2019 (9) TMI 1082 - HC - VAT and Sales Tax

Facility charge linked to sale of gases subject to VAT under JVAT Act, 2005

The High Court of Jharkhand concluded that the facility charge imposed by the petitioner company is deemed an additional consideration for the sale of ... Liability of VAT - taxable event - Recovery of facility charge - facility charge was for the provision, operation and maintenance of the plant, pipelines and the meter. - It is a specific case of the petitioner is that it has discharged its liability of payment of value added tax (VAT) on the consideration received for supply of gases and no VAT amount was leviable and/or charged from the petitioner prior to the present assessment years in dispute on the amount of facility charge recovered by it from Tata Steel Ltd. for providing facilities. HELD THAT:- We are not in agreement with the contention of the petitioner-counsel that the facility charge and the gas price are distinct and separate from each other as the contractual provision itself clarify that there is inter-dependency of the gas prices with the facility charges and both are linked to each other. In the instant case, the facility charge is a consideration passing from the purchaser (Tata Steel Limited) to the dealer (Linde India Limited) in relation to the sale of gases. According to the agreement, the freight charges are being taken for the provision, operation and maintenance of the plant, the pipelines and the meters. All the three constituents are important for selling gases by the petitioner to Tata Steel Limited and in their absence sale may not be complete. The plant is important for producing the saleable goods, the pipeline is important for transporting the saleable goods and the meter is important for calculating the total quantity of goods sold - Accordingly, facility charges are directly relatable to sale of goods by the petitioner to Tata Steel Limited and is a consideration passing from Tata Steel Limited to the petition for sale of goods. Thus is ample clear that taxable event in case of ‘Central Excise’ and ‘Sales Tax’ is different. While ‘manufacture’ is the event in case of Central Excise; the taxable event in the case of VAT is ‘sale’. The “Facility Charge” levied by the petitioner company is towards consideration of sale of gases and is exigible to value added tax - application dismissed. Issues Involved:1. Whether the 'facility charge' levied by the petitioner company is an additional consideration for the sale of gases and thus subject to VAT under the JVAT Act, 2005.Issue-wise Detailed Analysis:1. Nature of Facility Charge:The petitioner-company argued that the 'facility charge' is distinct from the sale price of gases and is levied for the provision, operation, and maintenance of the plant, pipelines, and meters. The petitioner emphasized that the facility charge is payable irrespective of whether there is any supply of gases, except in force majeure conditions. They relied on various clauses of the agreement to substantiate that the facility charge is independent of the sale price of gases.2. Respondent's Argument on Facility Charge:The respondent-State contended that the facility charge and gas price are interdependent and linked to each other. They argued that the contractual provisions show that the facility charge is variable and dependent on the wholesale price index and the price of gas supplied. The respondent further highlighted that the facility charge includes components of the cost and sale price of gases.3. Tribunal's Interpretation:The Tribunal held that the facility charge is part of the sale price of gases. They concluded that the facility charge is directly related to the sale of gases and is a consideration passing from Tata Steel Ltd. to the petitioner for the sale of gases. The Tribunal emphasized that the terms of the agreement must be read as a whole, and the facility charge cannot be separated from the sale price of gases.4. Judicial Precedents:The petitioner relied on the Supreme Court's decision in the case of Collector of Central Excise, Madras Vs. M/s. Indian Oxygen Ltd., which held that rental for gas cylinders does not form part of the sale consideration. They also referred to the case of Moriroku UT India (P) Ltd. Vs. State of Uttar Pradesh, which distinguished between the taxable events for excise duty and sales tax. However, the Tribunal and the respondent-State relied on the Supreme Court's decision in the case of Hindustan Sugar Mills v. State of Rajasthan, which held that any amount charged by the dealer for anything done in respect of the goods at the time of or before delivery thereof to the buyer forms part of the sale price.5. High Court's Conclusion:The High Court concluded that the facility charge is an additional consideration for the sale of gases and is subject to VAT under the JVAT Act, 2005. The Court emphasized that the facility charge is directly related to the sale of gases and is a consideration passing from Tata Steel Ltd. to the petitioner for the sale of gases. The Court also noted that the facility charge is variable and dependent on the wholesale price index and the price of gas supplied, further supporting the conclusion that it forms part of the sale price.6. Dismissal of Writ Applications:The High Court dismissed the writ applications filed by the petitioner, upholding the Tribunal's order and confirming the levy of VAT on the facility charge. The Court held that the facility charge is towards the consideration of the sale of gases and is exigible to value-added tax.Summary:The High Court of Jharkhand, in a detailed judgment, addressed the issue of whether the facility charge levied by the petitioner company is an additional consideration for the sale of gases and thus subject to VAT under the JVAT Act, 2005. The Court concluded that the facility charge is directly related to the sale of gases and forms part of the sale price. The Court dismissed the writ applications, upholding the Tribunal's order and confirming the levy of VAT on the facility charge.