Kalyan Jyoti Sengupta, J.:— By this writ application the petitioner has challenged a notice dated 30th December, 1992 issued by the respondent No. 1, namely the Assistant Collector of Central Excise, Midnapore Division, and all the proceedings initiated relating thereto and, further to approve the classification list on the basis of the goods are exempted from payment of any duty and to allow the petitioner company to export the goods without payment of excise duty.
2. The fact is very short and to iterate that the petitioner manufactured two decks and helidecks (hereinafter referred to as the said goods). The said goods are required for offshore drilling for oil. Central Excise Duty is leviable on the said goods under the provisions of the Central Excise and Salt Act, 1944 (hereinafter referred to as the said Act) read with the Central Excise Tariff Act, 1985. The petitioner obtained order in the year 1984 from the Oil and Natural Gass Commission, respondent No. 5, for supply of the said goods at their project for exploration of oil at Bombay High. On February 26, 1985, the petitioner made an application to the Ministry of Industries and Company Affairs, Department of Industrial Development, for grant of industrial licence under the Industries (Development and Regulation) Act, 1951 for manufacture of the offshore wellhead, water injection, process platform and allied components. The petitioner also requested the Ministry to process a proposal for obtaining 100% export oriented unit licence. After considering all the relevant facts, the Board of Approval of the Central Government duly approved the undertaking of the petitioner at Tehsil Jelligham, Mouza, Gangar Char, District-Midnapore, as 100% export oriented unit. Thereafter, the petitioner manufactured two decks and two helidecks in its said export oriented unit. By a letter dated April 7, 1988 addressed to the respondent No. 1, the petitioner informed that it would export the said goods and will avail of the benefit of exemption granted by the Notification No. 123/81 dated June 2, 1981. A classification list was enclosed with the said letter. In the said classification list, it was mentioned that the rate of duty is nil as the said goods are exempted from payment of excise duty on the strength of notification being Notification No. 123/81 dated June 2, 1981. However, the aforesaid classification list was not accepted and the respondent No. 1 issued show-cause notice as to why appropriate excise duty shall not be levied and realized. As a matter of fact, by order dated August 8/12, 1988 the Assistant Commissioner rejected the classification list availed by the petitioner on the alleged ground as the decks were sold to respondent No. 5. A platform which was placed for the time being is under the control of India and therefore the said case should not be considered. It was held further by the above respondent that the exemption Notification No. 125/84 did not apply as the decks were sold in India.
3. The learned counsel appearing for the petitioner contends that the decision of the respondent No. 1 is wholly wrong, as on the strength of the above exemption notification no excise duty is leviable as the goods were exported. He contends, admittedly, that the goods were sent and despatched to the ‘ED’ and ‘EE’ platforms, which are situated on the high seas more than 200 nautical miles (250 km.) beyond the territorial water of India. Section 2(18) of the Customs Act defines the word ‘Export’ to mean taking out of India. The word ‘India’ has been defined in section 2(27) of that Act which includes territorial waters. Section 3(2) of the Territorial Waters, Continental Shelf, Exclusive Economic Zones and other Maritime Zones Act, 1976 (hereinafter referred to as the Zone Act) provides that the limit of the territorial waters is extended upto a distance of 12 nautical miles. Section 5 of the said Zone Act provides that contiguous zone of India is extended upto 24 nautical miles section 6 of the said Zone Act provides that the continental shelf is extended upto a distance of 200 nautical miles. Section 6(a) of the Zone Act provides that the Central Government may by notification extend any enactment to the continental shelf or any part including any designated area under sub-section (5) of the said Act. By circular dated September 28, 1994, the Central Government, Ministry of Finance, classified that the provisions of Customs Act could not be made applicable to the area of exclusive economic zone unless legislations are specifically made applicable to the said area. It was further clarified by Circular dated March 27, 1995 that the platforms would lie outside the scope of Customs Act till the notification was issued. The said platform ‘ED’ and ‘EE’ were not included in the notification dated 18th July, 1986 issued by the Government. The said notification did not mention ‘ED’ and ‘EE’ platforms as declared areas in the continental shelf. The Customs Act was extended to such designated areas by Notification Bearing No. 64/99-Cus (N.T) dated 1st December, 1997. He then contends that although the said ‘ED’ and ‘EE’ platforms were within continental shelf the Central Excise Act did not apply to the said platforms in 1988 when the goods were exported as the Government did not issue notification entending the area. Granting of exemption has to be read and understood on the clear meaning of the word as mentioned in the notification irrespective of the legislative intention and object underlined therein. Unlike ordinary legislation, fiscal stature has to be read strictly in terms of the language. In this connection, he has relied on the two decisions of the Supreme Court reported in AIR 1970 SC 755, Hansraj Gordhandas v. H.H Dave and 25 ELT 861, Coromondal Fertilisers Ltd. v. Collector Of Customs, Madras. Act has been extended to the whole of the exclusive economic zone by Notification No. 189(e) dated 7th February, 2002 issued by the Ministry of External Affairs.
4. He, therefore, submits that the petitioner is not liable to pay any excise duty on the said goods sent to ‘ED’ and ‘EE’ platforms and the relief asked for in the petition shall be granted.
5. Mr. D. Banerjee, learned Senior Advocate appearing for the Oil and Natural Gas Commission (respondent No. 5), supports the submission of the learned counsel for the writ petitioner. He adds as follows:
That the writ petitioner manufactured the goods in the 100% export oriented unit. The goods are sent to various oil platforms at Bombay High. Under Excise Notification No. 125/84 dated 26th May, 1984 the said goods being manufactured in 100% export oriented undertaking are exempted from excise duty being paid provided the goods are not sold in India. Therefore, the exemption notification applied unless the goods are sold in India. In this case, the point for consideration is whether the various oil rigs at Bombay High are located in India. It has, therefore, to be examined whether the places where the oil rigs situated at the relevant times were within the territory of India or not. In order to find out the territorical area it has to be considered the provisions of Article 1(3) of the Constitution of India, Article 297 of the Constitution of India and also the provisions of section 2(28) of the Customs Act and also the provisions of the Zone Act.
6. It will appear from the updated provisions of Article 297(3) that the limits of the territorical waters, the continental shelf, the exclusive economic zone and other maritime zones, of India shall be such as may be specified from time to time, by or under any law made by Parliament. The Zone Act has been enacted in consonance with the aforesaid provisions.
7. Mr. Banerjee has drawn my attention to the various sections of the Zone Act and submits that the range of Indian Territory has been defined in the said Act from the baseline for different purposes and objectives. Complete and full sovereignty of this country is not extended upto any point from the baselines. According to him, complete sovereignty of this country which includes political and economic is extended only upto territorial waters meaning thereby upto the area as defined under section 3(2) of the Zone Act. The sovereignty in limited sphere for the purpose of exploration and extraction of mineral resources has been extended upto exclusive economic zone. However, this exclusive economic zone cannot be brought within the purview of the applicability of any Act unless the Central Government by notification to be issued under section 6(6) of the Zone Act specifically provides so. This specification has to be made by declaring a particular area as being designated area.
8. Undisputedly, at the relevant point of time when the transaction took place, the oil rigs were located in the exclusive economic zone but not the portion, which was the designated area under the Zone Act. He contends further that for the purpose of this case the word ‘India’ covers only designated area. He submits that exclusiveness attaches with the resources exploration only but does not incorporate the notion of reducing the area to the exclusive ownership or title of the coastal estate. In support of his contention he has relied on a decision of the Bombay High Court rendered in case of Bright Foramer v. Union of the India reported in 2002 (148) ELT 19. In order to make ONGC oil installation chargeable to duty it was necessary to include the said areas and to declare the same to be designated areas. In fact, the Ministry of Finance has issued circulars dated 28th September, 1994 and 27th March, 1995 making it clear in no certain terms that until and unless the area in question is declared as designated area the provisions of the Customs Act will not apply to the said area. As a matter of fact, in the Circular dated 27 March, 1995 the case of the ONGC oil exploration has been specifically considered. According to Mr. Banerjee, the Ministry's view was that until that notification for the designated area is issued covering ONGC area under exclusive economic zone these goods cannot be chargeable to duty. In order to make ONGC oil rigs chargeable to duty it was necessary to include the said areas and to declare the same to be designated areas. The view of the Minsitry of Finance as stated earlier is binding on the department. The department thus, has ignored the aforesaid binding circular by issuing the impugned show-cause notice in spite of the fact that ONGC oil installation situated outside the designated area specified at the relevant time.
9. Mr. Roychowdhury, learned Senior Advocate, appearing for the revenue, while opposing the writ petition contends that the area being platform ‘ED’ and ‘EE’ at Bombay High is within Indian territory in view of the aforesaid Zone Act read with Article 297 and Article 1(3) of the Constitution of India. The power to designate the areas (at Bombay High) under sections 6(5) and section 7(6) of the Zone Act applies only to areas, which are already the territories of India as extended by the Zone Act. According to him, the continental shelf, the exclusive economic zone and other maritime zones cannot be the territory of India by declaring the designated area, only the Parliament under Article 297(3) of the Constitution of India can do so as the 1997 Act has been done. He submits that the said two platforms situate within 200 nautical miles namely within exclusive economic zone. Therefore, all lands and resources of the said areas vest in the Union and to be held as part of India. He has explained the meaning of the word ‘vest’ with the help of Lexicon Dictionary, 5 edition. In support of his contention he has relied on a decision of the Supreme Court reported in AIR 1964 SC 845. He contends that Article 1(3)(c) of the Constitution does not purport to confer power on India to acquire territories. It merely provides for and recognizes automatic absorption or assimilation into the territory of India of areas, which may be acquired by India. By virtue of its sovereignty, a sovereign State has the inherent right to acquire foreign territory. In support of his contention, he has also relied on the other decisions of the Supreme Court, which are as follows: AIR 1971 SC 1130, AIR 1975 SC 1843.
10. Having heard the learned counsels for the parties and examined the materials placed before me, the moot question in this matter is whether the petitioner can get exemption from payment of excise duty by virtue of the notification No. 125/85 dated 26th May, 1984 treating the sale and despatch of the goods, namely, helidecks at the platforms ‘ED’ and ‘EE’ at Bombay High erected by the respondent No. 5, ONGC, not being done in India or not.
11. Therefore, I set out the text of the above notification:
“In exercise of the powers conferred by Sub-rule (1) of Rule 8 of the Central Excise Rules, 1944 the Central Government hereby exempts on excisable goods produced or manufactured in a 100% export oriented undertaking from the whole of the duty of excise leviable therefor under section 3 of the Central Excise and Salt Act, 1944 (1 of 1944):
‘Provided that exemption contains in this notification shall not apply to such goods if allowed to be sold in India.’.”
12. It is not in dispute that the above goods are not ordinarily exempted from excise duty. It is also not in dispute that the petitioner is treated to be an export oriented undertaking for manufacturing of the said goods. The place, where the goods were despatched, situates at a distance of 200 nautical miles from the baseline of the western coast of India. According to the respondents, the said place situates within the territory of India, as such goods are sold within India and question of exemption in terms of the notification does not and cannot arise.
13. Both the learned counsels for the petitioner and Oil and Natural Gas Commission contend that the above place does not situate within the territory of India in complete sense of sovereign or fisical dominion of India.
14. From the rival contention of the parties, it appears to me that a State has effusive sovereign right and dominion in all senses, if surrounded by ocean and sea, up to the outer limit of the landmass. However, by virtue of the International Treaty and Convention all the States, having bounded by seas and oceans, have demarcated their sovereign authority upto certain distance on the high seas. The territory of India has been defined in Article 1(3)(c) and Article 297 of the Constitution of India. By virtue of Article 297(3) of the Constitution of India, the Parliament of our country by the Zone Act has already provided for the specific demarcation for exercising sovereign authority for specified purposes in consonance with the International Treaty and Convention. Under the provisions of sub-section (2) of section 3 the Zone Act, it has been provided that sovereignty of India extends to the territorial waters of India and to the seabed sub-soil underlined up to the point at a distance of 12 nautical miles from the nearest point of the appropriate baseline. By virtue of section 4 of the Zone Act, it has been provided that within the above territorial limits all foreign ships (other than warships including submarines and other underwater vehicles) shall enjoy the right of innocent passage through the territorial waters. Section 5 has described and demarcated as contiguous zone of India. This zone has been demarcated as being an area beyond and adjacent to the territorial waters and the limit of contiguous zone is the line every point of which is at a distance of 24 nautical miles from the nearest point of the baseline as referred to in sub-section (2) of section 3 In section 6, continental shelf has been demarcated upto a point situates at a distance of 200 nautical miles from the baseline referred to in sub-section (2) of section 3. Section 7 of the Zone Act provides and demarcates an area within continental shelf as exclusive economic zone. In my view, having regard to the provisions of the Constitution as well as the Zone Act, India cannot have any exclusive sovereign right or power in all senses upto the area described as contiguous zone, continental shelf and exclusive economic zone. This be apparent from the language of section 5, section 6 and section 7 thereof.
15. Sub-section (4) of section 5 of the Zone Act enables the Central Government to exercise such powers and take such measures in or in relation to the contiguous zone, as it may consider necessary with respect to the security of India and immigration, sanitation, customs and other fiscal matters. Again, sub-section (5) of the section 5 enables the Central Government by notification in Official Gazette to the extend with such restrictions and modifications as it thinks fit, any enactment relating to any matter referred to cluase (a) or clause (b) of such-section (4), for the time being in force in India or any part thereof, to the contiguous zone; and to make such provisions as it may consider necessary in such notification for facilitating the enforcement of such enactment. Sub-section (4) of section 7 has made specific as to the extent of sovereign right and authority of India within continental shelf. This right, in my view, is in restricted sense as mentioned in sub-section (3). It provides that the Central Government has sovereign rights for the purpose of exploration, exploitation, conservation and management of the natural resources; and further exclusive rights and jurisdiction for the construction maintenance or operation of artificial islands, offshore terminals, installation and other structure and devices necessary for the exploration and exploitation of the resources of continental shelf or for the convenience of shipping or for any other purpose, exclusive jurisdiction to authorize, regulate and control scientific research and to preserve and protect the marine environment and to prevent and control marine pollution. However, this sovereign right has to be notified in the Official Gazette at any particular point or in its entirety by notification. Once this notification is made governing particular point within this limit, the place notified is called the designated area.
16. In this context the decision of the Division Bench of the Bombay High Court rendered in the case of Bright Foramer v. Union of India reported in 2002 (148) ELT 19, is very apposite. In paragraph 36, upon detail analysis of the Zone Act and also the provisions of the Constitution, Their Lordships have come to conclusion as follows:
“Para…….36. Section 7(1) describes the exclusive economic zone of India as an area beyond and adjacent to the territorial waters and the limit of such zone is 200 nautical miles from the baseline referred to in sub-section (2) of section 3. Under section 7(a), the Central Government may, by notification in the Official Gazette, extend with such restriction and modifications as it thinks fit, any enactment for the time being in force in India or any part thereof to the exclusive economic zone or any part thereof. Careful reading of section 6 and section 7 of the zone Act shows that the territorial waters, the seabed and subsoil underlying thereunder and the air space over such territorial water form part of the territory of India and that the sovereignty of India extends and has always extended to the historic waters of India. However, the position is different in the case of continental shelf and exclusive economic zone of India. The continental shelf for India comprises the seabed beyond the territorial waters to a distance of 20 nautical miles; the exclusive economic zone contains the seabed of waters over continental shelf. It is also clear from section 7(7) of the Zone Act that in respect of the continental shelf of exclusive economic zone, India has been given only certain limited sovereign rights conferred upon India in respect of the continental shelf, and exclusive economic zones do not make the continental shelf and economic exclusive zone part of India and the limited sovereign rights conferred upon India in respect of the continental shelf and exclusive economic zone cannot be equated with extending the sovereignty of India over continental shelf and exclusive economic zone as in the case of territorial waters. However, sub-section (6) of section 6 and sub-section (7) of section 7 of the Act empowered the Central Government by notification to extend any enactment in force in India with such restrictions and modifications, as it thinks fit, to the continental shelf and to the exclusive economic zone and further provided that any enactment so extended shall have effect as if the exclusive economic zone to which the enactment has been extended is a part of the territory of India. Thus section 6(6) by which the continental shelf on the exclusive economic zone is to be deemed to be a part of India for the purposes of such enactments which are extended to those areas by the Central Government by notification in the Official Gazette.
17. Thus, it will appear from the aforesaid observation that any part within continental shelf or exclusive economic zone is not the Indian territory in all senses. Respectfully adopting the observation of the Division Bench I view in order to hold a particular area as being a part of Indian territory, India must have full and absolute dominion and control in all respect meaning thereby India will have the total military, economic and legislative control and this has to be done in consonance with the provisions of International Law, United Nations' Convention and the Law of the Sea, 1982 (7 October, 1982). Happily and appropriately the Indian legislature has enacted the aforesaid Zone Act. By virtue of the provision of section 7(7), section 6(6) of the said Act, by appropriate notification, the Government can identify a particular area or spot for extending the operation of fiscal laws. Once it is done, the territorial sovereignty as far as the operation of fiscal law is concerned is established.
18. It is admitted position in this case that when the said goods were despatched and supplied to the said platform ED and EE of the respondent No. 5 this area was not notified as designated area. This is apparent from subsequent notification. Therefore, I hold that when the goods were sold and delivered, the site of delivery was not territorial part of India.
19. The Supreme Court decisions rendered in case of Collector Of Customs, Calcutta v. Sun Industries, 1988 (35) ELT 241 has ruled while deciding a case of admissiblity of a duty drawback for elucidating the word “export”, held that once the goods crossed territorial water of India taking out of the goods to a place outside India is complete. In that case, it has been specifically held in paragraph 6 amongst others as follows:
“…….It is true that the goods did not land in any place because of the defect in the ship. But the expression ‘taking out to a place outside India’ would also mean a place in high seas. It is beyond the territorial waters of India. High seas would also mean a place outside India, if it is beyond the territorial water of India. Therefore, the goods were taken out to the high seas outside territorial waters of India, they will come within the ambit of expression, taking out to a place outside India”.
20. Therefore, in this case with necessary corollary the goods were not sold within the Indian Territory. According to me, once this factum of not selling goods within India is established the writ petitioner is entitled to get exemption on the strength of the above notification.
21. Therefore, I am unable to accept the contention of Mr. Roychowdhury that the ED and EE are to be held to be Indian Territory following the decisions of the Supreme Court cited by him. The decisions cited by him of the Supreme Court are of no assistance in this matter and these are wholly distinguishable on the facts and circumstances of this case. The decision of the Supreme Court in case of N. Masthan Sahib v. Chief Commission, Pondichery was rendered on the question of acquisition of territory within the meaning of Article 1(3)(c) of the Constitution by the India Government. In this case, in paragraph 13, the Apex Court observed sovereignty and control of territory are exercised either by unilateral action or under a treaty, the term “acquired” can be inferred. In that case at that point of time it was held by the Supreme Court that there was no sovereign control over Pondichery given by French Government under a document of transfer to India Government to term the same being territory for issuance of writ or orders by the Supreme Court.
22. In the judgement of Supreme Court rendered in Presidential reference case reported in AIR 1960 SC 845, the Apex Court in paragraphs 30 & 33 interpreted and explained scope of the provision of Article 1(3)(c) of Constitution of India. It is observed as follows:
“………it does not purport to confer power on India to acquire territories; it merely provides for and recognizes automatic absorption or asimilation into the territory of India of territories which may be acquired by virtue of its inherent right as a sovereign State to acquire foreign territory”.
23. In this case it cannot be said that India has acquired absolute sovereignty in any part of exclusive economic zone. Limited right can be exercised under the said Zone Act enacted pursuant to international law.
24. The legal proposition that no tax or duty can be levied or collected except by authority of law reiterated in the decision of Supreme Court in case of H.L Mehta v. State of Maharastra, AIR 1971 SC 1130, is undisputedly well-known. Conversely it is also true that tax leviable or collectable under law cannot be foregone unless such power is reserved in the tax law concerned. In this case, such power is reserved by Rule 1(g) of the Central Excise Rules, 1944 which has got force of law.
25. I, therefore, allow the writ petition and set aside the show-cause notice and the order passed by the Assistant Commissioner of Central Excise and I direct the respondents to grant exception in terms of the notification and in the event and deposit having been made, should be refunded.
Writ petition allowed.
A.D
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