2013 (5) TMI 32 - HC - VAT and Sales Tax

Inter-State v/s Intra state sales - movement of GAS from Andhra Pradesh to UP / Gujarat - Place of delivery - Place of transfer to title of goods - petitioner is a public limited company engaged in business of extracting and refining petroleum and petro-chemical products - liability to VAT - assessee claimed refund claim on VAT paid - Held that:- As from the reading of contractual obligation in terms of GSPA, there appears to be no reason to disagree with the petitioner's contention that the delivery point of the natural gas to the buyer is at Gadimoga. The quantity of gas delivered to the buyer is measured in accordance to MMBtu Scale at delivery point and according to GSPA, it is the buyer who owes responsibility with regard to damage or loss caused, if any. Supply of natural gas by the petitioner is subject to execution of gas transportation agreement requiring the transporter to transport gas from delivery point to the inlet of buyer. It is for the buyer to make necessary arrangement for supply of gas from delivery point to buyer's facility. Delivery of gas from one pipeline to other in the course of transportation of gas to buyer's facility according to GSPA is for the purpose of making integrated and continuous movement of gas from delivery point to buyer's facility.

From the aforesaid reading of the contract, it appears that the petitioner or the seller is relieved from its liability immediately after delivery of possession of gas to the buyer at the sale point, i.e., Gadimoga in Andhra Pradesh. The seller or the petitioner shall be entitled for payment of cost of gas supplied at Gadimoga for the measured quantity. Virtually, the seller or the petitioner is absolved of the liability after delivery of gas at Gadimoga to the transporter, i.e. RGTIL and shall be entitled for payment of sale consideration on the basis of delivery made to RGTIL and not at Orai in the State of U.P.

Accordingly, in view of the provisions contained in Section 3 of the CST Act readwith definition of sale given in the CST Act or the VAT Act or even Sales of Goods Act, sale takes place in Gadimoga itself so far as petitioner is concerned. Delivery point being at Gadimoga, the sale consideration also co-relates to the delivery point and thereafter natural gas is transported to outside the State of Andhra Pradesh and comes to Uttar Pradesh via Gujrat, thus it appears to be inter-State sale.

It has rightly been argued by the petitioner that GSPA has been entered into between the parties in pursuance to statutory compulsion under 2008 Regulation read with PSA. Argument of learned Senior Counsel for the State i.e. it is merely an agreement to sale seems to be misconceived argument. It has been rightly submitted Senior counsel that the terms of contract should be treated on their face value and be presumed to mean what they say and must be acted upon unless proved to be sham or farce vide.

A combined reading of all three agreements reveals that the petitioner provides gas at Gadimoga to the buyer and payment is made in terms of measurement done at the entry point situated at Gadimoga by the 4th day of receipt of invoice. The movement of goods, in the present case, is for outside the State of Andhra Pradesh but the sale in terms of Section 3 takes place in the State of Andhra Pradesh at Gadimoga in pursuance to the conditions contained in GSPA. In view of Section 7 of the VAT Act, the State Government may not impose tax to a sale or purchase taking place outside its territory.

In exercise of its legislative power to impose tax on sale or purchase of goods under Entry 54 of the State List read with Article 366(29-A)(b), the State Legislature, while imposing a tax on the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract is not competent to impose a tax on such a transfer (deemed sale) which constitutes a sale in the course of inter-State trade or commerce or a sale outside the State or a sale in the course of import or export.

As admittedly the natural gas is handed over to bailee or transporter in terms of agreement at Gadimoga and after travelling a long distance it reaches State of U.P. Movement of lean gas from Gadimoga itself is indicative of the fact that the sale in question of inter-state sale. As there is no material on record nor there is any substance in the argument advanced on behalf of the State of U.P. that they have jurisdiction or statutory right to impose VAT ignoring statutory mandate of Central Sales Tax Act,1956 read with constitutional provisions (supra) and 2008 Regulation. Hence, the sale transaction which is the subject matter of the instant case is not an intra-state sale but is an inter-state sale and State of U.P. lacks jurisdiction to impose tax (VAT).

Section 43 of the VAT Act provides that the amount deposited by assessee which is not due as a tax be held by the State Government as a trustee and in case claimed, should be refunded. Thus, in case, tax realised is not passed on the consumer then under the statutory mandate assesse seems to have got right to seek refund but if it is passed on to the consumer then it may be refunded to consumer in such a manner as may be prescribed in the statute for the purpose. It has been submitted by the petitioner's counsel that it has not been passed on to the consumer while selling the fertilizers but reliance has recovered from the respondents no. 4 to 10 who are also assessee. Accordingly, there appears to be no reason to held that state is not liable to refund the tax which has been charged without jurisdiction.