TaxTMI 
TaxTMI 
2016 (1) TMI 870
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....e are three petitioners, viz. British Gas Exploration and Production India Limited, Reliance Industries Limited, and the Oil and Natural Gas Corporation Limited, who are collectively known as "the Contractor". All the three petitioners have filed individual petitions challenging orders passed by the Sales Tax Department against them. For the sake of convenience, reference is made to the facts as stated in Special Civil Application No.2084/2004 which has been filed by British Gas Exploration and Production India Limited. Wherever the facts are different, reference shall be made to the same at an appropriate stage. 2. The petitioner - British Gas Exploration and Production India Limited (hereinafter referred to as "BGEPIL") is engaged in the business of exploration and production of oil and gas. On 22nd December, 1994, the Government of India, BGEPIL, Reliance Industries Limited (hereinafter referred to as "RIL") and Oil and Natural Gas Corporation Limited (hereinafter referred to as "ONGCL") agreed and executed two Production Sharing Contracts for development and exploration of Panna- Mukta and Mid-South Tapti Oil and Gas fields, in the west-coast off shore, India. Under the term....
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....and distribution of natural gas. 5. The Government of India appointed Gas Authority of India Limited (hereinafter referred to as "GAIL") as its nominee to take over the natural gas produced by the Contractor on behalf of the Government of India. The Contractor delivered the natural gas to ONGCL for transportation and re-delivery of the same to GAIL. Natural Gas is separated from condensates at the oil fields and also measured under sophisticated equipment at the oil fields itself. The delivery is thereafter taken by ONGCL from the Contractor at the off-shore tie-in point into the ONGCL pipeline itself for and on behalf of GAIL in terms of the final delivery point in the said PSC. ONGCL, therefore, takes delivery on behalf of GAIL and undertakes to transport the said Natural Gas to Hazira for handing over to GAIL. It is the case of the petitioners that in the nature of the peculiar transport arrangement under sea water and commercial expediency, ONGCL transports the Natural Gas again mixed with its own gas. The pipeline, therefore, contains Natural Gas of which ONGCL has taken delivery from the joint venture as also its own Natural Gas as also similar gas of others, there being n....
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....ch sales should not be taxed. The Additional Commissioner, however, issued a notice purporting to be a show-cause notice calling upon the said petitioner to show cause why supply of Natural Gas from Panna-Mukta oil/gas fields to GAIL, should not be taxed. The petitioner submitted its reply by letters dated 28th January, 2002 and 4th March, 2002. It is alleged in the petition that the second respondent Commissioner has, notwithstanding the clear position of law, adopted a resolute attitude to tax these transactions of the Joint Venture and has directed the respective assessing authorities to impose tax on these transactions by resorting to reassessments or provisional assessments as the case may be in case of each respective constituent of the Joint Venture. Pursuant to these directions, the fifth and sixth respondents issued notice for reassessment under section 44 of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the GST Act"). Similar notices also came to be issued to RIL and ONGCL. In response to the notices, the first petitioner gave very specific and detailed reply and also pointed out that the sale of Gas under the GST was liable to tax at the last stage, that i....
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....tution quashing and setting aside the assessment order dated 3rd July 2008 passed by the Respondent No.3 for the F.Y.2003-04; Special Civil Application No.11677/2007 (a) this Hon'ble Court may be pleased to issue an appropriate writ, direction or order under Article 226 of the Constitution quashing and setting aside the assessment order dated 30-3-2007 passed by the respondent no.3 for the F.Y.2002-03. Special Civil Application No.3119/2004 (a) that this Hon'ble Court be pleased to declare that in respect of sale of Natural Gas effected by the Petitioner and the other Joint Venture Partners under the Production Sharing Contract dated 22nd December, 1994 with Government of India to Government of India and or its nominee GAIL, in view of sale of such Natural Gas taking place outside State of Gujarat, no Sales Tax is leviable or recoverable under the provisions of the Gujarat Sales Tax Act, from the Petitioner. (b) That this Hon'ble Court be pleased to issue Writ of Mandamus or any other appropriate Writ, Order or Direction under Article 226 of the Constitution of India, directing the Respondents - (i) to refrain from levying, assessing and re....
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....tively); C. Your Lordships be pleased to issue a writ of prohibition or a writ in nature of prohibition or any other appropriate writ, order or direction commanding the respondents not to levy/demand/collect any tax by treating the transaction between the petitioner and GAIL as sale eligible for payment of sales tax under the provisions of Gujarat Sales Tax Act, 1969. Special Civil Application No.4022/2009 [a] this Hon'ble Court may be pleased to issue an appropriate writ, direction or order under Article 226 of the Constitution quashing and setting aside the assessment order dated 30th March, 2009 passed by the Respondent No.3 for the F.Y. 2004-05. 9. Mr. P. Chidambaram, Senior Advocate, learned counsel for the petitioner - BG Exploration and Production India Ltd. assailed the impugned orders by submitting that such orders had been passed without any authority in law as the sales in question have not taken place within the State of Gujarat and, therefore, are not amenable to tax under the GST Act. It was submitted that there are limitations on the power of a State Government to impose sales tax. Under Article 286 of the Constitution, a State cannot impose s....
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....e seller or by the buyer. 9.2 It was submitted that in the facts of the present case, the sale of the goods, namely, Natural Gas under the PSC took place outside the State of Gujarat since none of the conditions under section 4(2) of the CST Act are satisfied. It was pointed out that the territory of "India" has been defined in the Constitution of India in Article 1(3) which states that the territory of India shall comprise of States and Union Territories and such other territories as may be acquired. There is, however, no reference to the territorial waters in Article 1. 'State' has been defined under Article 1(2) of the Constitution of India to mean the territories that are specified in the First Schedule of the Constitution of India. The territory of Gujarat is stated to be the territories specified in section 3(1) of the Bombay State Reorganization Act, 1960 under Entry 4 of the First Schedule. When read with section 3(1) of the Bombay State Reorganization Act, 1960, the territory of the State of Gujarat is extended to cover the following territories:- "(a) Banaskantha, Mehsana, Sabarkantha, Ahmedabad, Kaira, Panchmahals, Baroda, Broach, Surat, Dangs, Amreli, Surend....
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....gly, the gas was delivered at the delivery point in terms of Article 21.5.13(b). It was further submitted that Article 1.27 and Article 21.5.13(a)(iv) define "Delivery Point" as the upstream weld at the underwater connection between the seller's pipeline and ONGC's underwater gas transmission line or lines which transport gas from Bassein field to the Hazira area. Actually, gas is delivered to one of the two parallel pipelines laid down by ONGC from the Bassein field to Hazira which is entirely consistent with Article 1.27 of the PSC. It was submitted that for the purpose of Article 21.5.13(c), the gas is measured at the Offshore Processing Platform belonging to the petitioner. By virtue of Article 27.2, title passes to the Government of India or its nominee at the delivery point. The price of gas is payable for each MMBTU of gas delivered. Under Article 21.5.13(a)(vi), MMBTU means one million BTUs on a net heating value basis. The unit is based on 'heat energy'. There is a standard formula to convert a certain "volume" of' gas into the equivalent "heat energy". Article 21.5.13(d) sets out the formula for calculating the price that will be paid by the buyer to t....
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....ned by all the parties. It was submitted that GAIL is not a party to the contract and under Article 21.5.14, any document between the contractor and GAIL shall not abrogate the obligation of the Government of India under the PSC. Hence, the Interim Sales Purchase Agreement (ISPA) cannot amount to an amendment or modification or variation of the PSC. Reliance was placed upon the decision of the Supreme Court in the case of Hindustan Shipyard v. State of Andhra Pradesh, (2006) 6 SCC 579, for the proposition that it is not the meaning of an individual recital or the inference flowing from any term or condition of the contract read in isolation, but an overview of the contract wherefrom the nature of the transaction covered thereby has to be determined. It was submitted that no long term Gas Sales Contract was entered into between the Contractor and the Government of India or its nominee till 2008. For the intervening period, on 5th February, 1998, the sellers (ONGC, RIL and the petitioner) and GAIL entered into an Interim Sales and Purchase Agreement (ISPA) without prejudice of any kind in relation to their respective positions. This ISPA was renewed every year until 2005. According t....
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....act between the seller and the Government. The goods were always specific or ascertained goods because the volume of gas to be produced, sold and delivered is captured in the word "Deliverability" as defined in Article 21.5.13(a)(iii) of the PSC and that all the gas that falls within "Deliverability" must be sold on a daily basis to the Government of India or its nominee under Article 21.5.13(b). It was submitted that applying section 4(2)(a) of the CST Act, the goods were outside the State of Gujarat (gas wells or Offshore Platform) when the contract of sale was made. Alternatively, it was submitted that assuming that the goods (gas) were unascertained or future goods, they were appropriated to the contract, on a daily basis, when they were delivered at the delivery point to ONGC's Bassein - Hazira pipeline. There was appropriation on a daily basis and the seller and buyer assented to such appropriation. The goods were outside the State of Gujarat at the time of appropriation (at the delivery point). Therefore, whether section 4(2)(a) or section 4(2)(b) of the CST Act is applied to the case, the sale shall be deemed to have taken place outside the State of Gujarat. In support ....
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....e light of the principles laid down in the above decisions, the State of Gujarat is not competent to levy sales tax on the sale of Natural Gas to GAIL. 9.5 Alternatively, Mr. Chidambaram submitted that the sales in the present case are sales of goods in the course of import into the territory of India. Article 1(3) of the Constitution defines the territory of India. The gas wells and the Offshore Platform are located at places outside the territory of India. Article 297(3) of the Constitution enables Parliament to specify the limits of the territorial waters, the continental shelf, the exclusive economic zone and other maritime zones. Parliament has made the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 (Maritime Zones Act). Section 3 thereof declares that the sovereignty of India extends and has always extended to the territorial waters of India. Section 5 defines 'Contiguous Zone'. Section 6 defines 'Continental Shelf' and section 7 defines 'the Exclusive Economic Zone'. Under section 5(5), section 6(6) and section 7(7) of the Maritime Zones Act, the Central Government, by notification, may extend any enac....
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....oods into the territory of India" within the meaning of section 5(2) of the CST Act. According to the learned counsel, since the phrase "territory of India" is not defined in the CST Act, the meaning must be consistent with the Constitution of India and hence, the meaning of the phrase will be the same as in Article 1(3) of the Constitution. Since the CST Act has not been extended to any area beyond the territorial waters, there is no question of a deemed territory of India for the purpose of the CST Act. Consequently, the State of Gujarat would not have jurisdiction to levy sales tax on the transaction which is a sale in the course of import into the territory of India. It was submitted that the gas wells, Offshore Platform and delivery point are located outside the territory of India. Any movement of goods from a place outside the territory of India (Gas Wells, Offshore Platform and delivery point) to a place within the territory of India (Hazira) will indeed be a movement in the course of import of the goods into the territory of India. Any sale which occasions such import would fall under section 5(2) of the CST Act and, therefore, be outside the purview of the GST Act. In supp....
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....which are delivered at the delivery point and the title passes to the Government or its nominee at the delivery point and all costs and risks after the delivery point become the responsibility of the Government or its nominee. It was pointed out that the impugned assessment orders have assessed the goods as Natural Gas. The rate of sales tax is levied under Item (7) of part B of Schedule II to the GST Act which is "Natural and Associated Gas" and hence, the respondent State cannot now contend that the goods are anything other than Natural Gas. 9.8 As regards the validity of the reopening of assessment, it was submitted that the show-cause notices are under section 44 of the GST Act to reopen the assessment and the consequent reassessment orders are without jurisdiction and are void ab initio. Referring to the record of the case, it was pointed out that in respect of five years, viz., 1997-98 to 2001-02, the original assessment was a nil assessment so far as Panna-Mukta Gas was concerned. Notice of reassessment in respect of each of these five years was issued on 20th October, 2003 and the petitioner filed its reply thereto on 12th December, 2003. The reassessment orders were pas....
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...., CIT v. Kelvinator, (2010) 320 ITR 561, Phoolchand Bajranglal v. ITO, (1993) 4 SCC 77, State of Maharahstra v. Ketan Enterprises, 2010-(ST1)-GJX-0125-Bom, an unreported decision of this court in the case of Krishak Bharati Cooperative Limited v. State of Gujarat rendered in Special Civil Application No.3708/2012 as well as the decision in the case of Niko Resources v. Assistant Director of Income Tax, 2014-TIOL-1679-HC-AHM-IT. Referring to the impugned order, it was submitted that the reassessment orders proceed on the basis that since sweetened gas is delivered at Hazira, the State is competent to levy sales tax. It was submitted that for the reasons already submitted, the basis of the reassessment is erroneous and perverse. Moreover, it is merely a change of opinion and hence, does not furnish any ground to reopen the nil assessment insofar as Panna-Mukta Gas is concerned. 9.9 Next, it was submitted that assuming that the petitioner is liable to pay sales tax under the GST Act for the period from 1997-98 to 2004-05, under the PSC, it is the Government of India or its nominee who has to pay sales tax, if any such tax is due. Referring to the pleadings of the parties, it was po....
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....iculars. This is a case where the issue is a constitutional and legal issue namely, whether the sale is a local sale within the State of Gujarat or not and hence, in such a case, section 45(2)(c) of the GST Act is not attracted and no penalty can be levied thereunder. It was submitted that under section 45(6) of the GST Act, penalty is leviable if the reassessed amount of tax exceeds the original amount of tax by 25%. In the present case, the original assessment was made only in respect of Tapti gas. If sales tax is leviable on Panna-Mukta Gas also, the reassessed amount will naturally exceed the original assessed amount. If the difference exceeds 25%, the assessee is, under section 45(5), deemed to have failed to pay tax. Based on such a deeming provision, another penalty is leviable under section 45(6) of the GST Act. It was urged that in the present case, the failure to pay the tax on the Panna-Mukta gas is solely because of the dispute whether the sale of Panna-Mukta Gas is a local sale within the State of Gujarat. Since the question is purely a constitutional and legal issue, there is no justification to deem a failure to pay tax and levy penalty on the basis of such deemed fa....
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....ments and that this is not a fit case where provisional assessments can be made. It was argued that the impugned assessment orders are passed without jurisdiction and are void ab initio, inasmuch, as an order can be passed under section 41(b) of the GST Act where the Commissioner has reason to believe that the dealer has evaded tax. In the instant case, at no point of time, the Assessing Officer had any reason to believe that the dealer had evaded tax and that there did not exist any facts, circumstances or grounds, for the Assessing Officer to invoke the power of making provisional assessment under section 41(b) of the Act. It was contended that apart from the fact that there is no evasion of tax, the impugned order is not passed on the premise that the dealer has evaded the tax. Reliance was placed upon the decision of this court in the case of Batliboy v. Sales Tax Officer, 2000 (111 or 119) STC 583, wherein the court has held that under section 41B of the GST Act, provisional assessment can be made by the Commissioner or his delegate as assessing authority only if "he has reason to believe that a dealer has evaded tax". In the facts of the said case, neither in the show cause n....
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....ontended that the sales in question have not taken place in the course of import into the territory of India. The attention of the court was invited to the provisions of sub-section (2) of section 5 of the CST Act to submit that the word 'import' is not defined under the said Act. 'Customs frontier' is not defined under the CST Act and, therefore, section 2(22) of the Customs Act has to be imported into section 5(2) of the CST Act. It was submitted that section 5(2) of the CST Act is not applicable because the sale does not occasion import from a foreign destination. According to the learned counsel, in view of the provisions of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1956 and notification issued thereunder, the customs frontier is extended. The provisions of the Customs Act are imported into the provisions of the CST Act for determining whether the sale is in the course of import. It was submitted that the movement of goods from the Continental Shelf or Exclusive Economic Zone to Hazira onshore being within the customs frontier, is not import into the territory of India and the sales in question are, therefor....
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.... 11.1 Mr. Shelat next submitted that it is the case of the Contractor that the sale is of specific/ascertained goods; however, such contention is not borne out from the Production Sharing Contract which is for future goods, that is, unascertained goods. It was submitted that when the Contractor entered into the production sharing contract, they were not aware while undertaking petroleum operations in the contract area, as to what quantity/quality of natural gas could be received. Moreover, the contracting parties are not ad idem about the delivery point for the appropriation to the contract of sale. The attention of the court was invited to the provisions of section 4 of the CST Act to submit that clause (b) of subsection (2) thereof provides that in case of unascertained or future goods, a sale of goods is deemed to be inside a State if the goods are within the State at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. It was pointed out that according to the Union of India and GAIL, appropriation takes place at Hazira downstream of the separation and sweetening ....
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....opriation by the Union of India or its nominee. The delivery point, according to the Union of India and its nominee is onshore Hazira in view of Articles 21.5.13(iii), 21.5.13(c) and 21.5.13(e). Therefore, in view of the provisions of clause (b) of sub-section (2) of section 4 of the CST Act, the sale of goods in the instant case is deemed to have taken place inside the State of Gujarat. 11.3 It was submitted that when Article 21.3 of the PSC refers to the domestic market, the Government of India has contemplated domestic market to serve through its nominee GAIL and GAIL has to comply with the directions of the Union of India. Article 21.3, therefore, has to be read conjointly with other clauses. According to the learned counsel, reliance placed by the petitioners upon the decision of the Supreme Court in Reliance Natural Resources v. Reliance Industries (supra) is not justified because in the facts of the said case under the Production Sharing Contract with the Union of India, 'the contractor was free to sell the gas produced from the block subject to the adjustment and terms of profit sharing between the Government and it, as set out in the Production Sharing Contract'. It was....
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....sses where the terms of the contract show a clear intention that it will pass notwithstanding that there may be an express provision in the contract to the contrary." Reference was also made to Halsbury's Laws of England Volume 13 paragraph 174, wherein it has been stated that "It is a rule of construction applicable to all written instruments that the instrument must be constructed as a whole in order to ascertain the true meaning of several clauses. The best construction of deeds is to make one part of the deed expound the other so as to make all other parts agree. Effect must, as far as possible, be given to every word and every clause. It has been said that the court in a case of patent satisfaction (though the dictum may have a more general application) must adopt a purposive construction rather than a purely literal one derived from applying to it the kind of meticulous verbal analysis in which lawyers are so often tempted by their training to indulge. The fact that a particular construction leads to a very unreasonable result is a relevant consideration." 11.6 In support of his submissions, the learned counsel placed reliance upon the decision of the Supreme Court in ....
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....e by the vendor to the goods for the purpose of putting them into a state in which the vendee is to take them and a case where the vendee for his own satisfaction wants to get the goods weighed for the purpose of ascertaining the amount of the price. This distinction has been recognized in a number of cases and appears to be well founded: Annan v. Dubar Sheikh A.I.R. 1923 Oudh 15 (at p. 41 of 26 O.C.) and Abdul Aziz v. Jogendra Krishna Roy [1917] 44 Cal. 98 (at p. 115). Two rules of civil law appear to have been incorporated both in the Sale of Goods Act and in the Indian Statute with which we are concerned. These rules have been stated by Blackburn, J, to be as follows (Contract of Sale, third edition, 1910, P. 184): They are two fold: the first is that where, by the agreement, the seller is to do anything to the goods for the purpose of putting them into that state in which the buyer is to be bound to accept them, or, as it is sometimes worded, into a deliverable state, the performance of those things shall (in the absence of circumstances indicating a contrary intention) be taken to be a condition precedent to the vesting of the property. The second is, that wh....
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....contract for sale of a portion of a specified larger stock. Till the portion is identified and appropriated to the contract, no property passes to the buyer. Mr. Shelat submitted that appropriation is essentially a question of fact when parties are not ad idem and when the buyer contends that it is not appropriated on the delivery point as understood by the Contractor, this court is required to consider the totality of the circumstances under which the Production Sharing Contract has been executed and implemented. 11.12 On the question as to whether the sweetening of gas is a process leading to new marketable gas, the learned counsel submitted that what has been agreed upon by the Production Sharing Agreement is delivery of sweetened gas onshore at Hazira. It was submitted that the petitioners have contended that under the Production Sharing Contract, the sale is of natural gas delivered at the upstream weld, but such gas delivered at the upstream weld is not the same as agreed by the Union of India and GAIL. The sour gas becomes a product which is marketable only after it is sweetened by processing and it is this marketable product that the buyer had agreed to purchase. Therefo....
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....ncludes processing, treating or adapting any goods. The court was of the opinion that the expression 'manufacture' covers within its sweep not only such activities which bring into existence a new commercial commodity different from the articles on which that activity was carried on, but also such activities which do not necessarily result in bringing into existence an article different from the articles on which such activity was carried on. The decision of the Supreme Court in the case of Commissioner of Income Tax v. M/s. Oracle Software India Ltd. JT 2010 (6) SC 369 was cited wherein the court held as under:- "The term "manufacture" implies a change, but, every change is not a manufacture, despite the fact that every change in an article is the result of a treatment of labour and manipulation. However, this test of manufacture needs to be seen in the context of the above process. If an operation/process renders a commodity or article fit for use for which it is otherwise not fit, the operation/process falls within the meaning of the word 'manufacture." After examining various decisions, the court in paragraph 22 of the decision held as under:- "22. ....
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....or determination of price rate with price share agreement. In the Reliance case, the contractor was to sell gas to a third party with the approval of the Government. In the facts of the present case, the buyer is already nominated by the Government of India and the gas in the sweetened form is to be delivered as already indicated. Price is also fixed and hence, such decision would be of no assistance to the petitioners. 12. Vehemently opposing the petitions, Mr. P.K. Jani, learned Additional Advocate General for the respondent State authorities submitted that the question as to whether the goods are sold and manufactured within the State of Gujarat has to be dealt with in the light of section 4(2)(b) of the CST Act, viz., that the goods were within the State of Gujarat when the sale took place so as to attract the GST Act and that the said goods were future unascertained goods. Reference was made to the provisions of clause (b) of sub-section (2) of section 4 of the CST Act to submit that if the said section is read with the provisions of the Sale of Goods Act, it would specify that the goods are sold within the State of Gujarat on the same being ascertained by processing the ga....
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....ed on behalf of the Government of India who is a signatory to the PSC, to point out that it has been stated therein that according to the Union of India, insofar as interpretation of the PSCs and Interim Gas Sales and Purchase Contract is concerned, its stand is that in the facts and circumstances of the present case, the delivery point is onshore at Hazira and the contention of the petitioners that the delivery point is off-shore at Panna-Mukta oil fields has been denied. In view of the specific terms of the PSCs executed between the petitioner No.1 - RIL and ONGC and the Union of India and the Interim Gas Sales and Purchase Agreement executed between the petitioner No.1 - RIL and ONGC and GAIL - respondent No.7 as also the fact that the gas produced at Panna-Mukta oil fields is incapable of being consumed till it is subjected to a sweetening process on-shore at Hazira and the quantity of gas becomes ascertainable on-shore at Hazira, the delivery point is on-shore at Hazira. The liability of sales tax, if any, has to be determined on the above basis. It was submitted that when the Government of India, who is a signatory to the PSC, has specifically stated that the sale has taken p....
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....s of manufacture, a different and distinct product in the form of sweetened gas has emerged which is liable to be taxed under the provisions of section 3 of the Gujarat Sales Tax read with rule 3 of the Gujarat Sales Tax Rules, 1990. It was, accordingly, submitted that the say of the petitioners that the goods are appropriated by the purchasers, that is, GAIL is contrary to the provisions of the Contract Act, the Sale of Goods Act as well as terms of the PSC and the ISPA. 12.2 Next, it was submitted that in terms of the expression 'delivery point', the terms 'upstream' or 'downstream' are of great significance. The term 'upstream' is that stage of the production process that involves searching for and extracting raw materials. This part of the production process does not do anything with the material, such as processing it. It only deals with the finding and extraction of the raw material. The term 'downstream' means the stage in the production process that involves processing the materials collected during the upstream stage into a finished product. Further, the downstream stage includes the actual sale of that product to other businesses, Government or private individuals. The....
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.... the T-Junction. Therefore at the T-Junction in the ONGC pipeline both NANG and ANG is in a combined state. Mr. Jani further submitted that the contention that the title of goods passes at T-Junction because the goods in question acquire the characteristic of ascertained goods is incorrect and that reliance placed upon clause 21.5.13(a)(ii) has no relevance and in fact, the Production Sharing Contract refers to 100% deliverability. Referring to clause 21.5.13(e), it was submitted that the parties have acknowledged that Gas Authority of India shall receive the Gas at Hazira. Simultaneously, clause 3 of the ISPA also is very clear on the situs. Thus, it is clear that the parties have time and again acknowledged that the delivery point shall be Hazira. 12.4 Mr. Jani next contended that the sale has not taken place in the course of import into the territory of India. According to the learned counsel, the provisions of the Customs Act have been made applicable to the area of Panna and Mukta and by virtue of the notification issued by the Union of India, the customs frontiers have been extended to Panna- Mukta area and, therefore, for the purpose of the Customs Act, Panna-Mukta is a p....
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....ds. The natural gas, due to the presence of high content of Hydrogen Sulphide has a rotten smell and is commonly known as sour gas. The presence of Hydrogen Sulphide is undesirable because it makes the gas extremely harmful and lethal to breathe and can be extremely corrosive. The gas is considered sour if the content of Hydrogen Sulphide exceeds 5.7 mg per cubic metre of natural gas. The process of removing Hydrogen Sulphide and other organic compounds from sour gas is commonly referred to as sweetening and the gas is known as sweetened gas. The attention of the court was invited to the process known as "Amine Process" or alternatively, "Girdler Process" whereby Hydrogen Sulphide is removed from natural gas. It was submitted that in the present case, it is only after the completion of the said process of converting the natural gas/sour gas into sweetened gas that GAIL takes delivery of the same which can be appreciated from Article 21.5.13(e) of the Production Sharing Contract and the Interim Sales and Purchase Agreement. It was submitted that the processing of natural gas is a very detailed and complex procedure. Once the product is processed and manufactured, a new product comes....
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....ost important word which requires due consideration is the word 'recombine' used in clause 21.5.13(c) which means 'reunite'. Therefore, on recombining, it loses the characteristic of being ascertained even if it were to be assumed that the contention of the petitioner is accepted. It was submitted that it is thus relevant to consider the provisions of section 22 of the Sale of Goods Act which clearly mention that where there is a contract of ascertained goods in the deliverable state, but the seller is bound to weigh, measure, test or do something for the purpose of ascertaining the price, the title of the goods shall not pass, till the time such act is done. Therefore, if all the three provisions as well as Articles 21.5.13(e) and clause 3 of ISPA are read in a conjoint manner and applied to the present case, it would simply mean that Hazira, Surat is the place where ascertainment of goods takes place and on ascertaining only, the price gets fixed which is the specific intention of the parties to the contract. Therefore, the definition of 'delivery point' is not relevant at this juncture. In support of his submissions, the learned counsel placed reliance upon the following decisio....
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....of appeal before the appellate authority and in the facts of the present case, the petitioners have already availed of such alternative statutory remedy under section 65 of the Gujarat Sales Tax Act by preferring appeals before the appellate authority, which are pending for final adjudication. It was submitted that the petitioners have simultaneously preferred these petitions by challenging the very jurisdiction of the Sales Tax authorities in levying sales tax on the ground that the sales have taken place beyond the territorial waters of India and thus, the State of Gujarat has no jurisdiction to levy sales tax as delivery of natural gas in the light of clause 21.5.13(a)(iv) has taken place at upstream-weld underwater connection. Therefore, the court may first deal with the primary objection as regards the maintainability of the petitions on the ground that the petitioners have already availed of the alternative remedy and that they should be directed to first exhaust the statutory remedy so availed. In support of such submission, the learned counsel placed reliance upon the following decisions:- (1) Titaghur Paper Mills Company Limited v. State of Orissa, AIR 1983 SC 603....
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....s under the GST Act to impose tax on the sale transaction between the petitioner and GAIL provided the sale takes place in Gujarat. It was submitted that in view of the above propositions, the decisions cited by Mr. Chidambaram and Mr. Soparkar on the interpretation of the phrase 'occasions such import' under section 5 of the CST Act and 'occasions the movement of goods from one State to another' under section 3 of the CST Act are irrelevant. It was submitted that in view of the fact that neither has the sale of gas taken place in the course of import of goods into the territory of India nor has such sale been occasioned by the movement of goods from one State to another, the decisions cited by the learned counsel on the issue as to what is 'manufacture' and whether sweetened natural gas is different from sour natural gas, are irrelevant. 13.1 It was submitted that in the absence of the applicability of sections 3 and 5 of the CST Act, the court will have to determine whether the sale of gas has been made within the State of Gujarat as per section 2(28) of the GST Act read with section 4(2) of the CST Act read with the provisions of the Sale of Goods Act, 1930 to the extent appl....
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....ommodities or not under the Sales Tax Act and irrespective of the fact whether sweetening of gas is manufacturing or not, what is agreed to be sold is sweetened gas and consequently, the sale of such goods would be deemed to take place at the time of their appropriation to the contract of sale by the seller or the buyer. Such appropriation would be feasible only when the goods as agreed to be sold come into existence which is possible only after sweetening. The appropriation, therefore, takes place post sweetening. The appropriation of future goods would only take place when the goods are completed and ready for delivery. In view of section 4(2)(b) of the CST Act, the sale of gas is deemed to take place inside the State of Gujarat and consequently, such sales is liable to sales tax under the GST Act. 13.3 Elaborating upon the above propositions as well as dealing with the contentions raised on behalf of the petitioners, Mr. Thakore submitted that GAIL is in substantial agreement with what is submitted by the petitioner - BG Exploration in respect of the limitation on the power of the State Government to impose sales tax. Reference was made to the provisions of Article 286 of the....
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....he Sale of Goods Act, for the purpose of section 4(2) of the CST Act, it is irrelevant where the title of the property in goods passes or has already passed or will pass. It was submitted that to illustrate, suppose specific goods such as a motorcar is situated in Ahmedabad. The owner of the motorcar agrees to sell his motorcar to the purchaser under a written contract signed by the owner - vendor and the purchaser at Calcutta on 10th October, 2014 when the Car was at Ahmedabad. The terms of contract provide that the property in car will pass to the purchaser when the full payment is made. The payment will be made in installments within six months. The title in the property would pass on the last instalment being paid on 1st July, 2014. By then the car is stationed in Calcutta. So far as the Sale of Goods Act is concerned, the intention of the parties is that the property will pass on 1st July, 2014 and accordingly would actually pass on 1st July, 2014 at Calcutta. Yet for the purposes of the GST Act, the Gujarat Sales Tax Authorities would be entitled to levy sales tax because on the date of the contract, the car being specific goods was inside the State of Gujarat and that would ....
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....g such transactions, the legislature has not thereby lost the prerogative of bending the common law to the service of the revenue. The legislature has laid down in the sales tax statutes clear-cut principles of determining the situs of sales and purchase in order to bring about uniformity, certainty, economy in collection, and efficiency in tax management, all of which are desiderata in all fiscal measures. These provisions, if they should serve their purpose at all, must, in reason, override any special terms in private contracts to the contrary. Reliance was also placed upon the decision of the Supreme Court in the case of Madras Marine and Co. v. State of Madras, (1986) 3 SCC 552. 13.6 Dealing with the contention raised by the petitioners that the sale of goods took place outside the State of Gujarat, it was submitted that in this regard, it is important to determine whether the goods are specific goods/ascertained goods or future goods. If the goods are specific goods, then section 4(2)(a) will apply and the sale shall be deemed to take place inside the State, if the goods are within the State at the time the contract of sale is made. Assuming without admitting that the Prod....
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....f land (whether belonging to the seller or another) which are to be severed in the future, e.g. minerals to be won, timber to be cut, fixtures to be detached; and (e) crops in the category fructus industriales to be grown by the seller in future." 13.7 Dealing with the submission made on behalf of the petitioners relying on the definition of 'Deliverability' that since all that gas that falls within the deliverability must be sold on daily basis to the Government of India or its nominee under Article 21.5.13(b), the goods are specific or ascertained goods, it was submitted that the same completely ignores the definition of 'future goods' given under the Sale of Goods Act or in common law. It was submitted that the goods which are yet to be produced or extracted can never be specific goods or ascertained goods. They will always be future goods and only section 4(2)(b) of the CST Act would apply. In support of his submission, the learned counsel placed reliance upon the King's Bench decision in the case of Underwood Ltd. v. Burgh Castle Brick & Cement Syndicate, 1922 (1) KB 123 as well as the decision of the Andhra Pradesh High Court in the case of Markapur Municipality v. Dodda R....
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.... GAIL's principal Union of India had given was for sweetened gas. There is no scope, therefore, of appropriation with assent of the parties till the gas is sweetened. It is in these circumstances that the goods were situated factually in the State of Gujarat on the date of its appropriation, which necessarily would take place post sweetening, at Hazira in Gujarat and, therefore, the sale is deemed to have taken place within the State of Gujarat. In support of such contention, the learned counsel placed reliance upon the following decisions:- (1) Wilkinds v. Bromhed and Hutton, (1844) 6 M&G 963  134 ER 1182-1189 (2) Atkinson v. Bell, (1828) 8 B&C 277  108 ER 1046-1049 (3) Mucklow v. Mangles, (1808) 1 Taunt 318  127 ER 856 (4) Bellamy v. Davey, (1891) 3 Ch 540 (5) Indian Wood Products Co. Ltd. v. Sales Tax Officer, New Delhi & others, AIR 1968 Delhi 211 13.9 Dealing with the decisions on which reliance had been placed by the learned counsel for the petitioners, it was submitted that reliance placed upon the decision of the Supreme Court in A.V. Thomas & Co. Ltd. v Deputy Commissioner (supra) is totally inapposite....
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....on 3 of the CST Act also interprets section 4(2)(b) of the said Act. Referring to the following passage of the judgment, it was submitted that it is evident that the provisions of the contract regarding passing of risks or property are completely irrelevant for determining situs of sale and the question of appropriation has to be decided irrespective of passing of property:- "It is to be borne in mind that the term "appropriation may be used in two senses. It may either mean simply the identification of the goods by agreement of parties as the goods to which the contract of sale relates or it may mean the passing of the property in the goods from the seller to the buyer by such means as delivery to the carrier etc. The scheme of the Act shows that the element of passing of property is not relevant in determining the situs of the sale. The question of appropriation of goods has to be decided, therefore, irrespective of the passing of property. In other words, the appropriation referred to in section 4(2)(b) connotes the setting apart of goods as specific goods to be delivered under the contract of sale and not an appropriation linked with passing of property. The Indian Woo....
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....ive Economic Zone and Other Maritime Zones Act, 1976 to the designated area under the notification, the gas which comes to the mainland, has to be considered to be imported into the territory of India. It was submitted that the CST Act does not define the term 'import' nor is the said term defined in the General Clauses Act. Reference was made to section 2(ab) of the CST Act which defines "crossing the customs frontiers of India" to mean crossing in the limits of the area of the customs station in which imported goods or export goods are ordinarily kept before clearance by customs authorities and the Explanation thereto says that for the purposes of that clause, "customs station" and "customs authorities" shall have the same meanings as in the Customs Act, 1962. Referring to section 5 of the CST Act, it was submitted that in both eventualities envisaged thereunder, it has to be seen as to what are the customs frontiers of India. It was submitted that when the designated area has been extended to include the High Seas where the Offshore Platform is situated, that would be part of India for the purpose of import and hence, it cannot be said that the sale has taken place in the course....
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....t form part of any State of the Union of India and, therefore, movement of goods does not get covered within the expression "from one State to another" as contained in section 3 of the CST Act. It was submitted that the decisions of the Supreme Court in the case of K.G. Khosla v. Deputy Commissioner, Commercial Taxes, Indian Tourist Development Corporation v. Assistant Commissioner, State of Maharashtra v. Embee Corporation, Indure Ltd. v. CTO, State of Travancore, Cochin v. Bombay Company (supra) are of no relevance as there is no import of gas in its movement from Panna-Mukta to Hazira. 13.13 Dealing with the contention that the contract was for the sale and purchase of all the natural gas discovered and produced in the contract area as defined in the PSC and that sweetening of natural gas does not amount to manufacture nor does it bring about another product and that after sweetening, the goods remain natural gas, it was submitted that what has been agreed to be delivered and accepted or received is sweetened gas. Consequently, whether sweetening changes the nature of product or not, there can be no appropriation to the contract, unless the natural gas is sweetened, which tak....
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....oner that the delivery point is off-shore at the Panna- Mukta oil fields is denied. It was submitted that is further the case of Union of India that the two PSCs executed between the constituents of the contractor and the Union of India and the Interim Gas Sales and Purchase Agreement executed between the contractor and the respondent No.7 - GAIL, as also the fact that the gas produced at Panna-Mukta oil fields is incapable of being consumed till it is subjected to a sweetening process onshore at Hazira and the quantity of gas becomes unascertainable at Hazira, the delivery point is on-shore at Hazira and the liability of sales tax, if any, has to be determined on the above basis. 15. In rejoinder, Mr. P. Chidambaram, learned counsel for the petitioner - BG Exploration submitted that according to the respondents, the gas was produced in the deemed territory of India, the delivery point is in the deemed territory of India and Hazira is in the territory of India and hence, there can be no import into the territory of India. It was submitted that such argument is misconceived for the reason that the area in which the gas is produced is deemed to be part of territory of India only f....
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....ne. It was submitted that since the CST Act has not been extended to the area where the gas wells, Offshore Platform and the delivery point are located, the CST Act must be read and applied as it stands without the deeming fiction that any extended area is part of the territory of India. Similarly, since the GST Act has not been extended to the areas in question, no tax can be levied or demanded under the GST Act. It was submitted that, therefore, the gas wells, Offshore Platform and delivery point being located outside the territory of India, any movement of goods from a place outside the territory of India to a place within the territory of India will indeed be a movement in the course of import of goods into the territory of India. Any sale which occasions such import would fall within section 5(2) of the CST Act and would, therefore, be outside the purview of the GST Act. 15.2 As regards the contention raised by the learned Additional Advocate General regarding the maintainability of the petitions, it was submitted that since the assessment orders dated 3rd January, 2004 and 9th January, 2004 for the five years are wholly without jurisdiction, the petitioners had filed the p....
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....r the purpose of sale in the course of import under section 5(2) of the CST Act, exclusive economic zone is a part of the territory of India. The PSC is not a contract of sale. The parties to the PSC, by their conduct, have agreed to replace the PSC with ISPA. The word 'delivered' used in paragraph 3 of ISPA should be read as 'Delivery Point'. The PSC is a contract for the sale of sweetened gas. GAIL can refuse to take the Gas if it is not according to specifications required by it. Hence, the Gas has to be put into a 'deliverable state'. The petitioner lacks bona fides because it has not produced the ISPA or even the PSC. It was submitted that these statements and assertions have no basis whatsoever and must be disregarded. 16. In the backdrop of the facts and contentions noted hereinabove, the moot question that arises for consideration is whether the sale of natural gas pursuant to the PSC executed between the petitioners and the Central Government and the ISPA executed between the petitioners and GAIL, the nominee of the Centra....
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.... it is clear that the same provides that it is not permissible for the State to impose any tax on sale or purchase of goods in three eventualities. Firstly, if such sale is in the course of inter-State trade or commerce; secondly, if such sale has taken place outside the State; and thirdly, if such sale has taken place in the course of import of goods into the territory of India or export of goods out of such territory. As to whether such sale has taken place in any of the above eventualities, has to be determined in accordance with the principles specified in section 3, 4 and 5 of the CST Act. 19. For the purpose of ascertaining as to whether a sale has taken place in the course of inter-State trade or commerce, one has to refer to the principles specified in section 3 of the CST Act which postulates as to when a sale or purchase of goods is said to take place in the course of inter-State trade. However, in the present case, it is an admitted position between the parties that sale of the goods in question is not in the course of inter-State trade or commerce. Consequently, it is not necessary to refer to the provisions of section 3 of the CST Act. Of course, the learned counsel....
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....is the situs of the goods, in the case of ascertained goods, at the time of the contract of sale and in the case of unascertained or future goods, at the time of their appropriation to the contract of sale. 22. On behalf of the petitioners, it has been contended that the goods in question were ascertained goods at the time of the contract of sale. According to the petitioners, the goods were always specific or ascertained goods because the volume of Gas to be produced, sold and delivered is captured in the word "Deliverability" as defined in Article 21.5.13(a)(iii). All gas that falls within "Deliverability" must be sold on a daily basis to the Government of India or its nominee under Article 21.5.13(b) and that the goods were outside the State of Gujarat at the time when the contract of sale was made. The contention raised by the petitioners has been resisted by the respondents on the ground that the sale of goods is for unascertained and future goods and therefore, the first part of sub-section (2) of section 4 would not apply. 23. Before dealing with the rival contentions, reference may be made to the decisions on which reliance has been placed by the learned counsel for t....
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....he bamboos for its use, extract and appropriate the same towards the agreement. In other words, unless and until the Company chooses to severe and separate the bamboos standing on the forest land, the goods are not ascertained. When the Company actually cuts and extricates the bamboos, the goods being ascertained and also being in deliverable state, the property in goods passes to the Company." "14. ... ... It will be seen from Clause-8 that the bamboos extracted would remain at the sole risk of the Company and the company had to make its own arrangement for preserving or protecting the same from accidental fire. Even if the extracted bamboos were destroyed by fire, the Company would still be liable to pay the price and the sales tax in addition to fine that may be imposed by the competent authority. Since the Company was required to preserve the extracted bamboos at its own risk, the intention of the parties would seem to suggest that the property in bamboos stood transferred to the Company the moment it was severed and taken possession of by the Company, because generally though not always, the goods sold are at the seller's risk until the property in them is transferred....
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....ct of sale may be either existing goods, owned or possessed by the seller, or future goods. Under Section 6(2) there may be a contract for the sale of goods the acquisition of which by the seller depends upon a contingency which may or may not happen. Section 6(3) lays down that where by a contract of sale, the seller purports to effect a present sale of future goods, the contract operates as an agreement to sell the goods. As per Section 23, in the case of a sale of unascertained or future goods, the property in the goods passes to the buyer only when the goods are in a deliverable state and are unconditionally appropriated to the contract either by the seller with the consent of the buyer or by the buyer with the consent of the seller. Under Section 26, the goods remain at the seller's risk until the property passes to the buyer. It is apparent from the foregoing provisions that the law permits the sale of future ascertained or contingent goods". 24. For the purpose of deciding as to whether the goods in question were ascertained goods at the time when the contract of sale came to be made, it may be necessary to refer to certain recitals in the PSC. Article 9 refers to Dis....
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....z. Natural Gas, cannot be said to be ascertained goods at the time when the contract was made, as claimed by the petitioners. Clause (a) of subsection (2) of section 4 of the CST Act, therefore, would not be attracted. Having regard to the factual position as narrated hereinabove, it is not necessary to enter into any discussion in respect of the principles enunciated in the above decisions and their applicability or otherwise to the facts of the present case. 25. The next question that arises for consideration is as to whether the goods in question were within the State of Gujarat at the time of their appropriation to the contract of sale by the seller or by the buyer, whether the assent of the other party was prior or subsequent to such appropriation, so as to fall within the ambit of clause (b) of section 4(2) of the CST Act. On behalf of the petitioners, it has been alternatively submitted that if the goods are unascertained or future goods, they were appropriated to the contract on a daily basis when they were delivered at the Delivery Point to ONGC's Bassein Hazira pipeline and that the seller and buyer assented to such appropriation. Whereas it is the case of the responde....
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.... In somewhat similar circumstances this court in Indian Copper Corporation Ltd. v. State of Bihar, (1961) 2 SCR 276 held by a majority decision that the opening words of Article 286(1) which speak of a sale or purchase taking place and the nonobstante clause in the Explanation which refers to the general law relating to the sale of goods, indicated that it was the "passing of property within the State" that was intended to be fastened on, for the purpose of determining, whether the sale in question was "inside" or "outside" the State and therefore subject to the operation of the "Explanation", the State in which property passed would be the only State which would have the power to levy a tax on the sale. At p. 286 it was observed: "The conclusion reached therefore is that where the property in the goods passed within a State as a direct result of the sale, the sale transaction is not outside the State for the purpose of Article 286(1)(a) unless the Explanation operates". The majority decision in Indian Copper Corporation Ltd. v. State of Bihar concludes the point in favour of the appellant. On the facts of this case it was found by the Sales Tax Appellate Tribunal....
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....he intention of the parties cannot be clearly spelt out from the terms of their bargain. Under the Sale of Goods Act, therefore, the parties' intention, if clearly expressed, will always prevail over the statute, for the very purpose of that Act is to regulate the inter se relationship between the sellers and the purchasers of the goods. Not so the rules laid down in explanation 3 to section 2(n) of the Tamil Nadu General Sales Tax Act, 1949 or section 4(2) of the Central Sales tax Act. For, these rules are special and overriding rules for fixing the taxable event, as between the public exchequer, on the one hand and the taxpayers, on the other. While the sales tax law taxes up sales or purchases as taxable events, and to that extent, goes along with the general law governing such transactions, the legislature has not thereby lost the prerogative of bending the rules of common law to the service of the revenue. The legislature has laid down in the sales tax statutes clear-cut principles for determining the situs of sales and purchase in order to bring about uniformity, certainty, economy in collection, and efficiency in tax management, all of which are desiderata in all fiscal meas....
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....er should not pass upon its completion, as it would have done if it had been in existence at the time of the original contract. The objections raised upon this point were mainly founded upon Atkinson v. Bell (8 B. & C. 277, 2 Mann. & Ryl. 292). But, if that case be examined, it will be found not to apply. The decision there turned entirely on the absence of assent on the part of the purchases to the appropriation of the machines by the vendor. It is said, by Bayley J., "These were Sleddon's goods, although they were intended for the defendants, and he had written to tell them so. If they had expressed their assent, then this case would have been within Rohde v. Thwaites (6 B. & C. 388, 9 Dowl. & Ryl. 293), and there would have been a complete appropriation, vesting the property in the defendants. But there was not any such assent to the appropriation made by the bankrupt; and, therefore, no action for goods bargained and sold was maintainable." Holroyd J. observes, "I think the action will not lie for goods bargained and sold, because there was no specific appropriation of the machines assented to by the purchasers, and the property in the goods therefore remained in the maker.....
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....rect one, viz. that, while the article remains unfinished, no property in it passes, notwithstanding the vendor may intend it for the purchaser, or may put his name upon it, or otherwise show an intention to appropriate it, and that a payment of money on account makes no difference. Here, however, the greenhouse was completed, and after it was so completed the makers appropriated it to the purchaser. The latter, before paying for it, might have required to see it; but, instead of doing so, he transmitted the price. But that is not all; he also requested the bankrupts to keep the greenhouse for him, thereby assenting to the appropriation which they had made. When the latter deposited it with Wait, they gave notice that it was the plaintiff's property, and requested Wait to take care of it for him. The reason why it was held in Atkinson v. Bell (8B. & C. 277, Mann. & Ryl, 292) that the action for goods bargained and sold could not be maintained, was, that, although there had been an appropriation, no assent, on the part of the persons for whom the articles were made, had been shown. The language of the judges, as read by the Lord Chief Justice, shows that to have been the only gr....
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....isfactory to the parties concerned. If the Dock Committee and the bank of Messrs Redlers chose to deal with this matter by measurement instead of by weight there would be nothing to prevent them." 26.6 In K.G. Khosla v. Chief Commissioner, Union Territory of India (supra) the Delhi High Court was of the view that the term 'appropriation' may be used in two senses. It may either mean simply the identification of the goods by an agreement of parties as the goods to which the contract of sale relates or it may mean the passing of the property in the goods from the seller to the buyer by such means as delivery to the carrier, etc. The court observed that the scheme of the Act shows that the element of passing of property is not of relevance in determining the situs of the sale. The question of appropriation of goods has to be decided, therefore, irrespective of passing of the property. In other words, appropriation referred to in section 4(2)(b) connotes the setting apart of goods as specific goods to be delivered under the contract of sale and not an appropriation linked with passing of property. The court in the facts of the said case held that the appropriation took place when th....
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.... In Re Goldcorp Exchange Ltd (in receivership), (1994) 2 All ER 806, the Privy Council held thus:- "It is common ground that the contracts in question were for the sale of unascertained goods. For present purposes, two species of unascertained goods may be distinguished. First, there are 'generic goods'. These are sold on terms which preserve the seller's freedom to decide for himself how and from what source he will obtain goods answering the contractual description. Secondly, there are 'goods sold ex-bulk'. By this expression their Lordships denote goods which are by express stipulation to be supplied from a fixed and a predetermined source, from within which the seller may make his own choice (unless the contract requires it to be made in some other way) but outside which he may not go. For example, 'I sell you 60 of the 100 sheep now on my farm'. Approaching these situations a priori common sense dictates that the buyer cannot acquire title until it is known to what goods the title relates. Whether the property then passes will depend upon the intention of the parties and in particular on whether there has been a consensual appropri....
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....is sometimes worded, into a deliverable state, the performance of those things shall (in the absence of circumstances indicating a contrary intention) be taken to be a condition precedent to the vesting of the property. The second is, that where anything remains to be done to the goods for the purpose of ascertaining the price, as by weighing, measuring, or testing the goods where the price is to depend on the quantify or quality of the goods; the performance of these things, also shall be a condition precedent to the transfer of the property, although the individual goods be ascertained, and they are in the state in which they ought to be accepted." In Simmons v. Swift (5) (at p. 862) the rule has been enunciated as follows: "Generally speaking, where a bargain is made for the purchase of goods and nothing is said about payment or delivery, this property passes immediately so as to cast upon the purchaser all future risks, if nothing further remains to be done to the goods: although he cannot take them away without paying the price. If anything remains to be done on the part of the seller, until that is done the property is not changed." The real questio....
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....oods Act, 3 of 1930. That section lays down that "where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained." The Supreme Court held that in the said case, it was not in dispute that the goods covered by the pucca delivery orders were not ascertained at the time such orders were issued and ascertainment would take place in the shape of appropriation when the goods were actually delivered in compliance therewith. Therefore, till appropriation takes place and goods were actually delivered, they are not ascertained. The contract therefore represented by the pucca delivery orders was a contract for the sale of unascertained goods and no property in the goods was transferred to the buyer in view of section 18 of the Indian Sale of Goods Act till the goods were ascertained by appropriation, which in that case took place at the time only of actual delivery. 26.13 In DLF Universal v. Director, T & C Planning, Haryana, AIR 2011 SC 1463, the Supreme Court held thus:- "11. It is settled principle in law that a contract is interpreted according to its purpose. The purpose of a contr....
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....the goods. Not so the rules laid down in the relevant State Sales Tax Act or section 4(2) of the Central Sales tax Act. For, these rules are special and overriding rules for fixing the taxable event, as between the public exchequer, on the one hand and the taxpayers, on the other. In all the Sales Tax Acts, passing of property is not regarded as a nexus but the locale of the goods within the State either at the time of the contract of sale or later at the time of appropriation. (ii) The scheme of the Sales Tax Act shows that the element of passing of property is not of relevance in determining the situs of the sale. The question of appropriation of goods has to be decided, therefore, irrespective of passing of the property. In other words, appropriation referred to in section 4(2)(b) connotes the setting apart of goods as specific goods to be delivered under the contract of sale and not an appropriation linked with passing of property. (iii) The appropriation referred to in section 4(2)(b) connotes the setting apart of goods as specific goods to be delivered under the contract of sale and not an appropriation linked with passing of property. The term unconditional appropriati....
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....nsaction is contained in more than one document between the same parties, they must be read and interpreted together and they have the same legal effect for all purposes as if they are one document. (iii) Where several deeds form a part of a transaction and are contemporaneously executed, they have the same effect for all purposes such as are relevant to that case as if they were one deed. 29. The vexed question that arises is as regards the situs of the goods at the time of appropriation to the contract. The sale of natural gas to GAIL is governed by two contracts, firstly the Production Sharing Contract between the Government of India and the Contractor, viz. ONGCL, RIL and BGEPIL and the Interim Sales Purchase Agreement (ISPA) between the Contractor and GAIL. For the purpose of deciding the situs of the goods at the time of appropriation to the contract, it would be necessary to refer to certain recitals from the PSC as well as the ISPA to understand what the parties had agreed. Since the sale transaction is contained in two documents, as held by the Supreme Court in DLF Universal v. Director, T & C Planning, Haryana (supra) and S. Chhattanatha Karayalar v. Central B....
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....ANG.; (b) within six (6) months of the date of notification of the exercise of the Government's option pursuant to Article 21.4.3., the Contractor and the Government (or its nominee) shall agree on the terms of the sale to the Government (or its nominee) of Excess ANG. Therefore, by virtue of clause (b) of Article 21.4.4, the terms of sale are to be agreed after the Government (or its nominee) exercises its option to purchase the Excess ANG. If the Government does not exercise its option, the contractor is free to explore markets for commercial exploitation of Excess ANG. If the excess ANG cannot be commercially exploited or the Contractor is not able to find a market, the Government is entitled to take and utilize such Excess ANG. If the Government elects to take the Excess ANG, the Contractor is required to deliver such Excess ANG to the Government or its nominee free of cost, at the downstream flange of the Gas/Oil separation facilities and the Government or its nominee shall bear all costs including gathering, treating, processing and transporting costs beyond the downstream flange of the Gas/Oil separation facilities. 32.1 Article 21.5.13 provides that the price....
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....ances in the Buyer's operation and Seller's approval shall not be unreasonably withheld. Communications procedures shall be mutually agreed in the Gas sales contract in accordance with internationally accepted industry standards. 32.5 Thus, by virtue of clause (b) of Article 21.5.13 the parties, viz. the Government of India and the Contractor have agreed that the Seller shall produce and deliver, on a daily basis 100% of the Deliverability of ANG and NANG and Condensate to the Buyer at the Delivery Point. The Buyer, namely the Government of India and its nominee has agreed to take and purchase, on a daily basis 100% of the Deliverability of ANG and NANG and Condensate, provided the Seller makes available the Gas and Condensate and tenders the same for delivery. On a plain reading of the above clause, the Seller has to produce and deliver 100% of the Deliverability of ANG and NANG and Condensate on a daily basis to the Buyer at the Delivery Point and the Buyer has to take and purchase the Gas and Condensate so delivered. The "Delivery Point" envisaged in this clause would be in terms of sub-clause (iv) of clause (a) inasmuch as clause (a) provides that unless the context otherwis....
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...., modified or varied only by an instrument in writing by the parties to the PSC. 33. At the outset, it may be apposite to note that reference to GAIL in Clause (e) of Article 21.5.13 of the PSC is not in its capacity as a nominee of the Government of India, inasmuch as, at the stage when the PSC came to be executed, GAIL was not named as a nominee of the Government of India. What the clause provides is that the parties acknowledge that Gas is to be received by GAIL at Hazira downstream of ONGC's sweetening and separation facility. It may also be pertinent to note that the expression used is "acknowledge" and not "agree" and Gas is to be received by GAIL and not delivered to it. Though the term "received" may be synonymous with the term "delivered", in the context in which the expression "received" is used, there is a clear distinction between the two, which shall be elaborated hereinafter. 34. The fact regarding reference to GAIL not being in its capacity as nominee of the Government of India has been pointed out by the petitioner to the respondent Commissioner of Sales Tax in its letter dated 3rd September, 1999 wherein it has been stated that the Delivery Point of Panna-Muk....
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.... the sale to GAIL. In paragraph 14 of the said letter, it is stated that the sale of natural gas at Panna-Mukta oil/gas fields was as per agreement, and the goods were ascertained on and when measured at the offshore platform's measuring unit called LACT (Lease Automated Custody Transfer Point). It was further the case of the petitioner that the contract is for sale of Natural Gas, its sweetening when the sale has taken place outside India is of no consequence. The sweetening process means the removal of some sediment or some non-hydrocarbons (sulphur) which does not change the character of gas. Sweetening is done by ONGC and it is by way of operational reasons, business expediency and goodwill that they bear the cost thereof. This in no way affects the relevant fact of the matter, which is that it is only the natural gas, which is sold in accordance with the agreement. 35. The question as regards the stage when appropriation of the goods has taken place has to be considered in the light of the peculiar nature of the goods, viz. Natural Gas, which cannot be transported in the manner in which ordinary goods are transported. The facts on record reveal that the Gas and Condensate s....
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....he Gas into the pipeline of the carrier ONGC, which then emerges at ONGC's separation and sweetening facility at Hazira, where it is received by GAIL which has its pipeline at that point. As noticed earlier, reference to GAIL in the PSC is not as the nominee of the Government but as a recipient of the Gas which is injected into ONGC's pipeline. The expression "deliver" and "receive" may be synonymous as contended by Mr. Shelat for the respondent State Government. However, there is a distinction between the two expressions insofar as delivery and receipt of Gas is concerned, inasmuch as, the Gas which is delivered at one point is by the very nature of things received at another point. 36. According to the respondents, appropriation does not take place at the Delivery Point mentioned in Article 21.5.13 (a)(iv), because at that stage the goods, viz. Natural Gas, was not in a usable condition and that it was made fit for use only after it was subjected to processing at ONGC's separation and sweetening facilities at Hazira. It has been vehemently contended on behalf of GAIL that what GAIL had agreed to purchase was sweetened Gas and that the parties had agreed that the same would be ....
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....ence to sweetened gas or for that matter sour gas in either of the two agreements. Reference is made to the goods as Natural Gas, ANG and NANG and Condensate. The contention that what was agreed upon was sweetened gas is based upon the fact that in the PSC, the parties have acknowledged that GAIL would receive the Gas at the downstream of ONGC's Separation and Sweetening facilities and in clause 3 of ISPA, it is provided that the Buyer shall pay to the Sellers at the rate of 90% of gas price specified in Article 21.5.13(d) of the PSC for the net MMBtu of gas delivered at the downstream of ONGC processing facility at Hazira (on account basis as directed by the Ministry of Petroleum and Natural Gas). The payment shall be made by the Buyer within thirty days after receipt of each monthly invoice from sellers to be raised on the basis of quantity of gas delivered to the buyer at downstream of separation and sweetening facilities owned and operated by ONGC at Hazira as certified by ONGC. 38. To understand the intent of the parties, both the contracts, viz., the PSC as well as the ISPA have to be read together. Article 21.3 provides that for the purpose of sales to the domestic market....
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....he Buyer shall pay to Seller at the rate of 90% of Gas price specified in Article 21.5.13(d) of the PSC for the net MMBtu of gas delivered at the downstream of ONGC processing facility at Hazira (on account basis as directed by the Ministry to Petroleum and Gas). The payment shall be made by the Buyer within thirty days after receipt of each monthly invoice from Sellers to be raised on the basis of quantity of gas delivered to the buyer at downstream of separation and sweetening facilities owned and operated by ONGC as certified by ONGC. 4. Sales Tax: The Buyer shall pay any and all sales tax payable on the sale of gas, in addition to the price of gas. 5. Good Faith Negotiations: xxxx 6. Law and Resolution of Disputes: xxx 7. Neither the signing of the agreement or any action taken with regard hereto shall (i) create a precedent with respect to the rights or obligations of the parties, (ii) be deemed an admission by any party as to the proper interpretation of the PSC or the rights and obligations of any party thereunder, or (iii) be a waiver of any rights of a party under the PSC." 40. From the recitals contained in the ISPA, it is manifest t....
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.... Government of India and the contractor and a contract of supply of gas between RIL and RNRL. The court observed that the PSC overrides any other contract which may be entered into for the supply of gas. A perusal of the clauses contained in Article 21.5.13 of the PSC shows that under clause (b) thereof, the Seller has agreed to produce and deliver on a daily basis to the Buyer 100% of the Deliverability of ANG and NANG and Condensate at the Delivery Point, and the Buyer has agreed to take and purchase, on a daily basis, 100% of the Deliverability of ANG and NANG and Condensate so delivered. Thus, under the PSC the parties have agreed that 100% Deliverability of ANG and NANG and Condensate has to be produced and delivered by the Seller at the Delivery Point and correspondingly, the Buyer shall take and purchase the ANG and NANG and Condensate so delivered. Buyer under the PSC means Government of India or its nominee. Therefore, GAIL as nominee of the Government of India, steps into its shoes as Buyer and accordingly, is governed by the terms of clause (b) of Article 21.5.13 of the PSC has to take and purchase 100% of the Deliverability of natural gas as agreed under the ISPA at the....
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.... price clause as contained in the ISPA for contending that the delivery point is downstream of ONGC's sweetening and separation facilities at Hazira and that, therefore, what GAIL had agreed to purchase was sweetened gas. In the opinion of this court, clause 3 of the ISPA is merely a price clause and just because it provides for payment of the price based on the net MMBtu of gas delivered at downstream of ONGC processing facility at Hazira and the invoice is to be raised on the basis of quantity of gas delivered to the buyer at downstream and sweetening facilities owned and operated by ONGC at Hazira, it cannot be so construed as to override the specific provisions of the PSC which provide for delivery of the Natural Gas at the Delivery Point. Much emphasis is also laid on clause (e) of Article 21.5.13 of the PSC whereby the parties have acknowledged that Gas is to be received by GAIL at Hazira downstream of separation and sweetening facilities owned and operated by ONGC, to contend that even under the PSC it was agreed that GAIL would receive the gas at Hazira which is the delivery point. As noticed earlier, GAIL was not a party to the PSC and reference to GAIL in the PSC is as a ....
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....lied agreement to purchase sweetened Gas. The Natural Gas, which is in the nature of ascertained goods, is appropriated to the contract when it is separated and measured at the Offshore Processing Facility and is thereafter delivered at the Delivery Point, viz. the Offshore T-Junction and the title to the goods also passes there. Thus, appropriation, delivery and passing of title of the goods all take place Offshore, outside the State of Gujarat. Indubitably, under the Sales Tax Act, it is the situs of the goods at the time of their appropriation to the contract which is relevant and not the passing of property, nonetheless, in the present case apart from the fact that the goods were appropriated to the contract at the Offshore Processing Facility and delivered at the Delivery Point, viz. the Offshore T-Junction, the title to the goods also passed to the Buyer at the Delivery Point and the risk in the goods passed on to the Buyer, namely GAIL as nominee of the Government of India. In the opinion of this court, once the goods are appropriated to the contract and delivered at the Delivery Point outside the State of Gujarat, merely because the same undergo a process of sweetening havi....
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....have decided to charge on the basis of what is ultimately received by the Buyer cannot be determinative of the fact as to where the sale takes place. The price clause contained in the ISPA is only a mechanism by which the parties have decided the price of the goods and the same cannot decide the situs of the sale. Moreover, the ISPA cannot be relegated to the status of an agreement modifying the PSC or superseding the PSC to the extent of Delivery Point, inasmuch as, the ISPA is in continuation and not in derogation of the PSC. Besides, in terms of Article 34.2 of the PSC, the contract cannot be amended, modified, varied or supplemented in any respect except by an instrument in writing signed by all the parties, which shall state the date upon which the amendment or modification shall become effective. Therefore, if at all any term of the PSC is to be amended, modified or varied or supplemented, it is to be by way of an instrument in writing signed by all the parties namely, the constituents of the Contractor and the Government of India. The ISPA executed between the constituents of the Contractor and the GAIL, therefore, cannot amend, modify, vary or supplement the PSC. Under the ....
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....d goods and as such, the sale shall be deemed to take place at Orai in the State of U.P. and not in Gadimoga of Andhra Pradesh. It was further submitted that the gas of different buyers gets mixed with each other, becomes unascertained goods and hence, it cannot be an incidence of inter-state sale. The gas while moving in the common pipeline is in co-mingled form, hence it is not known as to which portion of gas belongs to whom and thus, it becomes ascertained goods only at Orai at the delivery point where appropriation takes place. The court observed that if the above argument advanced by the learned counsel for the State of U.P. was to be accepted, then the seller or buyer of natural gas, who does not possess his own pipeline, shall be prevented from transporting his gas and everyone would have to install his own pipeline which is neither feasible nor practical. The court observed that transportation of natural gas cannot be compared with transportation of tangible goods. Mixture of natural gas of common quality during the course of transportation does not affect the right of the buyer. Every buyer or shipper may draw its natural gas from the open access gas pipeline with due mea....
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....of sale shall be Gadimoga and not Orai in the State of U.P. The court further observed that though the Sale of Goods Act regulates the contractual obligations but when the question relates to inter-State sale, then primacy should be given to the construction of different provisions of the Central Sales Tax Act and not the Sale of Goods Act. CST Act is a special enactment to regulate the inter- State sale whereas the Sale of Goods Act is the general law. On the question as to whether the Natural Gas supplied to shipper (buyer) was unascertained, the court observed that in view of the nature and definition of gas, whenever Lean or Natural Gas is transported through a container or pipeline, it shall occupy the whole of its space irrespective of its quantity. Accordingly, supply of natural gas to two or more buyers or shippers shall always be in commingled form. On behalf of the State, it was contended that the gas pipeline possessing the gas of different customers is passed on in co-mingled form, hence, it is unascertained goods. The court observed that the factual matrix with regard to transportation of gas in co-mingled form was not disputed. The court held that the movement of gas ....
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....uld jeopardise the intended operation of the earlier title transfer." In the light of the above international practice with regard to delivery point, the court held that Gadimoga shall be the delivery point not only in terms of GSPA but in terms of international practice and all rights and liabilities and risk shall be transferred to the shipper at Gadimoga. The court, accordingly, held that keeping in view the recent technological development in the measurement of gas and its supply, the Natural Gas supplied to buyers at Gadimoga may not be termed as unascertained goods. The court referred to various decisions wherein the controversy with regard to fungible goods and co-mingling of gas was subject matter of consideration. Reference was made to Complete Auto Transit v. Brady, (1977) 430 US 274, wherein it was held that as a general rule, where fungible goods belonging to different persons are so intermingled as to be undistinguishable, whether by consent of the owners or by someone's wrongful act, the owners become tenants in common of the mass. The co-mingling of a fungible commodity does not affect ownership unless the parties intend to transfer title. The way the system works....
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....ic reality of transporting natural gas via pipeline through the United States. This economic reality was very much in the mind of the drafter of the legislation and found its way in the terms used by Parliament." 47. From the submissions made on behalf of the petitioners as well as the averments made in the memorandum of petition and the documents annexed therewith as well as from the above referred decision of the Allahabad High Court, it is apparent that due to its unique physical properties, large volumes of Natural Gas can only be transported in a continuous stream. Once delivered into a pipeline for transportation, it becomes co-mingled with other natural gas. Individual molecules are not separately identifiable and cannot be accurately tracked or traced. As a result, natural gas is sold and purchased on a "quality and quantity basis", and treated as a fungible good, with title taken on a quality and quantity basis. As discussed hereinabove, once the gas is injected at the ONGC's off-shore pipeline, the same is received downstream of ONGC's sweetening and separation facilities at Hazira. However, merely because the gas which is delivered at the Offshore T-Junction is co-min....
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....upra) and the decision of a Division Bench of this court in the case of Larsen & Toubro Limited v. Union of India (supra). For the purpose of appreciating the controversy in issue, it may be germane to refer to the above decisions. 49.1 In Pride Foramer v. Union of India (supra), the Bombay High Court was considering a case where the levy of customs duty on goods imported by the petitioner for being transhipped for their use as spares and stores at the Oil Rig which carried on operation in designated areas of the country as defined under the Act with the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 had been called in question. The petitioner company was importing goods including stores, spares, consumables and other articles required for use on the Oil Rig. As such imported goods/stores could not land directly on the Oil Rig, the same landed at Mumbai seaport/airport and were then transshipped to the Oil Rig. The respondents refused to permit the petitioner to transship stores and equipments to the Oil Rig without payment of customs duty. The petitioner contended that the goods imported for Oil Rig are liable to be transshippe....
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....hore Limited v. Union of India (supra), the issue which had fallen for consideration by the Supreme Court was whether the oil rigs engaged in operations in the exclusive economic zone/continental shelf of India, falling outside the territorial waters of India are 'foreign going vessels' as defined by section 2(21) of the Customs Act, 1962, and are entitled to consume imported stores thereon without payment of customs duty in terms of section 87 of the Customs Act, 1962? The court affirmed the view adopted by the Bombay High Court in Pride Foramer (supra) and held thus:- "73. A combined reading of Sections 3, 6 and 7 of the Maritime Zones Act, 1976 shows that territorial waters, the seabed and sub-soil underlying therein and the air space over such territorial waters form part of the territory of India. Sovereignty of India extends over the territorial waters but the position is different in the case of continental shelf and exclusive economic zone of India. The continental shelf of India comprises of the seabed beyond the territorial waters to a distance of 200 nautical miles. The exclusive economic zone represents the sea or waters over that continental shelf. 74....
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....as if these areas are a part of the territory of India. In these circumstances, the definition of "India" as given in Section 2(27) of the Customs Act gets extended by these provisions to cover areas declared as designated areas beyond the territorial waters and located the continental shelf and the exclusive economic zone of India. If one reads the Customs Act without reading the Maritime Zones Act, 1976, then the oil rig located in the notified areas/designated areas constitute "place outside India". On the other hand, the very purpose of Sections 5, 6 and 7 of the Maritime Zones Act, 1976 is to declare an area of the contiguous zone/continental shelf/exclusive economic zone as a designated area so that exploration, exploitation and protection of resources belonging to India could be carried out. Under the said Act, the Central Government can create artificial island, offshore terminals, etc. By the said Act, customs and other fiscal enactments have been extended. Therefore, the object is very clear that the revenue generated from exploration and exploitation should accrue to the coastal State viz. India." 49.3 In Commissioner of Sales Tax, Maharashtra State, Mumbai v. Pure He....
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....round that the sale was occasioned by a movement of goods from one State to another. The court held that the continental shelf and the exclusive economic zone do not constitute a part of the territory of India. As a matter of fact, it was in recognition of this position that section 6(6) and section 7(7) of the Maritime Zones Act, 1976 empowered the Union Government to extend the provisions of any enactment in force in India to a designated area or to the continental shelf or the exclusive economic zone as if the territory to which it is extended is a part of the territory of India. The court held that the movement of goods from the State of Maharashtra to Mumbai High does not constitute a movement from one State to another State. Mumbai High does not form part of any State in the Union of India. It was, accordingly, held that the basis on which the revenue sought to assess the sale is an inter-State sale involving a movement of goods from the State of Maharashtra to Mumbai High and was contrary to the mandate of the provisions of section 6 of the CST Act. On the question as to whether Mumbai High was a foreign destination, and that the sale of helium gas by the assessee to its ven....
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....otification issued in exercise of the powers conferred upon the Union Government in the Maritime Zones Act, 1976. 49.4 In Larsen & Toubro Limited v. Union of India (supra), this High Court was considering a case where the authority of the respondents to demand and levy any sales tax under the CST Act with respect to the sale transactions between the petitioners and Oil and Natural Gas Corporation, which sales had taken place at Bombay High was subject matter of challenge. The court looked into the question as to whether Bombay High which is situated in the exclusive economic zone is part of the territory of India. The court observed that under section 3 of the CST Act, the sale and purchase of goods is deemed to take place in the course of inter-State trade or commerce if the sale and purchase occasions movement of goods from one State to another. It was, therefore, necessary to ascertain whether the sale in question occasioned the movement of goods from one State to another. For this purpose, the court found it necessary to ascertain whether the movement of goods from Hazira to Bombay High can be stated to be a movement of goods from the State of Gujarat to another State within....
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....ia as provided in Article 1 of the Constitution of India. There is no claim of sovereignty over such an area, it is sovereign rights which are extended to such area by virtue of formation of Exclusive Economic Zone for the limited purposes envisaged under the statute. By virtue of clause (b) of sub-Section (7) of Section 7 of the Maritime Zones Act it becomes further clear that as and when Union of India issues notification extending any enactment over the Exclusive Economic Zone or part thereof such enactment extended is applicable as if the Exclusive Economic Zone or part thereof to which it has been extended is a part of the territory of India. 35. In view of the above discussion, it clearly emerges that when the sale of goods took place at Bombay High, for which the goods moved from Hazira to Bombay High, such movement does not get covered within the expression "movement of goods from one State to another" contained in clause (a) of Section 3 of CST Act. It is clear that the goods had not been moved from one State to another since, in our opinion, Bombay High does not form part of any State of Union of India." 40. By a notification dated 27.2.2010 provisions o....
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....hin the customs frontier. The movement of goods from the Panna-Mukta oil fields, therefore, cannot be said to be in the course of import of goods into the territory of India, inasmuch as, Panna-Mukta oil fields also stand included within the designated area to which provisions of the Customs Act have been extended. On behalf of the petitioners, strong reliance is placed upon the decision of this court in the case of Larsen & Toubro Limited v. Union of India (supra) for the purpose of contending that the court in the said case after considering the decision of the Supreme Court in the case of Aban Lloyd Chiles Offshore Limited (supra) has observed that in the said case on extending the Customs Act and Central Excise Act, by virtue of notifications, the Apex Court held that any movement of goods to such exclusive economic zone would not be an export and no export benefit can be availed on such supply. It was further held that mineral oil produced in the exclusive economic zone and continental shelf would be chargeable to central excise duty as goods produced in India. The court had observed that in the present case, it was, however, confronted with the situation where CST Act has not....
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....be a foreign going vessel under section 2(21) of the Customs Act. The Customs Act stands extended to the designated area by virtue of the Maritime Zones Act, 1976. The oil rig carrying on operations in the designated area is not a foreign going vessel as the same would be deemed to be a part of the Indian territory that is going from the territory of India to an area which is also deemed to be a part of the territory of India. The above decision of the Supreme Court was rendered in the context of the applicability of the provisions of the Customs Act to the designated area to which the provisions of the Customs Act had been extended by virtue of the notification issued by the Central Government. It is an admitted position that no notification has been issued by the Central Government extending the applicability of the provisions of the Central Sales Tax Act to the designated areas. Therefore, the provisions of the CST Act would not be applicable to the designated areas. The question that, however, arises for consideration in the present case is whether the movement of goods from Panna-Mukta oil fields into the State of Gujarat can be said to be in the course of import of goods into....
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....id installations, structures and platforms as designated areas for the purposes of the said sections. As per Notification No. 11/87-CUSTOMS dated 14th January, 1987, issued in exercise of powers conferred by clause (a) of subsection (5) of section 6 of and clause (a) of sub-section (6) of section 7 of the Maritime Zones Act, the provisions of the Customs Act, 1962 were extended to the areas in the continental shelf and the exclusive economic zones of India. By Notification No.S.O.643(E) dated 19th September, 1996, the Central Government in exercise of powers conferred by clause (a) of sub-section (5) of section 6 of and clause (a) of subsection (6) of section 7 of the Maritime Zones Act, has declared the areas in the continental shelf or, as the case may be, in the exclusive economic zone of India where the installations, structures and platforms, the coordinates of which are given in the Schedule below the same, are situated and the areas extending up to five hundred metres from the said installations, structures and platforms as designated areas for the purposes of the said sections. By Notification No. S.O. 189(E) issued on 11th February, 2002, the Central Government in exercise....
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....omic zone to which the enactment has been extended is a part of the territory of India. Thus, sub-section (6) of Section 6 and sub-section (7) of Section 7 create a fiction by which the continental shelf and the exclusive economic zone are deemed to be a part of India for the purposes of such en - actments which are extended to those areas by the Central Government by issuing a notification. 75. In exercise of the powers vested in the Central Government under sub-section (6) of Section 6 and sub-section (7) of Section 7 of the Maritime Zones Act, 1976, the Government extended the Customs Act, 1962 and the Customs Tariff Act, 1976 to the designated areas of the continental shelf and the exclusive economic zone by notification published in the Official Gazette referred to and reproduced in paras 29 to 32." "85. Reading of Sections 6 and 7 of the Maritime Zones Act, 1976 makes it clear that India's jurisdiction over the Maritime Zones Act, 1976 extends to the continental shelf and exclusive economic zone. Consequently, if mineral oil is extracted or produced in the exclusive economic zone or continental shelf and is brought to the mainland, it will not be treated as ....
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....es. Another implication of the said notification is that bringing of any goods from any other country to any place in EEZ or continental shelf of India in connection with any activity related to extraction or production of mineral oils shall be treated as import under the Customs Act, 1962 and would be charged to duty accordingly." "97. The combined effect of these notifications is to extend the application of the Customs Act and the Customs Tariff Act to the aforesaid areas declared as "designated areas" under the Maritime Zones Act, 1976. The further effect of these notifications is that the designated areas of the continental shelf and the exclusive economic zone become a part of the territory of India for limited purposes. The natural consequence of such declarations and the extension of the Customs Act and the Customs Tariff Act to these designated areas is to introduce the customs regime to such areas resulting in the levy and collection of customs duties on goods imported into these areas as if these areas are a part of the territory of India. In these circumstances, the definition of "India" as given in Section 2(27) of the Customs Act gets extended by these provis....
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.... and platforms of certain coordinates given in the Schedule are situated and the areas extending upto 500 metres from such installations, structures and platforms as "designated areas" for the purposes of sections 6 and 7 of the Maritime Zones Act, 1976. In view of the above notifications, the designated areas of the continental shelf and the exclusive economic zone become part of the territory of India for limited purposes and the definition of "India" as given in section 2(27) of the Customs Act gets extended to cover areas declared as designated areas beyond the territorial waters and located in the continental shelf and the exclusive economic zone of India. Undisputedly, the provisions of the Central Sales Tax Act have not been made applicable to the continental shelf and the exclusive economic zone and having regard to the fact that these areas are outside the State of Gujarat, the question of applying the provisions of the GST Act would not arise. But the question involved in the present case is not as to whether the provisions of the CST Act or the GST Act would be applicable, but whether the movement of goods from the Panna-Mukta oil fields to Hazira within the State of Guj....
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....of India. The expression "crossing the customs frontiers of India" has been defined under clause (ab) of section 2 of the CST Act to mean crossing in the limits of the area of a customs station in which the imported goods or export goods are ordinarily kept before clearance by customs authorities. The explanation says that for the purpose of this clause, "customs station" and "customs authorities" shall have the same meaning as in the Customs Act, 1962. Therefore, the import of sub-section (2) of section 5 of the CST Act would be that for the purpose of falling within the ambit of the expression "import" the goods have to cross the customs frontier so as to fall with the purview of the expression "in the course of import into the territory of India". In the present case, the provisions of the Customs Act have been made applicable to the designated areas and consequently, the customs frontiers stand extended beyond the designated areas and hence, the Panna-Mukta oil fields from where the movement of goods is occasioned in the present case, fall within the customs frontiers of India. Once the oil fields fall within the customs frontiers of India, the movement of goods therefrom, cann....
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.... section 5(1) of the CST Act. In the present case, the situation is converse namely, as to whether the sale of goods from the vendor situated at Panna-Mukta oil fields are sales in the course of import into the territory of India as contemplated by section 5(2) of the Central Sales Tax Act. This court is in respectful agreement with the view adopted in the above decision of the Bombay High Court whereby it is held that once the customs frontiers of India stand extended to the designated area, there can be no export of goods to a territory which falls within the customs frontiers. An export of goods involves movement of goods from within the customs frontier to a point beyond. Similarly, the import of goods involves a movement of goods from a point which lies outside the customs frontiers to a point within. The above decision would be squarely applicable to the facts of the present case. Accordingly, the movement of goods, viz. natural gas from the Panna-Mukta oil fields to Hazira within the State of Gujarat cannot be said to be in the course of import into the territory of India, as the movement of goods is not from a place which lies outside the customs frontiers of India so as to....
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.... and Toubro Ltd. v. Union of India (supra) wherein on behalf of the State it was contended that since the sale can fall in only one of the three categories and that in the said case, the court must hold that it is either inter-State sale or a local sale since the contention that the sale was an export sale had not been pressed. In support of such contention, reliance was placed upon the decision of the Supreme Court in the case of Murli Manohar & Co. and Another v. State of Haryana and Another, (1991) 1 SCC 377 wherein the court had held thus: "8. Shri Rajaram Agarwal, learned counsel for the assessees raised a new contention before us, which we have already referred to as an alternative contention. This contention which really seems to be unanswerable appears to have been missed at the stage of the High Court but this contention is purely one of law and merits consideration. The point made by him was this. There is no dispute that the assessees have transferred the manufactured goods by way of sale and that these goods have been despatched to various ports of India. The exact terms of despatch are not clear and there are no facts on record which will help us to understand....
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....y Shri Agarwal, even in Mohd. Sirajuddin case, although the exemption claimed for the sales are export sales was denied, the conclusion of the High Court that the sales to STC were inter-State sales chargeable under Section 5(1) of the C.S.T. Act was upheld. We are, therefore, of the opinion that this alternative contention urged by the learned counsel for the assessee has to be accepted and it has to be held that, since the sales effected by the assessees fall within one of the three exempted categories set out in Section 9(1)(b), there can be no levy of purchase tax under Section 9(1) of the Act. This court, after considering the above decision, held thus: "We are, however, unable to accept the contention. The observations of the apex court cannot be seen in isolation and it is well settled that it is not observation of the court but what the court holds in the fact-situation of a given case which is the ratio that can be applied in similar set of facts and circumstances. In the decision of Murli Manohar & Co., [1991] 80 STC 79 (SC); [1991] 1 SCC 377, the apex court was not considering the sale in the nature that we are confronted with. It was not a case where the0 sa....
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....ear 2001-02 with reference to the letter dated 30th September, 1999 wherein he had dealt with various aspects of the PSC according to his interpretation. On 28th January, 2002, the petitioner submitted a reply relying on various clauses of the PSC and in paragraph 7 thereof, a specific reference was made to ISPA. On 4th March, 2002, the petitioner filed a supplementary reply clarifying some issues such as delivery point, etc. and explained the difference between sour gas and sweetened gas and maintained that they continue to remain the same commercial commodity. Thus, the Assessing Officer had before him the PSC and the ISPA as well as detailed submissions made by the petitioners on various clauses of the PSC. After considering all the above material, the Assessing Officer passed a 'nil' assessment order (so far as Panna-Mukta gas was concerned) for the year 2001- 02 on 30th June, 2003 and on the same date, a 'nil' assessment order was also passed for the year 2000-01. According to the petitioners, having regard to the fact that 'nil' assessment orders were passed on 30th June, 2003, there was absolutely no reason to believe that any turnover of Panna-Mukta gas had escaped assessme....
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.... the assessing authority has recorded reasons or grounds for coming to the conclusion that dealer has evaded the tax. As has been mentioned above is the order effecting the seizure of its account books, the assessing authority found that certain works contracts were liable to be taxed under the Central Sales Tax Act which were in the nature of branch transfers. In the orders of assessment, the assessing authority has reproduced the stand taken on behalf of the assessee that 'such branch transfers were made for completing the works in accordance with the orders and specification of customers outside the State and were not sales but were merely transactions in the course of works contract'. The assessing officer has also in the order of assessment, rejected the contention advanced on behalf of the petitioner that the branch transfers were inter-State works contract and not inter-State sales. He held them exigible to tax under the Central Act. It is on taking such view of law that the assessing officer provisionally assessed the petitioner and consequently imposed tax, interest and penalty on it for the different assessment periods under consideration. On the facts and legal position ....
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....however, a sale of ascertained goods cannot be deemed to take place in the state of origin because the commingled and unsweetened gas is unascertained or future goods and it is only at the time of their appropriation as sweetened gas to the contract of sale by them to GAIL at Hazira, where actual physical delivery and sales takes place. In this regard, it may be noted that similar objections were raised by the Commissioner in the year 1999, pursuant to which Enron, the predecessor of the petitioner - BG Exploration had given its reply dated 3rd September, 1999. Thereafter, the Additional Commissioner had addressed a communication dated 15th September, 1999 calling for further details, in response to which the said petitioner had given a detailed reply dated 23rd September, 1999. On 7th January, 2002, the Additional Commissioner of Sales Tax (Enforcement) issued a show cause notice for the year 2001-2002 referring to the above letter dated 3rd September, 1999 and dealt with various aspects of the PSC according to his interpretation. In response thereto, the petitioner gave a detailed reply dated 28th January, 2002 as well as a reply dated 4th March, 2002 clarifying some issues such ....
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....lace in the stage of origin becauses the commingled and unsweetened gas is unascertained or future goods and it is only at the time of their appropriation as sweetened gas to the contract of sale by you to GAIL. at Hazira, Where actual physical delivery and sales takes place. Hence, you are liable to any Sales Tax in Gujarat State on the sales of Panna-Mukta Gas fields as per Gujarat Sales Tax - 1969. Your assessment for the Year ______98-99____ is finalised on dt. ______5-5-2000___ under Section 41(3) of GUJARAT SALES TAX ACT. is proposed to Re-assessment. Therefore you are required to remain present at above mentioned address on dt. 10-11-2003 with your explanation that why Sales Tax, penalty and interest should not be levied on said transactions as per Gujarat Sales Tax Act - 1969, Failure of which may result in to exparty decision. The notice under section - 44 of Gujarat Sales Tax, No.37, for Re-assessment for the year _98-99____ is attached herewith and detailed statement of Sales of Panna-Mukta Gas Oil field, Since 1997-98 to 2001- 2003 is also attached herewith." 62. At this juncture, reference may be made to the reply dated 28th January, 2002 ....
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....mere change of opinion. As held by the Supreme Court in Kelvinator of India Ltd. (supra) a mere change of opinion cannot be per se reason to reopen an assessment. Therefore, the show cause notices which form the basis of the impugned assessment orders are without jurisdiction as the same have been issued without formation of the requisite opinion as required under the provisions of section 41 and 44 of the GST Act. Consequently, the assessment orders based upon such show cause notices cannot be sustained. 64. On behalf of the respondents, a preliminary objection has been raised with regard to the very maintainability of the petitions on the ground that the petitioners have an alternative statutory remedy by way of appeal available under the provisions of the GST Act and the petitioners have also resorted to such remedy. 65. On behalf of the respondent State authorities, Mr. P.K. Jani, learned Additional Advocate General has contended that these petitions are not maintainable, inasmuch as, the petitions involve disputed questions of fact and the petitioners have already availed of the alternative statutory remedy under section 65 of the GST Act and the appeals preferred by the....
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....he Constitution of India is not available to any aggrieved person when the statute itself contemplates an efficacious remedy. Reliance was also placed upon the decision of the Supreme Court in State of Goa v. Leukoplast India Limited, AIR 1997 SC 1875, wherein the court, after observing that the controversy involved therein related basically to questions of facts held that there was no reason for the assessee to bypass the statutory remedy and come to the court with a writ petition. It was argued that the present case also involves disputed questions of facts and therefore, there is no warrant for intervention by this court. It was, accordingly, urged that the petitioners be relegated to pursue the statutory remedy under the GST Act. On the other hand, on behalf of the petitioners, the learned counsel had submitted that since the reassessment orders passed in the year 2004 are wholly without jurisdiction, the present petitions have been filed to quash the said orders and to declare that the sale of natural gas by the petitioners to Government of India cannot be taxed in view of Article 286 of the Constitution read with section 5 of the CST Act. It was submitted that the petitions a....
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....llate Bench appears to have been under the impression that the Income Tax Officer was the sole Judge of the fact whether the firm in question was resident or non-resident. This conclusion in, our opinion, is wholly wrong. No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly. The question whether the jurisdictional fact has been rightly decided or not is a question that is open for examination by the High Court in an application for a writ of certiorari. If the High Court comes to the conclusion, as the learned Single Judge has done in this case, that the Income Tax Officer had clutched at the jurisdiction by deciding a jurisdictional fact erroneously, then the assessee was entitled for the writ of certiorari prayed for by him. It is incomprehensible to think that a quasi-judicial authority like the Income Tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen. In our opinion, the Appellate Bench is wholly wrong in opining that the Income Tax Officer can "decide either way". 67. In Whirlpool Corporation v. Registrar of Trademarks (supra), the Supreme C....
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....e agreements between the parties and the relevant statutory provisions. While deciding the questions arising in these petitions, this court has not been called upon to touch any issue involving a disputed question of fact. 71. Thus, in the light of the above decisions, it is apparent that where the very jurisdiction of the concerned authority is called in question and the petitions do not involve any disputed questions of fact, the validity of an alternative remedy would not be a bar to entertaining a writ petition under Article 226 of the Constitution of India. Moreover, the present petitions have been filed way back in the years 2004 to 2010. At the relevant time, the court had admitted the petitions and had granted interim relief after bipartite hearing. The decision of the Supreme Court in the case of Indian Tourist Development Corporation Ltd. v. CCT (supra) wherein the court having regard to the fact that the matter pertained to assessment year 2004-05 did not find it in the interest of justice to relegate the appellant therein to the statutory authorities specially when the legal position was very clear and the law was also in favour of the appellant, would be squarely ap....
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....hat the Gas is to be delivered at the Delivery Point as contemplated in clause (a)(iv) of Article 21.5.13 of the PSC nor can the same be read to mean that the parties had agreed to sell and purchase sweetened Gas. v. The price clause contained in the ISPA is only a mechanism by which the parties have decided the price of the goods and cannot be relied upon to decide the situs of the sale. Merely because the Sellers have decided to charge on the basis of what is ultimately received by the Buyer cannot be determinative of the fact as to where the sale takes place. vi. The goods, viz., Natural Gas were ascertained goods at the time when they came to be separated and measured at the Offshore Processing Facility. The ascertained goods upon being separated and measured came to be appropriated to the contract and delivered at the Delivery Point. In terms of Article 27.2 of the PSC, the title to the goods also passed to the Buyer at the Delivery Point. The situs of the sale is the Offshore Processing Facility where the goods were appropriated to the contract. Therefore, it cannot be said that the goods in question were within the State of Gujarat at the time of their appr....