9911796707
TMI Blog2016 (4) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... at Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as "Tribunal") in Second Appeal No.103/2010 in respect of the period 2004-05, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.384/2014. Tax Appeal No.380/2014 [2.1] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.91/2010 in respect of the period 2005-06, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.380/2014. Tax Appeal No.1358/2014 [2.2] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 25.03.2014 passed by the learned Tribunal in Second Appeal No.428/2013 in respect of the period 2008-09, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.1358/2014. Tax Appeal No.1359/2014 [2.3] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 25.03.2014 passed by the learned Tribunal in Second Appeal No.427/2013 in respect of the period 2008-09, the original respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006-07, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.436/2014. Tax Appeal No.437/2014 [2.11] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.395/2011 in respect of the period 2006-07, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.437/2014. Tax Appeal No.468/2014 [2.12] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.393/2011 in respect of the period 2006-07, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.468/2014. Tax Appeal No.469/2014 [2.13] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.326/2012 in respect of the period 2007-08, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.469/2014. Tax Appeal No.470/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w in holding that the sale of kerosene by the respondent herein to Oil Marketing Companies falls within the meaning of the phrase "Sales of Kerosene for domestic use sold for public distribution system" and is therefore exempt from the whole of tax under Entry 33 of the schedule to the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969 and is otherwise exempt from the whole of tax under Entry 173 of the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969, and hence no tax can be levied on the discount amount of such sale? 3) Whether in the facts and circumstances of the case, the Tribunal was right in law in holding that the sale of Liquefied Petroleum Gas by the respondent to Oil Marketing Companies falls within the meaning of the phrase "Sales of liquefied petroleum gas (domestic) as used in Entry 70 of the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969, and hence no tax exceeding 14 paise in the rupee can be levied on the Liquefied Petroleum Gas sold by the respondent in bulk to Oil Marketing Companies? 4) Whether, in the facts and circumstances of the case, the Tribunal was right in law in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. No. Class of Sales or Purchases Exemption Whether of whole or Part of tax _________________ Ref. to Schedule Entry for goods given exemption Conditions 33. Sales of Kerosene for domestic use sold for Public distribution system. Whole of Sales Tax _________________ II A 33 Nil 70. Sales of liquefied Petroleum Gas (Domestic) To the extent to which the amount of sales tax exceeds fourteen paise in the rupee _________________ II A 123 Nil 173. Sales of petroleum products including liquefied petroleum gas, manufactured or purchased or imported from across the customs frontiers by any of the specified companies to any other specified company. Explanation: For the purpose of the entry, "specified company" shall mean, - (i) Indian Oil Corporation Ltd.; (ii) Bharat Petroleum Corporation Ltd.; (iii) Hindustan Petroleum Corporation Ltd; (iv) IBP Company Ltd; (v) Oil & Natural Gas Corporation Ltd; (vi) GAIL (India) Ltd; (vii) Petronet LNG. Whole of tax (1) Purchasing specified company shall sell the goods so purchased, within the State of Gujarat and it shall pay sales tax or the Central Sales Tax payable to Government of Gujarat in respect of such sales; (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous Gas Fields in Bombay High for its further transmission up to the Sweetening Plant of ONGC based at Hazira, wherein all the hydrocarbons from the sour Gas are separated to produce natural gas. That for the aforesaid processes, i.e. processing and transportation, the Joint Venture pays processing and transportation charges to ONGC, whereby natural gas gets converted into a deliverable state at the time of the sale thereof to GAIL. Apart from Natural Gas, from the above referred Oilfields, ONGC also gets Crude Oil and LPG. That the part of the said Crude Oil is being refined by ONGC itself for further sale of various petroleum products like kerosene, etc. obtained therefrom and part of the Crude Oil is being directly sold to various OMCs for the purpose of refining and sale thereof. That in the present case the respondent,herein i.e. ONGC, sells kerosene and LPG, both in bulk to various OMCs, which according to the State is a company to company sale for the purpose of resale. It appears that the OMCs thereafter, convert a part of quantity of kerosene, in a distinguishable form, i.e. 'blue kerosene', to be sold in Public Distribution System and sell the same to dealers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2008 onwards on sales of LPG for domestic use by the consumers of the State i.e. the exemption provided for whole of the tax. That as the ONGC was of the opinion that on sales of kerosene and LPG (domestic) sold to the OMCs, they are entitled to the exemption from payment of sales tax both under the Gujarat Sales Tax Act, Gujarat Value Added Tax Act as well as Central Sales Tax Act as provided under the aforesaid entries as they are forming part of the Public Distribution System and therefore, not liable to pay the sales tax, the dispute arose between the ONGC and the State Government. According to the ONGC sale of kerosene by them to OMCs falls within the meaning of the phrase "Sales of Kerosene for domestic use sold for public distribution system" and is therefore exempt from whole of tax under Entry 33 of the schedule to the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969. Thus, it was also the case on behalf of the ONGC that even the sale of LPG to OMCs falls within the meaning of phrase "Sales of liquefied petroleum gas (domestic)" as used in Entry 70 and hence no tax exceeding 14 paise in the rupee can be levied on the Liquefied Petroleum Gas sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of CST Act; and (iv) that the inter-State sales of LPG, effected by the appellant from the State of Gujarat to other States qualify for total exemption from tax only on the ground that "intra-State sales of LPG for domestic use by the consumers of the State", is exempt from whole of tax as per Entry 69 of the schedule to the exemption notification dated 31.03.2006, as amended and issued under section 5(2) of the GVAT Act. That by impugned judgment and orders the learned Tribunal has also set aside the respective penalties imposed under the relevant provisions of the Gujarat Sales Tax Act, Gujarat Value Added Tax Act, 2003 and Central Sales Tax Act referred to hereinabove. Hence, the State has preferred the present Tax Appeals to consider the following substantial questions of law. 1) Whether in the facts and circumstances of the case, the Tribunal was right in law in holding that processing and transportation charges not received by the respondent from Gas Authority of India Limited (GAIL) cannot be included as part of the sale price of the gas sold by the respondent to GAIL? 2) Whether, in the facts and circumstances of the case, the Tribunal was right in law in holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 5(2) of the GVAT Act. 8) Whether, in the facts and circumstances of the case, the Tribunal was right in law in holding that the opponent is not liable to pay any penalty under Section 9(2A) of the Central Sales Tax Act and under Section 34(12) of the Gujarat Value Added Tax Act, 2003 and the Tribunal was right in law in directing the assessing officer to rectify the assessment order for the issue relating to interest charged if there is any calculation error in charging interest as contended." [5.0] Shri Kamal B. Trivedi, learned Advocate General has appeared with Ms. Sangita Vishen, learned AGP appearing on behalf of the State and Shri N. Venkatraman, learned Senior Advocate has appeared with Shri Nitin Mehta, learned advocate on behalf of the respondent - ONGC. [6.1] Shri Kamal Trivedi, learned Advocate General appearing on behalf of the State has vehemently submitted that as such this is a fit case for remand of the matters to the learned Tribunal. It is submitted that as such there was no factual data of whatsoever nature pertaining to the controversies has been discussed by the learned Tribunal, since nothing was reportedly produced by the parties, and the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, learned Advocate General has heavily relied upon the decision of the Division Bench of this Court in ONGC vs. Commissioner of Sales Tax in Sales Reference No.3/1998. Making above submissions it is requested to answer the aforesaid substantial question of law No.1 in favour of the Revenue and against the respondent - assessee. [6.3] It is further submitted by the learned Advocate General appearing on behalf of the State that even otherwise even on merits also the learned Tribunal has committed a grave error in holding that on sale of kerosene as well as LPG by the ONGC to OMCs, there shall be exemption from payment of sales tax / value added tax / central sales tax (exceeding 14 paise a rupee) as per the relevant Entry 33 under the Gujarat Sales Act, under Entry 53 as well as Entry 53 and Entry 69 of the Gujarat Value Added Tax Act. It is vehemently submitted by Shri Trivedi, learned Advocate General appearing on behalf of the State that while deciding the controversies / issues / substantial questions of law raised in the present Tax Appeals, the main issue which is required to be considered and dealt with is whether can the ONGC be said to be the part of public distribution s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on when ONGC raises invoices at the time of actual supply of petroleum products to OMCs, price indicated there was merely provisional, temporary and adhoc and always subject to finalization once the Government of India issues final directives. It is submitted that it is further held that It is this price realized which would be the sale price and not its cost price. It is submitted that when OMCs sell kerosene to dealers, i.e. fair price shop owners, the price is the declared price as per clause 2(b) of the Order, 1993, which is not the case when ONGC sells kerosene in bulk to OMCs. [6.6] It is submitted that even as per clause 2(l) of the Public Distribution System (Control) Order, 2001, 'Public Distribution System' means a system for distribution of essential commodities to ration card holders through fair price shops, such as rice, wheat, sugar, edible oils, Kerosene and general commodities as are notified by the Central Government under clause (a) of section 2 of the Act. It is submitted that therefore fair price shop owner, i.e. dealer, and ration card holder, are two essential parts of Public Distribution System. It is submitted that therefore the ONGC cannot be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Schedule to Exemption Notification under section 5(2) of the Gujarat Value Added Tax Act, 2003. It is submitted that under the applicable State Sales Tax Legislations, the tax is imposed on transaction of 'sale' and not on 'goods'. In other words, charging event of taxation under the said legislations is 'sale' of goods from one party to another. It is submited that no sooner the said charging event takes place, then the sales tax becomes payable and the said charging event in the present case is, the first 'sale' of kerosene / LPG in bulk as effected by ONGC in favour of various OMCs, which is a companytocompany sale, for the purpose of resale. It is submitted that as submitted hereinabove, the sale by ONGC in favour of OMCs is not 'in Public Distribution System' or 'for domestic use'. It is submitted that so far as kerosene is concerned, the said first sale by ONGC in favour of OMCs is neither a sale at 'declared price' nor is the same of a distinguishable kerosene. It is submitted that therefore, the ultimate use of kerosene and LPG in the present case is not a relevant factor for interpreting the aforesaid Entries of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of Entry 69 referred to above inasmuch as, LPG being sold by it to OMCs in bulk is for resale thereof to various dealers and distributors and not for domestic use. It is submitted that so far as Entry 173 of the Schedule to the Exemption Notification in question is concerned, the same seeks to grant full exemption from tax liability, but subject to certain conditions. It is submitted that the ONGC does not comply with the said conditions and hence, no question arises of claiming any exemption on the part of the ONGC based upon the said Entry 173. It is submitted that apart from other conditions, the ONGC does not comply with condition No.2 specified against the said Entry 173 inasmuch as OMCs being the purchasing specified companies, do not sell the goods, i.e. Kerosene and LPG purchased from ONGC, only within the State of Gujarat. It is submitted that therefore, the alternative claim of ONGC regarding exemption based upon the said Entry 173 is absolutely misconceived and erroneous and hence, the same does not deserve to be entertained at all. [6.11] It is further submitted by Shri Trivedi, learned Advocate General that insofar as ONGC's claim of exemption in respect of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; and 'sale price' in the erstwhile Gujarat Sales Tax Act. It is submitted that in the present case the ONGC claims that it is not liable to pay sales tax on the transportation and processing charges, since neither it has raised the said charges against GAIL nor does GAIL pay the said charges to ONGC. It is submitted that however, what is being lost sight is the fact of the receipt of the said charges by ONGC in respect of the goods in question before the delivery thereof and that therefore, the said charges are necessarily required to be considered as the part of or included in 'sale price' as per section 2(29). It is submitted that merely because, GAIL does not directly make payment of charges to ONGC, the very fact that ONGC gets reimbursed towards processing and transportation charges of LPG sold in bulk to GAIL. In support of his above submissions, Shri Trivedi, learned Advocate General has heavily relied upon the recent decision of this Court in the case of ONGC vs. Commissioner of Sales Tax delivered on 19.07.2014 in Sales Tax Reference No.3/1996. [6.15] It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the State that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osene to OMCs; (iii) it wrongly availed of the benefit of concessional rate of tax with reference to LPG under Entry 70 sold by it to OMCs and not for domestic purpose; (iv) it wrongly availed of the benefit of exemption under Entries 53 and 69 with reference to sale of Kerosene and LPG in bulk to OMCs, and (v) it wrongly availed of full exemption in respect of sale of Kerosene and LPG, both in bulk, to OMCs during the course of their inter-State sale of the said products inasmuch as their intraState sale of Kerosene and LPG is not exempt from payment of tax. In support of his above submissions, Shri Trivedi, learned Advocate General has heavily relied upon the decision of the Hon'ble Supreme Court in the case of Chairman, S.E.B.I. vs. Shriram Mutual Fund and Anr. reported in AIR 2006 SC 2287 (paras 21, 22, 33 to 35). Making above submissions and relying upon above decisions it is requested to quash and set aside the impugned judgment and order passed by the learned Tribunal and answer the substantial questions of law in favour of the State and against the respondent - ONGC. [7.0] All these tax appeals are opposed by Shri Venkatraman, learned Senior Advocate appearing on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Joint Venture partners as per the Production Sharing Contract terms and billed on GAIL by Joint Venture partners on which appropriate GST/VAT has been charged. h. GAIL had settled the consideration including the taxes and the taxes had appropriately been remitted to the state government." It is vehemently submitted that the Tribunal had gone into said issue in detail and had held the following: "a. The processing and transportation charges had neither been received or receivable from GAIL to whom the gas was sold. b. The respondent had not raised any invoices nor received any amounts towards transportation and processing from GAIL. c. This fact has also been confirmed by GAIL by letter dated 25.09.2009. d. The finding that respondent had recovered transportation charges is erroneous and without basis. e. The amount had been received from the members of the J.V. And the same cannot form part of the turnover of sales to GAIL." It is submitted that the submission of the Revenue that in terms of section 2(29) which defines 'sale price', there is no need or mandate that the consideration should flow only from the buyer and even if it flows from any other source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent ONGC that while interpreting the respective exemption entries and considering the availability of exemption under the relevant tax exemption entries what is required to be considered is whether the ONGC while selling the kerosene and LPG can be said to be part of the Public Distribution System or not? While selling the kerosene by ONGC to OMCs, ONGC can be said to be part of the Public Distribution System, Shri Venkatraman, learned Senior Advocate appearing on behalf of the respondent - ONGC has relied upon the provisions of Order, 1993 more particularly clause 2(f) and clause 2(j). It is submitted that the said control order is issued in exercise of its powers under section 3 of the Essential Commodities Act, 1955. It is submitted that clause 2(f) defines "Government Oil Companies" and it means various Oil Marketing Companies and Oil producing companies including the ONGC. It is submitted that clause 2(j) defines Public Distribution System and it means, the system of distribution, marketing or selling of kerosene at declared price through a distribution system approved by the Central or State Government. It is submitted that therefore it is self-evident that keros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g on behalf of the respondent - ONGC has relied upon certain communications issued by the Ministry of Petroleum and Natural Gas to the Director General, Petroleum Planning and Analysis Cell for allocation of kerosene for public distribution for a specified quarter; State wise allocation; communication by Petroleum Planning and Analysis Cell issued to the Regional Level Coordinators and State Level Coordinators identifying the allocation of Public Distribution System kerosene for each of the oil companies; planned upliftment of PDS kerosene from each plant of the Oil Producing Companies; price circulars issued from time to time determining the price for Public Distribution System kerosene. It is submitted that the assessable value for payment of excise duty is far less than the basic supply price of Public Distribution System kerosene. It is further submitted that the end use certificate issued by each of the oil companies confirmed the fact that the kerosene purchased has been supplied only for Public Distribution System purposes. It is submitted that and it is an undisputed fact that the entire supply of kerosene by the ONGC to the various OMCs are only for public distribution. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be made freely available to everyone irrespective of the status in life." That the doctrine enjoins upon the Government to protect the resources for the enjoyment of the general public rather than to permit their use for private ownership or commercial purposes. That the State is the Trustee of all the natural resources, which are, by nature, meant for public use and enjoyment. That the State as a Trustee is under legal duty to protect the natural resources. He has also heavily relied upon the observations made by the Hon'ble Supreme Court in paras 114 to 118 and paras 247 to 249. [7.8] It is further submitted Shri Venkatraman, learned Senior Advocate appearing on behalf of the respondent - ONGC that in the case of Oil and Natural Gas Commission vs. Association of Natural Gas Consuming Industries of Gujarat reported in 1990 Supp.(1) SCC 397, the Hon'ble Supreme Court has held that the scheme of pricing for fixation of prices concerning essential commodities is one of the prerogatives of the Parliament and the Executive and Parliament has to interfere when the same is in pursuance of social and economic objective or by discharging duties under the Direct Principles of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stribute natural resources in the best possible way and to subserve the common good. (9) As part of Directive Principles of State Policy, it is a constitutional obligation on the State to interfere and influence the fixation of prices to ensure natural resources are made available at minimum prices. (10) As part of this constitutional obligation, the Government is still subsidizing the supply of these resources even after dismantling the APM and the circulars issued by the planning and policy side, evidently seeks one of the components which influences fixation and sharing of burden is the tax structure. (11) There is an involvement of three Agencies in the whole subject matter. The Core Ministry i.e. MoPNG which grants the price discount and resorts to fixation of prices, the Central Government which grants total exemption from payment of excise duty for the supply of both Kerosene and LPG. The State Government which has again issued various notification exempting the sale and supply of kerosene for PDS and LPG for domestic use. (12) When similar issues cropped up for payment of central excise duty, MoPNG vide communication dated 06.04.1999 clarified that LPG removed by the Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to find out basic eligibility followed by liberal construction in extending the benefit. It is submitted that taking into consideration the whole conspectus referred to above, the supply of Kerosene and domestic LPG would, without any difficulty, pass even the first test viz. plain or literal construction. It is submitted that expression used under the GST regime for LPG, "sale of LPG (domestic)" which means sale for domestic use. It is submitted that expression used under section 14(va) of CST Act is "Liquified Petroleum Gas for domestic use" and under the Gujarat VAT regime for LPG is "sale of LPG for domestic" use between 11.06.2008 to 02.10.2008 and "Sale of LPG for domestic use by the consumers of State" post 03.10.2008. It is submitted that consequently, what needs to be interpreted is the expression "Sale for domestic use". It is submitted that in the case of Kerosene, the expression used under the GST regime is, "Sale of Kerosene for domestic use for Public Distribution System" and under the Gujarat VAT regime, the expression used is, "Kerosene sold through the Public Distribution System". It is submitted that therefore, what is common between kerosene and LPG is, in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liberal construction. It is submitted that the Division Bench of the Karnataka High Court in the case of Bharat Petroleum Corporation Ltd. vs. State of Karnataka [Manu/KA/1374/2010] under similar circumstances has extended the exemption of tax benefits by applying the purposive construction. It is submitted that the Government of Karnataka has exempted the sale of diesel to Fishermen for use in fishing activity. It is submitted that question arose before the Karnataka High Court as to whether the exemption from Karnataka Sales Tax would also extend to the levy of cess in the absence of a separate exemption to cess and to that it is held that "when the government in order to mitigate the financial distress on the part of the poor Fishermen, thought it fit to exempt them from payment of tax under section 5 of the Act which is the basic tax payable for purchase of petrol or diesel, as cess was payable in addition to the said tax, which was in the nature of an increment on the tax, the said levy of cess also stands exempted." It is submitted that it is further held that "any other interpretation to the said provision would not only cause inconvenience to the poor Fishermen, but would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ople, with their meager resources, they cannot get it, unless priced less and reserved for them in larger quantity. If they are to buy at a higher price, they would be compelled to forego it, when their chance to get sugar is limited. It is all he more necessary to enable them to have it within their means or capacity. If only the aspect of capacity has been applied in this correct perspective, it would have resulted in more sugar given to them, than to the affluent people or atleast distributing it on per capita basis". Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC has also relied on the decisions of the Hon'ble Supreme Court in the case of Union of India vs. Ranbaxy Laboratories Ltd. reported in (2008) 7 SCC 502; Oxford University Press vs. Commissioner of Income Tax reported in (2001)3 SCC 359 and Commissioner of Customs vs. M. Ambalal & Company reported in (2011)2 SCC 74. Relying upon above decisions it is submitted that for any reason, strict or liberal interpretation fails, the case anyhow would be covered under the purposive or liberal interpretation. [7.12] Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC has submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mptions, or same rate of tax as is applicable under the GST/GVAT. It is revenue's case that, by virtue of usage of expression "domestic use" in the case of kerosene and LPG and further incorporation of the expressions "by the consumers of the state" introduced vide the notification (GHN-45) dated 3.10.2008 the benefit, if any, can be extended only to local sales within the State of Gujarat and not under CST sale. It is submitted that for this purpose reliance was placed on section 8(2), 82(A) and 8(5) of the CST Act. It is also submitted that it was contended that the notification being conditional, the benefit of the same would not be available to the ONGC. It is further submitted that further reliance was placed upon section 6(1A) of the CST Act, to contend that ONGC shall be liable to tax under CST even if no tax is leviable under the GST or GVAT and this provision is notwithstanding any other provision under the CST. It is further submitted that section 5(2)(a) of GVAT was also relied upon to show that the State Government is empowered to exempt tax subject to such conditions as may be imposed by the State Government. [7.14] It is further submitted by Shri Venkatraman, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(1) states that a dealer "shall be liable to pay tax under this act, which shall be 3% of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate state under the sales tax law of that state, whichever is lower". It is further submitted that thus, section 8 mandates that for determining the rate of tax one has to consider the rate applicable to the sale under the sales tax law of that state. It is further submitted that it may be pertinent to note that section 8(1) provided for blanket applicability of the rate of tax applicable under the respective state laws and does not prescribe any condition with respect to the applicability of the said rate of the state law. It is further submitted that in order to ascertain the respective rate of tax under GVAT, section 7 of GVAT deals with levy of tax on turnover of sales and rate of tax. It is submitted that section 7(1) provides that "subject to the provisions of this Act, there shall be levied a tax on the turnover of sale of goods specified in Schedule II and Schedule III at the rate set out against each of them in the said Schedule II or, as the case may be, Schedule III". It is further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is pertinent to highlight that section 8(2A) existed on the statute book till it was omitted with effect from 11.05.2002. In Statement of Object and Reasons of Finance Bill, 2002, Clause 145 seeks to amend section 8 of the Central sales Tax Act‚ 1956 so as to - i. Provide for central sales tax does not become greater than local sales tax in case of Sale of goods to the Government and registered dealer; ii. Provide for exemption from centra'l sales tax in case where goods are exempt from local sales tax" Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC has further submitted that with deletion of section 8 (2A) from the statute book on 11.05.2002, the concept of general and conditional exemption from State sales tax has given a go bye and that Prior to 11.05.2002, the State Government could retain levy of central sales tax by providing conditional exemption from local sales tax and that by deletion of section 8(2A), the State lost such powers. Therefore, now any exemption available to intrastate sales pursuant to the exemption notification of that respective state the same shall be available and applicable to inter-State sales out of that respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it is requested to decide the issues / substantial questions of law in favour of the ONGC and against the revenue. [8.0] In reply to the submissions made by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC, Shri Trivedi, learned Advocate General appearing on behalf of the State has vehemently submitted that none of the documents relied upon by the learned Counsel appearing on behalf of the ONGC in support of their case that ONGC can be said to be a part of Public Distribution System, suggest the said position and support the case of the ONGC. It is submitted that on the contrary considering the Order, 1993 and the Public Distribution System (Control) Order, 2001 while selling the kerosene to the OMCs, the ONGC cannot be said to be part of Public Distribution System. It is submitted that the notifications dated 16.08.2005 and 03.02.2005 which are heavily relied upon by the learned Counsel appearing on behalf of the ONGC, at the most suggest that it is the OMC which can, at the best, be the part of Public Distribution System. It is submitted that as such the ONGC is dealing with nonpublic distribution system consumers too, whereas anybody which is part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment when it seeks to levy and collect Sales Tax falling within its power flowing from the Constitution of India and that too, on the happening of the taxing events of sale of Kerosene and LPG in bulk by ONGC in favour of OMCs. It is submitted that even otherwise, under ordinary circumstances, if any concession or benefit is conferred by the Government of India in respect of levy and collection of Central Taxes, in that case, the State is not enjoined to extend similar benefits in the matter of its own taxation. [8.4] Now, so far as the reliance placed upon the communication dated 20.09.2007 issued by the Government of Karnataka to the State Sales Tax Authorities, by the learned Counsel appearing on behalf of the ONGC is concerned, learned Advocate General has submitted that vide aforesaid communication the Government of Karnataka, appeared to have inter-alia informed its Taxing Authorities that sale of Kerosene by MRPL to OMCs for further sale under Public Distribution System would fall under Entry 55 of the Third Schedule to the KVAT Act and that VAT would be leviable at 4% on Kerosene sold by MRPL to OMCs for distribution through Public Distribution System and not at 12.5%. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the said decision shall not be applicable to the facts of the case on hand. It is submitted that the observations by the Hon'ble Supreme Court in the aforesaid decision with respect to the public trust doctrine are as such with regard to the peculiar facts of the case wherein two Ambani brothers were fighting for implementation of an MoU arrived at between them for the purpose of sharing the gas and it was in that context the Hon'ble Supreme Court made observations in para 122. It is further submitted that as such complying with the Government's directives for making available the Kerosene and LPG for domestic use to the end consumers at subsidized rates, whatever losses are occasioned at the end of OMCs, are required to be absorbed on pro rata basis by OMCs and ONGC and ONGC is supposed to take care of the them by selling its other profit earning products. It is further submitted that approximately tax liability for the period in question i.e. 2004-05 to 2006-07, is about Rs. 500 crore as against which, net profit earned by ONGC during the said period and during last 2 years, is much much more. It is submitted that in the year 2004-05 the net profit earne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e part of Public Distribution System. It is submitted that principles relating to interpretation of any notification issued under nontaxing statute cannot be made applicable while interpreting a particular exemption notification issued under any taxing statute. It is submitted that at the same time no judgment with reference to facts and circumstances of a particular case can be stated to be precedent in the matter of any case having different facts and circumstances. [8.8] Now, so far as the reliance placed upon the decision of Hon'ble Supreme Court in the case of Dalmia Dadari Cement Ltd. (Supra) by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC is concerned, it is submitted by Shri Trivedi, learned Advocate General that in the aforesaid case, exemption was granted to the assessee under the Punjab General Taxes Act, 1948 with reference to the goods sold to a company generating and supplying electrical energy i.e. Punjab Electrical Board, provided that the goods so sold are used by Punjab State Electricity Board in the generation or distribution of such energy. It is submitted that assessing authorities denied exemption on the ground that cement sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Supreme Court in case of Dalmia Dadari Cements Ltd. (supra) observed "according to this decision, the object of grant of exemption was only to debar those importers/manufacturers from the benefit of the Notifications, who had diverted the products imported for other purposes and had no intention to use the same for manufacture of the specified items at any stage. It is submitted that thus, the common thread running through the aforesaid two judgments is the fact of usage of goods meant for exemption by the specified party without having diverted the said goods somewhere else. It is submitted that thus, in both the said cases, the Hon'ble Supreme Court found that users had been using the goods so sold by assessee / importer without diverting the same somewhere else. It is further submitted however, such is not the position in the present case. It is submitted that therefore in the present case, there is no question of interpreting the words 'through' or 'for domestic use' to mean 'intended for use', or in other words, ultimate use of kerosene or LPG is not relevant for interpreting the Entries and Entries in question in the exemption Notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, while strictly interpreting the Exemption Notifications in question, as demonstrated hereinabove, ONGC cannot claim that its sale of Kerosene in bulk in favour of OMCs for the purpose of resale thereof being not in bulk, is for Public Distribution System or domestic purpose and hence, strictly legally speaking, ONGC does not fall within the four corners of the Exemption Notifications in question. [8.12] Now, so far as the reliance placed upon the decision of the Karnataka High Court in the case of Sri Neelakanteshwar Oil Industries vs. State of Karnataka reported in ILR 1995 KR 52 by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC is concerned, Shri Trivedi, learned Advocate General has submitted that the principles relating to the interpretation of exemption provisions in Taxation Law as propounded by the Karnataka High Court in the aforesaid case do not fit in the principles laid down in that behalf by the Larger Bench of the Hon'ble Apex, more particularly in case of Novapan India Ltd. (Supra) and Bombay Chemicals (P) Ltd. (Supra) and therefore, the aforesaid judgment of the Karnataka High Court cannot be of any help to ONGC. [8.13] Now, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial distress, even the State of Gujarat has provided exemption from sales tax in respect of kerosene and LPG sold for use in public distribution system and domestic purposes, respectively. [8.15] Now, so far as the reliance placed on the decision of the Hon'ble Supreme Court in the case of Oxford University Press (Supra) by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC is concerned, Shri Trivedi, learned Advocate General has submitted that in the said case, the High Court denied exemption under section 10(22) of the Income Tax Act, 1961 to Oxford University Press on the ground that it is Oxford University which is entitled to such exemption and that Oxford University Press is not a part of the Oxford University. It is further submitted that majority judgment of the Hon'ble Supreme Court took a view that while a plain literal interpretation of the statutory provisions produced manifestly derived which resulted in it had never been intended by the legislature, the Court read into the statutory provision, the Company which, though never exempted in construction the transaction of the assessment under the statutory provisions. It is further su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the finding by the Hon'ble High Court of Bombay that the Respondent company had imported diamonds of foreign origin without a valid licence. It is further submitted that ultimately, the Hon'ble Supreme Court while setting aside the aforesaid decision of the Tribunal, inter-alia held that it would be antithetical to consider that 'smuggled goods' should be read within the definition of the 'imported goods' for the purpose of the Customs Act and that therefore, the Respondent company would not be entitled to the benefit of the Exemption Notification which is otherwise meant for imported goods and not for smuggled goods. [8.17] Now, so far as the submission of Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC with regard to availability of exemption to ONGC from payment of sales tax in respect of kerosene and LPG is concerned, it is submitted by Shri Trivedi, learned Advocate General has submitted that ONGC claims exemption in respect of Kerosene under the erstwhile Entry 33 and in respect of LPG under the erstwhile Entry 70, and alternatively under Entry 173 of the Schedule to exemption Notification issued under section 49(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present Tax Appeals and answer the substantial questions of law in favour of the State / Revenue and against the ONGC. [9.0] In rejoinder Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC has vehemently submitted that as such the Kerosene Control Order, 1993; PDS Control Order, 2001 and PDS Kerosene and Domestic LPG Subsidy Scheme, 2002 support the case of the ONGC and would not take the supply of kerosene from the Public Distribution System. It is submitted that a plain and simple construction of the definition contained in clause 2(j) of the Control Order, 1993 would show that "system of distribution, marketing or selling of kerosene through a distribution system approved by the Central or the State Government at a declared price". It is submitted that the said definition contains 4 conditions viz. the activity should be system of distribution marketing or selling of kerosene; secondly, at a declared price; thirdly, through a distribution system; fourthly, approved by central or State government. It is submitted that the ONGC is engaged in the sale of kerosene, at a declared price and is the founded head of the distribution system. It is submitted that al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cate appearing on behalf of the ONGC that said judgment states that onus is on the respondent to prove eligibility to an exemption. It is submitted that evidence on record and intention of the policymakers in unison point towards the conclusion that the sale by the respondents to the OMCs would stand exempted. [9.5] Now, so far as the reliance placed upon the decision of Basant Agrotech (Supra) on behalf of the State is concerned, it is submitted by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC that said judgment lays down the foundation principle as to how a charging section must be so construed. It is submitted that the interpretative rule on charging section is always tough in reiterating the aspect that a charging provision cannot be ambiguous and a charge cannot be read through implication. It is submitted that the case on hand is not one dealing with charging section but seeking to interpret only an exemption notification. It is submitted that therefore, the said decision has no relevance. [9.6] Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of Modi Sugar Mills Ltd. (Supra) on behalf of the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of a notification can only be on the basis of an objective criteria and never on the basis of a subjective criteria. It is submitted that tools of interpretation do not recommend ability to pay to be factored as a criteria while interpreting eligibility or ineligibility. It is submitted that therefore merely because the ONGC might be a profit making company the exemption which may be available to it cannot be denied. It is further submitted that neither capacity to pay nor capacity to absorb loss, if any, has any impact or bearing in interpreting an exemption notification. Making above submissions, it is requested to dismiss the tax appeals preferred by the Revenue and answer the substantial questions of law against the Revenue and in favour of the ONGC. [10.0] Heard learned advocates appearing on behalf of respective parties at length. [10.1] So far as the substantial question of law No.1 whether in the facts and circumstances of the case, the Tribunal was right in law in holding that processing and transportation charges not received by the respondent from Gas Authority of India Limited (GAIL) cannot be included as part of the sale price of the gas sold by the respondent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um Gas (Domestic) To the extent to which the amount of sales tax exceeds fourteen paise in the rupee _________________ II A 123 Nil 173 Sales of petroleum products including liquefied petroleum gas, manufactured or purchased or imported from across the customs frontiers by any of the specified companies to any other specified company. Explanation: For the purpose of the entry, "specified company" shall mean, (i) Indian Oil Corporation Ltd.; (ii) Bharat Petroleum Corporation Ltd.; (iii) Hindustan Petroleum Corporation Ltd; (iv) IBP Company Ltd; (v) Oil & Natural Gas Corporation Ltd; (vi) GAIL (India) Ltd; (vii) Petronet LNG. Whole of tax (1) Purchasing specified company shall sell the goods so purchased, within the State of Gujarat and it shall pay sales tax or the Central Sales Tax payable to Government of Gujarat in respect of such sales; (2) Purchasing specified company shall furnish to the selling specified company a certificate in Form 56 declaring inter-alia that the goods so purchased shall be sold by it within the State of Gujarat on which tax payable under the Gujarat Sales Tax Act or the Central Sales Tax will be paid to Government of Gujarat; (3) Purchasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e VAT Act, 2003, as per Entry No.53 and on and from 02.09.2006 onwards on sale of kerosene through the Public Distribution System i.e. exemption from payment of whole of the value added tax and as per Entry No.69 pre 02.10.2008 more particularly for the period between 11.06.2008 to 02.10.2008 on sale of LPG for domestic use there was an exemption from payment of whole of tax (VAT) and as per the amended Entry No.69 for the period 03.10.2008 if the sale of LPG is for domestic use by the consumers of the State then and then only the whole of the tax under the VAT Act, 2003 is exempted. Thus, from the aforesaid it appears that there is a significant difference in the wordings of relevant Entry No.33 under the Act, 1969 and the relevant Entry No.53 under the VAT Act, 2003 (in respect of sale of kerosene) and in the Entry No.69 pre 02.10.2008 and post 03.10.2008 (in respect of sale of LPG). [10.3] In the present case it is the case on behalf of the ONGC that in respect of sale of kerosene by ONGC to various OMCs, ONGC is entitled to the exemption from payment of tax under the Act, 1969 till the Act, 1969 was in force, as per the Entry No.33 and as per Entry No.53 of the notification is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumed deficiency. In the case of Novapan India Ltd. (Supra) it is observed and held by the Hon'ble Supreme Court that a person invoking an exception or exemption provision to relieve him from the tax liability must establish clearly that he is covered by the said provision. It is further held that in case of doubt or ambiguity, benefit of t must go to the State. Similar view has been expressed by the Hon'ble Supreme Court in the subsequent decision in the case of Saraswati Sugar Mills (Supra). Relying upon the above decisions it is submitted on behalf of the State that the relevant entries should be construed and/or interpreted strictly in accordance with the wordings used and according to the State the wordings in the relevant entries are very clear and therefore, the Court shall adopt a liberal interpretation. On the other hand it is submitted on behalf of the ONGC that the relevant entries must be first tried to be interpreted literally, if not possible then in that case liberal and even then if liberal interpretation is not possible then it must be interpreted purposively so as to grant the benefit of intended exemption to the ONGC. However, considering the relevant ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case the kerosene sold by ONGC to various OMCs is sold for ultimate public distribution system. Therefore, the sale of kerosene by the ONGC to various OMCs is as such intended for use of public distribution system. Under the circumstances and considering the decision of the Hon'ble Supreme Court in the case of Dalmia Dadri Cement Ltd. (Supra), when the kerosene is sold by the ONGC to various OMCs which is intended to be used for public distribution system, in respect of sale of kerosene by the ONGC to various OMCs, the ONGC shall be entitled to exemption from payment of sales tax under the Act, 1969 as per Entry No.33 of the Schedule to the exemption notification issued under section 49(2) of the Act, 1969. No error has been committed by the learned Tribunal in holding so i.e. in holding that in respect of sale of kerosene by ONGC to various OMCs, which is sold for domestic use for public distribution system, the ONGC shall be entitled to exemption from payment of whole of the tax sales tax under the Act, 1969, as per Entry No.33. Under the circumstances, the said substantial question of law is held in favour of the assessee and against the revenue. Exemption claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sold to the public at large under the public distribution system is altogether in a different colour (new colour) and even after the kerosene is sold by the ONGC to various OMCs, even the form of the kerosene would be changed and there shall be further process by the various OMCs. Merely because the kerosene which is sold by ONGC to various OMCs, may be ultimately used for sale of kerosene to the public at large under the public distribution system, it cannot be said that the kerosene sold by the ONGC to various OMCs can be said to be sold "through the public distribution system". As observed hereinabove there is a distinction between the sale of kerosene for domestic use "for public distribution system" and kerosene sold "through public distribution system". If the intention of the legislature was to grant exemption from payment of Value Added Tax under the VAT Act, 2003 in respect of the sale of kerosene, as contended on behalf of the ONGC, in that case, the wordings would have been "kerosene sold for the public distribution system", as it was there in Entry No.33 of the Schedule to the exemption notification issued under section 49(2) of the Act, 1969. Under the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is held that in respect of sale of kerosene by ONGC to various OMCs, the ONGC is not entitled to the exemption claimed as per Entry No.53 and the ONGC is liable to pay the value added tax under the VAT Act, 2003, as the kerosene sold by the ONGC to various OMCs cannot be said to be kerosene sold "through public distribution system". Accordingly the substantial question of law with respect to exemption claimed under Entry No.53 in respect of sale by ONGC to various OMCs is held in favour of the Revenue and against the assessee and to that extent the impugned judgment and order passed by the learned Tribunal is required to be quashed and set aside. Exemption claimed in respect of sales of LPG by ONGC to various OMCs, from payment of sales under the Act, 1969 as per Entry No.70 or in the alternative Entry No.173 [12.6] Now so far as the exemption from payment of Sales Tax under the Act, 1969 in respect of the sales of LPG (domestic) by the ONGC is concerned, the relevant entry under exemption notifications issued under section 49(2) of the Act, 1969 is Entry No.70 and 173 which is reproduced hereinabove. For the reasons recorded hereinabove, while considering Entry No.33 in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phrase used is "for domestic use" and for post 02.10.2008, phrase and wording used are "for domestic use by the consumers of the State". On fair interpretation of Entry No.69 for different periods we are of the opinion that so far as pre 02.10.2008 in respect of sales of LPG by ONGC to various OMCs for domestic use is concerned, the ONGC shall be entitled to exemption from payment of whole of the tax under the VAT Act, 2003, as the words and phrase used are "for domestic use". Therefore, so long as the sale of LPG in bulk by ONGC to various OMCs is for domestic use i.e. for intended domestic use, the ONGC shall be entitled to the exemption from payment of the whole of the tax under the VAT Act, 2003, pre 02.10.2008 as per Entry No.69 which was prevailing at the relevant time. However, so far as amended Entry No.69 post 03.10.2008 the phrase and wordings used are altogether different and distinct. The phrase in the amended Entry No.69 for post 03.10.2008 are "sales of LPG for domestic use by the consumers of the State". Therefore, the sale of LPG in bulk by the ONGC to various OMCs cannot be said to be sales of LPG for domestic use by the consumers of the State. The various OMCs ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of law is held against the assessee and in favour of the State. [13.0] Now, so far as the levy of penalty under Section 45(2)(c) of the Act, 1969 is concerned, Section 45(2)(c) and 45(6) read as under: "45. Imposition of penalty in certain cases and bar to prosecution. (1) ... (2) if it appears to the Commissioner that such dealer. (c) has concealed the particulars of any transaction or deliberately furnished inaccurate particulars of any transaction liable to tax, the commissioner may impose upon the dealer by way of penalty, in addition to any tax, a sum not exceeding one and onehalf times the amount of the tax. (3) ... (4) ... (5) ... (6) Where under sub-section (5), a dealer is deemed to have failed to pay the tax to the extent mentioned in the said sub-section, there shall be levied on such dealer a penalty not exceeding one and onehalf times the difference referred to in sub-section (5)." As per sub-section (2) of section 45 of the Act, 1969, the penalty is leviable if it appears to the Commissioner, a dealer has concealed the particulars of any transaction or deliberately furnished inaccurate particulars of any transaction liable to tax. In the present case, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 34 of the VAT Act read with section 9(2a) of the Central Sales Tax Act, 1956, the ONGC - dealer is liable to pay the penalty on the difference of the amount of tax liability in eventuality of mentioned sub-section (12) of section 34 of the VAT Act. Under the circumstances, said substantial question of law is also held against the dealer and in favour of the Revenue. [14.0] In view of the above and for the reasons stated above, Tax Appeals preferred by the State and the Special Civil Application No.5182/2014 are partly allowed to the aforesaid extent. The substantial question of law No.1 whether the Tribunal was right in law in holding that processing and transportation charges not received by the respondent from Gas Authority of India Limited (GAIL) cannot be included as part of the sale price of the gas sold by the respondent to GAIL is held in favour of the Revenue and against the assessee. The other substantial questions of law are held in favour of the Revenue with respect to exemption claimed under Entry No.53 in respect of sale by ONGC to various OMCs; with respect to interpretation of Entry No.69 in respect of the sale of LPG and the exemption claimed by ONGC in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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