2003 (1) TMI 664 - HC - VAT and Sales Tax

Summary

Issues:
Whether the amount received from the oil pool account is exigible to sales tax as per the Assam General Sales Tax Act, 1993.

Analysis:
The petitioner, a Government of India undertaking, received notices from the taxing authority to show cause why the amount from the oil pool account should not be assessed as taxable turnover. The petitioner argued that the amount received is in the nature of subsidy/compensation and not part of the sale price. They contended that taxing such compensation would violate constitutional protections. The State Counsel argued that the subsidy compensates for production pattern variations and should be considered part of the sale price.

The Oil Co-ordination Committee, established by the Government of India, fixes ex-refinery prices for petroleum products. The petitioner sells products to the Indian Oil Corporation at these fixed prices. The Committee ensures retention margins for refineries and compensates for shortfalls between ex-refinery and retention prices. The Court referred to a previous case where it was held that amounts received by refineries as subsidy or compensation are not liable for taxation under relevant tax acts.

The Court, following the precedent, ruled that the amount received by the petitioner from the oil pool account as subsidy is not subject to sales tax. The petitioner's argument that a special leave petition was filed in the apex court with no stay was noted. The writ petition was disposed of accordingly, with no order as to costs.