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Issues: (i) whether the writ petition was maintainable despite objection based on alternate remedy and jurisdictional challenge to the assessing authority; (ii) whether the sale of natural gas under the PSC, GSPA and GTA was an inter-State sale governed by the Central Sales Tax Act, 1956, so as to exclude levy of VAT by the State of U.P.; and (iii) whether the impugned assessment order and consequential demands were liable to be quashed with refund of tax collected.
Issue (i): whether the writ petition was maintainable despite objection based on alternate remedy and jurisdictional challenge to the assessing authority.
Analysis: The availability of an appellate remedy did not bar writ jurisdiction where the assessment order was passed by an authority who had ceased to hold the post and thus lacked jurisdiction. The Court also noted that the controversy raised pure questions of constitutional and statutory interpretation and involved no disputed factual inquiry requiring relegation to the appellate forum.
Conclusion: The writ petition was maintainable and the objection based on alternate remedy failed.
Issue (ii): whether the sale of natural gas under the PSC, GSPA and GTA was an inter-State sale governed by the Central Sales Tax Act, 1956, so as to exclude levy of VAT by the State of U.P.
Analysis: The Court held that Section 3 of the Central Sales Tax Act, 1956 is the controlling provision for determining inter-State sale, and that sale is occasioned when the movement of goods from one State to another is the result of the contract. Reading the PSC, GSPA and GTA together, the delivery point was Gadimoga in Andhra Pradesh, title and risk passed there, and the movement of gas to Uttar Pradesh was pursuant to the contractual and regulatory arrangement. Commingling in the pipeline, use of common carrier facilities, and later processing did not alter the character of the transaction. Section 4 of the Central Sales Tax Act, 1956 could not be used to convert an inter-State sale into an intra-State sale, and Section 7 of the Uttar Pradesh Value Added Tax Act, 2008 excluded such transactions from VAT.
Conclusion: The transaction was an inter-State sale and the State of U.P. had no jurisdiction to levy VAT on it.
Issue (iii): whether the impugned assessment order and consequential demands were liable to be quashed with refund of tax collected.
Analysis: Since the impugned levy was without jurisdiction and the assessment order suffered from non-application of mind to the governing constitutional and statutory framework, the consequential notices and orders could not stand. Tax realised under the invalid levy was liable to be refunded in accordance with law.
Conclusion: The impugned assessment order and consequential actions were quashed and refund was directed.
Final Conclusion: The dispute was resolved in favour of the assessee by holding that the natural gas transaction was an inter-State sale beyond the VAT power of the State, warranting quashing of the assessment and restitution of the tax collected.
Ratio Decidendi: For determining taxability of a sale of goods, the decisive test is whether the sale occasions movement of goods from one State to another under the governing contract and statutory scheme; where title passes at the agreed delivery point and the transaction is governed by a special central enactment, a State cannot recharacterize it as an intra-State sale by relying on later transit, commingling, or local processing.
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