In Brief
The Supreme Court upheld the State of Karnataka's authority to levy sales tax on a Time Charter Agreement for a vessel, finding it constitutes a "deemed sale" under Article 366(29A)(d) of the Constitution and section 5C of the Karnataka Sales Tax Act. The Court held that when a charter party transfers exclusive right to use a vessel for a specified period, it amounts to a transfer of the right to use goods regardless of terminology used or who bears operational costs. The taxable event occurs where the contract is executed (Mangalore), not where the vessel operates (territorial waters). The decision reaffirmed that charter parties must be interpreted based on their actual terms and substance, not standard formulaic language.
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