Inter-State movement for central sales tax depends on valid territorial extension of the taxing law to maritime zones.

Central sales tax under the Central Sales Tax Act, 1956 applies only where goods move from one State to another within the territory of India. The court noted that Article 297 and the Maritime Zones Act, 1976 confer only limited sovereign rights over the exclusive economic zone and do not, without a valid notification, make that zone part of India's territory for this purpose. As no notification extended the Act to the exclusive economic zone, the movement of goods from Hazira to Bombay High was not treated as inter-State movement under section 3. The tax demand was therefore held to lack jurisdiction and the assessment was quashed.

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Issues: Whether the sale of goods to be supplied to Bombay High occasioned movement of goods from one State to another so as to attract section 3 of the Central Sales Tax Act, 1956, and whether the absence of a notification extending that Act to the exclusive economic zone excluded the levy of Central sales tax.

Analysis: Article 1 of the Constitution of India confines the territory of India to the States, Union territories and other acquired territories. Article 297 and the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 confer only limited sovereign rights over the continental shelf and exclusive economic zone, and do not by themselves make those areas part of the territory of India. The deeming fiction in the Maritime Zones Act operates only when an enactment is extended by notification. In the absence of any notification extending the Central Sales Tax Act, 1956 to the exclusive economic zone, movement of goods from Hazira to Bombay High could not be treated as movement from one State to another within section 3 of that Act.

Conclusion: The impugned tax demand lacked jurisdiction under the Central Sales Tax Act, 1956.

Final Conclusion: The assessment was quashed and the petition was allowed, with the State restrained from insisting on refund of the deposited amount for the stated period.

Ratio Decidendi: For Central sales tax to arise, the movement of goods must be from one State to another within the territory of India, and a maritime zone acquires that status only if the relevant taxing enactment is extended to it by a valid notification.

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