TaxTMI 
TaxTMI 
2022 (6) TMI 701
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....for ONGC platform at ONGC, Bombay High Site. According to the petitioner, the petitioner had provided the services of the production of water at ONGC platform. On that platform, the sea water i.e. salt water was converted into potable water. The machinery performing the said process belongs to ONGC. The petitioner had only provided the labour and the chartered ship on the higher basis. The petitioner had its own chartered ship and the possession and control of the ship always remained with the petitioner. 4. It is the case of the petitioner that these activities provided by the petitioner were duly served. The petitioner had purchased the raw material in Maharashtra State and execution of works contract on ONGC platform to ONGC on turnkey basis. According to the petitioner the transfer of property took place on the ONGC platform which was not the part of the State of Maharashtra. The State of Maharashtra had no jurisdiction to levy tax on the goods involved in the execution of work contract, executed on the ONGC platform. 5. The Assessing Officer passed an Assessment Order on 29^th June, 2019 rejecting the contention of the petitioner that the transfer of the property in this....
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....hat the ONGC platform is located in the exclusive economic zone i.e. outside State of Maharashtra. The transfer of the property in goods imported in execution of the work contract is outside the State of Maharashtra and thus the State of Maharashtra has no jurisdiction to levy tax thereon in view of Article 286 of the Constitution of India. According to the petitioner, the transactions in the present case are 'works contract'. 10. It is the case of the petitioner that the appropriation of the goods to the contract happens at the time of incorporation or accretion in a work contract which is the point of the transfer of property. There is no concept of a separate delivery of such goods in such a contract. 11. This Court by an order dated 10th September, 2020 directed that no coercive steps shall be taken by the respondents against the petitioner on the basis of the order of assessment impugned. 12. Mr. Ishaan Patkar, learned counsel for the petitioner made the following submissions :- (a) The Assessing Officer in the Assessment Order dated 29th June, 2019 for the period 2005-06 has levied tax under the Maharashtra Value Added Tax Act, 2002 on the 'deemed sale' of t....
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.... The only recourse is to the judge-made law under Article 286(1)(a) of the Constitution of India. 15. Learned counsel invited our attention to paragraphs 2, 7 to 14 and 16 of the judgment of this Court in case of Pure Helium (supra) holding that the Bombay High located in the Continental Shelf/Exclusive Economic Zone is neither a 'State' nor a part of territory of India. India has only limited sovereignty for the purposes specified in the Maritime Zones Act, 1976. 16. It is submitted that the nexus theory does not revive. The judge made law under Article 286(1)(a) did not cover a particular sale, a situs of the sale was fixed by the judge made law - where transfer of property takes place. Nexus theory cannot be applied. He also relied upon the paragraphs 6 to 13 of the judgment in case of Indian Copper Corporation (supra) and paragraphs 9 and 10 of the judgment in case of A. V. Thomas (supra). 17. It is submitted that assuming but not admitting that the nexus theory could be applied to a works contract in Bombay High, the mischief of multiple taxation will be revived. The respondents in paragraph 2 of the affidavit-in-reply have put-forth two nexus as 'sufficient nexus' i.....
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.... the course of inter-state trade and commerce except in accordance with Parliamentary legislation. Learned counsel placed reliance on Entry 54, List II of the Constitution of India which provides 'Taxes on the sale or purchase of goods other than newspapers'. 21. Learned counsel placed reliance on the judgment of Hon'ble Supreme Court in case of Indian Copper Corporation v/s. State of Bihar (supra) and would submit that the said judgment deals with sales which were not covered by the Explanation to Article 286(1)(a) and held that the State where the transfer of property takes place can only tax it. Nexus theory is not applicable. He relied upon the 61st Law Commission Report submitted in May 1974 recommending that the judgment of the Hon'ble Supreme Court in case of Gannon Dunkerley 1 and 5 other decisions need to be overruled. 22. Learned counsel placed reliance on the judgment of Hon'ble Supreme Court in case of Gannon Dunkerley (supra) and would submit that Article 366(29A)(b) is subject to Article 286 and Article 269 read with 92A of List I. The tax is leviable at the time of incorporation/accretion and the value which can be taxed is only the value at the time of incorpo....
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....rned counsel for the petitioner placed reliance on Rule 58 of the Maharashtra Value Added Tax Rules, 2005 and submits that the judgment of this Court in case of Central Sales Tax v/s. Steel Plant Pvt. Ltd. (supra) was held good till prior to the date of carrying out amendment. He relied upon paragraphs 1 to 3 and 6 to 16 of the said judgment. He submits that the contract entered into between the petitioner and ONGC was an individual works contract and was not for sale or supply of goods. He invited our attention to judgment of Supreme Court in case of Commissioner of Commercial Taxes v/s. K. T. C. Automobiles (supra) and in particular paragraphs 2 to 4 and 22 to 27 and would submit that in the said judgment, the Supreme Court had considered Article 286(2) of the Constitution of India and also Section 4(2) of the Central Sales Tax Act, 1956. 29. Insofar as the issue of alternate remedy raised in the affidavit-in-reply by the respondents is concerned, it is submitted by the learned counsel that since the petition has raised jurisdictional issue on levy of tax by the respondents on the works contract, where the property has passed offshore, the powers of this Court to entertain thi....
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....d agreement and would submit that upto 80% of the cost of materials inclusive of all taxes and duties including duty, if any, limited to 60% of the total contract value to be released against receipt of materials at ONGC Yard Nhava Sheva after satisfactory inspection by certification agency and proof of receipt of materials in good condition at ONGC Nhava/Heli base. 34. Learned AGP placed reliance on clause 22.0 of the said agreement and submits that the lumpsum unit prices of stages/items of Work contained in the price schedule was to include price for procurement and supply and delivery of items at ONGC site/Nhava inclusive of all taxes, duties, fees including custom duties, excise duty, sales tax as applicable etc. for execution of the Works under the said agreement. 35. It is submitted that situs of the agreement to transfer goods was at Mumbai within State of Maharashtra. The terms and conditions of the agreement executed between HAL offshore and ONGC when considered in entirety would establish that the entire transaction of deemed sale has taken place in State of Maharashtra. There is a nexus at the place where the goods are delivered. As it is the place where it can be....
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....not the case of the petitioner that any of the items supplied by the petitioner to ONGC under the said agreement amounted to export and thus on that ground, the respondents have no jurisdiction to levy any tax on the petitioner for supply of material under the said agreement. She submits that the petitioner has accepted that the judgment of this Court in case of Commissioner of Sales Tax Vs. Pure Helium (supra) is against the petitioner. 40. Learned AGP for the State invited our attention to some of the provisions of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976 and the Maharashtra Marine Fishing Regulation Act, 1981. She relied upon definition of 'State under clause 'k' of the said Maharashtra Marine Fishing Regulation Act, 1981 and would submit that the State of Maharashtra includes the territorial water along the entire coast line of that State. She submits that territorial would include not only land but also water. The petitioner as well as ONGC have themselves submitted to the jurisdiction of the State of Maharashtra. 41. Learned AGP relied upon the judgment of Karnataka High Court in case of the Great Eastern Ship....
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....preme Court) dated 11th April, 2008. (b) Coram : Dr. D.Y.Chandrachud & A.A.Sayed, JJ. (Bombay High Court) dated 6/9th January, 2012. (c) Coram : S.C.Dharmadhikari & G.S.Kulkarni, JJ. (Bombay High Court) dated 19th October, 2015. 46. Mr.Patkar, learned counsel for the petitioner in his rejoinder arguments submits that the respondents have sought to argue that all the agreements mentioned in the assessment order were the works contract. There were three separate activities i.e. (i) Contract for operation and maintenance (O&M) for chlorinator which was a pure service contract with no goods element involved at all; (ii) Charter Hire of MSV support vehicles - this was not a contract for executing any works contract, but a Charter Hire of vessels which is fundamentally different type of contract. Petitioner has succeeded on this issue and therefore no dispute arises in respect of the Charter Hire contracts in this petition; (iii) works contracts involving the activities forming part of the agreement between the petitioner and ONGC which are the subject matter of this petition. 47. It is submitted that the Assessing Officer has not classi....
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....as held that Article 366(29A)(b) has altered an indivisible works contract into one for sale of goods and one for supply of services. 52. It is submitted that since the contract in question is indivisible at the contractual level, the stage is set for the legal fiction in Article 366(29A)(b) to apply and to effect divisibility by operation of law. This is the only change brought about by the 46th Constitutional Amendment. Earlier there was no divisibility by operation of law and the matter would end once the contract is found indivisible at the contractual level. He submits that the principles and formula for effecting this divisibility by operation of law are laid down in paragraph 45 to 47 in case of Gannon Dunkerley II (supra). 53. It is submitted that though the Hon'ble Supreme Court in case of Builders' Association of India (supra) has held that the indivisible contract is altered into a contract for sale of goods and supply of services, the Hon'ble Supreme Court in case of Gannon Dunkerley II (supra) still did not recognize the chattel qua chattel transfer principles of Sale of Goods Act, 1930 for determining the point of transfer of property under Article 366(29A)(b). ....
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.... transfer of possession from one person to another. He relied upon Clauses 8.2 and 17.2.2.3 of the said agreement and submits that neither clause speaks of any transfer of the right of possession, much less any actual transfer of possession. If the delivery is already complete in Nhava Sheva then there is no question of any "surplus material" being ferried back. The goods also remain entirely at Petitioner's risk during the sea journey and the entirety of the works. 58. In so far as the claim for deductions for labour and service charges under Rule 58 of the MVAT Rules, 2005, sales in the course of imports is concerned, he disputed the statement of the learned AGP that deductions were claimed in the returns filed by the petitioner. He invited our attention to the returns filed by his client and more particularly the description at Serial No.5 onwards and submits that the said description would show "0" i.e. no return was filed in the first place and therefore, no claims were lodged. The petitioner was not registered under the MVAT Act, 2002 for the period in issue in this Petition, that is 2005-06 and therefore no returns were filed at all. He also invited our attention to Row 6....
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.... at the stage of execution of contract and another at the stage of incorporation/accretion. He submits that it cannot be said that the "transfer of property in goods involved in the execution of works contract" is even remotely complete on execution of the works contract. The taxable event in the works contract is the point of incorporation/accretion. In the case of transfer of right to use goods, the last act required to complete the transfer of the right to use as per general law/common law is the execution of contract. It cannot be said that the last act for completing a deemed sale in a works contract is the mere execution of the contract. 64. It is submitted that the Explanation to Article 286(1)(a) has since been replaced by Section 4 of the CST Act, 1956 r/w. Article 286(2) which enacts fundamentally different principles for determining situs of sale. Where Section 4 Central Sales Tax Act, 1956 does not apply, the rule of situs continues to be where the transfer of property takes place as declared in Indian Copper Corporation (supra). It is stated that the peculiar issue of there being a "State" required for delivery for consumption which can shift the situs away from the....
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....hat non-entertainment of petitions under writ jurisdiction of High Court when an efficacious alternative remedy is available is a rule self-imposed limitation. It is essentially the rule of policy, convenience and discretion rather than the rule of law. High Court must not interfere if there is an adequate efficacious alternative remedy available to the petitioner and he has approached the High Court without availing the same unless he has made out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under Article 226. 70. The Supreme Court adverted to the judgment of the constitution Benches in case of K.S. Rashid & Sons vs. Income Tax Investigation Commission, AIR 1954 SC 207, Sangram Singh vs. Election Tribunal, Kotah, AIR 1955 SC 425, Union of India vs. T.R. Varma ,AIR 1957 SC 882, State of U.P. vs. Mohd. Nooh, AIR 1958 SC 86 and K.S. Venkataraman & Co. (P) Ltd. vs. State of Madras, AIR 1966 SC 1089 in which it was held that though Article 226 confers a very wide powers in the matter of issuing writs on the High Court, the remedy of writ is absolutely discretionary in character. If High Court is satisfied....
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....when an alternative remedy is available and the petition is entertained by this Court, the petitioner later cannot approach the appellate authority by way of appeal or revision as the case may and thus the petitioner would be to its disadvantage. For this reason also entertaining the petition without allowing the petitioner to avail an alternative remedy is not in the best interest of the petitioner. 74. It is held that even in case of violation of affording the opportunity before the Assessing Authority the Appellate Authority itself could consider the the same and if it is satisfied that further opportunity need to be given to the petitioner, the Appellate Authority could afford such an opportunity to the petitioner. But without going into the factual aspects and without considering the merits of the matter which are disputed facts, it cannot be concluded one way of the other, for which writ petition is not the remedy. The principles laid down by the Karnataka High Court in case of M/s. Leighton India Contractors Pvt. Ltd. (supra) apply to the facts of this case. We are in agreement with the view taken by the Karnataka High Court in the said judgment. 75. In paragraphs (b) ....