Larsen & Toubro Ltd Vs Union of India (Gujarat High Court)- The High Court examined in detail the provisions of the Maritime Zones of India Act, 1976 (MZA) and observed that Union of India had no sovereignty over the EEZ. The Union of India only had certain sovereign rights over the EEZ. The High Court further observed that MZA empowers the Central Government to issue specific notifications to extend the ambit of certain laws to any part of the EEZ and to make such provisions as are necessary for the enforcement of such laws in the EEZ.
Accordingly, for the purpose of the extension and application of the law, so notified, and for such limited purpose, EEZ shall deem to be a part of the territory of India. Hence, the High Court concluded that the movement of goods from Hazira to Bombay High was not covered within the expression “movement of goods from one State to another” ( Section 3(a) of the CST Act) since Bombay High did not form part of the territory of India in general sense, under MZA or any other law. Moreover no notification had been issued by the Government under the CST Act so as to extend the provisions of the CST Act to the EEZ. In the absence of such notification, the court held that the Gujarat VAT authorities could not demand tax under the CST Act treating the sale transaction under consideration as an interstate sale.
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION No. 5575 of 2011
LARSEN & TOUBRO LTD & 1 – Petitioner(s)
Versus
UNION OF INDIA & 4 – Respondent(s)
Date : 02/09/2011
ORAL JUDGMENT
(Per : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. Draft amendment dated 22.4.2011 is allowed. Amendments shall be carried out forthwith.
2. The petitioners have challenged an order dated 23.3.2011 annexed at Annexure-A to the petition passed by the Deputy Commissioner of Commercial Tax, State of Gujarat ( hereinafter referred to as the Assessing Officer). By the said order the Assessing Officer framed assessment in the case of the petitioner under the Central Sales Tax Act ( “CST Act” for short) for the period between 1.3.2006 to 31.3.2007. The Assessing Officer raised a demand of Rs. 192,05,53,975/-, towards sales tax, interest and penalties. The petitioners have challenged the said order on various grounds. However, before us, the main ground pressed in service on behalf of the petitioners was that the respondents have no legal authority to demand and levy any sales tax under the CST Act with respect to the sale transactions between the petitioners and respondent No. 5 Oil and Natural Gas Corporation (“ONGC” for short), which sales had taken place at Bombay High.
3. By an order dated 27.4.2011, while issuing notice in the present petition, we had granted ad interim relief preventing the respondents from carrying out coercive recovery of the tax under the impugned order on the condition that the petitioners shall deposit, if so desired, under protest, an amount of Rs.25 crores with the authorities by 1.6.2011.
4. It is stated that such amount has been duly deposited within the time permitted. Looking to the nature of disputes arising and also considering sizeable amount of tax recovery raised by the respondents, both sides requested us to take up the petition for final disposal at the admission stage itself. Accordingly, we have heard learned counsel appearing for both sides at considerable length. Before adverting to rival contentions, it would be necessary to take note of facts emerging from the record.
5. Petitioner No.1 is a company registered under the Companies Act. Petitioner No.1 company is also a registered dealer both under the Gujarat Value Added Tax Act, 2005 and CST Act. Petitioner No.1 company is involved in the business of manufacturing engineering goods and execution of works contracts in different parts of the country including the State of Gujarat. The petitioners have a manufacturing division at Hazira near Surat in the State of Gujarat. During the relevant assessment year, the petitioners had entered into four contracts with respondent No.5, ONGC. Details of such contracts are as follows:-
