2016 (7) TMI 715 - HC - VAT and Sales Tax

Inter-state Sale of Crude Oil: Central Sales Tax Applicable

Cairn India Limited & another Versus State of Rajasthan & others

The court held that the sale of crude oil by the petitioner to the nominees of the Central Government was an inter-state sale, subject to Central Sales ... The point of sale of the crude oil - shifting of delivery point/s for the sale of Barmer Crude oil outside the state of Rajasthan - the petitioner was then concerned with certain reports in the vernacular press that respondent state was seeking to impose Value Added Tax (VAT) at the rate of 4% then prevailing treating the sale of crude oil from the Barmer Oil Fields as a local sale (Intra State Sale) instead of an inter state sale-as it palpably was, on which the then extant CST @ 2% against C-form was leviable. Held that:- 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 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 to an inter-state sale. Besides it is preposterous to argue that sales tax would be leviable contrary to law and the mandate of Article 265 of the Constitution of India on the basis of a purported undertaking by the petitioner. It is held that the sale of crude oil by the petitioner from the Barmer Oil Fileds to MRPL etc., all nominated by the Central Government, under clause 1.23 of the PSC is an inter state sale and the Commercial Taxes Department of the State of Rajasthan has no jurisdiction to levy any tax under the provisions of the RVAT Act, 2003. Central Sales Tax at the rate applicable from time to time would however be leviable by the Commercial Taxes Department. Issues Involved:1. Nature of Sale Transactions (Intra-State vs. Inter-State)2. Territorial Jurisdiction of the Court3. Alternative Remedy under Section 83 of the RVAT Act, 20034. Doctrine of Promissory EstoppelIssue-Wise Detailed Analysis:1. Nature of Sale Transactions (Intra-State vs. Inter-State):The petitioner, engaged in the exploration and production of crude oil, contended that the sale of crude oil from Barmer, Rajasthan to the nominees of the Government of India, such as MRPL, was an inter-state sale, subject to CST @ 2% against C-form, rather than RVAT @ 4%. The petitioner argued that the sale occasioned the movement of goods outside Rajasthan, as the crude oil had to be transported to refineries outside the state, making it an inter-state sale under Section 3(a) of the CST Act, 1956. The respondent state, however, asserted that the point of sale being in Rajasthan, the sale was a local sale exigible to RVAT @ 4%.The court held that the sale of crude oil by the petitioner to the nominees of the Central Government was indeed an inter-state sale. The court emphasized that the movement of goods from one state to another, as a result of the sale, qualified the transaction as an inter-state sale. The court referred to the judgments of the Apex Court, which established that the sale occasioning the movement of goods from one state to another is an inter-state sale, regardless of the point of sale.2. Territorial Jurisdiction of the Court:The respondent state objected to the territorial jurisdiction of the Jaipur Bench to hear the petition. The court noted that the impugned order dated 9-2-2012 was passed by the Additional Commissioner VAT & IT at Jaipur, and the letters dated 22-6-2009 and 29-7-2009 were issued by the Department of Finance at Jaipur. Therefore, the court held that the objections to the territorial jurisdiction of the Jaipur Bench were untenable and liable to be rejected.3. Alternative Remedy under Section 83 of the RVAT Act, 2003:The respondent state argued that the petitioner had an alternative remedy of an appeal under Section 83 of the RVAT Act, 2003, and the court should not exercise its jurisdiction under Article 226 of the Constitution of India. The court observed that the petition had been pending for over six years, and the challenge was fundamentally to the jurisdiction of the respondent state to resort to the RVAT Act, 2003. The court held that the alternative remedy was not efficacious, and remitting the petitioner to the statutory alternative remedy at this belated stage would only prolong the litigation.4. Doctrine of Promissory Estoppel:The respondent state invoked the doctrine of promissory estoppel, arguing that the petitioner had undertaken that the point of sale of crude oil would be in Rajasthan, and therefore, the sale should be treated as a local sale. The court noted that the undertaking by the petitioner did not unequivocally represent that the crude oil sold would be a local sale. The court held that taxation based on waiver or consent is not permissible, as per the Apex Court's judgment in Bonanzo Engineering and Chemicals Pvt. Ltd. vs Commissioner of Central Excise.Conclusion:The court quashed the impugned order dated 9-2-2012, the notice dated 15-9-2009, and the letters dated 22-6-2009 and 29-7-2009. It declared that the sale of crude oil by the petitioner from the Barmer Oil Fields to the nominees of the Central Government was an inter-state sale, and the Commercial Taxes Department of Rajasthan had no jurisdiction to levy any tax under the RVAT Act, 2003. Central Sales Tax at the applicable rate would be leviable by the Commercial Taxes Department. Both writ petitions were accordingly allowed.