2015 (10) TMI 2406 - HC - VAT and Sales Tax

Petitioner's Sales Tax Exemption Claim Denied; Recovery Notices Valid

M/s. Raj Shipping and M/s. Bhambani Shipping Ltd. Versus The State of Maharashtra and Others

M/s. Raj Shipping and M/s. Bhambani Shipping Ltd. Versus The State of Maharashtra and Others - [2016] 89 VST 460 (Bom) Issues Involved:1. Whether the sales made by the petitioner are within the State of Maharashtra and taxable under the Maharashtra Value Added Tax Act, 2002 (MVAT Act).2. The legality and validity of the recovery notices and assessment orders issued by the respondents.3. Whether the transactions of the petitioner are exempt from sales tax under Notification No. VAT/1506/CR135B/Taxation1.4. The applicability of the Central Sales Tax Act, 1956 (CST Act) to the transactions in question.5. The territorial jurisdiction of the MVAT Act concerning sales made in territorial waters.Issue-wise Detailed Analysis:1. Whether the sales made by the petitioner are within the State of Maharashtra and taxable under the MVAT Act:The court examined the entire transaction process, noting that the petitioner is a registered dealer under the MVAT Act and CST Act. The petitioner receives orders from shipping vessels, places back-to-back orders with oil marketing companies, and supplies high-speed diesel (HSD) to vessels beyond the port limits. The court found that the goods, initially procured from within Maharashtra, are transported to the vessels stationed beyond 1.5 nautical miles. The court applied the principle of territorial nexus, concluding that substantial parts of the transaction, including the procurement and initial handling of goods, occur within Maharashtra. Therefore, the sales are within the State and taxable under the MVAT Act.2. The legality and validity of the recovery notices and assessment orders issued by the respondents:The petitioner argued that the assessment order was arbitrary, unreasonable, and issued without following the principles of natural justice. The court noted that the assessment order was claimed to be passed on 30th March 2015 but served on 30th April 2015. The court found that the petitioner had opportunities to present their case during the assessment process. The court held that the assessment order and recovery notices were issued following due process, and the petitioner had remedies available under the MVAT Act to challenge these orders.3. Whether the transactions of the petitioner are exempt from sales tax under Notification No. VAT/1506/CR135B/Taxation1:The petitioner claimed exemption under the said notification, arguing that their sales of HSD at retail outlets were exempt. The court examined the notification and the conditions for exemption, noting that the exemption applies to sales at retail outlets of motor spirits. The court found that the petitioner's transactions, involving large quantities of HSD supplied to vessels, did not qualify as sales at retail outlets. Therefore, the petitioner was not entitled to the claimed exemption.4. The applicability of the CST Act to the transactions in question:The petitioner contended that the transactions should be considered inter-state sales under the CST Act. The court referred to sections 3 and 4 of the CST Act, which outline the conditions for a sale to be deemed inter-state. The court found that the transactions did not meet these conditions, as the goods were appropriated to the contract within Maharashtra before being transported to the vessels. Therefore, the CST Act did not apply, and the transactions were taxable under the MVAT Act.5. The territorial jurisdiction of the MVAT Act concerning sales made in territorial waters:The petitioner argued that the sales occurred in territorial waters, which are outside the jurisdiction of the MVAT Act. The court examined various legal principles and precedents, including the concept of territorial nexus and the extension of state boundaries to territorial waters. The court concluded that the MVAT Act could apply to transactions with sufficient territorial connection to the State of Maharashtra. Since the goods were procured, handled, and initially transported within Maharashtra, the MVAT Act had jurisdiction over the sales, even if the final delivery occurred in territorial waters.Conclusion:The court discharged the rule in all petitions, holding that the sales made by the petitioner were within the State of Maharashtra and taxable under the MVAT Act. The petitioner was not entitled to the claimed exemption, and the recovery notices and assessment orders were valid. The court provided the petitioner with three weeks to file appeals and directed that no coercive measures be taken during this period.