1993 (2) TMI 289 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "condensate" under the Gujarat Sales Tax Act, 1969.
2. Applicability of entry 54 of Schedule II, Part A vs. residuary entry 13 of Schedule III.
3. Interpretation of "crude oil" and "condensate" in the context of sales tax.

Issue-Wise Detailed Analysis:

1. Classification of "Condensate" under the Gujarat Sales Tax Act, 1969:
The main question referred to the High Court was whether "condensate" falls under entry 54 of Schedule II, Part A of the Gujarat Sales Tax Act, 1969, or under residuary entry 13 of Schedule III. The Tribunal had previously held that "condensate" was covered by entry 54, which pertains to "crude oil, that is to say, petroleum in its natural state before it has been refined or otherwise treated."

2. Applicability of Entry 54 of Schedule II, Part A vs. Residuary Entry 13 of Schedule III:
The applicants, M/s. Atlas Petro Chemicals and M/s. Indequip Chem Dyes Limited, initially paid sales tax under residuary entry 13 of Schedule III but later claimed set-off under the relevant rules for initial use in the manufacture of goods for sale. The Sales Tax Officer initially granted the set-off, but subsequent revisions denied it, classifying "condensate" under entry 54 of Schedule II, Part A, which pertains to crude oil. The Tribunal upheld this classification, stating that "condensate" is a form of crude oil and thus falls under entry 54.

3. Interpretation of "Crude Oil" and "Condensate" in the Context of Sales Tax:
The Tribunal's decision was based on the definition and characteristics of "condensate" and "crude oil." It was noted that "condensate" is obtained from gas wells and is a liquid hydrocarbon that separates from natural gas. The Tribunal referred to various definitions and affidavits, including those from the Oil and Natural Gas Commission, which stated that "condensate" and "crude oil" are both hydrocarbons and are similar in their natural state.

The Tribunal also noted that the process of obtaining "condensate" involves separating it from gas, but this does not constitute treatment or refinement. The High Court agreed with the Tribunal's interpretation, stating that "condensate" is not treated before its sale and is therefore covered by entry 54, which pertains to petroleum in its natural state.

Conclusion:
The High Court affirmed the Tribunal's decision, holding that "condensate" is covered by entry 54 of Schedule II, Part A of the Gujarat Sales Tax Act, 1969, and not by residuary entry 13 of Schedule III. The Court concluded that "condensate" is a form of crude oil in its natural state and does not undergo any treatment before sale. Therefore, the question referred to the Court was answered in the affirmative, against the assessee.