Case: M/S. Raj Shipping &amp; Another Vs. The State of Maharashtra, Through The Government Pleader &amp; Others

it necessary to answer the larger questions or enter into wider debate. Therefore, we would not pursue the line of reasoning in the Karnataka High Court judgment to consider whether the conclusions reached by the said High Court are to be agreed with or otherwise. We leave such questions as are posed by the Karnataka High Court for being decided in an appropriate case.108. It is now time to note the contentions on the applicability of section 4 of the CST Act, 1956. Here as well, we have noted the contentions of both sides. Mr. Sridharan in his oral submissions as also in the written submissions and additional written submissions emphasised that even if by virtue of section 4 of the CST Act, a sale is treated as having taken place inside the State, the State cannot tax it under the States Sales Tax Act, if the same transaction satisfies section 3 of the CST Act, 1956. A very great emphasis has been laid on several judgments of the Honble Supreme Court by inviting our attention to the Sales of Goods Act, 1930.109. Mr. Sridharan, however, has not disputed the fact that for the purposes of determining the applicability of the two provisions viz. sections 3 and 4 of the CST Act, it will have to be determined firstly whether a sale or purchase of goods in the present case has taken place in the course of Inter-State trade or commerce. Section 3 of the CST Act falling in Chapter II deals with this aspect and enacts a deeming fiction. For that deeming fiction to apply there are two conditions and which are set out in clauses (a) and (b) of section 3 and there are explanations. It is thus upon fulfillment of these conditions and as set out that it could be said to be a sale in the course of Inter-State trade or commerce.110. Section 4 sub-section (1) opens with the words Subject to the provisions contained in Section 3. Section 4 deals with a situation and when is a sale or purchase of goods said to take place outside a State. Therefore, it is subject to section 3 and when a sale or purchase of goods is determined in accordance with sub-section (2) of section 4 to take place inside a State, such sale or purchase shall be deemed to have taken place outside all other States. By sub-section (2) a sale or purchase of goods shall be deemed to take place inside a State if the goods are within the Sate in the case of specific or ascertained goods, at the time the contract of sale is made and in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. Here also there is an explanation.111. If we were to determine the applicability of the provisions referred above we would have to go into the factual aspects and in great details. Concededly, in proceedings under the Bombay Sales Tax Act, 1959 (for short BST Act) particularly of the nature of appeal, the issue of BST Act not being applicable to sales covered by Chapter II to CST Act, 1956, can be raised and considered. It is not as if the Petitioners are remediless. They can rely upon the provisions and satisfy the authorities that since the sale attracts the provisions of the CST Act, 1956, particularly chapter II thereof, the same would not fall within the purview of the relevant provisions of the BST Act, 1959. On the particular sale, therefore, no tax under the BST Act is leviable and recoverable. Such contentions and by projecting the relevant and necessary facts can be raised by the Petitioners and in the event they are not favourably considered or satisfactorily dealt with, they have remedies open and further of carrying the matters in higher forums or courts. Thus, no prejudice is being caused by relegating the Petitioners to these remedies. More so, when these remedies are efficacious. Further, these being mixed questions of law and fact and concerning particular sales, the transactions and dealings between parties to the petition as also others that the writ jurisdiction is not the forum to decide or adjudicate such controversy. Therefore, we would not express any opinion on the rival contentions based on the judgments and legal provisions and leave the parties to raise them in the pending proceedings or the proceedings to be initiated and instituted but before the forums under the BST Act, 1959.112. Similarly, with regard to the other contentions of Mr. Sridharan on the goods, namely, the petroleum products in question enjoying an exemption and the Petitioners having satisfied all the pre conditions, they are entitled to such exemptions are concerned, they are also capable of being raised, dealt with and considered in proceedings under the BST Act. While challenging the assessment orders, it would be open for the Petitioners to raise the contentions of applicability of the CST Act and equally in the alternative and without prejudice that assuming those contentions are turned down and the BST Act is applicable and attracted, still the particular goods are exempt from tax. The construction and interpretation of the exemption Notification relied upon is an issue which can always be gone into and decided in the proceedings under the Act. Thus, on both counts, namely, whether jurisdictional facts or pre conditions attracting the levy are satisfied and even if these are satisfied and the levy is attracted, the particular goods are exempt from such levy, the matters can be resolved by the forums under the Act. In the absence of any favourable adjudication, there are always the higher courts available to the Petitioners. Therefore, without expressing any opinion on the rival contentions as far as the exemption Notification is concerned, we would leave the Petitioners to pursue their remedies under the Act.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]59. Therefore, in the present case,can only be said to have occurred in the transactions of the Petitioners, when the Petitioners transports the goods to customers location, delivers the required quantity of motor spirit, after weighing of the same by customer. That takes place in the territorial waters, which are outside the State of Maharashtra. Therefore, the goods are not within the State when they are appropriated to the contract of sale under Section 4(2(b)) of the CST Act, 1956.At the cost of repetition, what we find is that the order of assessment refers to the name of the dealer, namely the Petitioner Raj Shipping Agency and also points out as to how assessment proceedings were initiated in order to ensure that in the return furnished by the dealer in respect of the financial yearturnover of sales and purchases are properly admitted. Deductions are correctly claimed, tax has been calculated at the proper rates, set off has been correctly claimed and the deemed tax in respect of the said period has been admitted to be payable and has been paid is the correct position or assertion. If the position is otherwise, then, appropriate corrective action was contemplated.The principal argument of Mr. Sridharan needs to be considered in the light of some of the documents on record. Exhibitis the invoice. M/s. Indian Oil Corporation has raised the invoice and has stated that the consignee is the present Petitioner. The other details and to be found in that invoice as also anotherare that there is a indent which is raised based on which the product high speed diesel and in the quantity mentioned in Kilo Liters has been loaded by IBP, Wadala and Raj Shipping Agency is shown as the customer. Below the same name, the name of vesselis written. The delivery location is IBP Company Limited, Wadala. In the additional affidavit, that is filed, the Petitioner states that it is engaged in the business, namely, Bunker Supplies. Bunker supplies mainly consist of supply of petroleum products such as high speed diesel oil (HSD), light diesel oil (LDO) and furnace oil (FO) to various incoming and outgoing vessels within or beyond the port limits of Mumbai Port. These outgoing vessels, to which the supplies are made, are located beyond approximately 1.55 nautical miles from the coast of Mumbai and are anchored in various anchorage points within the territorial waters of the Union of India, off the coast of Maharashtra. It is stated that the outgoing shipping vessel places an inquiry for the required quantity of HSD with the Petitioner. Pursuant to the inquiry made by the customer, the Petitioner gave a quote for their supplies. In many cases, the Petitioner enters into a formal agreement with their customers for the purchase of HSD. At page 86 of the paper book is one of the illustrative copy of such an agreement.We do not see on what basis can the Petitioner therefore assert that the sales made by the Petitioner are within the territorial waters of India and accordingly not sales liable to tax withinA perusal of these definitions together with the section 1(2) would denote as to how the Maharashtra Value Added Tax Act extends to the whole of Maharashtra. It is an Act to consolidate and amend the laws relating to the levy and collection of tax on the sale or purchase of certain goods in the State of Maharashtra.88. Therefore, it would not be proper to proceed on any assumptions straightaway. One cannot presume that merely because the tax in this case is sought to be levied, assessed and collected from the Petitioner that it is out of the purview of the MVAT Act. All the sections noted above will have to be read together and harmoniously with other provisions of the MVAT Act to find out as to whether the sale in this case could be said to be within the State of Maharashtra. For the purpose of a decision on this aspect, we would have to also consider as to whether the sale has necessarily taken place within territorial waters as claimed. The assumption on the part of the Petitioner is that the sale has taken place outside the State of Maharashtra and in territorial waters which are international in character.In that regard, we find that there are several steps which form part of the transaction undertaken by the Petitioners. Firstly, the Petitioners themselves are registered as dealers under the MVAT Act. Secondly, there is an indent/order placed on the Petitioners by the shipping lines and which order was placed by email/fax or electronically but at a place of business in Mumbai. This term has a definite legal meaning. It is defined in an inclusive manner. It includes a warehouse, godown or other place where a dealer stores his goods and any place where the dealer keeps his books of accounts. In the instant case, place of business of the Petitioner is Mumbai. He has dealt with the goods in Mumbai and which are defined to mean every kind of movable property. In the present enactment, the term goods as also petroleum products have been defined separately. It is not the case of the Petitioner that these definitions cannot be read together or that petroleum products would not be goods. The term motor spirit is also defined and it would include one of the Petitioners product, namely, high speed diesel [see section 2(15A)] whereas the word Petroleum products is defined in section 2(17)(A) of the MVAT Act. If the Petitioner is a person who for the purposes of its business buys or sells goods in the State, then, it cannot escape the tax. The only question is whether the above business is in the State. The Petitioner cannot and does not dispute that Sales Tax is leviable on the sale of motor spirit, which the goods are in question. In other words, sections 3, 4 and 6 together with its subsections signify the tax on HSD. That the Petitioner in the alternative urges that the sale in this case is outside the State and within the meaning of Chapter II of the Central Sales Tax Act, 1956 and further alternatively pleads that it is exempted from MVAT would denote as to how the levy is understood. It is only the transaction or deal with the shipping lines and undertaken by the Petitioner is claimed as not occurring within the State. That is because the HSD is supplied by barges to the ships or vessels located beyond 1 or 1.5 nautical miles in the high seas that it is urged that so long as the barge carrying the HSD does not reach the vessel, unload the same, obtains a certificate from the Master of the vessel, that there is no sale and in any event all this takes place in the high seas, therefore, it is not a sale within the State of Maharashtra. The further contention is that MVAT Act cannot apply to territorial waters for they are international boundaries and controlled by the Union. This and the earlier submission proceeds on the footing that the sale in this case has no connection or nexus with the State of Maharashtrra, we would understand it that way.91. In this case we find that the high speed diesel, a petroleum product, is the subject matter of the transaction. The petitioner placed an order on the oil companies within the State to supply a fixed quantity of this petroleum product to the petitioner so as to enable the petitioner to fulfill its contractual obligation. That contractual obligation is of bunker supplies undertaken and in this case with the party M/s. Leighton Contractors (India) Private Limited, an illustrative copy of the agreement and the contents of which we have reproduced hereinabove would show that these orders are placed from a business address at Kalina, Santacruz (East), Mumbai. This private limited company addressed the communication reproduced above and awarding the bunker service supply of fuel oil contract on Raj Shipping Agency (the petitioner). The bunker service (supply of fuel oil) is a contract awarded to the petitioner so as to enable M/s. Leighton Contractors in turn to fulfill its commitment to the Oil and Natural Gas Corporation Limited, particularly in relation to the pipeline replacement projectII. It is in that regard and bearing in mind such contracts that we must find out as to whether the Maharashtra Value Added Tax Act would apply. Merely because the high speed diesel oil is carried in barges by the petitioners for being supplied to or discharged into a vessel at high seas would it necessarily mean that the sale was in territorial waters That the sale is in territorial waters and which belongs to the Union is the argument. We find it difficult to accept it and in the given facts and circumstances.92. In that regard, we find that there is ample material in law so as to assume that the MVAT Act will apply or will take within its import such a sale.93. We must at once clarify that the principle which the Courts are required to apply is that every legislation is presumed to be territorial in its operation. The parliament or the State Legislature cannot be presumed to have exceeded their territorial powers. As has been throughout clarified that in the case of sales tax, it is not necessary that the sale or purchase should take place within the territorial limits of the State in the sense that all the ingredients of sale like the agreement to sell, the passing of title, delivery of goods etc. should have a territorial connection. Broadly speaking, local activity of buying or selling carried out in the State in relation to local goods should be sufficient basis to sustain the taxing power of the State, provided of course, such activity ultimately resulted in a concluded sale or purchase to be taxed. This principle has been enunciated in the decision reported in the case of The State of BombayAnr. v. The United Motors (India) LimitedOrs., AIR 1953, SC, 252.If we apply this principle to the facts and circumstances of the present case, we do not have any hesitation in concluding that it is the goods which have been produced or manufactured or refined by the oil companies and which are drawn from their storage tanks in fixed quantity that are supplied on demand to the Petitioner. The manufacturers as also the refineries are very much within the State of Maharashtra viz. at Mumbai. The Petitioners are at Mumbai. Meaning thereby, their place of business is at Mumbai. It is from that place that the Petitioner requests the oil companies to supply to it the high speed diesel. It is received by the Petitioner from the oil companies at Mumbai. It may be that the Petitioner treats this as a contract on which they paid the sales tax as a component of the price. However, it is that very high speed diesel and supplied to the Petitioner at Mumbai which is carried from Mumbai in furtherance of a contract with parties like M/s. Leighton, which contract is also placed and finalised from Mumbai, through the barges of the Petitioner to the vessels of M/s Leighton and which may be stationed in territorial waters. However, Leighton comes in the picture, as have been stated by them, for the purpose of fulfilling a contractual obligation of M/s. ONGC. It is for that obligation to be discharged that they have deployed the vessels. It is these vessels which require the bunker supplies and which supplies are met by the Petitioner. The subject matter of the contract with M/s. Leighton is this high speed diesel or motor spirit which is taken and carried from Mumbai. Therefore, there is sufficient territorial nexus for the Maharashtra Value Added Tax Act to apply and to be invoked to the later sale by the Petitioner of the same goods to M/s. Leighton and other entities similarly placed. We do not see how the Petitioner can escape compliance with this legislation and by contending that the contract of M/s. Leighton being a distinct contract, the sale taking place in territorial waters that the sales tax legislation or the VAT legislation of the Maharashtra State would be applicable. Its applicability has to be tested by applying the above principles and particularly the nexus theory. After having found sufficient territorial connection, namely, between the back to back transaction and the taxing authority that we are not in a position to agree with Mr. Sridharan that MVAT Act is inapplicable.96. Mr. Sridharan has relied upon the principles relating to extension of the States boundaries to the territorial waters. Prior thereto, he has also relied upon section 8 of the MVAT Act but that in our opinion refers to certain transactions to which MVAT Act will not apply and which may fall within the purview of the Central Sales Tax Act 1956. It is clear that it refers to section 4 of the Central Sales Tax Act, 1956.97. As far as the State boundaries are concerned, our attention has been invited to several works and commentaries extensively dealing with this aspect. We would not be required to refer to these commentaries, particularly relating to territorial waters by CoulsonForbes, in the view that we have taken. Once we have made a reference to the theory of nexus and which is applicable to Sales Tax legislation as held by the Honble Supreme Court, then, strictly speaking the works and commentaries need not be referred.98. Equally, the principle that the country extends to its low water mark where the high seas begin is another principle which need not be referred in details for the simple reason that it can have no application to the facts and circumstances of the present case. For the afore indicated reasons, we have found that the very goods and which have been transported by the Petitioners via barges and to the vessels stationed in the territorial waters according to it have been obtained within the State of Maharashtra. We have found that substantial part of the transaction and from the stage of acquisition of these goods, paying for them, receiving an indent or order from the shipping lines and further communications have all taken place in Mumbai within the State of Maharashtra. It is these very goods, namely, high speed diesel oil which have been filled in and loaded on to the Petitioners barges at Mallet Bunder Mumbai. These are thus the acts within the State of Maharashtra. It is in these circumstances that we have applied this theory and once it is found to be so applicable, then, where the boundaries of the State end and in relation to waters, what could be the limitation thereof are all matters which need not be considered by us. For this reason, we do not make any further reference to the decision of the US Federal Court in United States vs. State of California 1947 (332) US 19 as also the decision of the Canadian Supreme Court reported as 1967 SCR 792. While it may be true that some of these decisions may make a reference to the taxing power of the State but having found that the ambit and scope of taxing power can be interpreted with the aid of nexus theory and that can be invoked that we do not deem it fit and proper to dwell on this aspect any further.99. It is also then not necessary to make a reference to the judgment of the Honble Supreme Court in the case of Gramaphone Company Limited vs. Union of India 1984 (2) SCC 534.   We are also not required then to refer to the principles of international law, particularly as to how a State or a country has been identified.100. For the aforesaid reasons, we also need not refer to the Constituent Assembly debates with reference to the territorial waters and Article 297 of the Constitution of India or Article 366(30) of the Indian Constitution.101. For the very same reasons the definition of the term State as appearing in General Clauses Act, 1897 and the Bombay General Clauses Act,1904 also need not bedo not think that we are required to decide any such controversy. Once we have held that the Assessing Officer could have taken note of the Petitioners transaction and probed and investigated it further so as to bring it to tax also by applying the nexus theory, then, this decision need not detainlearned single Judge took the view that the tug in question was in the State of Karnataka, though in territorial waters which forms the territory of the State, the question as to whether there was transfer of right to use the tug being one of fact the same has to be decided on the basis of the evidence produced by the parties before the second respondent and the same cannot be considered in the Writ Petition. That is how the Writ Petition was dismissed and the appeal was filed.We are of the considered view that it is not necessary to decide such wider questions as are posed by the Karnataka High Court and answer them. For the purpose of our judgment and having reached our conclusions on the theory of nexus or applying the principle of territorial nexus we do not deem it necessary to answer the larger questions or enter into wider debate. Therefore, we would not pursue the line of reasoning in the Karnataka High Court judgment to consider whether the conclusions reached by the said High Court are to be agreed with or otherwise. We leave such questions as are posed by the Karnataka High Court for being decided in an appropriateno prejudice is being caused by relegating the Petitioners to these remedies. More so, when these remedies are efficacious. Further, these being mixed questions of law and fact and concerning particular sales, the transactions and dealings between parties to the petition as also others that the writ jurisdiction is not the forum to decide or adjudicate such controversy. Therefore, we would not express any opinion on the rival contentions based on the judgments and legal provisions and leave the parties to raise them in the pending proceedings or the proceedings to be initiated and instituted but before the forums under the BST Act, 1959.112. Similarly, with regard to the other contentions of Mr. Sridharan on the goods, namely, the petroleum products in question enjoying an exemption and the Petitioners having satisfied all the pre conditions, they are entitled to such exemptions are concerned, they are also capable of being raised, dealt with and considered in proceedings under the BST Act. While challenging the assessment orders, it would be open for the Petitioners to raise the contentions of applicability of the CST Act and equally in the alternative and without prejudice that assuming those contentions are turned down and the BST Act is applicable and attracted, still the particular goods are exempt from tax. The construction and interpretation of the exemption Notification relied upon is an issue which can always be gone into and decided in the proceedings under the Act. Thus, on both counts, namely, whether jurisdictional facts or pre conditions attracting the levy are satisfied and even if these are satisfied and the levy is attracted, the particular goods are exempt from such levy, the matters can be resolved by the forums under the Act. In the absence of any favourable adjudication, there are always the higher courts available to the Petitioners. Therefore, without expressing any opinion on the rival contentions as far as the exemption Notification is concerned, we would leave the Petitioners to pursue their remedies under the Act.