Admitting a petition against the judgement of the Karnataka High Court, the Supreme Court has sought replies from the Union government and nine coastal states including Karnataka on the question of authority to levy local taxes on the goods transferred or sold in the territorial waters of the country. Karnataka HC had held that the state could levy local taxes such as sales tax etc. on the goods sold in the territorial waters adjacent to its coastline.

A bench headed by Justice Ashok Bhan issued notices to the Centre, Karnataka, Gujarat, Maharashtra, Goa , Kerala, Tamil Nadu, Andhra Pradesh, West Bengal and Orissa on the petition by Great Eastern Shipping Company, which challenged the order of the Karnataka High Court.

Karnataka government counsel Sanjay Hegde submitted that if the High Court order was overruled, the revenue of all the coastal states would be affected. “The issue will affect the capacity of all coastal states to levy taxes on transactions within territorial waters which these states had been collecting so far.”

At the preliminary argument, Additional Solicitor General Gopal Subramanium appearing for the Union government opposed the contention of Karnataka and said the territorial waters belonged to the whole nation and did not belong to a particular state.

Subramaium said the territorial waters, continental shelf, exclusive economic zone and other maritime zones Act, 1976 enumerated that the Centre has the exclusive, sovereign authority over the territorial waters, sea bed, the sub-soil under the sea and the air space over such areas.