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2016 (4) TMI 94 - GUJARAT HIGH COURT

2016 (4) TMI 94 - GUJARAT HIGH COURT - TMI - Inclusion of processing and transportation charges received by ONGC as part of the sale price of LPG sold by ONGC to GAIL - ONGC had not raised the said charges against GAIL or the ONGC had not paid any charges to the ONGC - Before the delivery of goods, the ONGC had charged and the ONGC is in receipt of the said charges - Held that:- merely because the ONGC had not received the transportation and processing charges from GAIL but had received from Joi .....

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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.

Levy of tax - Entitlement for exemption notifications issued under Section 49(2) of the Act, 1969 as well as under section 5(2) of the VAT Act, 2003 - Sale of kerosene and LPG by the ONGC to various OMCs and inter-State sale of LPG in bulk sold outside the State - The relevant entries in respect of .....

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of LPG (domestic) no tax exceeding the rate of 14% can be levied - Held that:- the entries in question of the Schedule to the respective exemption notifications issued under the Act, 1969 and VAT Act, 2003 are required to be interpreted. Considering the relevant entries and the wordings used in the relevant entries more particularly Entry Nos.33, 70 and 173 of the Act, 1969 and VAT Act, 2003, as the case may be, and considering the law laid down by the Hon'ble Supreme Court in catena of decision .....

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ion from payment of whole of the sales tax. Therefore, in respect of sale of kerosene by the ONGC to various OMCs for domestic use for public distribution system, the ONGC shall be entitled to exemption from payment of sales tax under the Act, 1969 as per Entry No.33 and not liable to pay tax.

Now for the exemption claimed by the ONGC in respect of the sale of kerosene by ONGC to various OMCs from payment of VAT under the VAT Act, 2003 claimed as per entry No.53, there is a vast diff .....

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l not be entitled to the exemption from payment of VAT Act, 2003 and liable to pay tax.

Now, for 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, the ONGC shall be entitled to the exemption from payment of sales tax as per Entry No.70 read with Entry No.173 to the extent to which the amount of sale tax exceeds 14 ps in a rupee.

For exemption claimed by ONGC .....

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ic use by the consumers of the State which is not the present case, therefore, the ONGC shall not be entitled to the exemption from payment of tax under the VAT Act, 2003.

Even the ONGC is not entitled to exemption from tax on the inter-State sales of LPG, effected by the ONGC from the Stat of Gujarat to other States as the exemption is available on inter-State sales of LPG for domestic use by the consumers of the State only and liable to pay VAT and is not exempt from more of the tax .....

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nnot be said that the ONGC has concealed the particulars of any transaction or deliberately furnished inaccurate particulars of any transaction liable to tax. Under the circumstances, there is no justification in levying the penalty under sub-section (2)(c) of section 45 of the Act, 1969.

Levy of penalty - Section 45(6) of the Act, 1969 - Held that:- the penalty leviable under the said provision is as such a statutory penalty and as such there is no discretion vested in the Commission .....

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essed or reassessed as aforesaid and the amount paid. Once considering sub-section (5) of section 45 of the Act, 1969, a dealer is deemed to have failed to pay the tax to the extent mentioned in sub-section (5), that shall be levied on such a dealer not exceeding a penalty times the difference referred to in sub-section (5). Under the circumstances, to the aforesaid extent and on the difference of tax, as per sub-section (5) of section 45, the respondent ONGC - dealer is liable to pay the pena .....

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l No. 1358 of 2014, Tax Appeal No. 1359 of 2014, Tax Appeal No. 1360 of 2014, Tax Appeal No. 382 of 2014, Tax Appeal No. 390 of 2014, Tax Appeal No. 433 of 2014, Tax Appeal No. 437 of 2014, Tax Appeal No. 468 of 2014, Tax Appeal No. 472 of 2014, Special Civil Application No. 5182 of 2014 For the Appellant : Mr Kamal Trived, Adv. General With Ms Sangita Vishen, Asstt. Government Pleader For the Respondent : Mr N Venkatraman, Sr. Adv. With Mr Nitin K Mehta, Adv. JUDGMENT ( Per : Honourable Mr. Jus .....

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010 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 .....

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Tribunal in Second Appeal No.427/2013 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.1359/2014. Tax Appeal No.1360/2014 [2.4] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 25.03.2014 passed by the learned Tribunal in Second Appeal No.448/2013 in respect of the period 2008-09, the original respondent - State of Gujarat through Commissioner of Commercial Tax .....

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d 19.09.2013 passed by the learned Tribunal in Second Appeal No.394/2011 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.390/2014. Tax Appeal No.433/2014 [2.7] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.104/2010 in respect of the period 2004-05, the original respondent - State of Gujarat throug .....

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impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.328/2012 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.435/2014. Tax Appeal No.436/2014 [2.10] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.396/2012 in respect of the period 2006-07, the original res .....

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ggrieved 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 t .....

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peal No.471/2014 [2.15] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.361/2010 in respect of the period 200506, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.471/2014. Tax Appeal No.472/2014 [2.16] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Ap .....

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orporation (hereinafter referred to as "ONGC") and has held that the sell of kerosene by the respondent - ONGC to Oil Marketing Companies (hereinafter referred to as "OMCs") is also exempt from whole of the tax under Entry No.173 of the Notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "Act, 1969"), the petitioner herein - original respondent - State of Gujarat through the Commissioner of Commercial Tax has prefer .....

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AIL? 2) Whether, in the facts and circumstances of the case, the Tribunal was right in law 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 .....

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ction 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 the respondent is not liable to pay any penalty under section 45(2)(c) and section 45(6) of the Gujarat Sales Act, 1969? 5) Whether, in the facts and circumstances of the case, the Tribunal was rig .....

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ue Added Tax Act, 2003, read with Section 8(1) of CST Act? 7) Whether, in the facts and circumstances of the case, the Tribunal was right in law in holding 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 date .....

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lation error in charging interest as contended." [3.1] At the outset it is required to be noted that in respective appeals the dispute is with respect to erstwhile Entry Nos.33, 70 and 173 of the Schedule to the Exemption Notification issued under section 49(2) of the Act, 1969 as well as the relevant Entry Nos.53 and 69 of the Schedule to the Exemption Notification No.(GHN35) VAT-2006-S. 5(2)(a)TH, dated 31.3.2006, issued under section 5(2) of the Gujarat Value Added Tax Act, 2003 (hereina .....

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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.; .....

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icate 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) Purchasing specified company shall maintain separate accounts of purchases and sales of such goods; (4) This exemption shall not be available to either purchasing specified company or the selling specified company, (a) which is holding a Certificate of Eligibility .....

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912007 to 1042011 (GHN1) 1912007 Goods declared as of special importance in section 14 of the Central Sales Tax Act, 1956. To the extent to which amount of tax exceeds four paise in the rupee. Nil 69 1162008 to 2102008 (GHN32) 1062008 Sales of Liquified Petroleum Gas (LPG) for domestic use. EII87 Whole of tax Nil 69 3102008 onwards (GHN45) 3102008 Sales of Liquified Petroleum Gas (LPG) for domestic use by the consumers of the state. EII87 Whole of tax Nil [4.0] Facts leading to the present tax a .....

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g, production and selling facilities on behalf of the Joint Venture. It appears that the Natural Gas in sour form obtained through exploration activity is taken from Panna Mukta Gas Field to ONGC, Hazira, through its own pipeline network connected to various 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 .....

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MCs 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 and fair price shop owners, whereas the remaining .....

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the amount of sales tax exceeds 14 paise in the rupee. As per Entry No.173 on sales of petroleum products including LPG, manufactured or purchased or imported from across the customs frontiers by any of the specified companies to any other specified company the whole of the tax was exempted. As per explanation, for the purpose of the said Entry, "specified company" shall mean, (i) Indian Oil Corporation Ltd.; (ii) Bharat Petroleum Corporation Ltd.; (iii) Hindustan Petroleum Corporatio .....

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e appended thereto, to the class of sales or purchases specified in column (2) of the said Schedule. That as per Entry No.53 vide Notification dated 02.09.2006 and from 02.09.2006 onwards on sale of kerosene sold through a public distribution system, there was exemption from payment of whole of the tax. As per Entry No.53 as per the Notification dated 19.01.2007 for the period between 19.01.2007 to 10.04.2011, on sale of goods declared as of special importance in section 14 of the Central Sales .....

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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 .....

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ax exceeding 14 paise in the rupee can be levied on the Liquefied Petroleum Gas sold in bulk to OMCs. Similarly the sale of kerosene to OMCs falls within the meaning of the phrase "Kerosene sold through the public distribution system" and therefore exempt from the whole of tax under Entry 53 of the notification issued under Section 5(2) of the Gujarat Value Added Tax Act, 2003. It was also the case on behalf of the ONGC that the inter-State sales of LPG effected by the appellant from t .....

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der section 9(2a) of the Central Sales Tax Act and under section 34(12) of the VAT Act. That by impugned respective judgments, the learned Tribunal has held that (i) 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 Guj .....

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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; (iii) that the sale of kerosene by the opponent herein to Oil Marketing Companies falls within the meaning of the phrase "Kerosene sold through the public distribution system" and is therefore exempt from the whole of tax under Entry 53 of the notification issued under Section 5(2) of the Gujarat Value Added Tax Ac .....

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ders 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 respond .....

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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 t .....

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d section 45(6) of the Gujarat Sales Act, 1969? 5) Whether, in the facts and circumstances of the case, the Tribunal was right in law in holding that the levy of interest on provisional refund is without authority of law? 6) Whether, in the facts and circumstances of the case, the Tribunal was right in law in holding that the sale of kerosene by the opponent herein to Oil Marketing Companies falls within the meaning of the phrase "Kerosene sold through the public distribution system" a .....

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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. 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 dire .....

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ral 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 Tribunal had proceeded entirely on the basis of the Assessment Orders passed by the Deputy Commissioner of Commercial Tax as well as .....

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earned Tribunal, all the documents submitted on behalf of the ONGC can be thrashed out and discussed. [6.2] Shri Kamal Trivedi, learned Advocate General appearing on behalf of the State has vehemently submitted that in the facts and circumstances of the case, the learned Tribunal has materially erred in holding that processing and transportation charges not received by the ONGC from Gas Authority of India Limited (GAIL) cannot be included as part of 'sale price' of the gas sold by the ON .....

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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 part of or included in the 'sale price& .....

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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 .....

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estion which is posed for consideration of this Court is the interpretation of the relevant entries more particularly Entry 33 and the phrase "sold for public distribution system" and/or "Sold through the public distribution system", so far as the kerosene is concerned and the "sale of LPG for domestic use". [6.4] It is vehemently submitted by Shri K.B. Trivedi, learned Advocate General appearing on behalf of the State that ONGC when it sells kerosene to OMCs, it ca .....

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Central or State Government. It is submitted that clause 2(e) of the Order, 1993 lays down an important characteristic of kerosene which is required to be made 'distinguishable' from other kerosene to be sold or distributed under parallel marketing system, as per clause 8 of the Order, 1993. It is submitted that in the present case, kerosene which is sold by ONGC to OMCs is neither kerosene with the specified characteristic nor is in a distinguishable form. It is submitted that it is the .....

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, which restrictions are very much applicable to the entities which are part of Public Distribution System. It is submitted that in the present case when ONGC sells kerosene to OMCs, there is no declared price in vogue, which is clearly established by virtue of the decision of this Court in respect of the very ONGC itself, reported in (2015) 79 VST 64. It is submitted that as held by this Court in the aforesaid decision when ONGC raises invoices at the time of actual supply of petroleum products .....

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k 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 ca .....

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Distribution System, which is the condition precedent for claiming the exemption either under Entry 33 (Gujarat Sales Tax Act) or Entry 53 (Gujarat Value Added Tax Act, 2003). [6.7] It is vehemently submitted by Shri Trivedi, learned Advocate General appearing on behalf of the State that while interpreting the relevant entries / exemption notifications and interpreting taxing statute, the Court must look squarely at the words of the statute and interpret them. It is submitted that as held by the .....

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f the State has relied upon the following decisions of the Hon'ble Supreme Court with respect to principles / law laid down by the Hon'ble Supreme Court while interpreting the exemption notifications in a taxing statute and/or the parameters to be applied by the Court while interpreting a taxing statute. 1. Commissioner of Sales Tax vs. Modi Sugar Mill Ltd. AIR 1961 SC 1041 (Para 11) 2. Novopan India Ltd. vs. CCE, Hyderabad (1994) Suppl. 3 SCC 606 (Para 16) 3. Saraswati Sugar Mills Ltd. .....

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d 69 of the 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 .....

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39; 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 applicable exemption notifications during the relevant period. It is submitted that there are several transactions before the last dealer of kerosene / LPG sells the same to the consumers at the declared price. [6.9] It is further submitted that the words 'through the Public Distribut .....

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ord 'through' as used in section 9 of the Income Tax Act, 1961, wherein the revenue sought to tax the capital gains arising from the sale of share capital of one CGP Investments (Holdings) Ltd., a company which was a tax resident in the Cayman Islands on the basis that the said foreign company holds the underlying Indian assets in Hutchison Essar Ltd and that therefore the word 'through' in section 9 should mean 'in consequence' so as to enlarge the meaning thereof to inc .....

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thereof to various dealers. Similarly, ONGC is not entitled to the benefit of Entry 70 in respect of LPG inasmuch as, sale of LPG in bulk by ONGC to OMCs is for the purpose of resale thereof and not for domestic purpose. It is submitted that similarly, the ONGC is also not entitled to the benefit of the aforesaid Entry 53 in respect of Kerosene sold by it in bulk to OMCs for the purpose of resale thereof, since the said sale in favour of OMCs cannot, by any stretch of imagination, be said to be .....

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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 altern .....

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tification issued under section 5(2) of VAT Act is concerned, it is submitted that such claim of ONGC is devoid of any substance inasmuch as ONGC's intraState sale of LPG in bulk in favour of OMCs and not for domestic use by the consumers of the State and hence, the same is not exempt from tax liability and consequently its inter-State sale of LPG is also not exempt. [6.12] It is submitted that in view of the whole basis of the premise of the aforesaid ONGC's contention being fallacious, .....

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ion (2A) of section 8 of the Central Sales Tax Act, which had provided that if goods (oil cake) in the said case are generally exempt (i.e. unconditionally or without any condition), its inter-State sales of oil cakes would also be exempt from tax. It is submitted that in the present case, firstly LPG was not generally exempt, since what was exempt was the sale of LPG 'for domestic use' and that too 'by consumers of the State' and secondly, sub-section (2A) of section 8 is now no .....

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and transportation charges received by ONGC as part of the sale price of LPG sold by ONGC to GAIL is concerned, Shri Trivedi, learned Advocate General has heavily relied upon the definition of 'sale' 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 .....

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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 the learned Tribunal has materially erred in relying upon the decision of the Tribunal in the c .....

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ed in section 47 with effect from 1.11.1991. It is submitted that in the aforesaid case of M/s. Rakesh Engineering Works (Supra), the learned Tribunal relied upon the decision of the Hon'ble Supreme Court in the case of J.K. Synthetics Ltd. vs. Commercial Taxes Officer reported in 1994 (Vol. 94) STC 422, wherein the Hon'ble Supreme Court specifically observed that section 11B before its amendment nowhere provided for payment of interest on the unpaid tax amount as found on final assessme .....

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thority for levy of interest flows from the above provisions of the GST Act and the GVAT Act and that therefore, the same cannot be considered as without authority of law, as held by the learned Tribunal. [6.17] It is further submitted by Shri Trivedi, learned Advocate General appearing on behalf of the State that that even the learned Tribunal has materially erred in deleting the penalty under section 45(2) (c) of section 45(6) of the GST Act and under section 38(2) of the GVAT Act. It is submi .....

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he 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 .....

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alf of the ONGC. [7.1] Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC has submitted that while considering 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 GAIL, the following facts are requir .....

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ure. c. As a part of contractual obligation the JV has to both transport and process gas and then redeliver to GAIL. d. ONGC in its individual capacity as a separate service provider has undertaken both to transport and process the gas for the JV, later to be redelivered to GAIL at Hazira. This role is different than its role as a partner of the JV under which the gas is sold. Thus he is in different roles, (a) as a service provider (for which service tax is paid) and (b) as a seller of gas (for .....

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nce Act, 1994 over and above the service consideration. The consideration is paid wholly by the Joint Venture partners. g. It is important to submit that GAIL is not a party, even remotely to any of these arrangement and activities. Neither the Joint Venture nor the respondent had charged or billed GAIL for these services. These charges had already formed part of the sale priced fixed and billed by the Joint Venture partners as per the Production Sharing Contract terms and billed on GAIL by Join .....

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mounts 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 ma .....

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activity rendered by the respondent to the JV partners in which GAIL had no role to play. b. This is an independent service activity and an independent consideration has been charged including service tax as and when it became a notified taxable service under the Finance Act, 1994. c. This service consideration even remotely has no nexus with the sale price or the consideration paid by GAIL for the purchase of gas under the Production Sharing Contract from the JV partners. d. This payment is ne .....

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ere is no additional consideration paid or payable by Buyer / GAIL or by any other person on its behalf to ONGC for providing these services of transportation and processing of gas. e. Finally this issue has been raised by the revenue only for two Assessment Years namely 2004-05 and 2005-06. This issue has not been raised for the subsequent years even though the transactions have remained the same. Thus the appellant has accepted the claim of the respondent principally." Making above submis .....

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alf of 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 .....

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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 kerosene meant for public distribution is governed by the Kerosene Control Order 1993 and the definitions therein will have a direct bearing. [7.4] It is further submitted that pursuant to the notification dated 16.08.2005 issued by the Ministry of Petroleum and Natural Gas, ONGC is exempt .....

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ibution system is as under: FLOW CHART OF SYSTEM OF PDS KEROSENE 1. Ministry of Petroleum and Natural Gas allocates kerosene for PDS on quarterly basis. 2. Petroleum Planning and Analysis Cell of Ministry of Petroleum and Natural Gas makes Oil Company wise and State wise allocation. 3. Director of Food and Civil Supplies of Government of Gujarat intimates Indian Oil Corporation which is a State Level Coordinator for PDS about district wise allocation of kerosene. 4. Indian Oil Corporation inform .....

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ndents placed by Government Oil Companies. 9. Goods Supplied to Government Oil Companies. 10. Government Oil Companies submit actual upliftment against approved allocation to Petroleum Planning and Analysis Cell of Ministry of Petroleum and Natural Gas. 11. Government Oil Companies submit claims for subsidy. 12. Petroleum Planning and Analysis Cell of Ministry of Petroleum and Natural Gas submits to the Ministry for budgetary appropriation of subsidy. 13. Government Oil Companies gives end use c .....

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oordinators 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 is .....

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tic (industrial) are different from each other. It is further submitted that the end use certificate issued by the various oil companies to the department confirming the fact that LPG is sold for domestic use only. Making above submissions, it is vehemently submitted that while selling the kerosene to various oil companies, the ONGC is part of the Public Distribution System and that the LPG sold in bulk is for 'domestic use' only and therefore, the ONGC is entitled to the exemption. [7.6 .....

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of the society and direct that the policy be framed in such a way so as to secure the catalogued benefits by Article 39(a) to (f) of the Constitution of India. [7.7] It is submitted that Article 39 obligates the State to direct its policy towards securing "that the ownership and control of the material resources of the community are so distributed as best to subserve the common good". It is submitted that the said Article deals with two vital aspect in producing an Egalitarian Society .....

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ire country have a stake in natural gas and its benefit has to be shared by the whole country". It is submitted that while dealing with the Public Trust Doctrine, it is held that resources being a gift of nature, they should 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. Th .....

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ssociation 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 State Policy especially relating to distribution and consumption of mat .....

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e of ONGC Ltd. vs. State of Gujarat reported in 2015(79) VST 64 (Guj), in support of his submission that ONGC is an instrument to implement the policy of the Government. Shri Venkatraman, learned Senior Advocate appearing on behalf of the respondent - ONGC has submitted that the following factors would lead to the conclusion that the ONGC while selling the kerosene and LPG is entitled to the exemption under the respective exemption Entries. (1) Both kerosene and LPG are precious natural resource .....

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upplied the entire lot exclusively for public distribution. In the case of LPG, it has been supplied both for domestic and for nondomestic but on identified allocable basis. Since the assessable values are different, even at the threshold, before the goods are dispatched by the respondent, the quantities are identified for domestic and nondomestic uses. (6) Both in the case of kerosene and LPG, oil marketing companies have produced end use certificates to the effect that the products are supplie .....

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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 .....

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at LPG removed by the Gas Extraction Plant and Petroleum Refineries in bulk form to the bottling plants, it clarified that for the purpose of declaring the assessable value for excise duty, the selling prices as applicable for the intended sale, should alone reflect, on which excise duty has to be discharged, meaning thereby that the supplies for domestic and nondomestic having two different prices should suffer the respective duties. (13) In an identical situation, the Government of Karnataka, .....

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would include the supply made by refineries / fractionators to OMCs like the respondent (fractionators) and similarly in the case of LPG, the supply chain of LPG for domestic use, starts from the procurement of bulk LPG through imports or from refineries / fractionators / OMCs to the Bottling Plant and thereafter, sale of LPG for domestic use in Cylinders to the Consumers. (15) Vide Para 4 of the same communication, it clarified that PDS Kerosene includes Kerosene supplied by Refiners like the r .....

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ed to the exemption under the Gujarat Sales Tax Act as well as under the Gujarat Value Added Tax Act. [7.10] Shri Venkatraman, learned Senior Advocate appearing on behalf of the respondent - ONGC has vehemently submitted that the basic three Rules of interpretation of exemption notifications are (a) plain or literal construction; (b) purposive or liberal construction and (c) a combination of literal construction at the threshold to find out basic eligibility followed by liberal construction in e .....

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t; 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 un .....

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n and Courts have consistently interpreted the expression "for use" as 'intended for use'. For the aforesaid, Shri Venkatraman, learned Senior Advocate has heavily relied upon the decision of the Hon'ble Supreme Court in the case of State of Haryana vs. Dalmia Dadri Cement Limited reported in 1987 Supp. 679; BPL Display Devices Ltd. vs. Commissioner of Central Excise reported in (2005)10 SCC 275 and the decision of the Division Bench of the Madhya Pradesh High Court in the .....

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stribution System" instead of "for Public Distribution System". It is submitted that difference between "for" and "through" may not really matter and for any reason, if the expression "through" is sought to be interpreted as the supplying entities should form part of the Public Distribution System, even then, that test would get satisfied. It is submitted that for any reason, the expression 'through' would demand the ONGC to be part of the sup .....

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is alternatively submitted that if for any reason there is any doubt or ambiguity and the plain or literal construction fail, the ONGC would pass the alternative test i.e. the purposive or 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 t .....

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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 run counter to the State Government's intention to extend the benefit to the poor Fishermen. .....

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ly construed and the assessee should bring himself squarely within the ambit of the notification. Courts cannot lose sight of the intention of the Government in issuing such notifications. It is not a case of liberal construction of such notification but purposive construction of such notification when a benefit is conferred, keeping in mind the historical background with a social objective, effect must be given to such notification to achieve such object. The courts cannot play such constructio .....

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dvocate appearing on behalf of the ONGC has also relied upon the decision of the Madras High Court in the case of R. Ramanujam Chettiar vs. The Commissioner and Secretary to the Govt. of Tamil Nadu reported in AIR 1982 (Mad) 261. It is submitted that while dealing with Sugar as an essential commodity and how State has to fulfill its constitutional obligation under the Directive Principles of State Policy, in the said decision it is held that "when distributing levy sugar, it is obligatory o .....

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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 th .....

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behalf of the ONGC has submitted that even on literal and liberal interpretation of respective exemption entries, the ONGC shall be entitled to the exemption on sale of Kerosene and LPG to OMCs. It is submitted that in the case of Collector of Central Excise vs. Parley Exports Pvt. Ltd. reported in (1989)1 SCC 345, the Hon'ble Supreme Court has held that "when a notification is issued in accordance with the powers conferred by the statute, it has statutory force and validity and theref .....

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rt has emphasized the need to derive the intent from a contractual scheme. Relying upon the decision of the Karnataka High Court in the case of Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner of Commercial Taxes it is submitted that as held by the Karnataka High Court "an interpretation which makes the exemption illusory and has the effect of giving by one hand and taking away by the other should be avoided. Where the words of exemption are not defined, the proper course .....

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er Gujarat Sales Tax Act and Gujarat VAT Act would qualify for exemption. [7.13] Now, so far as Central Sales Tax on inter-State CST Sales of kerosene and LPG and whether on inter-State sales of kerosene and LPG there shall be exemption or not, it is vehemently submitted by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC that it is the case of the revenue that the inter-State CST sales of kerosene and LPG would not qualify for exemptions, or same rate of tax as is appli .....

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T 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 .....

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. It is also submitted that sub-section (1A) was introduced to clarify that even if no tax is leviable under the sales tax law of appropriate state if the sales had taken place inside that state, notwithstanding this, the dealer shall be liable under this Act for inter-State trade and commerce. It is submitted that this amendment of introducing 6(1A) was brought to counter the argument of the assesse that since in the earlier sales tax regime only the sale at the first point was taxable and subs .....

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particular state law, the same would still be liable for tax under CST Act and thus, this sub-section does not cover a situation where tax is leviable or chargeable on a sale under state laws, but is exempted or has NIL rate of duty. [7.15] Shri Venkatraman, learned Senior Advocate has heavily relied upon the decision of the Hon'ble Supreme Court in the case of Union of India v. Azadi Bachao Andolan & Anr. reported in (2004)10 SCC 1; Kaniska Trading v. Union of India reported in (1995)1 .....

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he course of inter-State trade and commerce. It is further submitted that section 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 th .....

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ection 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 submitted that thus, section 7(1) states that its provision is subject to the provisions of GVAT Act and Section 5 deals with exemptions. It is also submitted that section 5(2)(a) empowers the State Gove .....

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mption notification, if any. Shri Venkatraman, learned Senior Advocate has further submitted that in the present case the rate of tax on LPG after giving effect to the exemption Rate of tax on LPG under the GVAT Act is as under: 1. LPG is not covered under any specific entry in Schedule I & II. Therefore, would be covered under entry 87 of Schedule-II liable to 15% tax [including 2.5% additional tax] 2. LPG for Domestic use is declared goods under section 14 of the CST Act, 1956. Therefore, .....

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008. 4. Thereafter on 03.10.2008 entry 69 came t0 be amended. The words "for use by the consumers of the State" came to be added in the entry. But after addition of these words, the rate of tax on LPG for Domestic use is not altered. It has remained Nil. Therefore, the amendment in entry 69 has no effect over applicable rate of tax on local sale of LPG for domestic use. It has remained Nil. Shri Venkatraman, learned Senior Advocate has further submitted that pursuant to the exemption t .....

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x 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 t .....

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of provisions of section 8(1) of the CST Act, in case where there is no levy of tax on local sales of any goods, the central sales tax would not be levied on inter-State sales, of similar goods, and the rate of tax on local sale and inter-State sale will be the equal i.e. if the local rate of tax on sale of any goods is nil, the rate of Central sales tax on inter-State sale of similar goods would also be nil. If the rate of tax on local sale is 1%, the rate of central sales tax on inter-State s .....

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'nil' conditions attached thereto. The use of the expression 'by the consumer of the state', itself is not a condition as sought to be argued by the appellant. It is further submitted that the state or the authorities under the state do not have the power to make any order in respect of inter-state sales and therefore, the use or omission of this expression cannot empower the state make the notification applicable to territories beyond the state. It is submitted that hence, even .....

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able to inter-State sales and accordingly the exemption under respective entries of the State exemption notification would in case of kerosene and LPG would also be available to the ONGC for its inter-State sale. Making above submissions, it is requested to dismiss the present Tax Appeals and 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 appeari .....

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ing 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 Public Di .....

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e tax invoices raised by ONGC to OMC by the ONGC in support of their case that the ONGC is part of Public Distribution System, it is vehemently submitted by Shri Trivedi, learned Advocate General that though the said invoices referred to supply by SKO (PDS), the same was not at the declared price and that kerosene sold thereunder was not all the specified type of kerosene as per Clause 2(e) read with Clause 8 of the Order, 1993. It is submitted that as such the basic price of kerosene shown in t .....

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, it is submitted by Shri Trivedi, learned Advocate General that merely because the ONGC is exempt from the payment of excise duty with reference to LPG for supply to domestic consumers, the same cannot ipso facto exempt ONGC from the payment of State Sales Tax. [8.3] Now, so far as the reliance placed upon by the learned Senior Advocate appearing on behalf of the ONGC on the communication dated 06.04.1999 by Government of India to OMCs is concerned, it is submitted by Shri Trivedi, learned Advo .....

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ution 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 .....

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rosene sold by MRPL to OMCs for distribution through Public Distribution System and not at 12.5%. It is submitted that if one or some of the States in the country have adopted a particular stand as mentioned above, the same cannot and should not mean that other States are obliged to follow the same. It is submitted that so far as sale of Kerosene and LPG by OMCs in favour of distributors as well as further sale thereof by such distributors and fair price shop owners in favour of the consumers in .....

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that on the basis of the said certificates one cannot conclude that the very quantity of Kerosene and LPG sold by ONGC to OMCs in bulk, had been ultimately used for Public Distribution System and domestic purpose only. It is submitted that in fact, at the end of OMCs, there is no segregation or earmarking of Kerosene and LPG, having been received in bulk from ONGC, on one hand and from other sources on the other. It is submitted that even otherwise what is required to be considered is the inter .....

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mandates to secure the benefit flowing therefrom to various sections of the society inasmuch as Article 39(b) obligates the State to direct its policies towards securing 'that the ownership and control of material resources of the community are so distributed as best to subserve common good' and that resources being a gift of nature, they should be made freely available to everyone irrespective of status in life is concerned, Shri Trivedi, learned Advocate General has vehemently submitt .....

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t 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, i .....

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net profit earned by the ONGC is ₹ 22,095 Crores. It is submitted that in view of the above, even if the ONGC has to bear the burden of Sales Tax liability, there would not arise any significant financial burden on the part of the ONGC and, therefore, ONGC cannot press in service the said public trust doctrine for contending that it is because of the said doctrine that it is not liable to pay Sales Tax with reference to its sale of kerosene and OPG to OMCs. It is submitted that on the con .....

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State's exchequer by levying and collecting Sales Tax for the purpose of utilizing the same for the benefit of the public at large. It is submitted that thus, the purpose of collecting sales tax under the State legislations and the purpose of fixing the maximum price beyond which essential commodities cannot be sold under the Essential Commodities Act, 1955, is different and none of the said two can be downplayed by bringing in picture, the aforesaid doctrine. It is submitted that in fact, .....

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istance in support of the case that while selling the Kerosene and LPG for domestic use to OMCs, it can be said to be 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 st .....

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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 sold by the above named assessee to Punjab State Electricity Board was not used in activity directly connected with generation or distribution of electrical energy, but was used in constru .....

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ailability of exemption, so long as goods supplied were in reality used by Punjab State Electricity Board. It is submitted that therefore, the aforesaid judgment cannot be applied to the facts of the present case where exemption is not specific. Shri Trivedi, learned Advocate General has submitted that in other words, exemption notification does not say that it seeks to exempt goods sold by ONGC to OMCs like in the case referred to above. It is submitted that in the aforesaid case, exemption was .....

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03. [8.9] Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of BPL Display Devices 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 an exemption was provided in respect of various parts imported 'for use' in the manufacture of picture tubes. However, importer manufacturer was denied exemption on the ground that a small perce .....

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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 so .....

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ase of Prakash Metal Craft Industries (Supra) relied upon by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC is concerned, Shri Trivedi, learned Advocate General has submitted that the said judgment shall not apply to the facts of the present case inasmuch as admittedly, all the tractor trailers manufactured and sold by Prakash Metal Craft Industries were used for agricultural purpose, regardless of the fact that they were directly or indirectly sold to the agriculturis .....

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PG received from ONGC on the one hand and that received from other sources, on the other. It is submitted that merely because the Government of India takes a decision on notional basis that equal quantum of Kerosene and LPG in bulk sold by ONGC to OMCs may be ultimately utilized for Public Distribution System and domestic purpose, ONGC cannot claim the benefit of exemption from Sales Tax with reference to its sale of Kerosene and LPG, both in bulk, to OMCs on the basis of the aforesaid judgment. .....

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ubmitted that the aforesaid judgment will also not come to the rescue of ONGC in any manner inasmuch as it simply suggests that the Exemption Notification is to be interpreted strictly to determine whether the subject is covered thereby and thereafter, full play should be given to it. It is submitted that in the present 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 .....

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erned, 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 O .....

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exemption on the ground that manufacturer was entitled to avail of exemption till midnight of 31.10.1999, but on and from 1.11.1999, the said drug can be sold only at a price specified in the order. However, the Hon'ble Supreme Court held that what has been exempted is a drug which has been manufactured by a Company till midnight of 31.10.1999, for which sometime would be necessary to market the same and that therefore, pragmatic and practical view is required to be taken while keeping in m .....

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ocate General has submitted that in the said case State of Karnataka had provided exemption from sales tax in regard to sale of High Speed Diesel Oil to Fishermen. However, the State levied Cess to be recovered from the Fishermen, despite there being exemption from sales tax in respect of high speed diesel oil. It is submitted that the High Court took a view that Cess payable on such sales would also stand exempted in view of there being exemption from the payment of sales tax since collection o .....

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x 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 t .....

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ugh never exempted in construction the transaction of the assessment under the statutory provisions. It is further submitted that the aforesaid view of the Hon'ble Supreme Court shall not be applied in the present case, more particularly when words used in the aforesaid Entries of the exemption notification in question is very simple and not capable of being producing any absurd and unjust result. It is further submitted that in view of the majority judgment of the Hon'ble Supreme Court .....

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Senior Advocate appearing on behalf of the ONGC is concerned, Shri Trivedi, learned Advocate General has submitted that the observations made by the Hon'ble Supreme Court in para 16 of its judgment in the above referred case cannot and should not be allowed to be treated as a ratio decidendi, more particularly when the facts obtaining in the said case are altogether different from the facts of the present case. It is submitted that in the aforesaid case, the respondent ONGC was charged with .....

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much available to the legally imported rough diamonds and in backdrop of the said facts, the Hon'ble Supreme Court considered the question as to whether the goods that were smuggled into the country can be read within the meaning of the expression 'imported goods' for the purpose of benefit of the Exemption Notification and as to whether the decision of the Tribunal allowing the benefit of Exemption Notification referred to above in favour of the Respondent Company was legal, more pa .....

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herefore, 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 exemp .....

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ic use by the consumers of the State is exempt from whole of tax as per Entry 69 of the Schedule for the exemption notification issued under section 5(2) of GVAT Act is concerned, it is submitted by Shri Trivedi, learned Advocate General that the above referred claim of ONGC is devoid of any substance inasmuch as ONGC's intraState sale of LPG in bulk is in favour of OMCs and not for domestic use by the consumers of the State and hence, the same is not exempt from tax liability and consequent .....

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id case, the Bombay High Court was dealing with the erstwhile provisions of sub-section (2A) of section 8 of the Central Sales Tax Act, which had provided that if goods (oil cake) in the said case are generally exempt (i.e. unconditionally or without any condition), its Inter-State sales of oil cakes would also be exempt from tax. It is submitted that in the instant case, firstly LPG was not generally exempt, since what was exempt was the sale of LPG 'for domestic use' and that too ' .....

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t from tax liability under the applicable State Sales Tax law. Making above submissions it is requested to allow the 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 .....

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ribution 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 allocations are first made to the ONGC with an obligation to sell the same to the OMCs who in turn sell it to the retailer and they in turn to the actual consumers through Fair .....

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for public consumption and therefore, would form part of Public Distribution System. [9.2] Now, so far as the revenue's submission relying upon para 8 of the Order, 1993 that the kerosene supplied through Public Distribution System shall be made distinguishable from the kerosene to be imported, sold or distributed under the parallel marketing system by use of suitable measures to be adopted by the Government Oil Companies as and when necessary is concerned, it is submitted that it is the du .....

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, it is submitted by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC that the said judgment recommends plain construction when the language is clear and unambiguous. It is submitted that in the present case the definition of Public Distribution System is very clear and unambiguous and it nowhere exclude sale of kerosene by ONGC to OMCs from the purview of Public Distribution System. It is submitted that therefore as such ratio of the said judgment supports the ONGC' .....

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spondents 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 ca .....

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ng on behalf of the ONGC that the said judgment is a reiteration of the foundation principle that tax and equity do not go together and cannot be interpreted based on presumptions and assumptions. It is submitted that however in the case of M. Ambalal & Co. (Supra), the Hon'ble Supreme Court has held that the general rule is strict interpretation whereas the special rule in the case of a beneficial or promotional exemption is liberal interpretation. [9.7] Now, so far as the reliance plac .....

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tion clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the language employed. It is submitted that in the aforesaid decision it is further observed that absurd results of constructions should be avoided. [9.8] Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of Saraswati Sugar Mills (Supra) on behalf of the State is concerned, it is submitted by Shri Venkatraman, learned Senior Advocate appe .....

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ss and since the ONGC would not be burdening the ultimate consumer, an interpretation which would advance denial is permissible is concerned, it is vehemently submitted by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC that the said submission is ex facie not maintainable. It is submitted that interpretation 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 d .....

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he 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 th .....

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ch transportation and processing charges cannot be excluded in the 'sale price'. Considering the definition of 'sale price' contained in section 2(29) such transportation and processing charges received by the ONGC before the actual delivery thereof it has to be included in the 'sale price' as per section 2(29). We are supported by the aforesaid view by the decision of the Division Bench in the case of ONGC vs. Commissioner of Sales Tax in Sales Tax Reference No.3/1998. U .....

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d that in this group of Appeals another / other dispute is with respect to the exemption notifications issued under Section 49(2) of the Act, 1969 as well as the exemption notifications issued under section 5(2) of the VAT Act. The dispute is with respect to the sale of kerosene and LPG by the ONGC to various OMCs. The relevant entries with respect to the exemption claimed under the Act, 1969 in respect of sale of kerosene and sale of LPG are 33, 70 and 173. The relevant entry Nos.33, 70 and 173 .....

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ise 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 Ga .....

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able under the Gujarat Sales Tax Act or the Central Sales Tax will be paid to Government of Gujarat; (3) Purchasing specified company shall maintain separate accounts of purchases and sales of such goods; (4) This exemption shall not be available to either purchasing specified company or the selling specified company, (a) which is holding a Certificate of Eligibility for incentives under any of the incentive schemes announced by the State Government, or (b) in respect of transactions on which in .....

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6.2008 to 02.10.2008 and 2) for the period between 03.10.2008 onwards. The relevant entries i.e. Entry Nos.53, 55, 69 (both pre 02.10.2008 and post 03.10.2008 of the Schedule to the exemption notification issued under section 5(2) of the VAT Act, 2003 are as under: Entry Period, Notification Date Class of Sales or Purchases ___________________ Ref. to Schedule Entry Exemption whether whole or part of tax Restriction and conditions if any 53 292006 onwards (GHN96) 292006 Kerosene sold through the .....

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Whole of tax Nil From the aforesaid it appears that as per the exemption notification issued under section 49(2) of the Act, 1969 and so long as the Act, 1969 was in force, on sale of kerosene for domestic use sold for Public Distribution System the whole of the sales tax was exempted and on sale of LPG (domestic) no tax exceeding the rate of 14% can be levied. From the relevant entries of the Schedule to the exemption notification issued under section 5(2) of the VAT Act, 2003, as per Entry No. .....

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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 e .....

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the ONGC that even in respect of inter-State sales of LPG, effected by the ONGC from State of Gujarat to other States, the ONGC shall be entitled to claim the exemption from tax, as per the Entry No.69. Per contra, it is the case on behalf of the State that in respect of sale of kerosene by the ONGC to various OMCs and on sale of LPG in bulk by the ONGC to various OMCs, and even with respect to inter-State sale of LPG in bulk sold outside the State, the ONGC shall not be entitled to the exempti .....

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rameters to be considered while interpreting any exemption notification in a taxing statute are by and large now not res integra. The Hon'ble Supreme Court as well as this Court in catena of decisions had an occasion to consider and deal with the principles of interpreting an exemption notification in a taxing statute. As per the catena of decisions of the Hon'ble Supreme Court when wordings in the notification are clear and unambiguous the same has to be strictly construed and one is no .....

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ed; taken impart provisions in the statute so as to supply any assumed 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 i .....

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o 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 entries and the wordings used in the relevant entries more particularly Entry Nos.33, 70 and 173 of the Act, 1969 and VAT Act, 2003, as the case may be, and considering the law laid down by the Hon'ble Supreme Court in catena of decis .....

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se where the wordings used in the relevant entries failed for scrutiny while literal interpreting the same, the question may arise for liberal and/or purposive interpretation. In the present case as observed herein above the wordings in the respective entries are as clear as it can be and therefore, respective entries are required to be considered literally and as they are. Exemption claimed from payment of sales tax under the Act, 1969 (till the said Act was in operation) in respect of the sale .....

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exemption from payment of whole of the sales tax. [12.1] The phrase "for use" came to be considered by the Hon'ble Supreme Court in the case of Dalmia Dadri Cement Ltd. (Supra). While interpreting section 5(2)(a)(iv) of the Punjab General Sales Tax Act, the Hon'ble Supreme Court has observed and held that the expression "for use" must mean "intended for use". Relying upon the decision of the Hon'ble Supreme Court in the case of Dalmia Dadri Cement Ltd. .....

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#39;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 hol .....

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istribution system by the ONGC to various OMCs [12.3] Now, so far as next substantial question of law and the issue with respect to the exemption claimed by the ONGC in respect of the sale of kerosene by ONGC to various OMCs from payment of value added tax under the VAT Act, 2003 claimed as per entry No.53 is concerned, on considering the relevant entry No.53 of the Schedule to the exemption notification No.(GHN35) VAT2006S. 5(2)(a)TH, dated 31.3.2006 issued under section 5 (VAT Act, 2003) and r .....

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public distribution system. Therefore, there shall be a vast difference between "through" and word "for". Therefore, as such both the entries i.e. Entry No.53 under the VAT Act, 2003 and Entry No.33 under the Act, 1969 are different and distinct and having different phraseology. [12.4] It is the case on behalf of the ONGC that as the ONGC can be said to be part of the public distribution system, on sale of kerosene by the ONGC to various OMCs, being a part of the public dist .....

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learned Counsel appearing on behalf of the ONGC has heavily relied upon various documents referred to hereinabove in support of the case on behalf of the ONGC that ONGC is part of the public distribution system. The aforesaid submissions seems to be attractive but has no substance. It is required to be noted that the kerosene which 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 .....

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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 notifi .....

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rosene is sold by fair price shop holder to the public at large subject to the scheme of the government, such sale of kerosene can be said to be the kerosene sold through the public distribution system. Merely because under different instructions by the Ministry of Petroleum and/or other Ministries and/or Department the ONGC and/or the OMCs are directed to allot a particular quota, it cannot be said that sale of kerosene by the ONGC to various OMCs can be said to be kerosene sold "through p .....

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from payment of whole of the tax under the VAT Act, 2003 and not otherwise. Under the circumstances, the sale of kerosene by the ONGC to various OMCs can be said to be kerosene sold "through public distribution system" which is the condition for the grant of exemption as per Entry No.53, the ONGC shall not be entitled to any exemption from payment of VAT Act, 2003 as per Entry No.53 in respect to the sale of kerosene by ONGC to various OMCs. [12.5] The learned Tribunal has as such misi .....

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distribution system". Under the circumstances, 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 .....

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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 respect of the sale of LPG sold by ONGC to various OMCs sold in bulk for domestic use, the ONGC shall be entitled to the exemption from payment of Sales Tax under the Act, 1969 to the extent to which the amount of sales tax exceeds 14 ps. in a .....

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of the Schedule to the exemption notification issued under section 49(2) of the Act, 1969 in respect of sales of LPG by ONGC to various OMCs to the extent of sale to any other specified company in bulk for domestic use is held against the revenue and in favour of the assessee and it is held that to the extent to which the amount of sale tax exceeds 14 ps. in rupee, the ONGC shall be entitled to the exemption from payment of sales tax as per Entry No.70 read with Entry No.173. Exemption claimed b .....

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wo parts with respect to different parties. As per Entry No.69, pre 02.10.2008, more particularly for the period between 11.06.2008 to 02.10.2008 in respect of sale of LPG for domestic use, there shall be exemption from payment of whole of the VAT Act, 2003. However, for the post 03.10.2008 and 03.10.2008 onwards the said Entry No.69 has been amended and it provides that in respect of sales of LPG for domestic use by the consumers of the State, there shall be exemption from payment of the whole .....

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oncerned, 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 amend .....

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s OMCs cannot be said to be sale for domestic use by the consumers of the State. There is a distinction between "sale of LPG for domestic use" and "sale of LPG for domestic use by the consumers of the State". The intention of the legislature while amending the Entry No.69 on and from 03.10.2008 seems to be to restrict the exemption and in respect of the sales of LPG for domestic use by the consumers of the State only. Earlier entry No.69 pre 02.10.2008 was a very wide entry a .....

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es, the ONGC is liable to pay the value added tax under the VAT Act, 2003 from 03.10.2008 onwards in respect of the sales of the LPG in bulk by ONGC to various OMCs. Under the circumstances, the substantial question of law framed with respect to interpretation of Entry No.69 in respect of the sale of LPG and the exemption claimed by ONGC in respect of the sale by it of LPG in bulk to various OMCs as claimed as per Entry No.69 is held pre 02.10.2008 to be in favour of the assessee and against the .....

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er-State sales of LPG effected by the ONGC from the State of Gujarat to other States and is not exempt from more of the tax as per Entry No.16 of the Schedule to the Exemption Notification dated 31.03.2006, as amended and issued under section 5(2) of the GVAT Act. Under the circumstances, the said substantial question 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 .....

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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 .....

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the Act, 1969 is held in favour of the assessee - ONGC and against the Revenue. [13.1] However, so far as penalty leviable of sub-section (6) of section 45 of the Act, 1969 is concerned, the penalty leviable under the said provision is as such a statutory penalty and as such there is no discretion vested in the Commissioner whether to levy the penalty leviable under sub-section (6) of section 45 of the Act, 1969 or not. Sub-section (5) of section 45 provides that in the case of a dealer the amo .....

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xtent mentioned in sub-section (5), that shall be levied on such a dealer not exceeding a penalty ½ times the difference referred to in sub-section (5). Under the circumstances, to the aforesaid extent and on the difference of tax, as per sub-section (5) of section 45, the respondent ONGC - dealer is liable to pay the penalty as mentioned under sub-section (6) of section 45. Under the circumstances, the learned Tribunal is not justified in holding that the respondent is not liable to pay .....

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