TMI Blog2016 (7) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... ery takes place has been relegated to an inconsequential event when the sale seamlessly occasions the movement of goods outside the state. It is thus evident that the sale transaction of crude oil by the petitioner in the facts of the case, even with the point of sale being in Rajasthan, partakes the character of an inter-state sale. The purport of the undertaking by the petitioner in its letter dated 23-10-2008 as also the subsequent the letter dated 7-1-2009 was only that the change of the delivery point by the Central Government from the outward flange of the petitioner’s delivery facility at Barmer to Salaya on 30-4-2008 would not facilitate stock transfer of Barmer crude oil to Gujarat such that the State of Rajasthan would stand deprived as the originating state, of its revenue on inter-state sales at the applicable rate. The undertaking did not at all state that RVAT would be paid. The levy was only to be dependent on the sale being a local sale or inter-state sale. In the instant case the sales on the facts relevant thereto being an inter-state sale, as the originating state in terms of Section 9 of the CST, the State of Rajasthan is entitled CST at the rate applicable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orandum of understanding in respect of crude oil produced in the Barmer Oil Fields with MRPL on 5-8-2009. Under the modus operandi, then obtaining, crude oil produced by the petitioner company and sold to the nominees of the Government of India was dispatched in heated insulated via road tankers from the Barmer Oil Fields to Kandla (coastal area in Gujarat) where it was stored in tanks (heated chambers) wherefrom it was thereafter loaded onto oil tankers(coastal heated tanker) for being further carried to Mangalore via a coastal run to MRPL s refinery. The petitioner states to have since then laid heated pipeline from Barmer, Rajasthan to Bhogat (Gujarat coast) operationalised in July, 2010, the Central Government has also approved with some intermediary delivery facilities (all in Gujarat State). All such enroute points are regarded as delivery points identified by the Central Government under clause 1.23 of the PSC. As per Article 1.23 of the PSC a delivery point is defined as the outlet flange of the delivery facility at Barmer or any other point as identified by the Government of India. MOPNG vide letter dated 30-4-2008 had first provided for the delivery point at Salaya, Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntra State Sale) instead of an inter state sale-as it palpably was, on which the then extant CST @ 2% against C-form was leviable. A letter dated 8- 6-2009 in this regard followed from the petitioner to the Principal Secretary, Mines and Petroleum, Government of Rajasthan expressing its apprehension at the potential levy of VAT @ 4% treating the sale of crude oil to the Central Government s nominated buyers out side the state as local sales. It was stated that the uncertainty occasioned by the vernacular press reports would concern crude oil buyers affecting sale of crude from the Barmer Oil Fields and potentially delay finalization of COSAs and start of production of crude. It was stated that as per the extant laws irrespective of the fact of the point of sale of crude oil being within the state of Rajasthan, only CST as leviable on the petitioner s inter state sales would accrue to the State of Rajasthan as the originating state . Analogy was drawn with the minerals mined and sold in Rajasthan by RSMML for consumption outside the state of Rajasthan, which transactions were being treated as interstate sales by the Commercial Taxes Department on which CST was leviable and not RVAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the crude oil produced at the Barmer Oil Fields in Rajasthan, the said sale with invoicing and the transfer of title of goods in the State of Rajasthan, (as alleged) was an intra state sale and hence liable to Rajasthan VAT at the rate of 4% advolerum. Disagreement on the nature of sale transactions between the petitioner and the respondent State ongoing, the petitioner company having in the meantime commenced production of crude oil in the Barmer Oil Fields under PSC dated 15-5-1995 entered into a MOU dated 5-8-2009 with MRPL for sale of crude. Clauses 7 and 10 of the MOU read thus: 7. Till completion of Bhogat facilities, Mangla crude oil will be delivered in small parcel sizes (200,000 bbls). The crude oil delivery point under the PSC will be decided by Government for this period. However, sellers undertake to deliver the nominated volume of crude oil to MRPL at Mangalore port at Seller s risk and cost. For the purpose of payment of crude oil, the quantity of crude oil will be lower of (a) discharged quantity at Mangalore escalated by 0.2% or (b) Bill of Lading quantity at Kandla/ load port. 10. The Buyer will not re-sell or consume the crude oil purchased under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with their refineries outside the State of Rajasthan was an obvious inter state sale on the implied but necessary condition that the crude oil in issue was to resultantly moved out of the State of Rajasthan. Hence the sale partook the character of an inter state sale under Section 3(a) of the Act of 1963. It was pointed out that at no point of time MRPL had any place of business in State of Rajasthan before or after purchasing the crude from Barmer Oil Fields. It was stated that even otherwise as per the MOU between the petitioner and MRPL, the buyer had categorically covenanted that it would not resell or use the crude oil purchased under the MOU in the State of Rajasthan and even in the State of Gujarat but instead that the crude oil purchased from the petitioner s Barmer Oil Fields would be transported outside both the State of Gujarat and Rajasthan. The respondent department, before the Commissioner, however asserted that the point of sale of crude from the Barmer Oil Fields having been unconditionally agreed by the petitioner to be in Rajasthan and the delivery point of the crude oil sold being in Rajasthan with reference to clause 19.4 of the PSC, the title in the crude oi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 15-5-1995 which was at the relevant time the outlet flange of the petitioner at its delivery facility at Barmer. A completed sale as defined in Section 2(38) of the RVAT Act, 2003 thus obtained in the State of Rajasthan, and therefore, levy of RVAT @ 4% advolerum on the sale transaction was appropriate. It was submitted that the whole case set up by the petitioner seeking to treat the sale of crude to various nominees of the Government of India, albeit situate outside Rajasthan, as an inter state sale is nothing but an after thought to wriggle out of the petitioner s commitment/ undertaking with regard to the point of sales being in Rajasthan and thus escape the levy of RVAT @ 4% advolerum causing loss of revenue to the State of Rajasthan in the cross hairs of a contrary commitment made. It was submitted that the issue whether the sales of crude oil produced at Barmer Oil Fields to nominees of the Central Government are local sales or inter state sales is a question of the fact determined by the Additional Commissioner (VAT IT) under his impugned order dated 9-2-2012 on the evidence on record and brooks no interference under Article 226/ 227 of the Constitution of India. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elds, the government provided the company land admeasuring over 8000 Bighas. Further the Right to Use (ROU) over hundred of acres of land was granted to the petitioner to lay the pipeline to Bhogat, Gujarat on the representation that the point of sale of crude oil produced would be at Barmer. The State of Rajasthan having thus facilitated the establishment of project of the petitioner at Barmer at enormous cost, the State cannot be denuded of its rights of collecting due tax under RVAT Act, 2003 on the transaction. It has been submitted that in the circumstances, the impugned order dated 9-2-2012 passed by the Additional Commissioner (VAT IT) on the petitioner s determination application treating the petitioner s sale of crude oil as an intra state sale is legal and warrants no interference by this court. In rejoinder to the additional submissions of the respondent state it has been submitted by the petitioner that the Jaipur Bench has territorial jurisdiction to hear the writ petition, inasmuch as the Additional Commissioner s order dated 9-2-2012 dismissing the petitioner s determination application under Section 36 of the Act of 2003 filed pursuant to interim directions dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the crude oil. The respondent State itself has in fact at all times been aware that crude oil produced at the Barmer Oil Fields and sold to the nominees of the Central Government would be as a consequence moved to the refineries outside the State of Rajasthan for being processed. It was submitted that under Article 265 of the Constitution of India no tax can be levied or collected without authority of law, and this also excludes the collection of taxes on the ground of a purported agreement/ undertaking-absent any statutory foundation for the levy in issue-in this case RVAT. Reference has been made to the judgment of the Apex Court in case of Bonanzo Engineering and Chemical Private Limited Vs. Commissioner of Central Excise [(2012) 4 SCC 771] to submit that estoppel even if made out cannot entail collection of tax not otherwise leviable in law. It has been further submitted that Article 286 of the Constitution of India as also the Schedule VII thereof make it clear that in case of Inter state sales, tax can only be levied by an Act of Parliament which in the instant case is the Central Sales Tax Act. In the course of the hearing before this court on 25-2-2016, it was dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of goods outside the State. The Principal Secretary Finance with all the legal paraphernalia as his disposal was expected to be more forthright in assisting the court. This unfortunately is not the case. CONTENTIONS: Mr. A.R. Madhav appearing with Mr. Sameer Jain on behalf of the petitioner has submitted that, under Clause 1.23 of the PSC, the point of delivery was to be the one identified by the Central Government. Initially this was the point at which the crude oil reached the outlet flange of the delivery facility of the petitioner at Barmer. Subsequently other delivery points were identified from time to time, (Salaya on 30-4-2008, Bhogat on 25-7-2009) and (Kandla, Radhanpur and Viramgham on 5-10-2009) all en route as approved by the Central Empowerment Committee (CEC) set up by the Central Government. Counsel submitted that the risk and title in the crude oil sold passes to the buyers as agreed by the parties to the transaction. The sale of the crude oil by the petitioner thus would stand completed as agreed even where the point of sale of the crude oil is at Barmer. The mining lease granted by the State of Rajasthan to the petitioner for excavation of oil specifical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommitted to ensuring that the delivery point for sale of crude oil from Barmer would be in the State of Rajasthan. It was submitted that the undertaking given by the petitioner on 23-10- 2008 to the State of Rajasthan and other correspondences on the subject with regard to point of sale being in Rajasthan has only entailed that crude oil would be appropriated by the nominated buyers of Government of India at Barmer and nothing more. Thereafter in terms of delivery points determined by the Central Government and governing MOU/ COSAs, the crude oil moves out of the State of Rajasthan to Gujarat. Further as the crude oil cannot at all be used in Rajasthan, the point of sale in Rajasthan only occasions, as of necessity and obvious clear intent the movement of crude oil sold to the buyers to their oil refineries, all situate outside the State of Rajasthan. In these circumstances in terms of Section 3 (a) of the CST Act, 1956 the sale of crude oil by the petitioner to the nominees of the Government of India is evidently without any question at all, an inter state sale on which the State of Rajasthan, cannot levy RVAT, but as the originating state, on the inter-state sale would be entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it subject to the provision of Section 3 of the CST Act, 1956. Mr. Madhav Rao then submitted that the issue in the writ petition also engaged the attention of the Ministry of Finance, Government of India wherein it was categorically stated as reflected in its letter dated 10-9-2009 that the sale of crude oil at Barmer to nominees of the Central Government for being processed by Refineries situate out side the state of Rajasthan would be an inter state sale. On the impugned order dated 9-2-2012 passed by the Additional Commissioner VAT IT on the determination application filed by the petitioner pursuant to order dated 16-11-2011 passed by this Court in SBCWP No.11965/2009, counsel submitted that it was palpably perverse and vitiated by complete non-application of mind as it only lopsidedly focused on the petitioner s undertaking dated 23-10-2008, the letter dated 7-1-2009 and other correspondences reflecting the petitioner s commitment to the point of sale being in Rajasthan without noticing and addressing the terms of the MOU dated 5-8-2008 between the petitioner and MRPL, particularly condition 10 thereof and the undisputed fact that following the sale of crude oil to MRPL, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale which is the incident of taxation and in the instant case as per the petitioner s own undertaking under letter dated 23-10-2008 and the subsequent letter dated 7-1-2009 the point of sale of crude oil produced in Barmer is the state of Rajasthan. Consequently the petitioner having admitted to the point of sale at Barmer, where the sale invoices are also drawn would be liable to pay VAT @ 4% on the transaction in respect of which show cause notice dated 15-9-2009 and letters dated 22-6-2009 and 29-7-2009 had been issued. Reliance has been placed on the judgment in case of Balabhagas Hulaschand Vs. State of Orissa [1976(2) SCC 44] in support of the contention that sale of crude oil by the petitioner to MRPL in the context of its undertaking dated 23- 10-2008 would render the sales of crude oil from the Barmer Oil fields intra state sales. It was submitted that the delivery point of the crude oil, sold to MRPL in terms of Clause 19.4 of the PSC was at the outlet flange of the petitioners delivery facility at Barmer. The sale was thus completed in Rajasthan and it is of no consequence as to whether the crude oil sold, was then transported outside the State of Rajasthan. The legalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the opinion is general in nature without regard to the terms and conditions of COSAs entered by the petitioner with different buyers nominated by the Central Government for purchase of crude oil from Barmer oil fields facility or the petitioner s undertaking of 23-10-2008 and 7-1-2009 and the Director of MOPNG s letter dated 14-1-2009 stating that no loss of revenue would accrue to the State of Rajasthan from the change in the delivery point from Barmer to Salaya/ Bhogat, etc. Even while it is admitted that the opinion by the Secretary, MOPNG conveyed to the Chief Secretary of Government of Rajasthan categorically states that leviability of sales tax is not determined by point of delivery, Mr. Ranjit Kumar emphasized that the point of sale of goods is not irrelevant and the petitioner having admitted in its undertaking dated 23-10-2008 and letter dated 7-1-2009 that the point of sale would be in Rajasthan the sales of crude oil at Barmer partakes the character of local sales exigible to RVAT Act, 2003. Heard. Considered. It would be appropriate to first deal with the objection to the territorial jurisdiction of the Jaipur Bench to hear this petition. It is not in dispute t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mohammad Nooh [(1958)1 SCR 595], Ram and Shyam Company vs. State of Haryana [(1985)3 SCC 267] has held that where the order impugned is stated to be illegal, invalid or being contrary to settled law a petition at the instance of aggrieved party would lie before the jurisdictional High Court under Article 226 of the Constitution of India and such a petition ought not to be rejected on the ground of an alternative remedy of a Statutory Appeal. So to in Hyderabad Engineering ltd. vs State of A.P. [(2011)4 SCC 705], Oil India ltd. vs The Superintendent of Taxes [(1975)1 SCC 733], D.C.M. Ltd vs Commissioner of Sales Tax, Delhi [(2009)4 SCC 231], Indian Oil Corporation ltd. vs. Union of India [(1980) Suppl. SCC 428], CST vs. Bakhtawar Lal Kailash Chand Areti [(1992)3 SCC 950] it has been held that a writ petition can not be rejected on the ground of availability of alternative remedy, if requisite facts obtain. For the aforesaid reasons, I am of the considered view that in the context of the facts and circumstances of the case and the nature of challenge laid in writ petitions, the alternate remedy under Section 83 of the Act of 2003 to impugn the order dated 9-2-2012 passed by the Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to various petroleum products the crude oil has to be as of necessity and known to all concerned moves outside the State of Rajasthan occasioned by the sale. The MOU dated 5-8-2008 between the petitioner and MRPL in fact prohibits resale or use of the crude oil not only in Rajasthan but also in Gujarat and mandates it being moved out of the two states. From the facts on record it transpires that the State of Rajasthan has at all times being conscious of the fact that crude oil produced at Barmer Oil fields in the absence of refinery in State of Rajasthan would be utilized out of the State of Rajasthan by the buyers nominated by the Central Government. This has also not been denied. Thus even with the point of sale of the crude oil produced at Barmer Oil fields being in the State of Rajasthan, it does not detract from the fact that the sales occasioned the movement of goods (crude oil) outside the State of Rajasthan. Section 3(a) of the Central Sales Tax Act, 1956 defines an inter-state sale as under:- 3. When is a sale or purchase of goods said to take place in the course of inter-state trade or commerce.--A sale or purchase of goods shall be deemed to take place in the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s situate in Gujarat and Karnataka, so to when the sale to MRPL was at the Delivery Point Barmer where the sale occasioned the movement of goods to Karnataka via Gujarat by road and steamer. In the circumstances, the ingredients of inter state sale are fully made out and it cannot be held that the sale of Barmer Crude oil by the petitioner to the nominees of the Central Government-all with refineries outside the State of Rajasthan is an intra state sale. The defence of the respondent State to the writ petition overlooks the fundamental aspect of sale transaction between the petitioner and nominated buyers of crude oil where movement of goods is inevitably occasioned out of the State of Rajasthan in one unbroken transaction, following the sale, as all nominated buyers such as MRPL etc. have their refineries in State of Gujarat and Karnataka. There is no third party. There is no third party transaction. Further in terms of the judgments of the Apex Court referred to above, where the sale and delivery takes place has been relegated to an inconsequential event when the sale seamlessly occasions the movement of goods outside the state. It is thus evident that the sale transaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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