APVAT | Value Added Tax Not Leviable On Offshore Sales Beyond Territorial Waters: Andhra Pradesh High Court

The Andhra Pradesh High Court held that Value Added Tax (VAT) under the Andhra Pradesh Value Added Tax Act (AP VAT) cannot be levied on sales beyond 12 nautical miles, as such transactions fall outside the State's territorial jurisdiction. Justices R. Raghunandan Rao and T.C.D. Sekhar stated that neither the State Legislature nor the Central Legislature would have the power to levy tax on the sale of goods made beyond the territorial waters of India. In the case at hand, the assessee/petitioner, a company incorporated in the United States of America, had entered into a sub-sea construction and diving contract with a company for on off shore Gas field. The assessee stated that it maintained contract-wise accounts as required under Rule 31 of the Andhra Pradesh VAT Rules, and a substantial portion of the work was carried out beyond 12 nautical miles, outside the State's taxing jurisdiction. As per the assessee, he had carried out 80% of the contract beyond 12 Nautical miles in the sea, and consequently, the turnover relating to that part of the contract would not be exigible to tax at all. The assessing authority rejected the accounts and invoked Rule 17(1)(g) of the AP VAT Rules to make a best judgment assessment and raised VAT demand. The assessee argued that the APVAT, which was enacted by the Andhra Pradesh State Legislature, would be applicable only within the territories of the State of Andhra Pradesh. Such territories would end with the boundaries of the land adjoining the sea. It was argued that the territorial waters, which stretch from the boundaries of the land to 12 nautical miles within the sea, would be within the exclusive jurisdiction of the Union, and a State cannot levy any tax, in relation to any transaction, occurring within the territorial waters. The bench observed that the assessee contends the transactions in question took place beyond the territorial waters of India as the said transaction took place beyond 12 nautical miles from the shore. These transactions would fall either within the ambit of the contiguous zone or the exclusive economic zone. The bench further opined that in such circumstances, it would only be Parliament which would have the jurisdiction and power to levy tax, in relation to any sale of goods. However, such power to levy tax on the sale of goods has been confined to the State Legislature, under Entry-54 of the Second list, in the VII Schedule to the Constitution. Thus, neither the State Legislature nor the Central Legislature would have the power to levy tax on the sale of goods made beyond the territorial waters of India. In view of the above, the bench disposed of the petition by setting aside the impugned order. Further, the bench remanded the matter back to the assessing authority to give an opportunity to the assessee to submit the entire records relating to the works contract executed by the assessee. Case Title: M/s Helix Energy Solutions Group Inc. v. The Commercial Tax Officer Case Number: WRIT PETITION Nos.6319 & 6321 & 5089 of 2010 Counsel for Petitioner/Assessee: Kadimisetty Sai Sreenadh Counsel for Respondent/Department: Suribabu S Click Here To Read/Download Order

APVAT | Value Added Tax Not Leviable On Offshore Sales Beyond Territorial Waters: Andhra Pradesh High Court

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