In a bid to decide who has the jurisdiction, the Central Government or the respective State, to levy tax on goods in territorial waters of the country, the Supreme Court has asked all the nine coastal states to furnish their responses at the earliest.

Even as the Bench headed by Justice Ashok Bhan issued notices to the States, the Union Ministry of Finance submitted that it has sole jurisdiction to levy tax on goods in territorial waters of the country and objected to States imposing duties in such cases.

The nine states include Gujarat, Maharashtra, Goa, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, Orissa and West Bengal. The issue was raised in a petition filed by the Great Eastern Shipping Company, aggrieved by a Karnataka High Court order that upheld the state Government’s decision to levy tax on goods in territorial waters adjacent to its coastal line.

While objecting to the State government’s stand, it said that it had the exclusive right to legislate or impose tax on goods within the territorial waters as it belongs to the country as a whole. “The interpretation is against all canons of Constitutional interpretation,” stated the affidavit filed by the Ministry, while seeking to quash the High Court’s decision.

Although Additional Solicitor General Gopal Subramanium said that the Centre’s legislative power would prevail as far as territorial waters were concerned, according to the Karnataka Government, the territorial waters adjacent to the state form a part of its territory.

In its affidavit, the Centre argued that Article 286 of the Constitution prohibits a state from imposing or authorising imposition of tax on the sale or purchase of goods where such sale or purchase takes place outside the state. “Thus, if the operation of an Act passed by the state legislature extends beyond the boundaries of the state, in the absence of a territorial nexus, the law will be considered invalid,” the Centre said. While referring to territorial waters, continental shelf, exclusive economic zone and Other Maritime Zones Act, 1976, it stated that it notifies that India alone has sovereign power over its territorial waters, sea bed, the underlying subsoil and air space over such waters.