9911796707
TMI Blog2022 (6) TMI 701X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 29th June, 2019 rejecting the contention of the petitioner that the transfer of the property in this case took place on the ONGC platform which were not part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side 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 transfer of property in goods involved in the works contract executed in Bombay High w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.e. (i) That the parties are registered and situated in State of Maharashtra and (ii) That the goods moved from State of Maharashtra. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 incorporation of goods into the works and not beyond that. He relied upon definition of 'sale' in Section 2(g) of the Central Sales Tax Act, 1956 and wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this writ petition under Article 226 of the Constitution of India are not taken away. 30. Learned counsel for the petitioner placed reliance on the following judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory 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 said that the goods are appropriated. As per the terms of agreement the goods are to be checked, verified by ONGC at Nhava-Sheva and the goods can be rejected by ONGC and returned at Nhava-Sheva and substantial payment i.e. upto 80% of the cost of goods/m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 Shipping Company Limited Vs. State of Karnataka, ILR 2004 KAR 3750 and in particular paragraphs 5 and 6 thereof. She also relied upon the judgment of Madras High Court in case of A.M.S.S. V.M. and Co. Vs. The State of Madras, AIR 1954 MADRAS 291 in which the judgment of K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 classified the contracts at Sr.nos.(i) and (ii) of the works contract in his order. It is also not the case of the respondents in their Affidavit-in-Reply that the contracts at Sr.nos.(i) and (ii) were the works contract. The petitioner is not undertaking any activity of laying down any pipes for this operation and maintenanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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). 54. It is submitted by the learned counsel that the formula in Gannon Dunkerley II for determining the value of the goods at the time of incorporation is applicable whether the works contract is one for lumpsum consideration or whether separate amounts were set out for the materials or stipulation for payment of consideration on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al" 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(a), Row 6(r), 14(f) and would submit that neither was any set off on purchases claimed, nor was it allowed. The Assessing Officer himself has nowhere said that the deductions were claimed. 59. In so far as the "sales in the course of import" is concerned, it is submitted that the "sales in the course of import" cannot be taxed by the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 State where transfer of property takes place does not arise after the deletion of the Explanation to Article 246(1)(a). 65. It is submitted by the learned counsel that the submission of the respondents that labour has been taken from Maharashtra and PF and ESI are subject to jurisdiction of Maharashtra is entirely irrelevant to the question at issue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the aggrieved party can have an adequate or suitable relief elsewhere, it can refuse to exercise its jurisdiction. The High Court in extraordinary circumstances, may exercise the power if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted. 71. It is held by the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) and (c) of the writ petition, the petitioner has prayed for a declaration that section 26 of the MVAT Act is ultra virus to extent it has constituted the First Appellate Authority and seeks further declaration that section 26 (6A) of the MVAT Act is ultra virus the Constitution of India. Both these issues raised by the petitioner are being dealt with by a Full Bench of this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Authority and not in this writ petition. 79. The petitioner has not made out any exceptional circumstances to entertain the petition for entertaining the writ petition without availing alternative efficacious remedy available to the petitioner. The Appellate Authority can also deal with the questions of law arising out of the said order. Though the petitioner has raised several issues as already referred to aforesaid which are summarized by this Court in the earlier paragraphs of the judgment, since we are not inclined to entertain this writ petition on the ground of the petitioner not having availed of alternative efficacious remedy available under section 26 of the MVAT Act, We are not dealing with those contentions raised by the petitioner. 80. We accordingly pass the following order :- i). The writ petition is dismissed as not maintainable on the ground of alternative efficacious remedy under section 26 of the Maharashtra Value Added Tax Act, 2002 not availed by the petitioner. The prayer clauses (b) and (c) of the petition challenging the validity of section 26 of the Maharashtra Value Added Tax Act, 2002 are being decided in the case of United Projects vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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