2016 (6) TMI 950 - HC - VAT and Sales Tax

Demand of Sales Tax / VAT - Whether sale to Bombay High was an export - contract with ONGC for the commission of turnkey projects at Bombay High which is situated in exclusive economic zone of the coast of India. - Held that - The Tribunal followed the decision of the Division Bench of this Court in the case of Larsen and Toubro Ltd. vs. Union of India and others 2014 (7) TMI 277 - GUJARAT HIGH COURT - transaction of works contract with ONGC is an export sale not liable to CST. - Decided against the revenue.

Issues Involved:
1. Whether the sale to Bombay High constitutes an export.
2. Applicability of the Central Sales Tax (CST) Act to transactions in the Exclusive Economic Zone (EEZ).
3. Jurisdiction and sovereignty over the EEZ and continental shelf.
4. Availability of alternative remedy and writ jurisdiction.

Issue-wise Detailed Analysis:

1. Whether the sale to Bombay High constitutes an export:
The primary question raised was whether the sale to Bombay High, located in the EEZ, is considered an export. The Tribunal held that the transaction with ONGC is an export sale not liable to CST. The court referenced the Division Bench decision in Larsen and Toubro Ltd. vs. Union of India, which clarified that Bombay High, situated 180 km from the Indian coast, is not part of the Indian territory under Article 1 of the Constitution. Therefore, the movement of goods from Hazira to Bombay High does not qualify as inter-State trade under Section 3 of the CST Act.

2. Applicability of the CST Act to transactions in the EEZ:
The court examined whether the CST Act applies to transactions in the EEZ. It was noted that the Maritime Zones Act provides that the EEZ is not part of the Indian territory, and the Union of India has only limited sovereign rights for specific purposes like exploration and management of natural resources. The court emphasized that the CST Act has not been extended to the EEZ by any notification from the Central Government. Therefore, the sale of machinery to Bombay High does not fall under the CST Act, as there is no inter-State movement of goods.

3. Jurisdiction and sovereignty over the EEZ and continental shelf:
The court discussed the extent of India's jurisdiction and sovereignty over the EEZ and continental shelf. It was highlighted that the Union has sovereign rights for limited purposes in these areas but does not have full sovereignty. The court referenced various statutory provisions and judicial decisions, including the Supreme Court's ruling in Aban Loyd Chiles Offshore Limited, which established that the EEZ is not part of the Indian territory for general legal purposes. The court concluded that the movement of goods to Bombay High does not constitute movement from one State to another within India.

4. Availability of alternative remedy and writ jurisdiction:
The court addressed the objection regarding the availability of an alternative remedy. It acknowledged that while statutory appeals are available, the court can exercise writ jurisdiction in cases where the authority's action is without jurisdiction. The court cited the decision in Gujarat Gas Co. Ltd. vs. Joint Commissioner of Income-Tax, where it was held that alternative remedies do not bar writ petitions when the action of the authorities is found to be without jurisdiction.

Conclusion:
The court dismissed the State Government's appeal, affirming the Tribunal's decision that the sale to Bombay High is an export sale not liable to CST. The court reiterated that the EEZ is not part of the Indian territory under the CST Act, and no notification has extended the CST Act to the EEZ. The petition was allowed, and the impugned order was quashed. The tax appeal and the civil application for stay were also dismissed.

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