Foreign aircraft fuel exemption prevails over State sales tax and excludes covered fuel sales from taxable turnover.

A notification issued under section 3 of the Foreign Aircraft (Exemption from Taxes and Duties on Fuel and Lubricants) Act, 2002, enacted to implement an international aviation convention under Article 253, prevails over contrary State sales tax law. Fuel supplied to foreign aircrafts within the notification's scope was therefore exempt from tax and could not be included in taxable turnover under the Punjab General Sales Tax Act, 1948. The assessment was set aside to that extent, and the authority was directed to exclude the impugned fuel sales and recalculate liability accordingly.

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Issues: Whether sale of air turbine fuel supplied by the corporation to foreign aircrafts was exempt from tax under the Foreign Aircraft (Exemption from Taxes and Duties on Fuel and Lubricants) Act, 2002, and whether such turnover could be included in the taxable turnover under the Punjab General Sales Tax Act, 1948.

Analysis: Article 253 of the Constitution of India empowers Parliament to enact laws for implementing international treaties and conventions. The Foreign Aircraft (Exemption from Taxes and Duties on Fuel and Lubricants) Act, 2002 was enacted for that purpose, and section 3 authorises the Central Government to issue a notification granting exemption from taxes and duties on fuel and lubricants supplied to aircraft of foreign countries. The notification issued under that provision was held to extend to all States and Union Territories and to operate notwithstanding any contrary State law. On that basis, the supply of fuel to foreign aircrafts could not be treated as part of the taxable turnover under the State sales tax law.

Conclusion: The claim for exemption was accepted, and the inclusion of the sale value of fuel supplied to foreign aircrafts in the taxable turnover was unsustainable and in favour of the assessee.

Final Conclusion: The assessment order was set aside to the extent it disallowed the exemption, and the authority was directed to exclude the impugned fuel sales and re-determine tax liability accordingly.

Ratio Decidendi: A notification issued under section 3 of the Foreign Aircraft (Exemption from Taxes and Duties on Fuel and Lubricants) Act, 2002, made to implement an international aviation convention, prevails over contrary State tax law and excludes the covered fuel sales from taxable turnover.

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