TaxTMI 
TaxTMI 
2012 (2) TMI 5
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.... are sales in the course of export out of India as contemplated by S. 5(1) of the Central Sales Tax Act 1956?" 2. The assessee, Pure Helium (India) Private Limited is a licensed manufacturer of Helium gas with a factory at Palghar in the district of Thane. The assessee imports liquid Helium gas and thereupon manufactures gas of the required standard in its factory. The assessee is registered under the Bombay Sales Tax Act 1959 and the Central Sales Tax Act 1956 with effect from 22 April 1988. The assessee was assessed as an unregistered dealer for the period commencing from 1 April 1984 and ending on 21 April 1988 and as a registered dealer for the period commencing from 22 April 1988 and ending on 31 March 1989 under the Central Sales Tax Act 1956. Assessment orders were passed by the Assistant Commissioner of Sales Tax on 29 March 1993 for the period when the assessee was assessed as an unregistered dealer and on 18 March 1992 for the period thereafter. The assessee had effected sales of Helium gas to the Oil and Natural Gas Commission (ONGC) which is engaged in the production of gas and crude oil at Mumbai High which is situated about 150 km from the coast line o....
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....conomic zone of India on the continental shelf to which limited sovereign rights stand extended and the movement of goods from Indian shores to Mumbai High will occasion an export of the goods to a place outside the territory of India. Consequently, the Tribunal allowed the sales as export sales under Section 5(1) and deleted the tax liability imposed by the Revenue authorities. Reference applications were filed by the Revenue. The Reference applications were initially rejected by the Tribunal. The Revenue having moved this Court the applications were disposed of by directing the Tribunal to draw up a statement of case and to refer certain questions of law, as formulated earlier for the decision of the Court. The Tribunal has accordingly referred the two questions noted earlier for the decision of this Court. 4. On behalf of the Revenue it has been submitted that i) Helium gas which is manufactured at Palghar, Thane is delivered to the Shipping Corporation of India, acting as agent for ONGC at Nhava Sheva Port for onward movement to the rig at Mumbai High which is situated within the area of the continental shelf at a distance of 160 nautical miles from the shore; i....
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.... thereto not amounting to export, for the purposes of sales tax also it cannot be treated as an export. viii)If the sale made by the Respondent is not held to be a sale in the course of interstate trade, and if the sale is not to be treated as an export, the sale will have to be held to be a local sale in view of delivery having been taken by ONGC through SCI at Nhava Sheva Port in Maharashtra by applying the principles of Section 20 of the Sale of Goods Act 1930. There is no difference in the rate of tax between local sales and interstate sales in the present case and the Respondent cannot be prejudiced by whether it is taxed as a local sale or interstate sale. 5. On the other hand it has been urged on behalf of the assessee that i) The Revenue has purported to tax the sale under the CST Act 1956 and consistently, since the order of assessment passed by the Assessing Officer. The case of the Revenue is that the sale has taken place in the course of interstate trade and commerce. It has never been the case of the Revenue that there has been a local sale and this issue has not been discussed, debated or dealt with because it was not raised by the Revenue at any stag....
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.... Zones " Act, 1976). Section 3 provides that the sovereignty of India extends and has always extended to the territorial waters of India and to the seabed and subsoil underlying and the area space over such waters. The limit of the territorial waters extends to 12 nautical miles under Section 3(2). Under Section 6(1), the continental shelf of India comprises of the seabed and subsoil of the submarine areas that extend beyond the limits of its territorial waters throughout the natural prolongation of its land territory to the outer edge of the continental margin or to a distance of 200 nautical miles from the baseline referred to in Section 3(2) where the outer edge of the continental margin does not extend upto that distance. Section 6(2) stipulates that India has and always has full and exclusive sovereign rights in respect of its continental shelf. Under sub section (3) it is submitted that without prejudice to Section 6(2) the Union has in the continental shelf inter alia sovereign rights in the following matters : "(a) sovereign rights for the purposes of exploration, exploitation, conservation and management of all resources; (b) exclusive rights and jurisdiction for ....
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....n respect of the continental shelf and exclusive economic zone, India has certain limited sovereign rights which cannot be equated to extending the sovereignty of India over the continental shelf and exclusive economic zone as in the case of the territorial waters; ii) Sub section (6) of Section 6 and sub section (7) of Section 7 of the Maritime Zones Act, 1976 create a fiction by which the continental shelf and exclusive economic zone are deemed to be a part of India for the purposes of such enactments which are extended to those areas by the Central Government by issuing a notification; iii) The Maritime Zones Act 1976 is in consonance with the United Nations Convention on the Law of Sea 1982 which has been acceded to by India. Under the convention, a coastal state has no sovereignty in the territorial sense over the contiguous zone, but it exercises sovereign rights for the purposes of exploring the continental shelf and exploiting its natural resources. In that sense the coastal state exercises a restricted sovereignty linked to the resources and without the incident of territoriality. 10. The Union of India has in exercise of the powers conferred by Sect....
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....to be a part of the territory of India under the notifications issued by the Union Government. The supply of imported spares or goods or equipment to the rigs by a ship will attract import duty and the ship employed for the transportation of goods would not be a foreign going vessel under Section 2(21) of the Customs Act. The Supreme Court has held that the entire scheme of the Customs Act and other Acts such as the Maritime Zones Act 1976 which are pari materia have to be read together. Consequently if mineral oil is extracted or produced in the exclusive economic zone or continental shelf and is brought into the main land, it will not be treated as an import and therefore, 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 Acts and no export benefit can be availed of on such supply. 12. The judgment of the Supreme Court was preceded by several judgments of the High Courts which considered inter alia the nature of sovereignty exercised by the Union over the continental shelf and the exclusive economic zone. The position that the nature of sovereignty over ....
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.... shelf or exclusive economic zone to which the enactment has been extended is part of the territory of India. Consequently and for instance once the Customs Act 1962 stands extended to a designated 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. 15. The next aspect of the case which needs analysis relates to the power of the States to legislate with respect to sales tax. Article 286(1) of the Constitution provides that no law of a State shall impose or authorize the imposition of a tax on the sale or purchase of goods where the sale or purchase takes place (a) outside the State; or (b) in the course of the import of goods into or export of goods out of, the territory of India. Clause (2) of Article 286 empowers Parliament to formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). Under Article 269(1) taxes on the sale or purchase of goods and on the consignment of goods in the course of interstate trade or commerce are levied and collected by the Union of India, but are to ....
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....stipulates that 'customs station' and 'customs authorities' shall have the same meanings as in the Customs Act 1962. 16. The liability under Section 6 of the CST Act arises on all sales of goods effected by a dealer in the course of interstate trade or commerce. A sale takes place in the course of interstate trade or commerce within the meaning of Section 3 if the sale has either occasioned the movement of goods from one State to another or is effected by a transfer of documents of title to the goods, during their movement from one State to another. A movement of goods from one State to another is required in order that the sale which occasions the movement is regarded as a sale in the course of interstate trade or commerce. The obvious fallacy in the attempt of the Revenue to tax the sale in the present case as an interstate sale is the assumption that the sale was occasioned by a movement of goods from one State to another. The Revenue relies upon the definition of the expression State in Section 3(" " 58) of the General Clauses Act 1897 which includes a Union territory. The hypothesis is that since under Article 366(30) a Union territory includes a territory other than t....
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....tory of India. Section 5(1) of the CST Act 1956 provides that a sale or purchase of goods is deemed to take place in the course of export of goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. Export of goods out of the territory of India envisages the movement of goods across the customs frontier. The notion of the customs frontier is not alien to sub section (1) of Section 5. Once the customs frontier stands extended to a territory, there can obviously be no export of goods to a territory which falls within the customs frontier. An export of goods involves the movement of goods from within the customs frontier to a point beyond. Contrariwise the import of goods involves a movement of goods from a point which lies outside the customs frontier to a point within. Indeed, sub section (1) of Section 5 also recognises the intrinsic relevance of the goods crossing the customs frontier in the case of an export, or as the case may be, on import of goods. On 14 January 1987, (and with effect from 15 January 1987) the Union Go....
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....me Zones Act 1976. 19. The issue that remains to be considered is about the position prior to 15 January 1987, when the notification issued by the Union Government extending the provisions of the Customs Act, 1962 and of the Customs Tariff Act, 1975 to designated areas of the continental shelf and exclusive economic zone came into force. Counsel appearing on behalf of the Revenue submits that even prior to 15 January 1987, there was no export involved in a sale which occasioned the movement of goods from the State of Maharashtra to Mumbai High. The submission is based on the decision of a Constitution Bench of the Supreme Court in Burmah Shell Oil Storage and Distributing Co. of India Ltd. vs. Commercial Tax Officer.11 STC 764 In that case, Burmah Shell supplied aviation fuel at Dum Dum Airport to aircraft which were to proceed abroad. The Sales Tax authorities assessed sales tax and issued notices of demand. The submission of the assessee was that the sale had taken place outside the State of West Bengal since aviation spirit was delivered for consumption outside the State. Alternatively, it was urged that there was export out of the territory of India since aviation fuel was tak....
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....f a sale was involved, while any sale in the course of the second taking out would be. In both, the goods were taken out of the country. The difference lies in the fact that whereas the goods, in the first example, had no foreign destination, the goods, in the second example, had. It means, therefore, that while all exports involve a taking out of the country, all goods taken out of the country cannot be said to be exported. The test is that the goods must have a foreign destination where they can be said to be imported. ... If the goods are exported and there is sale or purchase in the course of that export and the sale or purchase occasions the export to a foreign destination, the exemption is earned. ... The crucial fact is the sending of the goods to a foreign destination where they would be received as imports. The two notions of export and import, thus, go in pairs." In that case, the Supreme Court held that though the aviation fuel loaded on board of aircraft for consumption is taken out of the country, it is not exported since it has no destination where it can be said to be imported and so long as it does not satisfy this test, it cannot be said that the sale was i....