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of <h1>Court rules inter-state natural gas sales exempt from VAT under Central Sales Tax Act.</h1> <h3>Reliance Industries Limited and others Versus State of UP., Thru. Prin. Secy., Institutional Finance and others</h3> Reliance Industries Limited and others Versus State of UP., Thru. Prin. Secy., Institutional Finance and others - TMI Issues Involved:1. Facts2. Maintainability of Writ Petition3. Constitutional and Statutory Provisions4. Law Commission Report on Article 2865. Central Sales Tax Act 19566. Literal Construction/Deemed Provision in Section 3 of the CST Act7. Central Sales Tax (Registration and Turnover) Rules, 19578. U.P. Value Added Tax Act, 20089. Other Statutory Provisions10. Section 3 and 4 of the CST Act11. Production Sharing Contract (PSC)12. Gas Sales and Purchase Agreement (GSPA)13. Gas Transmission Agreement (GTA)14. Common Carrier- Open Access System15. Construction of Agreement16. Whether GSPA/GTA are Colourable Device to Escape Tax LiabilityRs.17. Whether Movement is Necessary to Constitute Inter-State Sale18. Situs of the Sale19. Sales of Goods Act20. Assessing Authority21. Main Judgments Relied Upon by the State of U.P.22. American Law23. FindingDetailed Analysis:I. Facts:The petitioner, a public limited company, engaged in extracting and refining petroleum and petro-chemical products, challenged the imposition of VAT on the grounds that the transactions constituted inter-state sales.II. Maintainability of Writ Petition:The writ petition was deemed maintainable as the petitioner lacked an alternative remedy due to jurisdictional errors by the assessing authority.III. Constitutional and Statutory Provisions:The judgment discussed various constitutional provisions, including Articles 269, 286, 297, and 301, emphasizing the Union's exclusive legislative competence over natural gas under Entry 53 of List I.IV. Law Commission Report on Article 286:The judgment referenced the Law Commission's recommendations, which led to the amendment of Article 286, clarifying the principles for determining inter-state sales.V. Central Sales Tax Act 1956:Sections 3 and 4 of the CST Act were pivotal, defining inter-state sales as those occasioning the movement of goods from one state to another or involving the transfer of documents of title during such movement.VI. Literal Construction/Deemed Provision in Section 3 of the CST Act:The court emphasized the literal interpretation of Section 3, deeming transactions as inter-state sales if they occasioned the movement of goods across state boundaries.VII. Central Sales Tax (Registration and Turnover) Rules, 1957:Rule 12 and Form C were crucial in establishing inter-state sales, as the buyers provided Form C to the petitioner, confirming the transactions as inter-state sales.VIII. U.P. Value Added Tax Act, 2008:Section 7 of the VAT Act exempted inter-state sales from VAT. The court found that the transactions in question were inter-state sales, thus not subject to VAT.IX. Other Statutory Provisions:The judgment referenced various statutory provisions regulating the extraction, distribution, and sale of natural gas, reinforcing the Union's exclusive legislative competence.X. Section 3 and 4 of the CST Act:The court clarified that Section 4, subject to Section 3, did not empower the state to impose VAT on inter-state sales.XI. Production Sharing Contract (PSC):The PSC between the petitioner and the Government of India established the delivery point at Gadimoga, Andhra Pradesh, where the title and risk passed to the buyer.XII. Gas Sales and Purchase Agreement (GSPA):The GSPA confirmed that the delivery point was Gadimoga, and the buyer assumed responsibility for transportation from this point, establishing the transactions as inter-state sales.XIII. Gas Transmission Agreement (GTA):The GTA outlined the transportation of gas from Gadimoga to the buyer's facilities, reinforcing the inter-state nature of the transactions.XIV. Common Carrier- Open Access System:The court noted that the transportation of gas through common carrier pipelines did not alter the inter-state nature of the sales.XV. Construction of Agreement:The court emphasized the literal interpretation of the agreements, which clearly indicated inter-state sales.XVI. Whether GSPA/GTA are Colourable Device to Escape Tax LiabilityRs.The court found no evidence of the agreements being sham or farce to avoid tax liability, as they were executed in compliance with statutory provisions.XVII. Whether Movement is Necessary to Constitute Inter-State Sale:The court reiterated that the movement of goods occasioned by the sale was sufficient to constitute an inter-state sale.XVIII. Situs of the Sale:The court determined that the situs of the sale was at Gadimoga, where the title and risk passed to the buyer.XIX. Sales of Goods Act:The court found that the Sales of Goods Act did not override the CST Act in determining inter-state sales.XX. Assessing Authority:The court criticized the assessing authority for not considering the statutory provisions and contractual agreements, leading to a jurisdictional error.XXI. Main Judgments Relied Upon by the State of U.P.:The court distinguished the cases cited by the State, finding them inapplicable to the present context of inter-state sales of natural gas.XXII. American Law:The judgment referenced American jurisprudence on inter-state commerce, reinforcing the principles applied in the Indian context.XXIII. Finding:The court concluded that the transactions in question were inter-state sales, not subject to VAT, and directed the State of U.P. to refund the tax collected. The writ petition was allowed, and the impugned order was quashed.
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