Gujarat High Court
State Of Gujarat vs Larsen And Tourbo Ltd on 21 June, 2016
Author: Akil Kureshi
Bench: Akil Kureshi, A.J. Shastri
O/TAXAP/484/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 484 of 2016
With
OJ CIVIL APPLICATION NO. 261 OF 2016
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STATE OF GUJARAT....Appellant(s)
Versus
LARSEN AND TOURBO LTD,....Opponent(s)
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Appearance:
Mr. Hardik Vora, Assistant GOVERNMENT PLEADER for the Appellant
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE A.J. SHASTRI
Date : 21/06/2016
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) State Government has filed this Appeal challenging the judgment of Value Added Tax Tribunal dated 23.7.2015 raising following question for our consideration.
" Whether the Hon'ble Tribunal has erred in law and in facts in holding that the sale to Bombay High was an export ?"
2. Since the question does not bring about the dispute accurately, brief facts may be noted. Respondent assessee is a public limited company and is engaged in business of manufacturing engineering goods and execution of work contracts in different parts of the country. The company has Page 1 of 19 HC-NIC Page 1 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER manufacturing division at Hajira near Surat in the State of Gujarat. The company had entered into contract with ONGC for the commission of turnkey projects at Bombay High which is situated in exclusive economic zone of the coast of India. The question of charging sales tax came up for consideration before the Tribunal. 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 dated 2.9.2011 in Special Civil Application No. 5575 of 2011 and provided as under:
"(ii) it is held that the transaction of works contract with ONGC is an export sale not liable to CST. In view of this finding, the alternative contentions raised by the appellant are not required to be dealt with."
3. Learned counsel for the parties agree that issue is identical to one which has been decided by this Court in the case of Larsen and Toubro Ltd. (supra). For convenience, we may record the findings of the Court in the said judgment.
"30. From the above statutory provisions it can be seen that as per Article 1 of the Constitution the territory of India comprises of the territories of the States, Union territories specified in the First Schedule and such other territories as may be acquired. Admittedly, Bombay High which is situated at about 180 kms. from the shores of India is not part of the territory of India as stated in Article 1 of the Constitution. As per Section 7 of the Maritime Zones Act, it is part of Exclusive Economic Zone. It is of course true that under Article 297 of the Constitution, it is provided that all lands, minerals and other things of value underlying the ocean within the territorial waters, or the continental shelf or the Exclusive Economic Zone of India shall vest in the Union and be held Page 2 of 19 HC-NIC Page 2 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER for the purposes of the Union. Thus for the purpose of vesting of lands, minerals and other natural resources etc, clause (1) of Article 297 clearly provides that the same shall vest in the Union. However, this is not the same thing as to suggest that such areas of Exclusive Economic Zone form part of the Indian territory. For the purpose of this petition, our enquiry is whether Bombay High, which is situated in the Exclusive Economic Zone is part of the territory of India. This is relevant because under Section 3 of CST Act, the sale and purchase of goods is deemed to take HC-NIC Page 18 of 34 Created On 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 is, therefore, necessary for us to ascertain whether the sale in question occasioned the movement of goods from one State to another. It is therefore, necessary for us to ascertain whether the movement of goods from Hazira to Bombay High can be stated to be a movement of goods from State of Gujarat to another State within the country.
31. From the statutory provisions contained in the Maritime Zones Act, as noted in the earlier portions of this order, it can be seen that the Act envisages territorial waters of India and limits of territorial waters is the line every point of which is at a distance of twelve nautical miles from the nearest point of the appropriate baseline. Sub- Section (1) of Section 3 specifies that the sovereignty of India extends and has always extended to the territorial waters of India and to the seabed and subsoil underlying and the air space over, such waters. Maritime Zones Act also envisages contiguous zones of India as the area beyond and adjacent to the territorial waters and the limit of the contiguous zone is the line every point of which is at a distance of twenty-four nautical miles from the nearest point of the baseline referred to in sub-section (2) of section
3. Sub-Section (5) of Section 5 empowers the Central Government by notification in Official Gazette to extend any enactment relating to any matter referred to in clause (a) or clause (b) of Page 3 of 19 HC-NIC Page 3 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER sub-Section(4), namely, the security of India and immigration, sanitation, customs and other fiscal matters to the contiguous zone and also make such provisions as it may consider necessary for facilitating the enforcement of such enactment. It is further provided that any enactment so extended shall have effect as if the contiguous zone is the part of the territory of India.
32. Section 6 of the Maritime Zones Act pertains to continental shelf and is described as an area which occupies seabed and subsoil of the submarine areas that extend beyond the limit of its territorial waters throughout the natural prolongation of its land territory to the outer edge of the continental margin or to a distance of two hundred nautical miles from the baseline referred to in sub-section (2) of Section 3. Sub-Section (2) of Section 6 provides that India has, and always had, full and exclusive sovereignty rights in respect of its continental shelf. It may be noted that the words used are sovereign rights and not sovereignty in respect of such continental shelf. Sub-Section (5) of Section 6 empowers the Central Government to issue notification to declare any area of the continental shelf and its superjacent waters to be a designated area and to make such provisions as it may deem necessary with respect to besides other purposes, customs and other fiscal matters in relation to such designated area.
33. Section 7 of the Maritime Zones Act pertains to exclusive economic zone and is defined as an area beyond and adjacent to the territorial waters and the limit of such zone would be 200 nautical miles from the baseline referred to in sub-Section (2) of Section 3 and sub-Section (4) of Section 7 of the Maritime Zones Act providing inter alia that the Union has exclusive sovereign rights in such exclusive economic zone for the purpose of exploration, exploitation, conservation and management of the natural resources, both living and non-living as well as for producing energy from tides, winds and currents. Union also has, within such exclusive economic zone exclusive Page 4 of 19 HC-NIC Page 4 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER jurisdiction to authorize, regulate and control scientific research and exclusive jurisdiction to preserve and protect the marine environment and to prevent and control marine pollution. Sub-
Section (5) of Section 7 prohibits any person except under, and in accordance with, the terms of any agreement with the Central Government or of a licence or a letter of authority granted by the Central Government, explore or exploit any resources of the exclusive economic zone or carry out any search or excavation or conduct any research within the exclusive economic zone or drill therein or construct, maintain or operate any artificial island etc. Sub-Section (6) of Section 7 empowers the Central Government by notification in Official Gazette to declare any area of exclusive economic zone to be a designated area and to make such provisions as it may deem necessary with respect to, besides other purposes, customs and other fiscal matters in relation to such designated area. Sub-Section (7) of Section 7 authorizes the Central Government by notification in Official Gazette to extend with such restrictions and modifications as it thinks fit, any enactment for the time being in force in India or any part thereof to the Exclusive Economic Zone or any part thereof and make such provisions as it may think necessary for facilitation of the enforcement of such enactment and any enactment so extended shall have effect as if the exclusive economic zone or the part thereof to which it has been extended is a part of the territory of India.
34. From the above provisions it can clearly be seen that though Union of India has certain rights over the Exclusive Economic Zone, the Indian Union does not have sovereignty over such an region. Clause (a) to sub-Section (7) of Section 7, for example provides that the Union has, over the Exclusive Economic Zone, sovereign rights for the purpose of exploration, exploitation, conservation and management of the natural resources. Sovereign rights are thus for the limited purposes provided therein. Sub-Section (4) of Section 7 does not speak of unlimited Page 5 of 19 HC-NIC Page 5 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER sovereign rights much less sovereignty of the Union of India over the exclusive economic zone. It is only by virtue of the notification in Official Gazette that the Central Government may declare any area of exclusive economic zone to be a designated area and make such provision as it may deem necessary with respect to such area for different purposes including for the purpose of customs and other fiscal matters in relation to such designated area. Further sub-Section (7) of Section 7 empowers the Central Government to issue notification to extend certain laws to any part of the exclusive economic zone and to make such provisions as are necessary for enforcement of such enactments. It is further provided that thereupon the enactments so extended shall have effect as if the exclusive economic zone or the part thereof to which it has been extended is a part of the territory of India. The language used in clause (b) of sub-Section (7) of Section 7 to the Maritime Zones Act is significant as it does not provide that the designated area upon notification by the Union of India, shall be part of the territory of India. It provides that law so notified shall be extended as if the exclusive economic zone or the part thereof is a part of the territory of India. The language is clear and gives rise to a deeming fiction for the limited purpose of extension and application of laws notified and for that limited purpose Exclusive Economic Zone shall be deemed to be a part of the territory of India. It is not the same thing as to suggest that Exclusive Economic Zone becomes part of the territory of India. It is not even the case of the respondents that the Exclusive Economic Zone is part of the territory of India 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 Page 6 of 19 HC-NIC Page 6 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER 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. We may notice that similar issues came up before different courts including the Apex Court under different fiscal statues such as the Customs Act, Central Excise Act and the Income Tax Act. The Income Tax Act, 1961 by virtue of sub-Section (2) of Section 1 extends to the whole of India. In the present form Section 2(25A) of the Income Tax Act, 1961 reads as under:-
"Section 2(25A) : "India" means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters."
Presently, Section 2(25A) of the Income Tax Act thus provides that "India" means territory of India and several other areas including Exclusive Economic Zone. Prior to its amendment by the Finance Act, 2007 with effect from 25.8.1976, Section 2(25A) of the Indian Income Tax Act read as under:-
"2(25A) "India" shall be deemed to include the Union territories of Dadra and Nagar Haveli, Goa, Page 7 of 19 HC-NIC Page 7 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER Daman and Diu and Pondicherry,-
(a) as respects any period, for the purposes of section 6;
and
(b) as respects any period included in the previous year, for the purposes of making any assessment for the assessment year commencing on the 1st day of April, 1963, or for any subsequent year;"
36. In the background of the unamended Section 2(25A) of the Income Tax Act, 1961, the Bombay High Court in the case of McDermott International Inc (No.1) vs. Union of India (supra) held that the income which had arisen on account of work done beyond 12 nautical miles was not exigible to Income Tax. Madras High Court in the case of Commissioner of Income-tax vs. Roland William Trikard (supra) also applying the unamended Section 2(25A) held that in absence of any notification extending the Income Tax Act to continental shelf and exclusive economic zone (which was issued with effect from 1.4.1983) no tax can be levied for income arising in such region.
37. Such was also the view of the Division Bench of Uttaranchal High Court in the case of Commissioner of Income-tax vs. Atwood Oceanics International S.A. (supra) wherein, it was held and observed as under:-
" In this appeal we are concerned regarding taxability of income earned by a foreign technician, employee, on the rigs located in the continental shelf and the economic zone but beyond territorial waters of India during the accounting year ending March 31, 1983. On March 31, 1983, the Government of India issued Notification no.G.S.R. 304(E) (see [1983] 142 ITR (St.)11), under section 6(6) and section 7(7) of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Page 8 of 19 HC-NIC Page 8 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER Zones Act, 1976 ( hereinafter referred to for the sake of brevity as " the said Act, 1976"). By the said notification the provisions of the Income-tax Act were made applicable from April 1, 1983, to the continental shelf and exclusive economic zone. It is important to note that in this case we are concerned with the concept of taxable territory of India under the Income-Tax Act,1961. This is important as it is only by virtue of notification dated March 31, 1983, that the continental shelf and the exclusive economic zone became part of the taxable territory with effect from April 1, 1983. Therefore, the said tax could not have been levied on the income which accrued in the accounting year ending March 31, 1983, when the territory in which it accrued was not the taxable territory to which the Income-tax Act applied. To levy the tax, the income must accrue in the territory to which the Income-Tax Act applies. In this case article 297 of the Constitution is not relevant. For the purpose of deciding this matter the only relevant issue is whether the income earned by a non-resident accrued in a taxable territory prior to April 1, 1983. On facts it is clear that the foreign technician had earned salary income before April 1, 1983, by working on the oil rigs, located beyond 12 nautical miles and therefore he was not taxable for the assessment year 1983-84. Our view is supported by the judgment of the Madras High Court in the case of CIT v. Ronald William Trikard [1995] 215 ITR 638 and also by the judgment of the Bombay High Court in the case of McDermott International Inc.(No. 1) v. Union of India [1988] 173 ITR 155. The various judgments of the Supreme Court cited by Mr. Posti on behalf of the Revenue have no application to the facts of the present case as in those judgments the facts related to the amendment of the Income- Tax Act either by the Finance Act or by the Tax Law Amending Act which is not the case herein. In the present case, there is only a notification issued by the Central Government, that notification is issued not under the Income tax Act but under the said Act, 1976. For the aforestated reasons, we answer both the above questions in the Page 9 of 19 HC-NIC Page 9 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER affirmative, i.e. in favour of the assessee and against the Department. Accordingly, all the above appeals are disposed of. No order as to costs."
38. We may notice that subsequently, however, the Union of India appears to have issued notification extending the Income Tax Act to the continental shelf and Exclusive Economic Zone with effect from 1.4.1983. It also emerges that the Income Tax Act, 1961 itself has been amended by making much wider provisions in Section 2(25A). In absence of such provisions as it stands in the present form and in absence of a notification extending the Income Tax Act to Exclusive Economic Zone and such other areas, as already noted, different High Courts have held that no tax can be collected on the incomes arising out of the works done in such Exclusive Economic Zone.
39. It may further be noticed that Union of India has issued different notifications under different fiscal statues e.g. by a notification dated 19.9.1996 the Central Government has extended the Customs Act and the Customs Tariff Act to the designated areas of the continental shelf and the Exclusive Economic Zone with immediate effect. Likewise in a notification dated 11.6.1987, the Central Government has extended the Central Excise and Salt Act, 1944, the Mineral Products (Additional Duties of Excise and Customs) Act, 1958 and the Central Excise Tariff Act, 1985 to the designated areas in the continental shelf and Exclusive Economic Zone. Similarly, by notification issued in March, 1983 the Central Government has extended the Income Tax Act, 1961 to the continental shelf of India and Exclusive Economic Zone in respect of income derived by every person from all or any of the activities specified in the notification.
40. By a notification dated 27.2.2010 provisions of Chapter V of Finance Act, 1994 ( pertaining to Service Tax) have been extended to continental Page 10 of 19 HC-NIC Page 10 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER shelf and Exclusive Economic Zone as indicated for the purposes specified in the notification. It can thus be seen that the Central Government has been issuing notifications extending different taxing statutes to designated areas, continental shelf and Exclusive Economic Zone. Such notifications have been issued extending the Income Tax Act, 1961, Customs Act and the Customs Tariff Act, Central Excise Act and the Central Excise Tariff Act, the Service Tax and the provisions contained in Finance Act, 1994. However, admittedly, no such notification has been issued extending all or any of the provisions of CST Act to any of the designated areas, continental shelf or Exclusive Economic Zone. To our mind in absence of such notification, respondents could not have demanded tax under the CST Act from the petitioners on its sale of machinery, parts etc. to the respondent No.5, which sale was completed at Bombay High.
41. Decision of the Apex Court in the case of Aban Loyd Chiles Offshore Limited and another vs. Union of India and others (supra) is relevant for our purpose. In the said case, the facts were that the appellants had engaged in drilling operations for exploration of offshore oil, gas and other related activities under the contracts awarded to them by ONGC. Such drilling operations were carried out at oil rigs/vessels, which were situated outside the territorial waters of India. In that background, question arose before the Apex Court whether the oil rigs engaged in the operations in exclusive economic zone /continental shelf falling outside the territorial waters of India, were foreign going facilities as defined under Section 2(24) of the Customs Act, 1962 and were entitled to consume imported stores without payment of customs duty. The appellant had imported the "stores" by air which landed at Sahara Airport. When they sought clearance to shift stores without payment of duty, the Revenue authorities opposed the same. The Revenue, relied on the decision of the Bombay High Court in the case of Pride Foramer vs. Union of India (supra), it was in this background the Page 11 of 19 HC-NIC Page 11 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER Apex Court considered the above noted legal question. The Apex Court examining the provisions contained in Section 6 of the Maritime Zones Act observed in paragraph 74 of its decision that it is clear that in respect of continental shelf and Exclusive Economic Zone, India has been given only certain limited sovereign rights and such limited sovereign rights conferred on India in respect of continental shelf and Exclusive Economic Zone cannot be equated to extending the sovereignty of India over the continental shelf and Exclusive Economic Zone. Referring to words "as if" used in the said provisions, it was observed that sub-Section (6) of Section 6 and sub-Section (7) of Section 7 create fiction by which continental shelf and Exclusive Economic Zone are deemed to be a part of India for the purposes of such enactments which are extended to those areas by the Central Government by issuing a notification. In paragraph 77 of the decision, it was observed that the coastal State has no sovereignty in territorial sense of dominium over the contiguous zone, but it exercises sovereign rights for the purpose of exploring the continental shelf and exploiting its natural resources. In paragraph 79 it was observed that it is a concept of restricted sovereignty linked to the resources sense sans the incidents of territoriality. This is so because, in other respects, the status of the waters in this area as a part of the high seas is specifically recognised and retained in the Convention. In this background, the Apex Court held as under:-
"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 import and, therefore,, no customs duty would be leviable. Likewise, goods supplied to a place in the exclusive economic zone or continental shelf will not be treated as export under the Customs Act Page 12 of 19 HC-NIC Page 12 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER and no export benefit can be availed on such supply. Any mineral oil produced in the exclusive economic zone or continental shelf will be chargeable to Central excuse duty, as goods produced in India." The decision of the Bombay High Court in the case of Pride Foramer was upheld observing as under:-
"89. We do not find any ambiguity in this situation. The interpretation given by the High Court in Pride Foramer case would not result in any absurd situation as contended by the counsel for the appellants. The appellants want the Court to read Section 2(21) of the Customs Act in isolation, which would not be the correct approach. The Customs Act has to be read along with the provisions of the Maritime Zones Act, 1976."
The Apex Court concluded as under:
"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 provisions to cover areas declared as designated areas beyond the territorial waters and located the continental shelf and the exclusive economic zone of India."
42. The decision in the case of Aban Loyd Chiles Page 13 of 19 HC-NIC Page 13 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER Offshore Limited and another vs. Union of India and others (supra), thus clearly lays down principle of limited sovereign rights over continental shelf and Exclusive Economic Zone regions and giving rise to a deeming fiction for the purpose of extension of the laws by notification issued by the Central Government under Sections 6 and 7 of the Maritime Zones Act. 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 will be chargeable to Central Excise duty as goods produced in India. In the present case, however, we are confronted with the situation where CST Act has not been extended by issuance of notification by the Central Government to the continental shelf or the exclusive economic zone.
43. Coming to the decisions cited by the counsel for the State, we may record that the cases of Burmah Shell Oil Storage & Distributing Co. of India Ltd. vs. CTO (supra), Madras Marine and Co. vs. State of Madras and The State of Madras vs. Davar & Co. Etc., related to the question whether the movement of goods can be stated to be in course of export. Counsel for the petitioners did not pursue this line of arguments in the present petition, confining challenge only to the non-applicability of the provisions of CST Act contending that since there is no inter- State movement, CST Act would not apply. We, therefore, need not go any further into this aspect.
44. In the case of Oil and Natural Gas Corporation Ltd vs. Rt. Hon.Sir Michael Karr and another (supra), the Bombay High Court was concerned with the jurisdiction of arbitration proceedings and the decision therein, therefore, would have no direct bearing on the present Page 14 of 19 HC-NIC Page 14 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER issue.
45. In the case of Nand Lal Hira Lal vs. The Punjab State (supra), the Punjab and Haryana High Court was examining a situation where the sale of goods had occasioned the movement from the State of Punjab into the State of Jammu and Kashmir. Since CST Act is not extended to Jammu and Kashmir, contention of the assessee was that no sales tax can be collected on such sale of goods. It was in this background, the Division Bench held that the provisions of CST Act would be applicable since the same are extended to the State of Punjab. In the said case, however, it can be seen that the movement of goods was from Punjab to Jammu to Kashmir, which was also part of the territory of India and thus squarely answered description "sale of goods having occasioned the movement of goods from one State to another."Similar facts were involved in the decision of Madras High Court in the case of S. Mariappa Nadar and others vs. The State of Madras (supra).
46. In the case of Murli Manohar and Co. and anr. vs. State of Haryana and anr (supra), the Apex Court did observe that there can be movement of goods by virtue of local sale, inter-State sale or sale in course of export outside the territory of India. It was observed that sale effected by the assessees in the circumstances, which have been set out in the earlier portion of the judgment,must fall in one of the three categories. It was observed that "We are unable to conceive of a fourth category of sale, which could be neither a local sale nor an inter-State sale nor an export sale." Much was sought to be made out from these observations of the Apex Court by the counsel for the State. It was contended that since the sale can fall in only one of the three categories, in the present case, the Court must hold that it is either inter-State sale or a local sale since the contention that it was an export sale has not been pressed. We are, however, unable to accept the contention. The observations of the Apex Court cannot be seen in isolation and it is Page 15 of 19 HC-NIC Page 15 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER 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 and Co., the Apex Court was not considering the sale in the nature that we are confronted with. It was not a case where the sale of goods occasioned the movement from the Indian State to a territory which is not part of India and which is for the limited purpose of claiming rights to exploit the natural resources and exploration etc. the Indian Union claims limited sovereign rights.
47. Learned Government Pleader also referred to Section 9 of CST Act to contend that the State has the power to collect Central Sales Tax when the jurisdiction over the transaction is within the State. To such preposition there cannot be any dispute at all. The Central Sales Tax envisages tax collection by the respective States as contained in Section 9 of the Act. For application of Section 9 of the Act, however, there must first be exigibility to tax of a certain transaction. When we hold that the transaction in question is not exigible to CST, the question of permitting the State to collect such tax does not arise.
48. In the reply affidavit filed, objection has also been raised with respect to availability of alternative efficacious remedy. We are conscious that the petitioners have assailed the order of assessment passed by the competent authority under the CST Act. We are also conscious that against such an order, statutory appeals are available. It is also true that the Courts normally do not permit the litigant to by-pass such alternative remedy, particularly in the matters of fiscal statues. However, there are certain well established and well accepted exceptions to such a rule. For example when it is found that action of the authorities is wholly without jurisdiction, the Court may in a given case exercise writ jurisdiction despite availability of alternative remedy. We are fortified by the decision of the Division Bench of this Court in the case of Gujarat Page 16 of 19 HC-NIC Page 16 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER Gas Co. Ltd. vs. Joint Commissioner of Income- Tax (Assessment) reported in [2000] 245 ITR 84 (Guj.), wherein considering the facts of the case and finding that relegating the assessee to the Appellate Commissioner would be a futile exercise, the Division Bench of this Court after examining large number of decisions on the point held that alternative remedy would not be a bar to entertaining the writ petition directly against the order of assessment. The Court observed as under:-
"However, in our opinion, the rule that the court would not entertain a writ petition under article 226, if there was an alternative remedy was a rule of judicial policy. " It was a rule of policy, convenience and discretion rather than a rule of law." If the alternative remedy was onerous and burdensome or the decision of an authority was without jurisdiction or in violation of the rules of natural justice or there was an error of law apparent on the face of the record, or where the statute under which an administrative order was passed was unconstitutional, the courts granted the remedy under article 226. In our opinion, though learned counsel appearing for the Revenue has relied upon several judgments of the Supreme Court regarding alternative remedy, the same are not applicable to the present case. In our view even if the petitioner files an appeal before the Commissioner of Income-tax, the Commissioner of Income-tax would be guided by what the circular of the Central Board of Direct Taxes says and, therefore, the remedy provided by way of appeal under the Act is futile and therefore also we are inclined to entertain this petition."
49. In this regard, we may also rely on the decision of the Apex Court in the case of Whirlpool Corporation vs. Registrar of Trade Marks,Mumbai and others reported in AIR 1999 SC 22, wherein it was observed that jurisdiction of High Court in entertaining a writ petition under Article 226 of the Constitution of India in spite of alternative statutory remedy, is not Page 17 of 19 HC-NIC Page 17 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER affected specially in a case where the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation. In the case of State of U.P. vs. Mohammad Nooh reported in AIR 1958 SC 86, the Apex Court observed that there is no rule with regard to certiorari as there is with mandamus, that it will lie only where there is no other equally effective remedy. It is well established that, provided the requisite grounds exist, certiorari will lie although a right appeal has been conferred by statute.
50. Before closing, we my record that counsel for the petitioners also argued that even if the sale had taken place and completed at Hazira, the same would not be categorized as a local sale as the sale occasioned the movement of goods from Hazira to Bombay High. He, therefore, argued that even if the sale had been completed at Hazira, the same would not be exigible to any sales tax. We, however, need not go into this question for the following reasons:-
(1) Both the sides have agreed on record and proceeded before us on the basis that title of goods passed on at Bombay High and the sale took place at Bombay High.
(2) Therefore any observations that we may make with respect to the contention of the counsel for the petitioners would be only obiter in nature since such question has not arisen for our consideration in this petition.
(3) When the petitioners contended that the sale of goods had not occasioned movement of goods from one State to another, the question would be can it then still be kept out of the purview of the local sales tax if the sale had actually taken place at Hazira. In other words, would such a contention not lead to legal fallacy, is a question we keep open to be judged in appropriate case at appropriate time.Page 18 of 19
HC-NIC Page 18 of 19 Created On Thu Jun 23 02:32:43 IST 2016 O/TAXAP/484/2016 ORDER
51. In the result, the petition is allowed. The impugned order at Annexure-A is quashed. Petition is disposed of accordingly."
4. In the result, without recording separate reasons, this Tax Appeal alongwith Civil Application for stay is also dismissed.
(AKIL KURESHI, J.) (A.J. SHASTRI, J.) VC DARJI Page 19 of 19 HC-NIC Page 19 of 19 Created On Thu Jun 23 02:32:43 IST 2016