2015 (12) TMI 237 - HC - VAT and Sales Tax

Supreme Court: Tax on petroleum resale based on price difference, not entire sale; Interest not needed for NIL demand

Indian Oil Corporation Ltd. Versus State of Assam and others

The Supreme Court held that tax liability on petroleum products resale should be based only on the difference between purchase and resale prices, not the ... Levy of tax on difference between the re-sale price and the purchase price and the surcharge component collected on the sale price - Held that:- Earlier assessment orders and demand notice passed were set aside by the Supreme Court with a direction for de novo assessments and after de novo assessment it is found that there is Nil demand for the assessment years. Therefore, the question of payment of interest for the Nil demand does not arise. - Accordingly the impugned orders are quashed - It is not clear whether there was any tax liability preceding the demand notices, whether the difference of liability is more than 10 per cent. between the returns and demand notice. In this regard, the Superintendent of Taxes is directed to verify and pass fresh orders in accordance with law under section 22 of the Assam General Sales Tax Act. - Decided in favour of assessee. Issues:Assessment of tax liability on petroleum products resale, Collection of surcharge, Interpretation of statutory provisions for tax calculation, Application of interest on tax liabilities, Assessment order validity post remand.Assessment of Tax Liability on Petroleum Products Resale:The petitioner, Indian Oil Corporation, purchased petroleum products from BRPL and resold them in Assam, collecting surcharge from dealers for the Central Government. The Superintendent of Taxes assessed the petitioner's tax liability on the difference between resale and purchase prices, rejecting the contention of tax only on the price difference with dealers. The Supreme Court held that surcharge collection for the oil pool account is administrative, not statutory, justifying its inclusion in the sale price. However, for tax liability, only the difference between purchase and resale prices should be taxed. The matter was remanded for factual assessment by the Superintendent of Taxes, setting aside the previous assessment and demand notice.Collection of Surcharge:The collection of surcharge by the petitioner towards the oil pool account was deemed administrative by the Supreme Court, not a statutory provision. The Court justified including the surcharge in the sale price but clarified that tax liability should be based only on the difference between purchase and resale prices, not the entire sale consideration.Interpretation of Statutory Provisions for Tax Calculation:The legal debate centered on the interpretation of tax liability under section 22 of the Assam General Sales Tax Act. The petitioner argued that with fresh assessments resulting in NIL demand, no tax payment was required. The Department contended that interest on the demand notice amount was justified under the law, citing the provisions of section 22 pre-amendment.Application of Interest on Tax Liabilities:Section 22 of the Act details the interest payable by a dealer for tax non-payment or deficit payment. The Court analyzed sub-sections dealing with different scenarios of tax payment deficits and interest applicability. It concluded that when de novo assessments resulted in NIL demand, interest payment for the assessment years with NIL demand was not required.Assessment Order Validity Post Remand:Following the Supreme Court's directions, the Superintendent of Taxes conducted fresh assessments for five years, resulting in NIL demand for tax payment. The Court quashed the impugned orders where NIL demand was found. However, for other cases with demand notices for interest payment, the Superintendent of Taxes was directed to verify the tax liability preceding the demand notices and assess the interest in accordance with the law under section 22 of the Act.The judgment clarified the tax liability calculation for petroleum product resale, the treatment of surcharge, the interpretation of statutory provisions for tax calculation, the application of interest on tax liabilities, and the validity of assessment orders post remand, providing detailed analysis and directions for further assessment in specific cases.