GREAT EASTERN SHIPPING CO. LTD. versus STATE OF KARNATAKA & ORS.

Citation: [2019] 17 S.C.R. 856 · Decided: 04-12-2019 · Supreme Court of India · Bench: ARUN MISHRA, M.R. SHAH, BHUSHAN RAMKRISHNA GAVAI · Disposal: Dismissed

Cited by 1 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 17 S.C.R.
THE GREAT EASTERN SHIPPING CO. LTD.
v.
STATE OF KARNATAKA & ORS.
(Civil Appeal No. 3383 of 2004)
 DECEMBER 04, 2019
[ARUN MISHRA, M. R. SHAH AND B. R. GAVAI, JJ.]
Karnataka Sales Tax Act, 1957:
s.5C r/w. Art.366(29A)(d) of the Constitution of India –
Charter Party Agreement – By the company (owner of the ship)
with Manglore Port Trust for a period of six months – Notification
by the Revenue asking the company to get itself registered as a
dealer under the Act, as the agreement attracted tax u/s.5C of the
Act – The company repudiated its exigibility to tax on the ground
that it had not transferred the rights to the Port Trust – Writ petition
inter alia on the ground that the Act does not extend to territorial
waters of India and hence State not authorised to levy tax – Single
Judge as well as Division Bench rejected the case of the company
– Appeal to Supreme Court – Held: In the facts of the present case,
the Charter Party Agreement tantamount to a deemed sale as there
was a transfer of right to use the vessel as provided in
Art.366(29A)(d) r/w. 5C or s.2(j) of the Act – For realization of
tax imposed within the ken of power u/Art.366(29A)(d), it is not
material where the goods are passed, but the situs of agreement is
determinative for realization of tax – Thus, location of delivery of
goods cannot be made the basis for levy of tax on the sale of goods
– The question as to extent of power of coastal ”State with respect
to territorial waters, is left open – Constitution of India –
Art.366(29A)(d).
Dismissing the appeal, the Court
HELD: 1.1  A tax on the sale or purchase of goods includes
a tax for transfer of right to use goods as that is deemed to be
a sale. The tender documents pursuant to which agreement has
been entered into contains the conditions and instructions to
tenderers. The pre-qualification criteria provide that the
tenderer has to submit the documents regarding ownership or
   [2019] 17 S.C.R. 856
856
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possession of tug on bareboat/committed demise charter hire
of tugs. In case he does not own the tug, he has to provide
documents to prove that he has entered into a lease for charter
hire of tug(s) for deploying them in the Port Trust during the
period of the contract. The tenderer should have experience of
manning and harbor practice for one year during the last 3 years.
Tugs should be deployed at harbors at New Mangalore Port
during the contract period. [Para 22] [873-B-D]
1.2  As per the Charter Party Agreement, Annexure I, the
vessel has been taken by the Port Trust for various lawful
services required by the chartered Port Trust, including towing,
docking, and undocking at the Port round the clock for the
contract period of 6 months. The contractor that is the company
has to provide the cost or expenses related to the vessel, her
master and crew, whereas the charterer to provide fuel,
lubricants, water, electricity, port charges, and for anti-pollutants.
The provisions for maintenance and operation are also contained
in the agreement. As per clause 7, the vessel shall during the
charter period be for all purposes at the disposal of the
charterers and under their control in every respect, whereas the
maintenance part is with the contractor company. The charterer
shall have the use of all outfits, equipment, and appliances on
board the vessel at the time of delivery. Insurance charges have
to be borne by the contractor. The vessel shall be kept insured
by the contractors at their expense against protection and
indemnity risks. The whole reach and burthen of the vessel,
including the lawful capacity to be kept at the charterer’s
disposal. [Para 27] [882-D-F]
1.3  On perusal of the various terms and conditions of the
Charter Party Agreement (Annexure I), clause 1 provides that
the contractors “let” and the charterer “hire” the goods vessel
for six months. The expression ‘let’ has been used, and the
vessel most significantly during the charter period has been
placed at the “disposal” of the charterers and under their control
in every respect. The charterers have been given the right to
use all outfits, equipment, and appliances on board the vessel
at the time of the delivery, including the whole reach, burthen,
and deck capacity. Thus, merely by providing the staff, insurance,
THE GREAT EASTERN SHIPPING CO. LTD. v.
STATE OF KARNATAKA & ORS.
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SUPREME COURT REPORTS
[2019] 17 S.C.R.
indemnity, and other respons

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