1 wp500.11gp.sxw ssm IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 500 OF 2011 Larsen and Toubro Limited .....Petitioners. Vs. The State of Maharashtra and Ors. ......Respondents. Mr. N. Venkatraman, Sr. Advocate with Mr. Mohd. Shaikh, Mr. Phiroze Colabawala, Mr. P. Purshottam, Mr. Sachin Kudalkar with Mr. V. Patkar i/by M/s. Madekar & Co. for the Petitioners. Mr. S.K. Nair, ‘A’ Panel Counsel for Respondent Nos. 1, 3 and 4. Dr. G.R. Sharma with Ms. Purnima Avasthi and Mr. H.V. Mehta for Respondent No.2. Ms. Lopa Munim with Ms. Pooja Patankar i/by M/s. Rajesh Kothari & Co. for Respondent No. 5. WITH WRIT PETITION NO. 983 OF 2011 Larsen and Toubro Limited .....Petitioners. Vs. The State of Maharashtra and Ors. ......Respondents. Mr. N. Venkatraman, Sr. Advocate with Mr. Mohd. Shaikh, Mr. Phiroze Colabawala, Mr. P. Purshottam, Mr. Sachin Kudalkar with Mr. V. Patkar i/by M/s. Madekar & Co. for the Petitioners. Mr. Vinay A. Sonpal, ‘A’ Panel Counsel for Respondent Nos. 1, 3 and 4. Mr. R.V. Desai, Sr. Advocate with Mr. H.V. Mehta, Mr. A.S. Rao and Ms. Purnima Avasthi for Respondent No.2. Ms. Lopa Munim with Ms. Pooja Patankar i/by M/s. Rajesh Kothari & Co. for Respondent No. 5. 2 wp500.11gp.sxw ssm CORAM : DR. D.Y. CHANDRACHUD AND ANOOP V. MOHTA, JJ. DATE : JULY 4, 2011 P.C.: In these Petitions, under Article 226 of the Constitution, the Petitioners have challenged orders of assessment passed by the Deputy Commissioner of Sales Tax (Assessment), the Assessing Authority under the Bombay Sales Tax Act, 1959, in relation to assessment years 2003-2004 and 2004-2005. The Petitioners had entered into contracts with the Nuclear Power Corporation of India Limited (NPCL) for the execution of a project on a turnkey basis. According to the Petitioners, they had two independent and divisible contracts: (i) A contract for the supply and sale of goods; and (ii) A contract for erection and commissioning on a turnkey basis. The case of the Petitioners is that in execution of the first of those contracts, goods imported from abroad were sold to NPCL on a high seas sale or were sold in transit in the course of inter-state trade and there was a transfer of the title to the goods from the Petitioners to NPCL by endorsement of the documents of title – the bill of lading or, as the case may be, the lorry receipt. According to the Petitioners, since the ownership and title to 3 wp500.11gp.sxw ssm the goods came to be transferred to their principal on high seas in the course of import or, as the case may be, in the course of transit in inter-state trade, no sales tax could be levied under State Sales Tax Legislation. 2 An earlier order of assessment was questioned before this Court in Writ Petition No. 1136 of 2010. By an order of the Division Bench dated 20 September 2010, an earlier assessment for Assessment year 2004-2005 was set aside and the proceedings were remitted back to the Assessing Officer. Before the Division Bench, the Petitioners had relied upon a judgment delivered by the Andhra Pradesh High Court in their own case1 against which a Special Leave Petition was dismissed by the Supreme Court on 26 March 2004. While remanding the proceedings back to the Assessing Officer, the Division Bench of this Court observed that the Assessing Officer ought to have dealt with the contract in question and should have then applied the principles enunciated in the Judgment of the Andhra Pradesh High Court dated 10 July 2003. The Assessing Officer passed an order for assessment year 2004-2005 upon remand. That Assessment order, coupled with an order for assessment year 2003-2004 forms the subject matter of 1 Special Appeal Nos. 54 and 55 of 1997 and Tax Revision Case No. 14 of 1999. 4 wp500.11gp.sxw ssm the writ proceedings before this Court. 3 During the course of the hearing, learned Senior counsel appearing on behalf of the Petitioners submitted that: (i) The Assessing Officer has principally held against the Petitioners on the ground that control, possession and supervision over the goods in question continued to remain with the Petitioners; (ii) The Assessing Officer has overlooked the circumstance that tax law, including sales- tax legislation, recognizes the existence of dual relationships; (iii) The Petitioners, despite the sale of the goods to NPCL on a High Seas basis or, as the case may be, in the course of inter state trade and commerce, continued to retain custody and possession of the goods in pursuance of a contract of bailment; (iv) Having regard to the law laid down by the Supreme Court inter alia in M/s. Gannon Dunkerley and Co. & Ors. Vs. State of Rajasthan 2 as well as in the Judgment of the Andhra Pradesh High Court, the Assessing Officer has manifestly erred in taking the view that he did. 4 On the other hand, the submissions which have been urged on behalf of the Respondent-State are; (i) The question as to whether 2 (1993) 1 SCC 364 5 wp500.11gp.sxw ssm there was a transfer of title in a high seas sale or, as the case may be, a transit sale in the course of inter state trade, would have to be determined on the basis of the terms of the contract and this among all the other questions which arise can be determined in Appeal against the assessments; (ii) The Assessing Officer, upon considering the diverse terms of the contract has come to the conclusion that the Petitioners have resorted to a colourable device with a view to evade the levy of sales tax; (iii) In the present case, there is no contract evidencing a relationship of bailor and bailee between the Petitioner and its principal; (iv) If the terms of the contract were to be properly construed, it would be evident that title to the goods would pass to NPCL only after the entire project, upon its completion, is handed over to the latter. Until then, no title would pass from the Petitioners to the purchaser; and (v) All these issues have to be enquired into in an appellate forum and hence the Petitioners should be relegated to the alternate remedy. 5 Notice was issued by this Court for final disposal of these Petitions. During the course of the hearing of the Petitions, it has emerged before the Court that the submissions urged before the Court, would involve a determination facts based on the provisions of 6 wp500.11gp.sxw ssm the contract between the Petitioners and NPCL. The State seeks to levy sales tax on the basis that as a matter of fact, transfer of title to the goods would take place only when the completed work under the works contract is handed over upon erection and commissioning. According to the State, the judgment of the Andhra Pradesh High Court does not contain a specific reference to the terms of the contract in any detail. Each case would turn upon the contractual provisions. Learned Counsel appearing on behalf of the Petitioners has stated before the Court that the Petitioners would seek recourse to their remedy in Appeal before the Appellate Authority since the orders of Assessment are subject to an Appellate remedy. We accordingly dispose of the Appeal, by leaving it open to the Petitioners to espouse the remedy of an Appeal. We clarify that we do not express any opinion on the merits of the rival contentions in these proceedings. The Appellate Authority shall have due regard to the observations and directions contained in the previous order of the Division Bench dated 20 September 2010 in Writ Petition No.1136 of 2010. All questions including the issues raised in the rival submissions, to which a reference has been made earlier, are kept open to be decided by the Appellate Authority in accordance with law. During the pendency of these proceedings, the Petitioners have been protected against coercive steps 7 wp500.11gp.sxw ssm by ad-interim orders. We direct that for a period of six weeks from today, the ad-interim orders shall continue to remain in operation in order to enable the Petitioners to apply before the Appellate Authority for continuation of stay pending Appeal. The Petitions shall accordingly stand disposed of in terms of the aforesaid directions. There shall be no order as to costs. (ANOOP V. MOHTA, J.) (DR. D.Y. CHANDRACHUD, J.)