Offshore supply in the exclusive economic zone was not a sale in India for excise exemption purposes.

For fiscal exemption purposes, goods supplied to offshore platforms in the exclusive economic zone were not treated as sold in India merely because they were delivered to offshore installations. The Court held that territorial waters form part of India, but the continental shelf and exclusive economic zone do not become Indian territory for duty purposes unless the relevant fiscal enactment is extended to that area by valid notification. Because the platforms had not been so notified at the material time, the supply was outside India for the notification. The goods were therefore eligible for exemption, and the principle that goods taken beyond territorial waters are treated as exported supported that result.

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Issues: Whether goods supplied to offshore platforms in the exclusive economic zone were sold in India so as to deny exemption under the excise notification.

Analysis: The exemption applied to excisable goods manufactured in a 100% export oriented undertaking, provided they were not allowed to be sold in India. The relevant question was therefore whether the delivery sites at the offshore platforms formed part of India for fiscal purposes at the material time. The Court examined the Constitution, the Territorial Waters, Continental Shelf, Exclusive Economic Zones and other Maritime Zones Act, 1976, and the later notifications extending fiscal laws to designated areas. It held that territorial waters form part of India, but the continental shelf and exclusive economic zone do not become part of India in all senses merely by reason of limited sovereign rights. For fiscal statutes, the relevant enactment must be extended by notification to a designated area before the area can be treated as within India for duty purposes. At the time of supply, the platforms had not been so notified. The Court also relied on the principle that goods taken beyond territorial waters to high seas are treated as exported.

Conclusion: The goods were not sold in India for purposes of the notification, and the assessee was entitled to exemption from excise duty.

Ratio Decidendi: For fiscal exemption purposes, an offshore area in the exclusive economic zone does not become Indian territory unless the relevant enactment is validly extended to that area by notification, and goods delivered there are not treated as sold in India merely because they were supplied to offshore installations.

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