Mumbai: The central government alone is empowered to legislate or impose tax on goods within the country's territorial waters and no coastal state or territory is empowered to do so, the centre has submitted in an affidavit filed in the Supreme Court.

The centr was responding to a case relating to tax imposed by the Karnataka state government on Great Eastern Shipping Company Ltd. The centre has said that its legislative power would prevail as far as territorial waters were concerned.

Great Eastern Shipping Company Ltd, in its appeal to the Supreme Court, had sought quashing of the Karnataka high court order directing the company to pay tax on goods traded within the "state's territorial waters to the state government.

The high court had held that territorial waters as also the entire coastline along Karnataka belonged to the state and hence it can levy tax on the goods in these waters.

While the centre stated that the Karnataka high court had drawn wrong inference that the makers of the Constitution intended to exclude territorial waters from the union of India's purview, Karnataka state counsel Sanjay R Hedge, said, "The issue will affect the capacity of all coastal states to levy tax on transactions within territorial waters, which these states have been collecting so far."

He said the centre's affidavit would severely hit costal states like Maharashtra and Gujarat, which have been deriving a substantial portion of revenues from offshore installations in Bombay High and Jamnagar refineries, respectively.