2009 (10) TMI 856 - HC - VAT and Sales Tax

Whetehr sales have to be treated as exempted from payment of tax as per 2002 Act - Held that - The stand of the respondent that a separate notification for Union Territory, Chandigarh is required to be issued would not require any detailed consideration in view of the fact that notification issued by the Ministry of Civil Aviation under section 3 of the Act on November 18, 2002 would extend to all the States and Union Territories. It is further made clear that by letter dated February 10, 2003 (P4) circulated by the Ministry of Petroleum and Natural Gases intimating all the States and Union Territories the entitlement of the corporation like the petitioner stipulating that no tax/duties whether levied by the Central or State Government are leviable on the supply of fuel/lubricants on the air crafts of foreign countries. Even the refund has been permitted as the notification has come into force with effect from November 23, 2002. As a sequel to the above discussion, this petition succeeds and order dated May 8, 2009 (P5) is set aside. Respondent No. 2 is directed to exclude the sale concerning ATF made to foreign aircrafts by the petitioner-corporation and re-determine the tax liable of the petitioner in accordance with law. The petition stands disposed of accordingly.

Summary

Issues:
1. Implementation of the Foreign Aircraft (Exemption from Taxes and Duties on Fuel and Lubricants) Act, 2002.
2. Quashing of an order by the Assessing Authority regarding taxation on air turbine fuel (ATF) sales to foreign aircrafts.

Analysis:
1. The Indian Oil Corporation Ltd. approached the court seeking directions to implement the 2002 Act, which grants exemptions on fuel and lubricants for foreign aircraft. The corporation contended that sales of ATF to foreign aircrafts should be tax-exempt as per the Act. The Assessing Authority rejected this claim, including ATF sales in the total turnover. The court noted that a notification issued by the Central Government exempted such sales from taxes and duties, applicable to all States and Union Territories. The court upheld the corporation's claim and directed the Assessing Authority to exclude ATF sales to foreign aircrafts from the total turnover for taxation purposes.

2. The court highlighted the importance of Article 253 of the Indian Constitution, which empowers Parliament to enact laws to implement international agreements. In this case, the 2002 Act was enacted to comply with the Convention on International Civil Aviation. The Act required a notification to grant exemptions on fuel and lubricants for foreign aircraft. The Ministry of Civil Aviation issued such a notification, extending the exemption to all States and Union Territories. The court emphasized that the notification was applicable to sales of ATF to foreign aircrafts, exempting them from taxes and duties. Consequently, the court set aside the Assessing Authority's order and directed a reassessment of the petitioner's tax liability in accordance with the law.

In conclusion, the court ruled in favor of the Indian Oil Corporation Ltd., directing the exclusion of sales of ATF to foreign aircrafts from the total turnover for taxation purposes. The judgment highlighted the legal framework under the 2002 Act, emphasizing the exemption granted by the Central Government through a notification applicable to all States and Union Territories.