 (6) Jute and Gunny Brokers Ltd. v. The Union of India, AIR 1961 SC 1214 paragraphs 6-9, 11, 12 12.7 As regards the action taken by the respondent authorities under section 44 of the GST Act, it was submitted that the respondent authorities were required to carry out the reassessment for the reason that the petitioners in their returns did not show the tran .....

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case of Asian Paints India Ltd. v. Deputy Commissioner of Sales Tax, Circle 2(6), [2006] 148 STC 532 (Guj), for the proposition that when an assessee files return, it is his duty firstly, to disclose facts; secondly, those which are material; thirdly, the disclosure must be full; and fourthly, true. Assessment can be reopened on assessing officer s reason to believe regarding, based on specific reliable and relevant information, subsequently received by him which tends to expose untruthfulness o .....

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peal 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 .....

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so availed. In support of such submission, the learned counsel placed reliance upon the following decisions:- (1) Titaghur Paper Mills Company Limited v. State of Orissa, AIR 1983 SC 603, paragraphs 11, 12, (2) State of U.P. v. Rajya Khanij Vikas Nigam Sangharsh Samiti, 2008 (12) SCC 675 paragraphs 36, 38, 39, 41, 44, 47, 48, 52 (3) State of Goa v. Leukoplast (India) Ltd., 1997 (4) SCC 82 paragraphs 15, 17 (4) Kanaiyalal Lalchand Sachdev v. State of Maharashtra, 2011 (2) SCC 782, paragraphs 17, .....

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As there is no import, it cannot be said that the Production Sharing Contract read with the Interim Sales and Purchase Agreement occasions the import of natural gas and it cannot be said that the sale or purchase of gas has taken place in the course of import of goods into the territory of India in terms of the principles laid down in section 5 of the Central Sales Tax Act. Consequently, Article 286 of the Constitution of India does not prohibit the tax authorities under the Gujarat Sales Tax A .....

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ng Central Sales Tax to the said area has been issued by the Central Government. Consequently, transportation of gas from Panna-Mukta to Hazira pursuant to 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 doe .....

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w 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 natural gas, are irrelevant. 13.1 It was submitted that in the absence of the applicability of sections 3 and 5 of the CST Act, the court will have to dete .....

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future goods namely, natural gas to be extracted from the well at Panna-Mukta oil fields and sweetened. Since it is an agreement to sell future goods which had to be extracted and sweetened, section 19 of the Sale of Goods Act which deals with sale of specific or ascertained goods has no application. Similarly, sections 20 to 22, which also deal with specific goods, will have no application. According to the learned counsel, it is not necessary to determine the intention of the parties as to wh .....

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e of sales tax is section 4(2) of the CST Act which reads as under:- (2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within a State. - (a) In the case of specific or ascertained goods, at the time of the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. .....

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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 whi .....

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itioners, Mr. Thakore submitted that GAIL is in substantial agreement with what is submitted by the petitioner - BG Exploration in respect of the limitation on the power of the State Government to impose sales tax. Reference was made to the provisions of Article 286 of the Constitution of India read with the CST Act, 1956 to submit that there are limitations on the power of the State to impose sales tax. It was submitted that however, GAIL does not agree with the proposition that no recourse can .....

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looked at. Similarly, for understanding the meaning of ascertained and unascertained goods, the meaning thereof given in the judgments under the Sale of Goods Act will have to be looked into. It was submitted that while there are differences in the language used in section 23 of the Sale of Goods Act and section 4(2)(b) of the CST Act, there are substantial similarities between the two and for proper appreciation of section 4(2)(b), recourse can be had to the judgments delivered under section 2 .....

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4 and 5 of the CST Act. It was submitted that there can also be no dispute that for the parties to determine the situs of sale, section 4(2) of the CST Act can be looked into. In fact, the provisions of the Sale of Goods Act, nowhere deal with the situs of sale. The provisions of the Sale of Goods 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 .....

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aser 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, the int .....

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asses. 13.5 Mr. Thakore next submitted that similarly in case of future goods where or when the title passes to the buyer under the agreement entered into between the buyer and the seller is irrelevant. It shall, for the purposes of section 4(2)(b) of the CST Act be considered to have been sold at the place where the goods are situated, when appropriated to the contract with the assent of the parties. It is irrelevant when they come into existence or where they come into existence or where the c .....

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State of Tamil Nadu, 1984 55 STC 536 (Madras) wherein the court had held that the special term in the contract between the seller and buyer cannot prevail over a fiscal statute, or bind the taxing 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 for ascertaining when the property in goods passes in a given transaction are to be applied only in cases where the intention of t .....

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ding 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 .....

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oners that the sale of goods took place outside the State of Gujarat, it was submitted that in this regard, it is important to determine whether the goods are specific goods/ascertained goods or future goods. If the goods are specific goods, then section 4(2)(a) will apply and the sale shall be deemed to take place inside the State, if the goods are within the State at the time the contract of sale is made. Assuming without admitting that the Production Sharing Contract is a contract of sale, th .....

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o such goods. Reference was made to section 2(6) of the Sale of Goods Act which defines future goods to mean goods to be manufactured or produced or acquired by the seller after making the contract of sale. It was submitted that the gas which has to be extracted are goods to be produced, after making of the PSC and are, therefore, future goods. Reference was made to the following extract from Benjamin on Sale of Goods to submit that the same clearly establishes that the goods in question are fut .....

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y agree to sell goods which at the time of the contract are in the ownership and possession of a third party, and which he expects or hopes to acquire before performance is due. The statutory definition of future goods refers simply to goods to be manufactured or acquired by the seller. But a more elaborate classification may be made as follows: (a) goods to be manufactured by the seller, whether form materials which are now in existence or not; (b) goods which are to become, or may become, the .....

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ategory 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 .....

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lity v. Dodda Ramireddi, AIR 1972 A.P. 299. 13.8 It was submitted that the issue, therefore, is as to when such future goods can be said to be appropriated to the contract. For that limited purpose and only for that limited purpose, one has to see the terms of the PSC and the Interim Sales and Purchase Agreement as well as the Long Term Gas Sales Contract entered into in 2008. It was submitted that according to the petitioners, the situs of sale is at the TJunction outside the State of Gujarat i .....

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ich is the word used in Article 21.5.13(e); that GAIL is not a party to the PSC and the use of the word GAIL in Article 21.5.13(e) is not because GAIL is a nominee, but because GAIL s pipeline is situated thereat and the nominee has to receive gas at that point; and that the emphasis of the petitioners is on the definition of delivery point and that the PSC contemplated that the title passes at the delivery point as stated in Article 27.2. It was submitted that in this argument, the petitioners .....

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wo requirements are 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 .....

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;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. Davey, (1891) 3 Ch 540 (5) Indian Wood Products Co. Ltd. v. Sales Tax Officer, New Delhi & others, AIR 1968 Delhi 211 13.9 Dealing with the decisions on which reliance had been placed by the learned counsel for the petitioners, it was submitted that reliance placed upon the decision of the Supreme Court in A.V. Tho .....

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the ways mentioned in clause (1). Pursuant to this amendment in Article 286, the Central Sales Tax Act was enacted in 1956 and section 4 operates since then. The Supreme Court was concerned in that judgment with a period when there was no section 4 of CST Act and was required to interpret the Explanation to clause (1) of Article 286, which was also omitted by the Constitution 6th Amendment Act, 1956. 13.10 It was submitted that the decision of the Madras High Court in the case of Bengal Corpora .....

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servations clearly support the submissions of GAIL. Reference was made to the observations made by the court to the effect that in the case of a contract of sale of specific ascertained goods it is the State in which the goods are situated at the time of the contract of sale that will have the power to levy sales tax under section 4(2)(a), though the property in those goods may pass in some other State. The court was of the opinion that the appropriation referred to in section 4(2)(b) signifies .....

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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 th .....

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of goods as specific goods to be delivered under the contract of sale and not an appropriation linked with passing of property. The Indian Wood Products Company Ltd., v. The Sales Tax Officer, Ward No.13, New Delhi. (1968) 21 S.T.C. 437. Therefore, the fact that the property in the goods moved from Faridabad to Delhi may not have passed to the buyer but may still be in the petitioner did not prevent the appropriation of the goods to the contract of sale within the meaning of section 4(2) (b) of .....

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n the sales effected by the petitioner by the movement of the goods from Faridabad to Delhi taking place as an incident of the contract of sale as contemplated by section 3(a) of the Act was in the Sales-Tax authorities at Faridabad. (emphasis supplied) In the facts of the present case, appropriation would be setting apart of the goods namely, sweetened natural gas to be delivered which can only take place at Hazira. It was submitted that in Indian Tourist Development Corporation v. CCT (supra), .....

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in the matter as the same deals with section 18 of the Sale of Goods Act in respect of passing of property in unascertained 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 Territori .....

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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. Referring to section 5 of the CST Act, it was submitted that in both eventualities envisaged thereunder, it has to be seen as to what are the customs frontiers of India. It was submitted that when th .....

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opositions can be culled out therefrom, firstly, if the goods are sent from the territory of India to a designated area, the same would not amount to export and section 5(1) would not apply; and secondly, if the goods are brought into the territory of India from the designated area, it would not amount to import and section 5(2) would not apply. It was submitted that the designated area is not a part of India for the purpose of the CST Act but only for the purposes of the Customs Act. If it is n .....

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f the CST Act. It was submitted that reliance placed upon the decision of this court in the case of Larsen & Toubro vs. Union of India (supra) is completely inappropriate as the court was not concerned in the said matter with the issue as to whether the sale was in the course of export. The attention of the court was invited to the following observations made in the judgment: 6. ... ... We have, therefore, proceeded to examine the grievances of the petitioners on the basis of this conceded f .....

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he 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, Sta .....

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sweetening, the goods remain natural gas, it was submitted that what has been agreed to be delivered and accepted or received is sweetened gas. Consequently, whether sweetening changes the nature of product or not, there can be no appropriation to the contract, unless the natural gas is sweetened, which takes place at Hazira. In this context, it is irrelevant that the PSC provides for 100% of the deliverability of the natural gas. It was submitted that the distinction sought to be drawn between .....

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he Government of India or its nominee is obliged to bear the burden of sales tax and if the petitioner is liable to pay sales tax, GAIL is obliged to furnish Form 17 and 17B, it was submitted that GAIL had vide letter dated 24th November, 1999 categorically requested the petitioners - BG Exploration, ONGC and Reliance to pay sales tax and recover the same. The petitioners, however, opted not to do so. The petitioners are, therefore, not entitled to claim the same now in respect of the past perio .....

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less in the present proceedings. 14. Mr. Saurabh Amin, learned advocate appearing on behalf of the Union of India adopted the submissions advanced on behalf of respondent GAIL and reiterated the averments made in the affidavit-in-reply dated 15th April, 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 .....

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n 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 the petitioner - BG Exploration submitted that accord .....

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der the Maritime Zones Act. The CST Act and the GST Act have not been so extended. For the purpose of CST Act, there is no deemed territory of India and no part of the Continental Shelf or the Exclusive Economic Zone can be deemed to be part of the territory of India. According to the learned counsel, the judgment of the Bombay High Court in Commissioner of Sales Tax v. Pure Helium (supra) is per incuriam to the extent it observes: Export for the purposes of section 5(1) of the CST Act, 1956 can .....

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section 1(2) of that Act. It was submitted that there is no deemed territory of India and there is no need to extend the CST Act to any deemed territory. It was submitted that the High Court of Bombay appears to have overlooked the fact that the CST Act could have been extended to the area but was not extended by the Union of India. It was only the Customs Act that was extended. Just because the Customs Act was extended, it does not mean that all other Acts would stand extended to where the gas .....

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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 deemin .....

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the territory of India. Any sale which occasions such import would fall within section 5(2) of the CST Act and would, therefore, be outside the purview of the GST Act. 15.2 As regards the contention raised by the learned Additional Advocate General regarding the maintainability of the petitions, it was submitted that since the assessment orders dated 3rd January, 2004 and 9th January, 2004 for the five years are wholly without jurisdiction, the petitioners had filed the present writ petitions to .....

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to avail of the alternative remedy but can maintain a writ petition under Article 226 of the Constitution of India. In support of his submissions, the learned counsel placed reliance upon the decisions of the Supreme Court in the case of Raza Textiles v. Income Tax Officer, (1973) 1 SCC 633; in the case of Whirlpool Corporation v. Registrar of Trademarks, (1998) 8 SCC 1 and in the case of Godrej Sala Lee v. Assistant Commissioner, (2009) 14 SCC 338. It was further submitted that the writ petitio .....

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il of the alternative remedy without deciding the constitutional and legal issues that arise and that have been argued extensively in these proceedings. In support of his submission, the learned counsel placed reliance upon the decision of this court in the case of Pioma Industries v. Union of India, 2011 (273) ELT 54 as well as the decision of the Supreme Court in Indian Tourist Development Corporation through Hotel Ashoka v. Assistant Commissioner of Commercial Taxes (supra). 15.3 It was furth .....

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23;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 petiti .....

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ment, has taken place within the State of Gujarat. It is an admitted position, which even otherwise cannot be disputed that in view of the provisions of Article 286 of the Constitution of India, a State Government cannot impose sales tax where the sale takes place outside the State or during the course of import of goods into the territory of India. Therefore, two questions are required to be determined. Firstly as to whether the sale of goods has taken place within the State of Gujarat; and sec .....

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of the Government of India does not fall within the ambit of the GST Act and as such the sales are not amenable to tax under the provisions of the said Act. Since, the case relates to the applicability or otherwise of the provisions of the GST Act, it may be germane to refer to section 87 of the said Act which reads thus: 87. Certain sales and purchases not liable to tax. Nothing in this Act or the rules made thereunder shall be deemed to impose or authorise the imposition of a tax on any sale o .....

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side 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- .....

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r-State trade or commerce, one has to refer to the principles specified in section 3 of the CST Act which postulates as to when a sale or purchase of goods is said to take place in the course of inter-State trade. However, in the present case, it is an admitted position between the parties that sale of the goods in question is not in the course of inter-State trade or commerce. Consequently, it is not necessary to refer to the provisions of section 3 of the CST Act. Of course, the learned counse .....

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required to be applied. As to when a sale or purchase of goods can be said to take place outside a State is provided under section 4 of the CST Act, which reads thus: 4. When is a sale or purchase of goods said to take place outside a State.- (1) Subject to the provisions contained in section 3, when a sale or purchase of goods is determined in accordance with sub-section (2) to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. (2) A .....

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ituated at more places than one, the provisions of this sub-section shall apply as if there were separate contracts in respect of the goods at each of such places. Thus, under sub-section (1) of section 4 of the CST Act, if a sale or purchase of goods is determined in accordance with the provisions of sub-section (2) of section 4 to have taken place inside a State, then subject to the provisions of section 3, such sale or purchase of goods shall be deemed to have taken place outside all States. .....

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ime 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 Govern .....

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placed by the learned counsel for the respective parties. 23.1 In a pre-bifurcation decision of the Bombay High Court in the case of Emperor v. Kunverji Kavasji Kavarana, AIR 1941 Bombay 106, the court has held that the expression specific goods necessarily means goods capable of being ascertained with certainty - cerium est quod cerium reddi potest. The words, specific goods would, according to their natural interpretation mean goods whose delivery can be demanded in specie. A contract to sell .....

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inment and appropriation. 23.2 In State of Karnataka v. West Coast Paper Mills (supra), the Karnataka High Court was considering the question as to when did the property in the goods (in Bamboos) pass to the company - was it when the bamboos were cut and extracted from the forest land or when they were actually lifted from the forest through any specified out-post. There was no specific clause in the agreement in this regard in the matter. The court, accordingly, observed that it had to ascertai .....

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such 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 ot .....

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ng 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 imposed by the competent authority. Since the Company was required to preserve the extracted bamboos at its own risk, the intention of the parties would seem to suggest that the property in bamboos stood transferred to the Company the moment it was severed and taken possession of by the Company, because genera .....

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he order, the buyer acquires no property in the chattels till it is finished and delivered to him. The court held that if the thing be in existence at the time of the order, the property of it passes by the contract, but not so, where the subject is to be made. 23.4 In Atkinson v. Bell (supra), the court held that where goods are ordered to be made, while they are in progress, the materials belong to the maker. The property does not vest in the party who gives the order until the thing ordered i .....

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ssumed the character bargained for, and the employer accepted it, the party employed may maintain an action for goods sold and delivered; or if the employer refuses to accept, a special action on the case for such refusal. But he cannot maintain an action for work and labour, because his labour was bestowed on his own materials, and for himself, and not for the person who employed him. I think, that in this case the plaintiff cannot recover on the count for work and labour. 23.5 In Markapur Muni .....

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ting 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 .....

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stion were ascertained goods at the time when the contract of sale came to be made, it may be necessary to refer to certain recitals in the PSC. Article 9 refers to Discovery, Development and Production. On a perusal of the contents thereof, it is apparent that the stage of entering into the contract was prior to the discovery within the contract area. In case of a new discovery having potential commercial interest an appraisal programme was required to be submitted by the contractor. Article 21 .....

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ascertained goods because one hundred percent of the deliverability had to be delivered to the Buyer cannot be accepted. Merely because, 100% of the deliverability of ANG and NANG and condensate was agreed to be produced and delivered, would not make the goods ascertained goods, while still in the wells and at a stage when they were not even discovered. Besides, a perusal of clauses 21.4.3, 21.4.4, 21.4.5, 21.4.6 and 21.4.7, reveals that in the event of discovery of Crude Oil containing ANG, if .....

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e excess ANG. Similarly in respect of NANG the provisions of Article 21.5.1 to 21.5.12 of the PSC are required to be complied with. It is only if the 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 Exc .....

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o 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 within the ambit of clause (b) of section 4(2) of the CST Act. On behalf of the petitioners, it has been alternatively submitted that if the goods are una .....

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eetened gas and not sour gas. Therefore, the buyer did not assent to appropriation of the goods at the Bassein Hazira pipeline and hence, the sale of the goods in question falls within the ambit of clause (b) of sub-section (2) of section 4 of the CST Act and is a sale within the State of Gujarat. Thus, the crucial question that arises for consideration is the situs of the goods in question at the time of their appropriation to the contract of sale. 26. The learned counsel for the respective par .....

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eer delivery notes directing the godown keepers at Willingdon Island to deliver the goods and only the actual physical delivery of the goods took place at Willingdon Island. In these circumstances the question is whether the sale was "outside" or "inside sale" as the expressions have been compendiously used in various judgments to indicate sales taking place within a State or without it. The Explanation to Article 286(1)(a) which has been set out above explains what a sale ou .....

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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 .....

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property in the goods passed within a State as a direct result of the sale, the sale transaction is not outside the State for the purpose of Article 286(1)(a) unless the Explanation operates". The majority decision in Indian Copper Corporation Ltd. v. State of Bihar concludes the point in favour of the appellant. On the facts of this case it was found by the Sales Tax Appellate Tribunal that in regard to the sales of tea in full lots the property passed at Fort Cochin and this view has not .....

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the State of Madras. Apart from that money was paid there and the delivery order was also received there even though the actual physical delivery of goods was made at Willingdon Island in the State of Travancore Cochin. The fiction created by the Explanation to Article 286(1)(a) is inapplicable because there was no delivery as a direct result of sale for the purpose of consumption in any particular State. As is apparent on a plain reading of the above decision, the same was rendered in relation .....

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[Bengal Immunity v. State of Bihar, (1955) 2 SCR 603]. In order to obviate such controversy, the CST Act has adopted the simple test of the physical location of the goods for determining the situs of the sale. The above decision, therefore, may not be very relevant for the purpose of the controversy involved in the present case. 26.2 In Arcot Mills Limited v. State of Tamil Nadu (supra), the Madras High Court held that the special term in the contract cannot bind the fiscal statute or bind the .....

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atute, 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 .....

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These provisions, if they should service their purpose at all, must, in reason, override any special terms in private contracts to the contrary. 26.3 In Bengal Corporation Private Ltd. v. State of Madras (supra), the Madras High Court was of the opinion that the appropriation referred to in section 4(2)(b) signifies and connotes the earmarking and setting apart of goods as specified goods to be delivered under the contract of sale and does not signify an appropriation carrying with it the idea o .....

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ne single uniform test regarding the locale of the sale in all the States and that the lawmakers were well aware that in all the Sales Tax Acts, passing of property was 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 the appropriation. 26.4 In Wilkins v. Bromhead and Hutton (supra), the court held thus:- As to the first point, there can be no doubt but that a contract for the making of a chattel, does not of .....

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ation 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 cont .....

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eir 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, vesting the property in the defendants. But there was not any such assent to the appropriation made by the bankrupt; and, therefore, no action for goods bargained and sold was maintainable. Holroyd J. observes, I think the action will not lie for goods bargained and sold, because there was no specific appropriation of the machines as .....

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He did so, at the same time requesting the vendors to keep the greenhouse for him until he sent for it. It has been argued, that the letter of the plaintiff, desiring Smith and Bryant to keep the greenhouse for him, was written before the article was seen, and that it would be hard if it were held to be such an acceptance as would preclude him from rejecting the article if it afterwards turned out defective in its construction. If a purchaser's assent to the appropriation was shown to have b .....

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ss, to be discharged, if there was any evidence to go to the jury. But perhaps it would be too strict, under the circumstances, to hold the defendants within that precise limit. If the court saw that there was any evidence which might make any difference in the finding of the jury, it would be but just and right to allow the defendants an opportunity to try the cause again. I confess, however, I cannot see any ground on which the jury could come to the conclusion that there was any reputed owner .....

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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 .....

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nt, on the part of the persons for whom the articles were made, had been shown. The language of the judges, as read by the Lord Chief Justice, shows that to have been the only ground on which the case was decided. If, says Baylej J., the defendants had expressed their assent, then this case would have been within Rohde v. Thwaites (6 B. & C. 388, 9 D. & R. 293), and there would have been a complete appropriation, vesting the property in the defendants. What was the assent in Rohde v. Thw .....

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ed the vendors to keep the greenhouse for him. It appears to me that the property completely passed to the plaintiff, and that if the article had been accidentally destroyed while in the possession of the bankrupts or of Wait, it would have been the plaintiff's loss. 26.5 In Wait and James v. Midland Bank (Bristol Corporation Enter-Pleaders), 1926 Lloyd s List Law Reports Volume 24 - 313, the King s Bench Division held thus:- The next point which is interposed against the claim of the bank i .....

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re could be no ascertainment. It is not a case such as may arise under Sect. 18 of the Sale of Goods Act, where weighing is required for the purpose of ascertaining 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 delivere .....

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s 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 of the sale. The question of appropriation of goods has to be decided, therefore, irrespective of passing of the property. In other words, appropriatio .....

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f diversion of these goods to any other person in view of the contract and the law. Diversion made contrary to the contract and law would not be in pursuance of any right and is, therefore, not relevant. 26.7 In Indian Wood Products Co. Ltd. v. Sales Tax Officer (supra), the Delhi High Court observed that since the goods in question were unascertained, consequently, the place where the sale is effected will have to be determined under section 4(2)(b) of the CST Act. Under section 4(2)(b), the pl .....

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n the sense that the goods are identified by the agreement of the parties as the goods about which they are contracting, so that the contract can never apply to any other goods. In other words, the goods are so far appropriated that the seller would, by delivering any other goods, break the contract though the goods still remain the seller s property. The court observed that the Scheme of the Sales Tax Act goes to show that the Parliament left out of account the element of passing of property as .....

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ntral 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 .....

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9;I sell you 60 of the 100 sheep now on my farm'. Approaching these situations a priori common sense dictates that the buyer cannot acquire title until it is known to what goods the title relates. Whether the property then passes will depend upon the intention of the parties and in particular on whether there has been a consensual appropriation of particular goods to the contract. On the latter question the law is not straightforward, and if it had been decisive of the present appeal it woul .....

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Prasad v. Diwan Singh - Ganeshi Lal (supra), the Allahabad High Court held thus:- In Seath v. Moore (1), at p. 370, it has been held that it is a question of the construction of the contract in each case at what stage the property shall pass and it is a question of fact in each case whether that stage has been reached. It was held in Shoshi Mohan Pal v. Nobo Kristo Poddar (2), at p. 805, that where in a contract for sale of rice so far as vendors were concerned, nothing remained to be done on t .....

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s 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 (3) (at p. 41 of 26 O.C.) and Abdul Aziz v. Jogendra Krishna Roy (4) (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, 1 .....

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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 a bargain is .....

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t p. 203) and Martineau v. Kitching (7). The true test therefore is what was the intention of the parties. The court further observed that the word ascertained has not been defined or explained in the Indian Contract Act. According to Chitty (Law of Contracts, 17th edn.1921, p.462) the expression means goods which the parties have agreed upon as the goods to be appropriated to the contract . 26.10 In Underwood Limited v. Burgh Castle Brick and Cement Syndicate, 1 K.B. 123, it was held thus:- The .....

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e to it that the sellers had to do to it as an article. 26.11 In P.S.N.S. Ambalavana Chettiar v. Express Newspapers Limited, Bombay (supra), the Supreme Court held that section 18 of the Sale of Goods Act provides that where there is a contract for 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 .....

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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 .....

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property in the goods was transferred to the buyer in view of section 18 of the Indian Sale of Goods Act till the goods were ascertained by appropriation, which in that case took place at the time only of actual delivery. 26.13 In DLF Universal v. Director, T & C Planning, Haryana, AIR 2011 SC 1463, the Supreme Court held thus:- 11. It is settled principle in law that a contract is interpreted according to its purpose. The purpose of a contract is the interests, objectives, values, policy t .....

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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. 26.14 In Her Highness Maharani Shantadevi Gaekwad v. Savjibhai Patel, 2001 (3) GLR 2097 (supra), a Division Bench of this court held that 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 .....

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hey must be read and interpreted together and they have the same legal effect for all purposes as if they are one document. 27. The above decisions can be classified into three categories. The first category is the decisions which lay down principles in the context of section 4(2) of the CST Act; the second category is the decisions rendered in the context of the provisions of the Sale of Goods Act; and the third category is the decisions as regards how the contracts are required to be construed .....

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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 .....

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nconditional 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). CATEGORY II (i) When there is an appropriation on the one side, and an assent to such appropriation on the other; it is sufficient to pass the property to the plaintiff. (ii) Ascertainment might take place by any method which is satisfactory t .....

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made for the purchase of goods and nothing is said about payment or delivery, this property passes immediately so as to cast upon the purchaser all future risks, if nothing further remains to be done to the goods, although he cannot take them away without paying the price. If anything remains to be done on the part of the seller, until that is done the property is not changed. (v) The term deliverable means that everything must be done to the article that the sellers had to do to it as an artic .....

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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 t .....

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RIL and BGEPIL and the Interim Sales Purchase Agreement (ISPA) between the Contractor and GAIL. For the purpose of deciding the situs of the goods at the time of appropriation to the contract, it would be necessary to refer to certain recitals from the PSC as well as the ISPA to understand what the parties had agreed. Since the sale transaction is contained in two documents, as held by the Supreme Court in DLF Universal v. Director, T & C Planning, Haryana (supra) and S. Chhattanatha Karayal .....

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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 of receipt of each monthly invoice from Sellers to be raised on the basis of quantity of gas delivered to the buyer downstream of the separation and sweetening facilities owned and operated by ONGC at .....

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y be made to the following sub-articles, which would be relevant for the purpose of deciding the controversy in issue: 21.4.3 If the contractor wishes to exploit the Excess ANG such ANG shall first be offered for sale to the Government or its nominee in writing in accordance with the terms of the contract. On receipt of such offer the Government or its nominee is required to exercise its option to purchase the Excess ANG. Thus, by virtue of Article 21.4.3, the Excess ANG has to be first offered .....

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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 exploi .....

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on facilities. 32.1 Article 21.5.13 provides that the price of ANG and NANG produced from the Oil or Gas Field for use in India shall be specified in the Gas sales contract which shall be in accordance with the provisions of this Article 21.5.13. Thus, the price of ANG and NANG has to be specified in the Gas sales contract and has to be in accordance with the provisions of Article 21.5.13. 32.2 Clause (a) of Article 21.5.13 contains certain definitions which are for the purposes of that sub-Arti .....

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sing facility, subject to generally accepted international petroleum industry prices. (iii) Delivery Point means the upstream weld at the underwater connection between Sellers pipeline and ONGC s underwater Gas transmission line or lines which transport Gas from the Bassein Field to the Hazira area. (iv) Seller means Contractor. The central question involved in the present case is whether the Natural Gas is appropriated to the contract at the Delivery Point as envisaged under the PSC or Downstre .....

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f the Deliverability of ANG and NANG and Condensate delivered 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 procedure .....

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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 Deliverability of ANG and NANG and Condensate on a daily basis to the Buyer at the Delivery Point and the Buyer has to take and purchase the Gas and Condensate so delivered. The Delivery Point envisaged in this clause would be in terms of sub-clause ( .....

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cility, measured separately, and recombined and delivered at the Delivery Point at the operating pressure of the Buyer s owned or contracted pipeline up to a maximum pressure of one thousand psig. Under this clause, the Gas and Condensate are first required to be separated at the offshore processing facility, measured and recombined and then delivered at the Delivery Point. The expression Delivery Point in clause (c) would also mean Delivery Point as defined in clause (a)(iv) of Article 21.5.13 .....

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and sweetening facilities owned and operated by ONGC. The clause further provides that in order to compensate ONGC for the cost of ownership and operations of these facilities, Contractor shall make payments to ONGC on the basis of the costs fixed on an incremental basis by an internationally recognised expert who shall be selected by two members of the operating committee from a panel of three internationally recognised experts selected by ONGC. In case there is no agreement between the Compan .....

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rument 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. .....

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r to the respondent Commissioner of Sales Tax in its letter dated 3rd September, 1999 wherein it has been stated that the Delivery Point of Panna-Mukta gas is offshore underline connections at ONGC s existing pipeline, where the title passed to Government of India (or its nominee GAIL) (Reference Article 12.5.13(a)(iv) in 21.5.13(e) and Article 27.2 of PSC). It has further been stated that this gas together with ONGC s own gas, passes through ONGC owned sweetening facilities. As a matter of gest .....

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ng Contract negotiations. Installation of a sweetening facility at the Panna processing platform was determined not to be cost effective. In any case, the associated natural gas from Panna is commingled with ONGC gas in the ONGC pipeline and would require re-sweetening which would make the process redundant. The current arrangement is typical of most gas purchase and sales agreements in which commingling of gas takes place during transportation. In the letter dated 28th January 2002 (Exh-C2) of .....

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processing facility as per article 21.5.13(c) of the PSC. The sale is based on this measurement, and the carrier, i.e. ONGCL deducts the transportation and processing losses. No further measurement is taken after the 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 r .....

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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 with the agreement. 35. The question as regards the stage when appropriation of the .....

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or contracted pipeline up to a maximum pressure of one thousand psig. Under this clause, the gas and condensate are first required to be separated at the offshore processing facility, measured and recombined and then delivered at the Delivery Point. Delivery point is defined in clause 21.5.13(a)(iv) as the upstream weld at the underwater connection between Seller s pipeline and ONGC s underwater Gas transmission line or lines which transport Gas from Bassein Field to the Hazira area. Therefore, .....

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vant Party, or as the case may be, to Government or its nominee at the Delivery Point. Contractor shall be responsible for all costs and risks prior to the Delivery Point, and each Party shall be responsible for all costs and risks associated with such Party s share after the Delivery Point. Where the Government or its nominee purchases all or some of the Contractor s share of Crude Oil or Condensate, the Government or its nominee shall be responsible for all costs and risks in respect of the am .....

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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 .....

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viz. Natural Gas, was not in a usable condition and that it was made fit for use only after it was subjected to processing at ONGC s separation and sweetening facilities at Hazira. It has been vehemently contended on behalf of GAIL that what GAIL had agreed to purchase was sweetened Gas and that the parties had agreed that the same would be received by GAIL at Hazira downstream. That sweetening is a duty imposed on the Contractor and not the Union of India or GAIL. The cost of operating the swee .....

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s amounts to manufacture 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 same 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. Thus, the appropriation takes place post sweetening. It has been submitted that the appropriation of future goods would only ta .....

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s a Delivery Point other than the Delivery Point mentioned therein and that clause 3 of the ISPA contemplates delivery of Gas to the buyer at downstream of separation and sweetening facilities owned and operated by ONGC at Hazira. Therefore, when a different delivery point is provided for in the ISPA, which is the agreement between the Contractor and GAIL, it is that delivery point which would prevail over the general provisions of the PSC. 37. In the aforesaid backdrop, what arises for determin .....

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e 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 .....

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ry Point set forth in the Gas sales contract entered into by the Contractor. In the opinion of this court, in the first place, sale to GAIL as nominee of the Government of India cannot be said to be a sale to the domestic market, because, the domestic market would include several players, whereas here the gas is sold to GAIL as a nominee of the Government of India. Therefore, insofar as sale of Gas to the Government of India or its nominee is concerned, the same is governed by the PSC and the IS .....

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e heading Recitals it has been stated that the Government of India and Sellers are parties to that certain Production Sharing Contract dated 22nd December, 1994, with regard to Panna and Mukta fields. The PSC provides for sale of natural gas by Sellers to GOI or a nominee of GOI. GAIL having been nominated by the Government of India to purchase gas sold pursuant to the PSC is therefore the Buyer. The Seller claims to have potential of 50 MMSCFD of natural gas available from wells covered by the .....

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hase 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 (o .....

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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 respect to the rights or obligations of the parties, (ii) be deemed an admission by any party as to the proper interpretation of the PSC or the rights and obligations of any party thereunder, or (iii) be a waiver of any rights of a party under the PSC. 40. From the recitals contained in the ISPA, it is manifest that the contract is for sale and purc .....

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o refer the matter to arbitration, and signing of the agreement shall not be deemed to be a waiver of any rights of a party under the PSC. On a reading of the ISPA in its entirety, there is no reference to any Delivery Point therein. On behalf of the respondents, reliance has been placed upon the price clause in the agreement, viz. clause 3 of ISPA for the purpose of contending that in terms thereof, the Buyer has to pay to the Seller price on the basis of gas delivered at the downstream of ONGC .....

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PSC as well as the ISPA have to be read together to understand the true intent of the parties and not the stand of the respective parties. Both, the Government of India as well as GAIL have stated that what was agreed between the parties was sale and purchase of sweetened gas and that the delivery point is downstream of ONGC s sweetening and separation facilities at Hazira and that unless sweetened gas was delivered, GAIL would not have assented to accept the same and hence, there is no questio .....

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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 agre .....

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eliverability of natural gas as agreed under the ISPA at the Delivery Point. For the purposes of Article 21.5.13, Delivery Point means the upstream weld at the underwater connection between Sellers pipeline and ONGC s underwater Gas transmission line or lines which transport Gas from Bassein Field to the Hazira area. Therefore, on a conjoint reading of the PSC and the ISPA, what was agreed to be sold and purchased was Natural Gas which was to be delivered at the Delivery Point as defined under c .....

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shore processing facility in terms of clause (c) of Article 21.5.13 of the PSC at which point of time they are appropriated to the contract, whereafter they are delivered by the Contractor at the Delivery Point, as contemplated under clause (a)(iv) of Article 21.5.13 of the PSC, namely the upstream weld at the underwater connection between the Sellers pipeline and ONGC s underwater Gas transmission line or lines which transport Gas from Bassein Field to Hazira area. Thus, the ascertained goods a .....

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t the contention of the respondents, it would be necessary to examine the recitals contained in the ISPA to ascertain whether the parties 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 conte .....

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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 received by GAIL at Hazira downstream of separation and sweetening facilities owned and operated by ONGC, to contend that even under the PSC it was agreed that GAIL wo .....

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hrough a gas pipeline. Therefore, once the gas is appropriated and delivered at the Delivery Point as defined in Article 21.5.13 (a)(iv) of the PSC, namely at the offshore T-Junction, it can only be received downstream of ONGC s sweetening and separation facilities at Hazira along with all the other gas in the pipeline. Therefore, the natural gas which is delivered at the T-Junction, when it is received at Hazira by GAIL, would be in the form of sweetened gas as the same along with all other gas .....

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ed at the Delivery Point as provided under sub-clause (iii) of clause (a) of Article 21.5.13 of the PSC, viz. at the upstream weld at the underwater connection between Seller s pipeline and ONGC s underwater Gas transmission line or lines which transport Gas from the Bassein Field to Hazira also known as the Offshore T-Junction and the title to the goods also passes at the T-Junction and post appropriation, in terms of the PSC, the goods, viz. Natural Gas so appropriated, is taken to the ONGC s .....

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se 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. Indu .....

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L as nominee of the Government of India. In the opinion of this court, once the goods are appropriated to the contract and delivered at the Delivery Point outside the State of Gujarat, merely because the same undergo a process of sweetening having regard to the nature of the goods, it cannot be said that the goods were appropriated to the contract only post sweetening as is sought to be contended on behalf of the respondents. 44. Another aspect of the matter is that the reference to the goods in .....

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aseous hydrocarbons, and all substances contained therein, including Sulphur and Helium, which are produced from oil or gas wells, excluding those condensed or extracted liquid hydrocarbons that are liquefied at natural temperature and pressure conditions, and include the residue gas remaining after the condensation or extraction of liquid hydrocarbons from gas. Therefore, reference to Gas or Natural Gas in the PSC and the ISPA have to be attributed the meaning as contained in the above definiti .....

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ove, the gas which is injected at the T-Junction can be received by GAIL only at downstream of ONGC s processing facility at Hazira and hence, there is no option but for the gas to undergo processing at Hazira. The mere fact that the gas which is delivered at the TJunction undergoes certain processing at ONGC 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 deliver .....

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ement 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, modifi .....

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u 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. 4. Another contention which has been vehemently canvassed on behalf of the respondents is that the Gas which is delivered at the Offshore T-Junction is .....

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at the transactions were inter-state sales. The petitioner therein, entered into Gas Sales and Purchase Agreement (GSPA) with its customers in different States, including the State of U.P. The gas was extracted from the sea and brought to a place called Gadimoga in the State of Andhra Pradesh. At Gadimoga, the petitioner delivered natural gas (lean gas) to its different customers through a meter installed there to measure the quality and quantity of gas supplied to the buyers. It was the case of .....

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er 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 in .....

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and everyone would have to install his own pipeline which is neither feasible nor practical. The court observed that transportation of natural gas cannot be compared with transportation of tangible goods. Mixture of natural gas of common quality during the course of transportation does not affect the right of the buyer. Every buyer or shipper may draw its natural gas from the open access gas pipeline with due measurement at exit point. The court noted that while transporting the gas from Hazira .....

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ined with due movement to forward destination situated outside the State, therefore, it is an inter-state sale or trade. The court observed that in view of the statutory compulsion under the Petroleum and Natural Gas Regulatory Board (Access Code For Common Carrier Or Contract Carrier Natural Gas Pipelines) Regulations, 2008 and Notification dated 20th December, 2006 issued by the Government of India laying down the policy of natural gas pipeline, the change of the nature of gas during movement .....

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urt in 20th Century Finance Corporation Limited v. State of Maharashtra, (2000) 6 SCC 12, wherein the court examined the power of the State Legislature under Entry 54 of List II and held that State Legislature cannot by law, treat sales outside the State and sales in the course of import as sales within the State by fixing the situs of sales within the State since it is within the exclusive domain of the appropriate legislature, that is, the Parliament. The Allahabad High Court in the facts of t .....

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es 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 .....

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vement of gas on common carrier basis under the open access system because of statutory compulsion does not make the shipper s gas unascertained. The court referred to the international practice in the book dealing with Sale and Gas Transport Agreement Principle and Practice (Third Edition) written by Peter Roberts and observed that the delivery point shall be the point at which title, custody and risk or loss of damage of gas transfers from seller to buyer. The court referred to the following o .....

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e sale of goods, such that these components can be considered and applied individually. The GSA (or SPA) might seek to exclude certain implied conditions which would otherwise apply to define the transfers of title, custody and risk under GSA (or SPA). The GSA (or SPA) might also set up a regime whereby the seller indemnifies the buyer for claims and liabilities associated with the gas (or LNG) prior to the transfer of title and the buyer indemnifies the seller for claims and liabilities after t .....

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ler is exporting gas to (but is not conducting business within) 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 .....

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in 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 belonging to different persons are so intermingled as to be undistinguishable, whether by consent of the owners or by someone s wrongful act, the owners become tenants in common of the mass. The co-mingling of a fungible commodity does not affect owners .....

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- 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 commingled 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 goods, with title taken on a quality and quantity basis. Accordingly, and at the .....

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mental properties of natural gas (i.e., it is a fungible commodity, commingled with the contents of the pipeline on delivery, and therefore not separately identifiable once delivered), all of Tenaska s shipments of the Canadian natural gas via the TCPL/GLGC Pipeline were commingled with like natural gas and lost their separate identities once delivered to that pipeline. Furthermore, and when transported through the U.S, the Canadian natural gas would likely have been further commingled with U.S. .....

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tes. 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 .....

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separation facilities at Hazira. However, merely because the gas which is delivered at the Offshore T-Junction is co-mingled with other gases, does not detract from the fact that prior thereto, the natural gas sold by the seller to the buyer, was ascertained at the off-shore processing facility and appropriated to the contract of sale and delivered at the Delivery Point. The subsequent sweetening of the gas post appropriation, does not change the situs of the sale in terms of clause (b) of sect .....

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Point namely, at the upstream weld at the underwater connection between the Seller s pipeline and ONGC s underwater Gas transmission line which transport Gas from the Bassein Field to the Hazira area, that is, outside the State of Gujarat. Once it is held that the sale is not within the State of Gujarat, as a natural sequitur thereto, the State of Gujarat is not authorised or empowered to levy sales tax on such transaction. 48. As noticed earlier, it has been alternatively contended on behalf o .....

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controversy as to whether the sale of goods has taken place in the course of import, the learned counsel for the respective parties have placed reliance upon the decision of the Supreme Court in the case 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 (In .....

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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 land directly on the Oil Rig, the same landed at Mumbai seaport/airport and were then transshipped to the Oil Rig. The r .....

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s Act, 1976 whereby the Customs Act, 1962 and Customs Tariff Act, 1975 had been extended to the designated areas in the Continental Shelf and Exclusive Economic Zone of India as declared by the notification of the Government of India in the Ministry of External Affairs No. SO 643(E) dated 19th September, 1996 with immediate effect. The court after referring to the provisions of sections 7(1) and 7(7) along with sections 3, 6 and 7 of the Maritime Zones Act, held that if the area of the exclusive .....

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Act since the area of discharge or unloading/loading is within India by virtue of the deeming provisions of sections 6 and 7 and consequent explanations of the Maritime Zones Act. The court, accordingly, held that the respondents were justified in refusing to permit the petitioner to clear, ship stores and spares for use on the Oil Rig, on transhipment permit and without payment of customs duty while the Oil Rig is in the designated area. The court also held that the continental shelf land, the .....

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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 the .....

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different in the case of continental shelf and exclusive economic zone of India. The continental shelf of India comprises of the seabed beyond the territorial waters to a distance of 200 nautical miles. The exclusive economic zone represents the sea or waters over that continental shelf. 74. From the reading of Sections 6 and 7 of the Maritime Zones Act, 1976, it is clear that in respect of the continental shelf and exclusive economic zone, India has been given only certain limited sovereign ri .....

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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, subsection (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 enactments which are .....

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. 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 .....

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sive 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 .....

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ai High is a foreign destination and whether the sales of helium gas by the respondent to its vendee situated in the Mumbai High region are sales in the course of export out of India as contemplated by section 5(1) of the Central Sales Tax Act, 1956. The assessee claimed that the sales which were effected were sales in the course of export under section 5(1) of the CST Act for the reason that Mumbai High falls beyond the territorial waters of India. The case of the assessee, therefore, was that .....

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at Schedule. The court found the submission fallacious because it proceeded on the basis that the continental shelf and the exclusive economic zone are comprised within the territory of India. The court held that section 6(6) and section 7(7) empower the Central Government to extend any enactment for the time being in force in India to the continental shelf or the exclusive economic zone, respectively. Upon being extended, the enactment is to have effect as if the continental shelf or, as the ca .....

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ignated 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 .....

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ent 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 revenue sought to assess the sale is an inter-State sale involving a movement of goods from the State of Maharashtra to Mumbai High and was contrary to the mandate of the provisions of section 6 of the CST Act. On the question as to whether Mumbai High was a foreign destination, and that the sale of helium gas by the assessee to its vendee .....

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rt of goods involved the movement of goods from within the customs frontier to a point beyond. Contrariwise, the import of goods involves the movement of goods from a point which lies outside the customs frontier to a point within. Sub-section (1) of section 5 also recognises the intrinsic relevance of goods crossing the customs frontier in the case of an export, or as the case may be, on import of goods. The court observed that the provisions of Customs Act, 1962 had been extended to designated .....

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conclusion. Once, the Union Government acting as a delegate of a legislature has extended the provisions of the Customs Act, 1962 and the Customs Tariff Act, 1976 to designated areas of the continental shelf or the exclusive economic zone, with effect from January 15, 1987, it would be impossible to hold that the movement of goods from within the territory of India to that territory of the continental shelf or exclusive economic zone constitutes an export of goods out of the territory of India. .....

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ct, 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 th .....

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ay High can be stated to be a movement of goods from the State of Gujarat to another State within the country. The court referred to various provisions of the Maritime Zones Act and held thus:- 34. From the above provisions it can clearly be seen that though Union of India has certain rights over the Exclusive Economic Zone, the Indian Union does not have sovereignty over such an region. Clause (a) to sub- Section (7) of Section 7, for example provides that the Union has, over the Exclusive Econ .....

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ated area and make such provision as it may deem necessary with respect to such area for different purposes including for the purpose of customs and other fiscal matters in relation to such designated area. Further sub-Section (7) of Section 7 empowers the Central Government to issue notification to extend certain laws to any part of the exclusive economic zone and to make such provisions as are necessary for enforcement of such enactments. It is further provided that thereupon the enactments so .....

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f the territory of India. The language is clear and gives rise to a deeming fiction for the limited purpose of extension and application of laws notified 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 Arti .....

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ed 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 expression movement of goods from one State to another contained in clause (a) of Section 3 of CST Act. It is clear that the goods had not been moved from .....

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and Exclusive Economic Zone. Such notifications have been issued extending the Income Tax Act, 1961, Customs Act and the Customs Tariff Act, Central Excise Act and the Central Excise Tariff Act, the Service Tax and the provisions contained in Finance Act, 1994. However, admittedly, no such notification has been issued extending all or any of the provisions of CST Act to any of the designated areas, continental shelf or Exclusive Economic Zone. To our mind in absence of such notification, respon .....

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tion issued by the Central Government under Sections 6 and 7 of the Maritime Zones Act. 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 export benefit can be availed on such supply. It was further held that mineral oil produced in the exclusive economic zone and continental shelf will be chargeable to Central Excise duty as goods produced .....

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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 .....

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the exclusive economic zone and continental shelf would be chargeable to central excise duty as goods produced in India. The court had observed that in the present case, it was, however, confronted with the situation where CST Act has not been extended by issuance of notification to the Central Government to the continental shelf or exclusive economic zone. It has been contended on behalf of the petitioners that there is a contradiction between the law laid down by this court in the case of Lar .....

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goods is in the course of import of goods into the territory of India. The Supreme Court in the case of Aban Lloyd Chiles Off-Shore Limited (supra) has, after considering the provisions of the Maritime Zones Act and the notifications whereby the provisions of the Customs Act and Customs Tariff Act have been extended to the designated areas under the Maritime Zones Act, 1976, held that the definition of India as given in section 2(27) of the Customs Act gets extended by these provisions to cover .....

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onomic zone as a designated area so that exploration, exploitation and protection of resources belonging to India could be carried out. The court held that the area of exclusive economic zone/continental shelf where the oil rigs are stationed (of course outside territorial waters) is deemed to be a part 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 g .....

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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 Sal .....

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rritory of India as a result whereof, the sale can be said to be in the course of import of goods into the territory of India. 52. It may be noted that while a specific contention has been raised by the petitioners in the memorandum of petition that the Panna and Mukta oil/gas fields are located in the area of Economic Zone as defined in the Maritime Zones Act; the location of the said oil/gas fields is beyond the Territorial Waters of India; and since the Natural Gas has been imported by the Jo .....

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rs, it has been contended that the statements and assertions regarding Customs frontiers having been extended to the exclusive economic zone which are not supported by any pleadings and documents must be disregarded. While it is true that the facts regarding issuance of the notifications which find reference in the above decisions do not form part of the pleadings in the present case, nonetheless, this court cannot be oblivious to the notifications which find reference in the above decisions. Be .....

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y 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 claus .....

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ay 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. By Notification No. S.O. 189(E) issued on 11th February, 2002, the Central Government in exercise of powers conferred by clause (a) of sub-section (5) of secti .....

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ction with any of the activities referred to in clause (a). The Explanation thereto provides that for the purposes of that notification mineral oils include petroleum and natural gas. 53. The Supreme Court in Aban Lloyd Chiles Off- Shore Limited (supra), in the context of the above notifications 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 subsoil underlying therein and the air space over such territorial w .....

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in respect of the continental shelf and exclusive economic zone, India has been given only certain limited sovereign rights and such limited sovereign rights conferred on India in respect of continental shelf and exclusive economic zone cannot be equated to extending the sovereignty of India over the continental shelf and exclusive economic zone as in the case of territorial waters. Sub-section (6) of Section 6 and sub-section (7) of Section 7 of the Maritime Zones Act, 1976 empower the Central .....

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al 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 .....

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refore, no customs duty would be leviable. Likewise, goods supplied to a place in the exclusive economic zone or continental shelf will not be treated as export under the Customs Act and no export benefit can be availed on such supply. Any mineral oil produced in the exclusive economic zone or continental shelf will be chargeable to Central excise duty, as goods produced in India. 86. Implication of Notification No. S.O. 189(E) dated 7- 2-2002 and its consequences have been clarified in Circular .....

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ot 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. Further, mineral oils produced in the EEZ or c .....

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ty shall 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 .....

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ve 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 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 Ac .....

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ental 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 island, offshore terminals, etc. By the said Act, customs and other fiscal enactments have been extended. Therefore, the object is very clear that the revenue generated from exploration and exploitation should accrue to the coastal State viz. India. 98. As stated above, the .....

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der Section 2(21) of the Customs Act. The area of discharge or unloading/loading is within India by virtue of the deeming provisions of Sections 6 and 7 of the Maritime Zones Act, 1976. The Customs Act stands extended to the designated areas by virtue of the Maritime Zones Act, 1976. The oil rigs carrying on operations in the designated area is not a foreign going vessel as the same would be deemed to be a part of Indian territory i.e. going from the territory of India to an area which also deem .....

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eas 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 wat .....

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e applicable, but whether the movement of goods from the Panna-Mukta oil fields to Hazira within the State of Gujarat is a sale in the course of import into the territory of India. Therefore, what is required to be examined is whether the Panna-Mukta oil fields can be said to be outside the territory of India. Since the Panna-Mukta oil fields are situated in the exclusive economic zone, they are not situated within the territory of India. But by virtue of a deeming fiction, in view of the above .....

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ls in the continental shelf of India or the exclusive economic zone of India. It may be noted that for the purposes of the said notification, mineral oils include petroleum and natural gas. Thus, for the purpose of extraction of natural gas in the continental shelf and the exclusive economic zone, the provisions of the Customs Act apply. Consequently, the customs frontiers of India stand extended beyond the designated areas viz., continental shelf and the exclusive economic zone for the said pur .....

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t, which provides as to when a sale or purchase of goods is sought to take place in the course of import or export. In the present case, the relevant provision would 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 fr .....

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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 designated areas and consequently, the customs frontiers stand extended beyond the designated areas and hence, the Panna-Mukta oil fields from where the .....

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ccepted. In the opinion of this court, there is no contradiction between the decision of the Bombay High Court in the case of Commissioner of Sales Tax v. Pure Helium (supra) and the decision of this court in the case of Larsen & Toubro Limited v. Union of India (supra). In Larsen & Toubro Limited (supra), this court was seized with a matter wherein it was contended that the movement of goods from Hazira to Bombay High was a movement of goods from the State of Gujarat to another State wi .....

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State of the Union of India. The court held that in the absence of any notification extending the provisions of the Central Sales Tax to the designated area, the respondents could not have demanded tax under the CST Act from the petitioners on its sale of machinery parts etc, which sale was completed at Bombay High. Therefore, the court in the said case was seized with a question as to whether the provisions of the CST Act would be applicable to the designated area. In the context, the court hel .....

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e 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 Co .....

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ase. Accordingly, the movement of goods, viz. natural gas from the Panna-Mukta oil fields to Hazira within the State of Gujarat cannot be said to be in the course of import into the territory of India, as the movement of goods is not from a place which lies outside the customs frontiers of India so as to fall within the ambit of sub-section (2) of section 5 of the Act. Under the circumstances, in the facts of the present case, it cannot be said that the sale of Natural Gas by the Contractor to G .....

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o manufacture and would attract the provisions of the GST Act. Having regard to the fact that this court has held that what was agreed to be purchased was natural gas, and the goods as agreed viz. natural gas stood appropriated at the offshore Processing Facility and delivered at the Delivery Point as contemplated under sub-clause (iv) of clause (a) of Article 21.5.13 of the PSC, and consequently, the sale did not take place within the State of Gujarat, the question as to whether subjecting the .....

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quired to fall in any of the three categories namely, (i) sale in the course of inter-State trade, (ii) sale in the course of import or export of goods, or (iii) sale within the State. It was submitted that there is no fourth category and that in the present case, it is an admitted position that the sale in question is not an inter-State trade, 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 .....

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e 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 .....

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e assessees can only fall within one of three categories. They are either local sales or inter-State sales or export sales. Each of the assessees have sold its goods to another dealer. If that dealer is also a resident of Haryana and has taken delivery of the goods in Haryana and exported them thereafter, the assessees sales would be local sales. If the purchaser-dealer of the manufactured goods is in some other State and the goods have been moved out of Haryana in pursuance of that sale, they w .....

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ning of Section 5(1) of the Central Sales Tax Act. 9. We think Shri Agarwal is right in saying that any sale effected by the assessees in the circumstances, which have been set out by us earlier, must fall in one of three categories. We are unable to conceive of a fourth category of sale, which could be neither a local sale nor an inter-State sale nor an export sale. Shri Gupta, on behalf of the State, contended that the goods might have been directly moved by the assessee to a port for shipment .....

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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 Sectio .....

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bservations of the apex court cannot be seen in isolation and it is well settled that it is not observation of the court but what the court holds in the fact-situation of a given case which is the ratio that can be applied in similar set of facts and circumstances. In the decision of Murli Manohar & Co., [1991] 80 STC 79 (SC); [1991] 1 SCC 377, the apex court was not considering the sale in the nature that we are confronted with. It was not a case where the0 sale of goods occasioned the move .....

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from one State to another since Bombay High does not form part of any State of the Union of India. In the present case, this court has held that the movement of goods is not in the course of import of goods into the territory of India and that the sale has not taken place within the State of Gujarat and the parties do not dispute that the sale is not an inter-State trade. Therefore, the sale does not fall within any of the three categories. This case is squarely covered by the above referred de .....

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for reopening the assessment and the re-assessment orders are without jurisdiction and ab initio void. It has been contended that in respect of five years, namely, 1997-98 to 2001-02, the original assessment of the assessee namely, BG Exploration is a nil assessment insofar as the Panna-Mukta gas is concerned. Notices of reassessment in each of these five years were issued on 20th October, 2003 and the reply of the petitioners was filed on 12th December, 2003 and the reassessment orders were pa .....

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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 we .....

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hat any turnover of Panna-Mukta gas had escaped assessment to invoke section 44 of the Gujarat Sales Tax Act on 20th October, 2003 and that between 30th June, 2003 and 20th October, 2003, the Assessing Officer had no new material before him nor did he discover any new fact that was unknown to him. Reliance has been placed upon various decisions of the Supreme Court as referred to hereinabove. On behalf of the respondents, it has been contended that the respondent authorities were required to car .....

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TO, etc. have been rendered in the context of the Income Tax Act, it may be germane to refer to the decision of a Division Bench of this court in the case of Batliboi & Co. Ltd. v. Sales Tax Officer (I), Class-I, Division 1, Surat, (2000) 119 STC 583, wherein orders of provisional assessment were subject matter of challenge in a writ petition under Article 226 of the Constitution of India. The court held thus: 17. Section 41B providing for provisional assessment reads as under: 41B. Provisio .....

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ning* to invite pointed attention and for emphasis) 18. 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 d .....

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mers 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 transfers were inter-State works contract and not inter-State sales. He held them exigible to tax under the Central Act. It is on taking such view of law that the assessing officer provisionally assessed the petitioner and consequently imposed tax, interest a .....

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are sought to be supported by stating thus: as a very large amount of tax was involved and regular assessment of the petitioner was likely to take time, I decided to make provisional assessment. 20. From the portion quoted above, it is amply clear that at no point of time the assessing officer had any reason to believe that the dealer has evaded the tax. The expression evasion of tax conveys mens rea on the part of the dealer. The expression conveys a meaning that the dealer by infringing the l .....

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ver of sales or turnover of purchases of any goods chargeable to tax under that Act has escaped assessment or has been under-assessed or assessed at a lower rate in respect of any period in an order of assessment under section 41. Therefore, in either case, the Commissioner should have reason to believe that the dealer has evaded the tax; or that any turnover of sale or purchase of goods chargeable to tax has escaped assessment or is under assessed or assessed at a lower rate. Therefore, while r .....

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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 Exploratio .....

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rding to his interpretation. In response thereto, the petitioner gave a detailed reply dated 28th January, 2002 as well as a reply dated 4th March, 2002 clarifying some issues such as Delivery Point as well as the difference between sweet and sour gas, etc. and the fact that sweet and sour gas remain the same commercial commodity. The Assessing Officer, therefore, had before him, the PSC, the ISPA as well as the detailed submissions of the petitioner on various clauses of the PSC and after consi .....

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h January, 2002 issued by the Additional Commissioner, it is evident that the show cause notice for re-assessment had been issued on the very same grounds as in the previous show cause notice. Therefore, when the Assessing Officer had, after applying his mind to the material produced before him and the grounds raised by him and the explanation given by the petitioner, issued a subsequent show cause notice on the very same grounds, it is nothing but a mere change of opinion. A perusal of the subs .....

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n paying any Sales Tax in Gujarat State on said transactions on the ground that delivery point of Panna-Mukta Fields is at offshore underline connection at O.N.G.C s existing pipeline and title of goods is 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 sal .....

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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 exparty decision. The notice under section - 44 of Gujarat Sales Tax, No.37, for Re-assessment for the year _98-99____ i .....

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d a NIL assessment order. Therefore, while issuing the show cause notice under section 44 of the GST Act, the Commissioner was required to have reason to believe that any turnover of sales or purchase had escaped assessment. The formation of such opinion is a precondition for exercise of powers, both under section 41 as well as section 44 of the GST Act. The Supreme Court in Commissioner of Income-Tax v. Kelvinator of India Ltd. (supra) has in the context of section 147 of the Income Tax Act, 19 .....

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believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to .....

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sioner 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 .....

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arned Additional Advocate General has contended that these petitions are not maintainable, inasmuch as, the petitions involve disputed questions of fact and the petitioners have already availed of the alternative statutory remedy under section 65 of the GST Act and the appeals preferred by the petitioners are pending for final adjudication. Therefore, these petitions are required to be rejected on the ground of there being an efficacious alternative remedy available to the petitioners. In suppor .....

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and dismissed the petitions. It may be noted that in the facts of the said case the assessment orders were challenged on the ground of being arbitrary etc. The very jurisdiction to levy sales tax was not subject matter of challenge therein. The decision of the Supreme Court in Sales Tax Officer, Jodhpur v. M/s Shiv Ratan G. Mohatta, AIR 1966 SC 142, was cited wherein the court found that no exceptional circumstances existed in that case to warrant the exercise of extraordinary jurisdiction unde .....

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something to show that it would be a case of palpable injustice to the assessee to force him to adopt the remedies provided under that Act. Reliance was placed upon the decision of the Supreme Court in Jaipur Shahar Hindu Vikas Samiti v. State of Rajasthan, (2014) 5 SCC 530, wherein the court held that the appellant therein 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 Su .....

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sy 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 c .....

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ed by reopening the assessments without having reason to believe that any turnover had escaped assessment. It was argued that the petitioners are not obliged to avail of the alternative remedy but can maintain a writ petition under Article 226 of the Constitution of India. In support of such submission, the learned counsel placed reliance upon the decisions of the Supreme Court in the case of Raza Textiles v. Income Tax Officer, Whirlpool Corporation v. Registrar of Trademarks and Godrej Sala Le .....

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April, 2005. It was submitted that, therefore, at this stage, it would be iniquitous to ask the petitioners to avail of the alternative remedy without deciding the constitutional and legal issues that arise and that have been argued extensively in these proceedings. In support of such submission, reliance was placed upon the decisions of this court in the case of Pioma Industries v. Union of India and Indian Tourist Development Corporation through Ashoka Hotel v. Assistant Commission of Commerci .....

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te 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. .....

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erroneously, then the assessee was entitled for the writ of certiorari prayed for by him. It is incomprehensible to think that a quasi-judicial authority like the Income Tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen. In our opinion, the Appellate Bench is wholly wrong in opining that the Income Tax Officer can decide either way . 67. In Whirlpool Corporation v. Registrar of Trademarks (supra), the Supreme Court held that under Arti .....

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writ petition has been filed for the enforcement of any of the fundamental rights or where there has been violation of the principles of natural justice or where the order or proceedings are wholly without jurisdiction or the vires of an Act is challenged. 68. In Godrej Sara Lee v. Commissioner (AA) (supra), the Supreme Court was of the opinion that the question as to whether the notification referred to therein could have a retrospective effect or retroactive operation was a jurisdictional fac .....

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r Article 226, something going to the root of the jurisdiction of the Sales Tax Officer, something to show that it would be a case of palpable injustice to the assessee to force him to adopt the remedies provided by the Act. In the present case, the controversy raised in the petitions goes to the root of the jurisdiction of the Sales Tax Officer to levy tax under the GST Act. Therefore, it would be highly unjust to ask the assessee to avail of the alternative statutory remedy when the entire pro .....

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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 y .....

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e law was also in favour of the appellant, would be squarely applicable to the facts of the present case wherein the assessment orders are from 1997-98 to 2001-02 and the legal position is, as discussed hereinabove, clearly in favour of the petitioners, it would, therefore, not be in the interest of justice to relegate the petitioners to avail of the remedy before the statutory authorities. In the aforesaid premises, the availability of the efficacious alternative remedy when the very jurisdicti .....

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iscovered and was still in the wells and it was not even certain as to whether the Government of India would purchase all the Gas that is produced and delivered. Therefore, though under the PSC 100% of the deliverability of ANG and NANG and Condensate was agreed to be produced and delivered, the goods viz., natural gas cannot be said to be ascertained goods at the time when the Production Sharing Contract came to be executed. Clause (a) of section 4(2) of the Central Sales Tax Act, 1956 would no .....

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e ISPA executed between the constituents 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 .....

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ods, 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 contract and delivered at the Delivery Point. In terms of Article 27.2 of the PSC, the title to the goods also passed to the Buyer at the Delivery Point. The situs of the sale is the Offshore Processing Facility where the goods were appropriated to the contract. Therefore, .....

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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. viii.The act of sweetening of natural gas, having taken place post ap .....

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customs frontiers of India Consequently, the sale of goods cannot be said to have taken place in the course of import of goods into the territory of India as contemplated under sub-section (2) of section 5 of the Central Sales Tax Act, 1956. x. Since the the sale of goods has taken place outside the State of Gujarat, the question as to whether or not subjecting the Natural Gas to the process of sweetening amounts to manufacture becomes redundant, and hence, it not necessary to enter into the me .....

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