TaxTMI 
TaxTMI 
2013 (5) TMI 32
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....ing out the jurisdictional error claiming transaction to be Inter-State sales. 2. In this bunch of writ petitions, common question of law and facts are involved and the same assessment order has been challenged, hence with the consent of the parties' counsel, arguments were heard and now decided by common judgment. Writ petition No. 6281 of 2010 is treated as leading writ petition to adjudicate the controversy. 3. Keeping in view lengthy argument advanced by the parties' counsel, we are adjudicating the dispute under the following heads:- (I) Facts (II) Maintainability of Writ Petition (III) Constitutional and Statutory Provisions (IV) Law Commission Report on Article 286 (V) Central Sales Tax Act 1956 (VI) Literal Construction/Deemed Provision In Section 3 of the CST Act (VII) Central Sales Tax (Registration and Turnover) Rules,1957 (VIII) U.P. Value Added Tax Act, 2008 (IX) Other Statutory Provisions (X) Section 3 and 4 of the CST Act (XI) Production Sharing Contract (PSA) (XII) Gas Sales and Purchase Agreement (GSPA) (XIII) Gas Transmission Agreement (GTA) (XIV) Common Carrier- Open Access System (XV) Construction of Agreement (XVI) Whether GSPA/GTA are colour....
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....isonous constituents, and condensable hydrocarbons. Apart from methane, the processed gas contains small amounts of ethane, propane, butane, pentane, carbon dioxide and nitrogen. The gas is transported from the producing areas to the market in underground pipelines under pressure or in liquefied form at low temperatures and transported in specially designed ocean-going tankers. The natural gas is found in areas of the earth that are covered with sedimentary rocks. These sediments were first laid down during the Cambrian period, ca 500 million years ago, and this process continued until the end of the Tertiary period ca 100 million years ago. The sediments contain the organic source materials from which natural gas and petroleum are produced. The gas and petroleum, being less dense than the water present in the rocks, tended to migrate upward until contained under impervious rock barriers. 6. The Government of India in the year 1999 announced a New Exploration and Licensing Policy (in short "NELP) whereby it provided that the various petroleum blocks should be awarded for exploration, development and production of petroleum and gas to provide entities. According to the policy, the ....
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....) Article 8.3(k) makes the contractor is to be mindful of the rights and interest of the people of India in the conduct of petroleum operations. (iii) Article 10.7(c) (iii) the contractor is duty bound to ensure that the production area does not suffer any excessive rate of decline of production or an excessive loss of reservoir pressure. (iv) Article 32.2 makes it clear that the contractor is not entitled to exercise the rights, privileges and duties within the contract in a manner which contravenes the laws of India. (v) Article 21(1) mandates that the discovery and production of natural gas shall be in the context of government's policy for the utilization of natural gas. The above clauses in the form of articles make it clear that PSC is subject to the Constitution of India, the Oil Fields Act, 1948, the Petroleum and Natural Gas Rules, 1959, the Territorial Waters, the Continental Shelf and 81 Exclusive Economic Zone and other Maritime Zones Act, 1976 and also the gas utilization policy. (vi)Article 27(1) deals with title to petroleum under the contract areas as well as natural gas produced and saved from the contract area vests with the Government unless such title has p....
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....mer. A mechanism is provided under the PSC. The PSC overrides all other contractual obligations between the contractor and any other party. 9. Under the terms and conditions of the licence, the petitioner has been permitted to extract petroleum and natural gas from KG Basin and sell it to the different customers (buyers). Once the petitioner recovered the investment made by it through extraction process, then a part of the product is to be given to the Government of India free of cost and the remaining quantity of petroleum and natural gas may be sold by the petitioner to its customers subject to allocation of product in their favour by the Government of India. Subject to above conditions, the petitioner entered into Gas Sales and Purchase Agreement(in short GSPA) with its customers of different States including the State of U.P. Some of the customers of State of U.P. are respondent no. 4 to 10. A copy of the GSPA signed between the petitioner and the respondent no. 5, i.e., Indo Gulf Fertilizers Ltd. dated 27.3.2009 is attached as Annexure No. 1 to the writ petition. The GSPA has been entered into between the petitioner and other customers/respondent nos. 4,6,7,8,9 and 10. The g....
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....s. 4 to 10 that they have been regularly purchasing natural gas for the manufacture of UREA and other products and providing Form C under Section 8(4) of the Central Sales Tax Act, 1956 readwith Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 (in short Rules) to the seller, i.e. the petitioner. The document filed by the respondent nos. 4 to 10 with the counter affidavit also indicate the delivery point at Gadimoga village, Andhra Pradesh. The IFFCO Ltd. has filed an agreement dated 27.3.2009 between itself and RGTIL which reveals that RGTIL operates gas pipeline termed as 'East West Pipeline' and the transporter i.e. RGTIL agreed to carry natural gas on behalf of the respondent no. 5 to Hajira (Gujrat) in terms of GSPA for sale between the petitioner and respondent-industry. Another agreement annexed with the counter affidavit of IFFCO is with GAIL which also deals with the transportation of gas. 13- According to learned counsel for the petitioner, from April, 2009 to March, 2010, the petitioner had paid Central Sales Tax to the tune of Rs. 14,21,29,149.14. A table indicating the details of sale of natural gas by the petitioner is given below:- Month Bil....
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....ount of availing the promotional benefit on 8.6.2010. It is also stated that since under Rule an officer of the rank of Additional Commissioner is appellate authority, against the impugned order no appeal shall lie and the petitioner has got no remedy to approach the Tribunal since only against the order passed by the Additional Commissioner, the First Appellate Authority, an appeal may be preferred before the Tribunal. 16 While filing counter affidavit, under para 29, it has not been disputed by the State Government that in pursuance of the promotion order dated 8.6.2010, Shri P.C. Tiwari, the assessing authority had joined the promotional post of Additional Commissioner, Grade-2, Commercial Tax on 8.6.2010 itself. However, defence has been taken that Shri P.C.Tiwari was working as 'empowered assessing authority' under the Provisions contained in Section 2(b) of the U.P. VAT Act. 17. Shri J.N. Mathur, learned Senior Counsel has vehemently argued that the writ petition should be dismissed on account of availability of alternative remedy. II- MAINTAINABILITY OF WRIT PETITION 18. While admitting the writ petition by interim order dated 26.7.2010, the preliminary objection raised ....
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....ointed or conferred power of the assessing authority by the Commissioner by any order on or after 8.6.2010. Under Rule 2(c), the assessing authority shall be Joint Commissioner (assessment) appointed and posted by the State Government or Deputy Commissioner or the Assistant Commissioner appointed and posted by the State Government or Commissioner or a Commercial Tax Officer. In the present case, nothing has been brought on record by which Mr. Tewari can be said to be conferred with the power of assessing authority on or after 8.6.2010 in terms of Section 2(b) of VAT Act and Rule 2(c) of the VAT Rules. Defence taken while filing counter affidavit with regard to availability of power or "empowered assessing authority" under Section 2(b) of the VAT Act readwith Rule 2(c) of the VAT Rules seems to be misconceived and unfounded. 21. The language of Section 2(b) or Rule 2(c) of the VAT Act and Rules are clear and does no suffer from any ambiguity, hence no 'causus omisus' may be supplied. Once Shri P.C.Tiwari had joined on the post of Additional Commissioner on 8.6.2010 itself, then he could not have exercised the jurisdiction of assessing authority on 11.6.2010. While passing the impu....
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.... order of appellate authority under Section 55 shall be heard and disposed of. (i) by a bench of two members, where such order, not being an order passed on the application of the appellant for stay, is passed by an Additional Commissioner (appeals) or the amount of tax, fee or penalty in dispute, exceeds two lakh rupees; (ii) by a single member bench, in other case." 24. In the present case, since the order has been passed by an authority, who lacks jurisdiction, that too, as an assessing authority appeal may not be maintainable before the Tribunal. It is well settled proposition of law that a thing should be done in the manner provided in the Act or statute and not otherwise vide Nazir Ahmed Vs. King Emperor, AIR 1936 PC 253; Deep Chand Versus State of Rajasthan, AIR 1961 SC 1527, Patna Improvement Trust Vs. Smt. Lakshmi Devi and others, AIR 1963 SC 1077; State of U.P. Vs. Singhara Singh and other, AIR 1964 SC 358; Barium Chemicals Ltd. Vs. Company Law Board AIR 1967 SC 295, (Para 34) Chandra Kishore Jha Vs. Mahavir Prasad and others, 1999 (8) SCC 266; Delhi Administration Vs. Gurdip Singh Uban and others, 2000 (7) SCC 296; Dhanajay Reddy Vs. State of Karnataka, AIR 2001 SC 15....
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....ot taken any action against them. Argument advanced by the learned Counsel for the State seems to be misconceived since keeping in view the fact that in pursuance to assessment order the State Government had proceeded to impose penalty and issued notices to some of the private respondents. Writ Petition No. 6508 of 2010, IFFCO VS. State of U.P. was dismissed by this Court by judgement and order dated 25.7.2010 only on the ground that basic order i.e. assessment order has been challenged with liberty to move impleadment application. A review has been filed, which is pending for disposal. Hence, there appears to be no reason not to decide this writ petition filed by IFFCO along with the present leading writ petition being effected by order passed by the Assessing Authority. In case, basic order is set aside or upheld it shall effect all consequential action, hence it is not necessary to keep the other writ petitions pending. 29. In view of above, we reiterate the order dated 26.7.2010 and proceed on merit instead of relegating the matter to the alleged appellate Forum. III- CONSTITUTIONAL AND STATUTORY PROVISIONS 30. Reliance entered into product sharing agreement with the Governm....
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....rticle 298 extends to carrying on a trade in other States also vide AIR 1974 SC 669 Khazan Singh vs. State of U.P. By using word 'business' and 'contracts for any purpose' and its title 'power to carry on trade etc.' makes the field of Article 298 wider than Article 301. So every trade which is covered by Article 301 would be within the filed of Article 298 vide AIR 1999 SC 1867 B.R. Enterprises vs. State of U.P. Article 299 of the Constitution provides that all contracts made in exercise of executive power of Union or of a State shall be expressed to be made by the President, or by the Governor, as the case may be. Neither the President nor the Governor shall be personally liable in respect of any contract or assurance made or executed for the purpose. Article 301 of the Constitution deals with Freedom of Trade, commerce and intercourse throughout the territory of India and provides that these shall be free. 34. It has been settled by Hon'ble Supreme Court that Article 301 provides freedom not from all laws but freedom from such laws which restrict or affect activities of trade or commerce among the States. It further refers freedom from law which goes beyond regulations which b....
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....x cannot be levied upon imported goods, and such taxing law must be held to be invalid to the extent of imported goods vide AIR 1969 SC 147 State of Madras vs. Nataraja Mudaliar, AIR 1974 SC 1505 State of Tamil Nadu vs. Sitalakshmi Mills, AIR 1967 SC 1189 State of Mysore vs. Sanjeeviah H., AIR 1963 SC 928 Mehtab Majid & Co. A.T.B. vs. State of Madras, AIR 1986 SC 63 Anraj H. vs. Government of Tamil Nadu, AIR 2003 SC 1149 Premier Enterprises, Secunderabad vs. Commercial Tax Officer. 38. Hon'ble Supreme Court in AIR 1966 SC 1686 Kalyani Stores vs. State of Orissa held that the exercise of the power under Article 304 can only be effective if the tax or duty imposed on goods, imported from other States and the tax or duty imposed on similar goods manufactured or produced in the State are such that there is no discrimination against imported goods. Hence, if there is no foreign liquor produced within a State, the State cannot, under Article 304 (a) read with Entry 51 of List II, impose any duty on imported foreign liquor. 39. Under Entry 53 List I of 7th Schedule, Union of India may frame Regulation for development of oil fields and mineral oil resources etc. Under Entry 92 A of List ....
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.... The Second Law Commission Report was submitted by Sri M.C.Setalvad on 2nd July, 1956. According to the report, purpose to amend Article 286 has been sorted out as under:- "1- The Law Commission was invited to offer its suggestions for formulating principles for determining when a sale of goods takes place- (i) outside a State; (ii) in the course of the import of the goods into, or export of the goods out of, the territory of India; (iii) in the course of inter-State trade or commerce. 2. At the date of the reference to the Commission the Constitution (Tenth Amendment) bill had been introduced in Parliament and under it Parliament was to be empowered to formulate by law principles for determining when a sale or purchase of goods takes place in any of the ways mentioned above. The bill has since been passed by both Houses of Parliament. 3. Broadly speaking, the proposed Constitutional Amendment seeks to curtail the power of States to levy taxes on the sale or purchase of goods other than newspapers by providing that that power is to be subject to the power of the Union to levey taxes on the sale or purchase of goods other than newspapes where such sale or purchase takes places....
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.... of inter-State trade or commerce" has a very wide connotation. In India we are, however, not concerned with the regulation of commerce generally among several States as under the commerce clause in the American Constitution. What we have to determine is what is a sale or purchase in the course of inter-State trade or commerce. The problem, therefore, is to ascertain what transactions of sale or purchase can fairly be said to arise in the course of inter-State trade or commerce. For this purpose we have to fix upon some characteristics of these transactions which can well be said to stamp them with an inter-State character. In the large mass of American decisions under the commerce clause the one element which is stated to be an indispensable incident of commerce between the States is the movement of the goods which are the subject-matter of the sale or purchase from one State into another. We may refer in this connection to the definition of "inter-State commerce" given by Rottschafer in his "Constitutional Law". 44. Law Commission (supra) after discussing the entire pros and cons of inter-State trade and judgment of Indian Supreme Court and American Supreme Court finally recomme....
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.... been used in the legislation enacted by the States for fixing the situs of a sale within a particular State. The question for consideration is which out of these ingredients affords a certain and easily workable basis for fixing the situs of a sale. The Explanation to Article 286(1) (a) which is now proposed to be omitted attempted to fix as the situs of a sale the State in which goods were actually delivered for consumption. That attempt led to numerous difficulties. Controversies arose as to what constituted actual delivery and consumption. In effect that provision laid down that the tax should go with consumption and that the exporting State should not be entitled to levy any part of it. As pointed out by the Taxation Authority Commission the Constitutional provision as interpreted placed the exporting States and States with a backward economy in a disadvantages position. (T.E.C. Report, p. 48, para.8). In selecting the appropriate ingredient with reference to which the situs of a sale may be determined these considerations will have to be borne in mind. We are of the view that the location of the goods will be a very suitable test to apply in determining the situs of a sale.....
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....se frequently in practice. But in order to provide for them we have in framing the principle used language which makes it clear that the location of the goods at the time of the appropriation by the seller or the buyer irrespective of their location at the time when the assent of the other party is given to the appropriation should be the decisive factor in determining the situs of the sale. We have thought it necessary also to provide for cases where a single contract of sale comprises goods located in different States. In order to obviate difficulties in determining the situs of the sale by reference to the location of the goods in such cases we have suggested that such contracts of sale or purchase should be regarded as separate contracts in respect of the goods situated at different places. Article 286 (1)(a) of the Constitution prohibits a State from taking a sale outside the State. The principles we have suggested will indicate the State within which the sale has taken place. It will, therefore, have further to be provided that as soon as a sale is deemed to have taken place within a State, it shall be deemed to have taken place outside all other States. It will be recalled....
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....e Constitution. 48- Hon'ble Supreme Court in the case reported in AIR 1966 SC 142 S.T.O. vs. Shiv Ratan G. Mohatta held that location of goods means, the location of goods in the form which constituted the subject matter of the agreement and in view of language of Section 23 of the Sales of Goods Act, the appropriation may be by the seller with the assent of the buyer or by the buyer with the assent of seller and the assent to appropriation may be expressed or implied or in advance before such appropriation. 49. Article 286 of the Constitution and the provisions contained in Central Sales Tax Act may be considered and interpreted with the extrinsic aid, i.e., Law Commission Report (supra) to resolve ambiguity, if any. 50. While deciding Writ Petition No. 7825 (MB) of 2011 Sadhana Sharma vs. State of U.P. by judgment and order dated 11.1.2012, of which one of us (Hon'ble Devi Prasad Singh) was a member, importance of Law Commission's Report has been considered after taking into account various pronouncements of Hon'ble Supreme Court and it has been held that in the event of ambiguity, Law Commission's Report may be guiding spirit. 51. In a case reported in AIR 1989 SC 1247 Mithi....
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....India and others, while considering the matter with regard to appointment of Governor, their Lordships of Hon'ble Supreme Court noted the factual position that Raj Bhawans are increasingly turning into extensions of party offices and the Governors are behaving like party functionaries of a particular party. Hon'ble Supreme Court relied upon the Sarkariya Commission's Report and noted that the Governors were not displaying the qualities of impartiality expected of them. Their Lordships held that it has become imperative and necessary that right persons are chosen as Governor for the maintenance of sanctity of post. Hon'ble Supreme Court has taken into account the opinion expressed by Sarkaria Commission and National Commission to review working of the Constitution in the matter of appointment of Governors while expressing its views. 54. In a case reported in 2009(10) SCC 374, U.P. Cooperative Federation Limited versus Three Circles, Hon'ble Supreme Court has relied upon the 55th Report of the Law Commission, 1973 and held that in a lengthy litigation proceeding, there is no infirmity in awarding interest on costs while awarding damages for wrongful retention of money. 55. Thus, Ho....
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....therwise provide, no law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of any goods where such sale or purchase takes place in the course of inter- State trade or commerce. Provided that the President may by order direct that any tax on the sale or purchase of goods which was being lawfully levied by the Government of any State immediately before the commencement of this Constitution shall, notwithstanding that the imposition of such tax is contrary to the provisions of this clause, continue to be levied until the thirty first day of March, 1951. (2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1). Before 11.9.56 After 11.9.56 3. No law made by the Legislature of a State imposing, of authorising the imposition of, a tax on the sale or purchase of any such goods as have been declared by Parliament by law to be essential for the life of the community shall have effect unless it has been reserved for the consideration of the President and has received his assent. (3) Any law of a State shall, in so far as it imposes, or authorises the imposit....
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.... State' means- (i) in relation to a dealer who has one or more places of business situated in the same State, that State; (ii) in relation to a dealer who has places of business situated in different States, every such State with respect to the place or places of business situated within its territory; Section 2(d) "goods" includes all materials, but does not include [newspaper] actionable claims, stocks, shares and securities" Section 2(dd) "place of business" includes- (i) in any case where a dealer carries on business through an agent by (whatever name called), the place of business of such agent; (ii) a warehouse, godown or the place place where a dealer stores his goods; and (iii) a place where a dealer keeps his books of account; 60. Section 2 (g) "sale" with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes,- (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods (whether as goods or in some ot....
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....e a State, such sale or purchase shall be deemed to have taken place outside all other States. (2) A sale or purchase of goods shall be deemed to take place inside a State, if the goods are within the State-- (a) in the case of specific or ascertained goods, at the time the contract of sale is made; and (b) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale by the seller or by the buyer, whether assent of the other party is prior or subsequent to such appropriation. Explanation - Where there is a single contract of sale or purchase of goods situated at more places than one, the provisions of this sub-section shall apply as if there were separate contracts in respect of the goods at each of such places. 62. Section 5 of the CST Act deals with the situation when sale or purchase of goods is said to take place in the course of import or export, whereas Section 6 deals with the situation where as to when there shall be liability to pay tax on inter-State sale. For convenience, Section 6 of the CST Act is reproduced as under:- "6 Liability to tax on inter-State sales:- (1) Subject to the other provisions contained in this Act, ....
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....sale or purchase of such goods is, under the sales tax law of the appropriate State, exempt from tax generally or is subject to tax generally at a rate which is lower than four per cent, or such reduced rate as may be notified by the Central Government, by notification in the Official Gazette, under sub-section (1) of Section 8 (whether called a tax or fee or by any other name); and (b) the dealer effecting such subsequent sale proves to the satisfaction of the authority referred to in the preceding proviso that such sale is of the nature referred to in clause (a) or clause (b) of this sub-section. (3) Notwithstanding anything contained in this Act, no tax under this Act shall be payable by any dealer in respect of sale of any goods made by such dealer, in the course of inter-State trade or commerce, to any official, personnel, consular or diplomatic agent of - (i) any foreign diplomatic mission or consulate in India; or (ii) the United Nations or any other similar international body, entitled to privileges under any convention or agreement to which India is a party or under any law for the time being in force, if such official, personnel, consular or diplomatic agent, as the c....
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....n as a result of sale. Explanation - In this section, "assessing authority", in relation to a dealer, means the authority for the time being competent to assess the tax payable by the dealer under this Act. 64. Section 9 deals with the rates of tax on sales in the course of inter-State trade or commerce. Under sub-Section (1) of Section 8 of the Act, liability with regard to payment of tax has been provided whereas sub section (4) of Section 8 of the said Act deals with the situation where sale takes place in the course of inter-State trade or commerce. For convenience, Sections 9(1), 9(3) and sub-section (4) of Section 8 is reproduced as under:- " Section 9 (1) Levy and collection of tax and penalties:- The tax payable by any dealer unde3r this Act on sales of goods effected by him in the course of inter-State trade or commerce, whether such sales fall within clause (a) or clause (b) of section, 3 shall be levied by the Government of India and the tax so levied shall be collected by that Government in accordance with provision of sub-section (2), in the State from which the movement of the goods commenced: Provided that, in the case of a sale of goods during their movement fr....
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....e tax is levied and collected by the Central Government. The Central Sales Tax Act has not created any machinery of its own to assess and collect the tax levied by it. Job has been entrusted to each state to the machinery created by the State under Section 9(2) of the Act. The CST leviable in the respective States will be collected by its machinery, for and on behalf of the Central Government, which will, cf course, make it over to that State as contemplated by Article 269 of the Constitution. 67- Hon'ble Supreme Court in a case reported in 1996(4) SCC 230 Bharat Heavy Electrical Ltd. vs. Union of India and others while considering the different provisions of the Act readwith Article 286 and 269 of the Constitution has held as under;- "The aforesaid survey of the relevant provisions of the Act clearly shows that Sections 3,4,5,9(1), 14 and 15 pertains to and deal with distinct topics and different aspects of Articles 286 and 269. It follows that if a question arises whether a sale is an inter-State sale or not, it has to be answered with reference to and on the basis of section 3 and section 3 alone. Section 4, or for that matter section 5, is not relevant on the said question--s....
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....ed. In AIR 1959 SC 763 Income Tax, West Bengal vs. Calcutta Stock Exchange Association, their Lordships held that the use of word 'deemed' shows that the Legislature is deliberately using the fiction of law treating a thing as something which otherwise it may not have been. In AIR 2004 SC 5120 Sudha Rani Garg vs. Jagdish Kumar, their Lordships ruled that the word 'deemed' is used to put beyond doubt a particular construction that might otherwise be uncertain. 72. In AIR 1980 SC 1468 Consolidated Coffee Ltd. and another vs. Coffee Board, Bangalore, their Lordships held that a deeming provision might be made to include what is obvious or what is uncertain or to impose, for the purpose of a statute, an artificial construction of a word or phrase that would not otherwise prevail. In (1996) 3 SCC 282 Governor of Andhra Pradesh vs. H.E.H., The Nizam, Hyderabad, their Lordships ruled that the word 'deemed' used in Section 10 (3) of the Act is used to give effect to the operation of a statutory provision from a particular date or from the date the Act was brought into force. In (2000) 5 SCC 415 Rishabh Agro Industries Ltd. vs. P.N.B. Capital Services Ltd. their Lordships held that the ....
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....in the course of inter-state trade or commerce, if the sale or purchase has occasioned the movement of goods from one State to the other or is effected by transfer of document of title to the goods during their movement from one State to the other, it shall be deemed to be inter-state trade. Meaning thereby, transfer of goods from one State to other State in pursuance to covenant (agreement) if occasions the movement of goods, it shall be deemed to be an incident of inter-state sale. Because of any subsequent development, the nature of transaction shall not be changed but it shall remain the inter-state sale by the fiction of law. 77. Explanation 2 of Section 3 further clarifies that subject to clause (a) and (b) of Section 3, delivery of goods to a carrier or other bailee for its transmission to outside the State coupled with the movement of goods, shall, for the purpose of clause (b) be deemed to commence immediately when it is delivered to a carrier or bailee and terminate when delivery is taken from such carrier or bailee. Thus, in the event of inter-state sale, the trade in such category starts immediately at the time of delivery of goods to bailee or transporter in pursuanc....
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....ules provides that a declaration is to be made under Form C and Form D respectively with regard to inter-State trade in pursuance to sub-section (4) of Section 8 of the Act. For convenience, relevant portion of Rule 12 is reproduced as under:- "Rule 12:- (1) The declaration and the certificate referred to in sub-section (4) of Section 8 shall be in Forms C and D respectively; Provided that Form C in force before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1974, or before the commencement of the Central Sales Tax (Registration and Turnover) (Amendment) Rules, 1976, may also be used upto the [31st December, 1979] with suitable modifications:] Provided further that a single declaration may cover all transactions of sale, which take place in a quarter of a financial year between the same two dealers: Provided also that where, in the case of any transaction of sale, the delivery of goods is spread over to different quarters in a financial year or of different financial years, it shall be necessary to furnish a separate declaration or certificate in respect of goods delivered in each quarter of a financial year. (4) The certificate referr....
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..... The U.P. Value Added Tax Act, 2008 contains provision with regard to sale and purchase of goods liable for taxation under the U.P. Act. The sale has been defined under Section 2(ac) of the Act, Section 2 (ag) defines tax, which shall be leviable under the Act, Section 2 (ag) of the Act is reproduced as under:- "Tax" means a tax leviable under this Act, on the sale or purchase of goods other than newspapers; and shall include- (a) tax or lump sum, as the case may be, payable, in lieu of actual amount of tax due on turnover of sales, in accordance with provisions of Section 6; or (b) amount of reverse input tax credit; 85. Section 3 deals with the incident and levy of tax. Section 4 and Section 5 deal with the levy of tax on turnover of sale. A combined reading of these provisions of the Act reveals that the State may impose tax on the sale or purchase of goods in the manner provided therein. Right of the State to impose tax is confined to statutory provision contained in the VAT Act. 86. Section 7 of the VAT Act further provides that no tax shall be levied on certain sales and purchases, which includes inter-State trade or commerce or where sale or purchase takes place outsi....
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.... amounts of purchase prices paid or payable in respect of purchase of goods made by a dealer either directly or through another dealer, whether on his own account or on account of others, after deducting the amount, if any, refunded by the seller in respect of any goods returned to such seller within such period as may be prescribed; (aq) "turnover of sale" means the aggregate of amount of sale prices of goods, sold or supplied or distributed by way of sale by a dealer, either directly or through another, whether on his own account or on account of others;" 89. Hon'ble Supreme Court while dealing with the word, "turnover" has defined it as under : (1) (2005)1 SCC 719 State of A.P. versus A.P. Paper Mills Limited : ''TURNOVER' means the total amount set out in the bill of sale excluding the amount collected towards the tax or the tax due under the Act, whoever is less. (2) (1975)2 SCC 358 Joint Commrl. Tax Officer versus Spencer and Co. "TURNOVER" means the aggregate amount for which goods are bought or sold, or supplied or distributed, by a dealer, either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other v....
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....missioner of Sales Tax, Jabalpur, Hon'ble Supreme Court while interpreting Section 3(a) of the CST Act held that so far as Section 3(a) of the CST Act is concerned, there is no distinction between unascertained and future goods and goods which are already in existence. When the sale takes place, the goods come into actual physical existence where movement of goods takes place in pursuance to the contract of sale, then immediately after movement, the contract by sale merges into actual sale and being transported to outside the State, no tax could be imposed. To quote the relevant portion:- "So far as s. 3(a) of the Central Sales Tax Act is concerned there is no distinction between unascertained and future goods and goods which are already in existence, if at the time when the sale takes place these goods have come into actual physical existence. In the instant case also it was never disputed before the High Court or before us that the manganese ore was loaded into the wagons after being extracted from the mines and that the sales of these manganese ores despatched from Madhya Pradesh to various States actually took place and the goods were ultimately accepted by the buyers in other....
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....ion 4 of the Sale of Goods Act runs thus: "4. (1) A contract of sale of goods is a contract where by the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. (2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. (4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred." Section 4(1), therefore, clearly provides that a contract of sale of goods includes also an agreement to transfer property in goods to the buyer for a price. The inevitable conclusion that follows from the combined effect of the interpretation of s. 3 of the Central Sales Tax Act and s. 4 of the Sale of Goods Act is that an agreement to sell is also an essential ingredient of sale provided it....
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....I.-A who is a dealer in State X agrees to sell goods to B but he books the goods from State X to State Y in his own name and his agent in State Y receives the goods on behalf of A. Thereafter the goods are delivered to B in State Y and if B accepts them a sale takes place. It will be seen that in this case the movement of goods is neither in pursuance of the agreement to sell nor in the movement occasioned by the sale. The seller himself takes the goods to State Y and sells the goods there. This is therefore, purely an internal sale which takes place in State Y and falls beyond the purview of s. 3(a) of the Central Sales Tax Act not being an inter-State sale. Case No. III-B a purchaser in State Y comes to State X and purchases the goods and pays the price thereof. After having purchased the goods he then books the goods from State X to State Y in his own name. This is also a case where the sale is purely an internal sale having taken place in State X and the movement of goods is not occasioned by the sale but takes place after the property is purchased by B and becomes his property." 95. Shri J. N. Mathur, learned Senior Advocate representing the State has relied upon the exampl....
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....other words the agreement to sell merges into a concluded sale the question regarding the application of the provisions of the Central sales Tax Act does not arise at all because the tax is on sale and not on an agreement to sell or a forward contract. 17. Finally if all these conditions are satisfied the question whether the agreement to sell is in respect of ascertained or unascertained goods, existing or future goods, makes no difference whatsoever so far as the interpretation of s. 3(a) of the Central Sales Tax Act is concerned." In case, aforesaid judgment is read in its totality, then there appears to be no room of doubt that sale of the natural gas by the petitioner takes place at Gadimoga and not in the State of U.P. 96. In (1985) 4 SCC 173 Sahney Steel and Press Works Ltd. & another vs. Commercial Tax Officer & others, Section 3 of the Act was again interpreted by the Hon'ble Supreme Court and relying upon earlier judgment, Hon'ble Supreme Court ruled that movement of goods makes out inter-State sale under Section 3(a) of the CST Act. The Hon'ble Supreme Court considered the controversy with regard to movement of goods in the following words:- "In the instant case, the....
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....tract. Two cases on opposite sides of the line were considered by this Court in K.G. Khosla and Co. Ltd. (supra). In Tata Engineering and Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes Anr. the appellant carried on the business of manufacturing trucks in Jamshedpur in the State of Bihar. The sales office of the appellant in Bombay used to instruct the Jamshedpur factory to transfer stocks of vehicles to the stock-yards in various States after taking into account the production schedule and requirements of customers in different States. The stocks available in the stock-yards were distributed from time to time to dealers. The transfer of the vehicles from the factory to the various stock-yards was a continuous process and was not related to the requirement of any particular customer. Until an appropriation of the vehicle was made by the stock-yard incharge against a contract of sale out of the stocks available with him it was open to the appellant to allot any vehicle to any purchaser or even to transfer the vehicles from the stock-yard in the State to a stock-yard in another State. It was held on the facts that the sale by the appellant to a purchaser from its st....
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....udes. It follows as a necessary corollary of these principles that a movement of goods which takes place independently of a contract of sale would not fall within the meaning of inter-State sale. In other words, if there is no contract of sale preceding the movement of goods, obviously the movement cannot be attributed to the contract of sale. Similarly, if the transaction of sale stands completed within the State and the movement of goods takes place thereafter, it would obviously be independently of the contract of sale and necessarily by or on behalf of the purchaser alone and, therefore, the transaction would not be having an inter-State element. 100. In (2009) 4 SCC 231 DCM Ltd. vs. Commissioner of Sales Tax, Delhi, Hon'ble Supreme Court reiterating the aforesaid proposition of law held that the determinative test of inter-State sale is: whether the purchasing dealers were obliged contractually to remove the goods from Delhi, in which they were bought, to the assigned territories and whether in fact the goods stood actually removed, the entire contract must be examined to answer this question. 101. In (2011) 4 SCC 705 Hyderabad Engineering Industries vs. State of Andhra Prad....
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.... Section 3 of C.S.T. Act the ingredients for inter-state sale relate to a transaction where sale or purchase occasions the moment of goods from one State to other and is affected by transfer of documents of title to goods during its movement from one State to other. In view of Explanation to Section 3 of the Act, the delivery of goods to a carrier or other bailee for transaction shall be inter-state trade and will be deemed to commence at the time of delivery and terminate at the time when delivery is taken from such carrier or bailee. Keeping in view the Explanation to Section 3, the delivery of goods means to terminate the transaction in other State. IX- OTHER STATUTORY PROVISIONS 103. Apart from aforesaid statutory provisions, there are certain other statutory provisions meant to regulate the extraction, distribution, sale and purchase of petroleum and natural gas and for the purpose, different Boards have been constituted conferred with statutory powers referred to by Shri Sunil Gupta, learned Senior Counsel. They are:-The Petroleum and Natural Gas Regulatory Board Act, 2006, Policy for Development of Natural Gas Pipelines, The Petroleum and Natural Gas Regulatory Board (Auth....
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.... shall be exclusively governed by provision contained in CST Act readwith different constitutional provisions. X- SECTION 3 AND 4 OF THE CST ACT 105. Shri J.N. Mathur, learned Senior Counsel representing the State has relied upon sub-Section 2 of Section 4 of C.S.T. Act and submits that in case controversy in question is considered under the said provision, it shall not be inter-state trade. Section 4 has been subjected by legislature to Section 3 of the Act. Accordingly while interpreting Section 4, the provisions contained in Section 3 of the Act cannot be overlooked. Accordingly, in the event of ascertained goods, the sale or purchase shall take place at the time of execution of contract but in the event of unascertained goods or future goods, the sale shall take place at the time of appropriation of goods in pursuance to contract of sale by seller or buyer. Assent subsequent to or prior to appropriation shall make no difference. 106. Section 4 of the Act begins with the word 'subject to provision contained in Section 3'. Hon'ble Supreme Court from time to time in catena of judgments considered and interpreted the word 'subject to'. It shall be appropriate to consider some o....
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....ver a State law in case of repugnancy, meaning thereby the law made by the State Legislature under Entry 36 shall be subject to provision of Parliamentary statute made in exercise of legislative powers under Entry 42 of the Concurrent list vide AIR 1952 SC 252 The State of Bihar vs. Maharajadhiraja Sir Kameshwar Singh of Darbhanga and others, AIR 1961 SC 1152 K.R.C.S. Balakrishna Chetty and Sons & Co. vs. State of Madras. 108. Shri Sunil Gupta, learned Senior Counsel while rebutting the argument advanced on behalf of Shri J.N.Mathur submitted that in any case, Section 4 of the Act does not have overriding effect which may amount to ignore Section 3 while considering a case with regard to inter-state trade or commerce. 109. In a case reported in AIR 1961 SC 65 Tata Iron & Steel Co. vs. S.R. Sarkar, their Lordships of Supreme Court after considering different provisions of the Act have held that the purpose of sub-section 2 of Section 4 is to define when a sale shall be deemed to take place inside a State and sub-section 1 of Section 4 provides that when a sale or purchase of goods is determined in accordance with sub-section 2 to take place inside a State, to quote relevant portio....
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....of Rajasthan and another again the Supreme Court considered section 4 of the Act and held that where sale is in the course of inter-state trade, if its situs is within the State, the State cannot impose tax because the State Legislature lacks legislative competence to impose tax on sale in the course of inter-State trade or commerce. To quote relevant portion:- "There is, in our opinion, no antithesis between a sale in the course of inter-State trade or commerce and a sale inside the State. Even an inter-State sale must have a situs and the situs may be in one State or another. It does not involve any contradiction in saying that an inter-State sale or purchase is inside a State or outside it. The situs of a sale may fall for consideration from more than point of view. It may require to be considered for the purpose of determining its exigibility to tax as also for other purposes such as the one arising in the present case. Of course a sale which is in the course of inter-state trade or commerce cannot be taxed by a State Legislature even if its situs is within the State, because the State Legislature has no legislative competence to impose tax on sale in the course of inter-State....
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.... gas is at Orai and not at Gadimoga. This argument also does not seem to be sustainable for the reasons discussed here-in-above. 113. According to Black's law Law Dictionary, word 'appropriation' has been defined as under:- "Appropriation:-The exercise of control over property; a taking of possession. Cf. Expropriation (1); Misappropriation, A legislative body's act of setting aside a sum of money for a public purpose. If the sum is earmarked for a precise or limited purpose, it is sometimes called a specific appropriation. [Cases: States 129.] 3. The sum of money so voted. 4. Torts. An invasion of privacy whereby one person takes the name or likeness of another for commercial gain. [Cases: Torts 385, 386.] 5. The transfer of a benefice, together with all its interests, to a spiritual corporation. See spiritual corporation under Corporation. Cf. Impropriation. 6. The benefice so transferred.-- appropriate, vb.--appropriable, adj.--appropriator, n. 114. In the Major Law Lexicon, by P. Ramanatha Aiyar, fourth edition, dictionary meaning of word "appropriate" in terms of judgment of Hon'ble Supreme Court, another Courts has been defined as under: "Appropriate. To make a thing one'....
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....goods shall commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee i.e. at the time of appropriation. 117. In view of Section 6 of the C.S.T. Act a declaration furnished by the assessee with regard to movement of goods within prescribed time in the prescribed format along with evidence with regard to dispatch of goods shall be deemed to be result of inter-state sale. The dealer has to furnish to the prescribed authority in prescribed manner a declaration duly filled and signed by the registered dealer to whom goods are sold in view of provisions contained in sub Section (4) of Section 8 of the Act readwith Rule 12 of the Registration and Turnover Rules, 1957. Admittedly Form C duly signed by the assessing authority was handed over to the seller and furnished at the time of assessment. It is not disputed that the Form C was issued by the assessing authority of the State of U.P. and submitted to seller and produced at the time of assessment. 118. In view of various pronouncements of Hon'ble Supreme Court (supra) there can be an agreement between the parties with regard to sale of unascertained goods under Section 3 of the ....
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....ia and the petitioner contains almost identical provision as contained in GSPA with regard to delivery point. Under the PSC dated 12.4.2000 entered into between Government of India and the petitioner RIL, the delivery point has been defined as under:- "Delivery Point" means, except as otherwise herein provided or as may be otherwise agreed between the Parties having regard to international practice, the point at which Petroleum reaches the outlet flange of the delivery facility, either offshore or onshore and different Delivery Point(s) may be established for purposes of sales. Delivery Points(s) for the purpose of sale(s) of Petroleum from the Contract Area shall be approved by the Management Committee." 125. The procedure with regard to valuation of natural gas has been dealt with under Clause 21.6 of the PSC, which is as under:- "Clause 21.6 Valuation of Natural Gas 21.6.1 : The Contractor shall endeavour to sell all Natural Gas produced and saved from the Contract Area at arms-length prices to the benefits of Parties to the Contract. 21.6.2 : Notwithstanding the provision of Article 21.6.1, Natural Gas produced from the Contract Area shall be valued for the purposes of thi....
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....ight to use thereof as therein provided. Thus, under the terms and conditions of the PSC, it is obligatory for the petitioner to transfer all rights and liabilities to the buyer (shipper) at the delivery point. Meaning thereby, the title of natural gas gets transferred to buyer at the delivery point, i.e. Gadimoga in terms of PSC. In consequence of contractual obligation of PSC, it shall be obligatory for the contractor or the petitioner to make necessary provision in GSPA with regard to transfer of rights and tile of natural gas in favour of buyer at the delivery point, which shall be discussed in the proceeding paras. Needless to say that PSC, entered into between the Government of India and the petitioner, is in pursuance to constitutional obligation vis a vis statutory provisions (supra) and has overriding effect. 127. Shri R.N.Trivedi, learned Senior Counsel has filed comparative chart indicating the similarity between PSC and GSPA, which has not been objected at any stage of argument advanced by the learned counsel for the State of U.P. It shall be appropriate to reproduce the chart which shows binding similarity with regard to contractual obligation. "COMPARATIVE CHART O....
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....eipt and continued effectiveness of all requisite approvals required under laws and regulations and the PSC and approvals of the Gas Price formula in Exhibit 2 as the Gas Price formula to be used for cost recovery, profit sharing, and all other purposes under the PSC in respect of Gas old under this Agreement. (Clause 26 (e) At Page 91) Valuation of Natural Gas 21.6.1. The Contractor shall endeavour to sell all Natural Gas produced and saved from the Contractor Area at armslength prices to the benefits of Parties to the Contract. 21.6.2. Notwithstanding the provision of Article 21.6.1, Natural Gas produced from the Contract Area shall be valued for the purposes of this Contract as follows: (a) Gas which is used as per Article 21.2 or flared with the approval of the Government or re-injected or sold to the Government pursuant to Article 21.4.5 shall be ascribed a zero value; (b) Gas which is sold to the Government or any other Government nominee shall be valued at the prices actually obtained; and (c) Gas which is sold or disposed of otherwise than in accordance with paragraph (a) or (b) shall be valued on the basis of competitive arms length sales in the region for similar sales u....
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....ween the petitioner and the respondent Indo Gulf Fertilizer, copy of which has been annexed as Annexure No. 1 to the writ petition. Sale agreement has been signed between the petitioner and other buyers, i.e., respondents no. 4 to 10. It shall be appropriate to reproduce relevant portion of the GSPA, as under:- "RECITALS:- (a) Buyer is the business of production and sales of fertilizer and desires to purchase Gas from Sellers for its unit at Jagdishpur Industrial Area, Dist Sultanpur, PIN 227817, Uttar Pradesh India. (b) Sellers are parties to a Production Sharing Contract with the Government of India dated 12 April 2000 in respect of Block KG-DWN-98/3 ("PSC") and a Join Operating Agreement dated 4 October 2002 in respect of the PSC ("JOA"). Each of the Sellers desire to supply Gas to be available to them for sale from the Gas Fields to Buyer in a commingled stream in the qualities and subject to the terms stated herein. (c) The PSC requires Sellers to maintain accounts in United States Dollars and accordingly all calculations under this Agreement shall be done in United States Dollars and where necessary, United States Dollars shall be converted into Indian Rupees as provided ....
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....r and Shipper for transportation of Gas purchase and sold under this Agreement. "RIL" has the meaning given to such term in the Preamble to this Agreement. "Scheduled Daily Quantity" has the meaning given to such term in Exhibit 4. "Seller" and "Sellers" has the meaning given to such term in the Preamble to this Agreement. "Sellers' Facilities" means the reservoirs in the Gas Fields and any platforms, pipelines, wells, plant, machinery or any other equipment or facilities used or to be used from time to time by Sellers to produce, gather, receive, process, compress, store, treat, transport, meter, test, or deliver Gas at the Delivery Point for sale to Buyer. "Seller's Representative" has the meaning given to such term in Clause 26(h). "Taxes" means any and all present or future statutory taxes, levies, duties, cesses, charges, withholdings and imposts, or any similar charges or levies imposed by any Relevant Authority of Republic of India from time to time including sales tax, value added tax, excise duty, customs duty, octroi duty, works contract tax, construction cess, service tax and stamp duty, but shall not include any corporate or income tax". "Sale and Purchase of Gas....
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....r action or notice by the Parties, and the Parties shall have no right of any nature whatsoever against the other Parties in relation to the maters contemplated by this Agreement. Any termination of this Agreement under this Clause 8 shall be without liability to any party. (c)on the date of condition precedent in Clause 8(a) has been satisfied, the rights and obligations of the Parties in respect of the purchase and sale of Gas shall become effective." "Nominations, Scheduling, and Allocation Buyer shall give estimates and nominations (indents) in accordance with the nomination procedures set out in Exhibit 4. Sellers shall schedule Gas flow and allocate Gas deliveries in accordance with the scheduling and allocation procedures set out in Exhibit.4". "Commissioning Period (a) During the Commissioning Period, Sellers may (at their discretion) supply Gas and Buyer may (as its discretion) take delivery of Gas, but Sellers shall have no obligation to supply Gas (or liability for failure to supply Gas) and Buyer shall have no obligation to take Gas (or liability for failure to take Gas) during such period. Buyer shall pay Sellers for the Allocated Quantity of Gas supplied during t....
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....not meet the Specifications as soon as practicable following Sellers becoming aware of the same. (iii) Buyer (or Buyer's nominee) may reject Gas that does not meet the Specifications by giving notice to Sellers as soon as practicable following Buyer becoming aware of the same. (iv) If Buyer (or Buyer's nominee) accepts Gas not being aware of the failure of such Gas to meet the Specifications, subject to Clause 23, Sellers shall pay to Buyer any actual costs paid by Buyer to RGTIL relating to losses, costs, and expenses incurred by RGTIL (A) in cleaning or clearing RGTIL's facilities or rectifying an other damage caused by the acceptance of such Gas by RGTIL; (B) in disposing of and replacing Gas in RGTIL's facilities contaminated by such Gas delivered by Sellers; and (C) otherwise in connection with any reasonable measures taken by RGTIL to bring the Gas within the Specifications. (v) Buyer's sole remedy with respect to the tendering by Sellers of Gas that does not meet the Specifications shall be rejection of such Gas under Clause 14 (b)(iii) (or, in case that Buyer accepts Gas not being aware of the failure of such Gas to meet the Specifications, Buyer's sole remedy shall be t....
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....ade by any Relevant Authority. Buyer shall be liable for fines, penalties or interest on Taxes which are reqired to be paid by Sellers under order made by Relevant Authority. (b) Buyer shall be liable for and shall indemnify (and keep indemnified), protect, defend and hold harmless Sellers and its Affiliates from and against all actions, proceedings, claims and demands brought or made and all losses, damages, costs, expenses, liabilities, settlements, and judgments from and against any Taxes which should properly have been levied against Buyer or for which Buyer has assured full and exclusive liability for payment in connection with the pursuant to this Agreement or any activities connected thereto and Seller may recover such sums from Buyer including all costs, expenses and charges incurred by Sellers in connection therewith." 130. Exhibit 1 of the aforesaid contract contains proforma with regard to Daily Contract Quantity. Exhibit 2 relates to Sales Price and Exhibit 3 provides different conditions regulating Gas Quality Specifications. Nomination, Scheduling and Allocation Procedures have been provided under Ext. 4 of the agreement. Measurement is to be done in terms of provis....
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....er. Buyer shall not withhold the payments to the Sellers under the Agreement pending action to Buyer's request for such re-calibration or validation or proving of the equipment or the final result of such calibration, validation or proving; however' Buyer or Sellers may lodge claim for refunds or adjustments, if any, depending upon the final results of such calibration, re-calibration, validation or proving within a period of seven (7) days of such calibration, re-calibration, validation or proving. Such claim, if found correct by Buyer or Sellers shall be adjusted against the subsequent invoice(s) of supply of Gas. The cost of such special test shall be borne by Sellers if the percentage of inaccuracy is found to be beyond + 1%, but the cost of such special test shall be borne by Buyer if the percentage of inaccuracy is no greater than + 1%." 131. From the aforesaid reading of contractual obligation in terms of GSPA, there appears to be no reason to disagree with the petitioner's contention that the delivery point of the natural gas to the buyer is at Gadimoga. The quantity of gas delivered to the buyer is measured in accordance to MMBtu Scale at delivery point and according to G....
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....should be treated on their face value and be presumed to mean what they say and must be acted upon unless proved to be sham or farce vide; 1995 Supp. (2) SCC 372; 2009 (4) SCC 231, DCM Limited Vs. Comm. of Sales Tax, Delhi and 2000 (6) SCC 579, Hindustan Shipyard limited Vs. State of U.P. 134. Neither there is any pleading on record nor a finding has been recorded by Assessing Authority creating doubt over the genuineness of GSPA. In absence of any pleading or finding recorded by Assessing Authority, the genuineness and effectiveness of GSPA in question cannot be doubted which has been entered into between the parties in pursuance to statutory provisions and PSA. It has got binding effect. It is binding on the parties and State Government not to ignore the binding nature of PSC, GSPA and GTA with an intention to acquire right to impose VAT. XIII- GAS TRANSMISSION AGREEMENT (GTA) 135. The condition precedent with regard to inter-state trade under Section 3 of the CST Act is that there should be movement of goods from one State to other and should be affected by transfer of documents of title to the goods during their movement from one State to the other. The delivery of goods to ....
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.... (ii) Transporter shall not be obligated to perform Transportation Services in respect of quantities of Gas in excess of the Exit Point MDQ. (iii) Transporter may consider, but shall be under no obligation to accept, any request made by Shipper for Transportation Services in respect of Authorised Overrun Quantities. Transporter may at any time restrict, limit, or cancel any Authorised Overrun Quantity under the provisions of Operating Code. Transporter shall incur no liability to Shipper for failure to schedule or accept any Authorised Overrun Quantity. (c) In providing Transportation Services, Transporter shall have the right to commingle Shipper's Gas with other Gas in Transporter's Facilities. (d) Transporter shall provide quantities of Gas required for line pack, and System Use Gas, and the Tariff shall include an allowance for recovery of the costs of such quantities of Gas. At the request of Transporter, Shipper shall sell or provide its pro rate share of Gas for such purposes at the prevailing market price, in proportion to Shipper's Exit Point MDQ. (e) In accordance with and subject to the terms and conditions of this Agreement, Transporter shall be responsible for the ....
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....edgement to be delivered to such 'Sellers" under the GSPA promptly following the determination of Allocated Quantity for each Day. (c) Transporter is authorised by Shipper to; (i) receive quantities of Gas at the Entry Point from the Upstream Operator on behalf of Shipper; (ii) transport such quantities and deliver such quantities at the Exit Point to Shipper or, as applicable, to the Downstream Operator at such point on behalf of Shipper. (d) References under this Agreement to tender or delivery of Gas by Shipper at the Exit Point shall include such actions taken by the Upstream Operator or the Downstream Operator (as applicable) or other party designated by Shipper, on Shipper's behalf." Clause 15.11 of the agreement further provides as under:- "This Agreement does not constitute either Party as the agent, partner or legal representative of the other for any purpose whatsoever, and neither Party shall have any express or implied right or authority to assume or to create any obligation or responsibility on behalf of or in the name of the other Party." 138. Under the agreement, different issues have been dealt broadly but keeping in view the relevant conditions referred here....
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....ed reading of all three agreements reveals that the petitioner provides gas at Gadimoga to the buyer and payment is made in terms of measurement done at the entry point situated at Gadimoga by the 4th day of receipt of invoice. The movement of goods, in the present case, is for outside the State of Andhra Pradesh but the sale in terms of Section 3 takes place in the State of Andhra Pradesh at Gadimoga in pursuance to the conditions contained in GSPA. In view of Section 7 of the VAT Act, the State Government may not impose tax to a sale or purchase taking place outside its territory. 142. The agreement with RGTIL which is in common format reveals that the RGTIL i.e. transporter operates gas pipeline system in India from Kakinada in the State of Andhra Pradesh to Bharuch (Gujrat), referred as East-West pipeline. The buyer, i.e., Shipper secured transportation services from transporter for transportation of natural gas through East-West pipeline from entry point to exit point for onward transportation in downstream pipeline to consumer's facilities. The Gas Transport Agreement (in short GTA) reveals that the Shipper or buyer has executed GSPA (supra) or shall execute GSPA (supra) and....
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....tural gas pipeline into a number of "a homogenous area" (AHA) and shall continuously measure the quality parameters by Gas Chromatograph (GC) in each AHA. 3- Measurement of CV and gas quality as provided in sub-regulations (1) and sub-regulation (2) shall be sufficient for billing and other contractual purposes for all exit points served by the AHA. 4- Total error limit and accuracy of the measuring equipment shall be as agreed to between the entities subject to any mandatory specification, if any, laid down by the Board through regulations. 5- The transporter shall carry out verification, calibration or proving of measuring equipment as per the relevant codes and standards. 6- Either shipper or transporter may instal check meters at requisite points with a pre-condition so as not to interfere with the measurement equipment installed by the entity for custody transfer purpose. 7- Gas accounting shall be done on daily basis and the gas reconciliation, billing & other terms shall be as decided between the entities." 147. Regulation 8 further deals with entry point and exit point. Regulation 9 provides the obligation for the Shipper (buyer) to make arrangement at entry point and....
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....ents" in the form of MDQ. (3) When a transporter receives a request for access from a shipper it shall respond within three days after receiving the request from the shipper- (a) confirming that spare capacity exists to satisfy the request and specifying the charges and terms and conditions upon which it will make the service available. (b) advising that spare capacity does not exist to satisfy the request; (c) advising that the data provided by the shipper require technical study to accommodate his request and such study shall be completed within seven days from the date of receipt of request; or (d) advising that it is not technically or operationally feasible to provide access. (4) Shipper may release the capacity in favour of other shippers to the extent of the capacity booked. (5) The shipper may assign in part or full the capacity booked by him or trade in open market and the transporter shall deliver the capacity in physical terms of any person or entity which wishes to take physical delivery on the basis of a valid contract. (6) The nomination of natural gas for transportation shall contain the expected gas flow details of one or more days daily-nominated quantities....
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....transporter and the shipper. (6) Interconnection of pipeline network is like adding an exit point to the existing pipeline and all such provisions shall be applicable for such interconnection. (7) The authorized entity for receiving common carrier pipeline shall inform the Board in the case any interconnection request is denied." Thus, interconnection pipeline of RGTIL and GAIL at Hajira seems to possess statutory sanction to transport natural gas to onward destination in the State of U.P. 151. With regard to excess of gas, Regulation 12 provides that the contracted capacity between a shipper and a transporter shall be for a gas quantity not exceeding the own firmed up capacity and aggregated volume contracted by the transporter. The excess 33% capacity shall be allocated on common carrier principle in terms of Regulation 12. For convenience, Regulation 12 is reproduced as under:- "12. Methodology for providing access- (1) The contracted capacity between a shipper and a transporter shall be for a gas quantity not exceeding the own firmed up capacity and aggregated volume contracted by the transporter for a period of more than a year. (2) The excess 33% capacity shall be alloc....
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....ther submits that the gas of different buyers mixed with each other becomes unascertained goods, hence it cannot be an instance of inter-state sale. He further submits that the gas while moving in common pipeline is in commingled form hence it is not known as to which portion of gas belongs to whom, and thus it becomes ascertained goods only at Orai at the delivery point where appropriation takes place. 156. In case argument advanced by the learned counsel for the State of U.P. is accepted, then the seller or buyer of natural gas, who does not possess his own pipeline shall be prevented to transport his gas and everyone will have to install his own pipeline, which shall not be feasible or practical. Transportation of natural gas cannot be compared with transportation of tangible goods. Mixture of natural gas of the common quality during the course of transportation shall not affect the right of the buyer. Every buyer or shipper may draw its natural gas from open access gas pipeline with due measurement at exit point. 157. It is not disputed that a large number of customers are being allotted gas by 'Gas Linkage Committee' and the price determined by the sale committee, the custom....
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....contract but really it is an expression of greater breadth of meaning and less technicality. Every contract is an agreement but every agreement is not a contract. In its colloquial sense, the term agreement would include any arrangement between two or more persons intended to affect their relations to each other. Virtually, an agreement is nothing more than a manifestation of mutual assent by two or more parties or legally competent persons to one another. Contracts deal with variety of subjects relating to business transaction or performance. In Black's Law Dictionary (9th Edition Page 365), the contract has been defined as under:- "An agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law [Cases: Contracts-]The writing that sets forth such an agreement . "The term contract has been used indifferently to refer to three different thing: (1) the series of operative acts by the parties resulting in new legal relations: 92) the physical document executed by the parties as the lasting evidence of their having performed the necessary operative acts and also as an operative fact in itself: (3) the legal relations resulting from....
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....the immediate transfer of property interest. In ordinary usage the contract is not the promise alone, but the entire complex of these elements. John D. Calamari & Joseph M. Perillo. The Law of Contracts $ 1.1. at 1-2 (4th ed. 1998). Broadly, any legal duty or set of duties not imposed by the law or tort; esp, a duty created by a decree or declaration of a court [Cases:Contracts] The body of law dealing with agreements and exchange the general theory of contract. The terms of an agreement, or any particular term>there was no express contact about when the money was payable. Loosely, a sale or conveyance. "Sometimes the word 'contract' is used to designate a transaction involving the exchange of goods or land for money. When money is exchanged for goods, this constitutes a sale. When money is exchanged for land, this constitutes a conveyance. Sales and conveyances may be the result of a previous contract but they are not the contracts in themselves. There is no undertaking or commitment to do or refrain from doing anything in the future. This indispensable element of contract is missing. John Edward Murray Jr. Murray on Contracts $ 2, at 5 (2d ed. 1974)." 161. The Black's Law Dict....
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....ration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in (India) and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. 164. The agreements in question (PSA, GSPA & GTA) ordinarily cannot be doubted unless, material on record, reveals the existence of conditions provided by Section 10 of the 1872 Act. Agreements in question should be construed keeping in view the statutory provisions and should be given literal meaning considering the trade compulsions and requirement. In view of Reliance case (supra) the Production Sharing Agreement (PSA) has got overriding effect over all the agreements like GSPA and GTA. The delivery point has been approved in a meeting convened by Empowered Group of Ministers dated 25.6.2008, copy of which has been annexed as Annexure No. SCA-2 to the counter affidavit filed by Union of India in Writ Petition No. 6281 (MB) of 2010. The delivery point is also fixed in terms of 2008 regulation (supra). Accordingly, there cannot be delivery point other tha....
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.... go behind it to some supposed underlying substances" Acceptance of argument of learned Senior Counsel representing the State of U.P. shall amount to going behind some supposed underlying substance merely on presumption & supposition having no material on record. 168. In Vodafone (supra) after considering various Indian and Foreign judgments and subsequent development in law with regard to Westminster principle, their Lordships have summarized and made observation as under:- "The majority judgment in McDowell held that "tax planning may be legitimate provided it is within the framework of law" (para 45). In the latter part of para 45, it held that "colourable device cannot be a part of tax planning and it is wrong to encourage the belief that it is honourable to avoid payment of tax by resorting to dubious methods". It is the obligation of every citizen to pay the taxes without resorting to subterfuges. The above observations should be read with para 46 where the majority holds "on this aspect one of us, Chinnappa Reddy, J. has proposed a separate opinion with which we agree".The words "this aspect" express the majority's agreement with the judgment of Reddy, J. only in relation ....
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....ting status of residents as well as beneficial ownership for applying the tax treaty, it can be ignored if the treaty is abused for the fraudulent purpose of evasion of tax." A five Judges Bench judgment of this Court in Mathuram Agrawal v. State of Madhya Pradesh (1999) 8 SCC 667, after referring to the judgment in B.C. Kharwar (supra) as well as the opinion expressed by Lord Roskill on Duke of Westminster stated that the subject is not to be taxed by inference or analogy, but only by the plain words of a statute applicable to the facts and circumstances of each case. Revenue cannot tax a subject without a statute to support and in the course we also acknowledge that every tax payer is entitled to arrange his affairs so that his taxes shall be as low as possible and that he is not bound to choose that pattern which will replenish the treasury.Revenue's stand that the ratio laid down in McDowell is contrary to what has been laid down in Azadi Bachao Andolan, in our view, is unsustainable and, therefore, calls for no reconsideration by a larger branch. 170. Thus, while reiterating the McDowell (supra) in the light of subsequent judgment of Mathuram Agrawal and Azadi Bachao Andola....
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....id to be unlawful. Every agreement of which the object or consideration is unlawful is void." 174. Section 24 further provides that even if consideration and objects are unlawful in part, a contract may be void. For convenience, Section 24 is reproduced as under:- "Agreements void, if consideration and objects unlawful in part- If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations of a single object, is unlawful, the agreement is void." 175. In the present case, no finding has been recorded by the assessing authority that GSPA or GTA suffer from some illegality, misrepresentation of fact or any portion or part of it is for unlawful object and consideration. No portion of the contract or its object has been held to be forbidden by law by the assessing authority or that it is for any immoral purpose or opposed to public policy. 176. In absence of any such finding or pleading on record, argument advanced by Shri J.N.Mathur, learned Senior Counsel representing the State that the GSPA or GTA are sham and farce or are designed in such a manner so as to avoid tax or is an instrument to escape tax seems to be a miscon....
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....isfy the two specified conditions displays an anxiety not to diminish the State's revenues beyond a certain limit. The section in any case gives no indication that one public interest is to be preferred to the other and, therefore, the matter must again depend upon the proper construction of the language employed. On construction it must be held that by implication the expression 'the agreement' occurring in S. 5 (3) refers to the agreement with a foreign buyer." 180. In (1987) 2 SCC 424 K.P. Subbarama Sastri and others vs. K.S. Raghavan and others, Hon'ble Supreme Court while agreeing with the contractual obligations upheld the condition provided in the agreement with regard to payment of consideration in instalments giving sanctity to the contractual obligation. 181. In (2004) 4 SCC 698 Dr. Karan Singh vs. State of J & K and another, while giving primacy to the constitutional provision upheld the settled proposition of law with regard to contractual obligation within four corners of statutory provisions. 182- In (1977) 3 SCC 147 The Bhopal Sugar Industries Ltd. vs. Sales Tax Officer, Bhopal, while considering the dispute under the tax law of Madhya Pradesh, Hon'ble Supreme Cou....
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....Neither there is pleading on record nor Assessing Authority has recorded any finding raising any doubt over the genuineness of GSPA and GTA, hence, they cannot be termed to be a colourful device to escape tax liability more so, when they have been created in pursuance to statutory mandate and PSA. 185. Subject to aforesaid proposition of law, there appears to be no reason to interpret GSPA in a manner other than what is revealed from it literal construction, moreso when, GSPA does not seem to be violative of constitutional mandate (supra); rather it is drafted in terms of Regulation 2008 . The collective reading of GSPA and GTA in the light of PSC and Regulation 2008 reveals that the delivery of natural gas takes place at Gadimoga to the buyer (shipper) through transporter with due measurement and payment thereon. Though it has been argued by Shri Mathur, representing the State, that payment is made after delivery of gas at Orai in U.P. in terms of measurement made there, but it seems to be misconceived argument and is not based on material on record. The Assessing Authority has also not recorded any finding that payment to seller(petitioner) is made after delivery of natural gas ....
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....and Press Works Ltd. and another vs. Commercial Tax Officer and others again Supreme Court held that once in pursuance to agreement/delivery orders trucks used to be in the State of Bihar and taken over to the territories assigned to the dealer and where under the terms of the contracts of sale the purchasers were required to remove the goods from other State, it shall be inter-state trade. Aforesaid proposition has been reiterated in the case reported in 2009 (4) SCC 231 DCM Limited vs. CST. Hon'ble Supreme Court held as under:- "In our view taking of delivery in Delhi by the purchasing dealers for their assigned territories outside Delhi per se would not take away the transactions in question from the category of inter-State sales. The determinative test to be applied in this case is: whether the purchasing dealers were obliged contractually to remove the goods from Delhi, in which they were bought, to the assigned territories and whether in fact the goods stood actually removed. It is this test that would decide the question as to whether the sales in question were "inter-State sales" or "local sales"." Keeping in view the aforesaid proposition of law discussed here-in-above i....
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....principles providing situs of sale was engrafted in Explanation to clause (1) (a) of Article 286, as it existed prior to the Constitution (Sixth Amendment) Act, which provided that the situs of sale would be where the goods are delivered for consumption. The second view is, situs of sale would be the place where the contract is concluded. The third view is, that the place where the goods are sold or delivered would be the situs of sale. The fourth view is, that where the essential ingredients, which complete a sale, are found in majority would be the situs of sale. There would be no difficulty in finding out situs of sale where it has been provided by legal fiction by the appropriate legislature. In the present case, we do not find Parliament has, by creating any fiction, fixed the location of sale in case of the transfer of right to use goods. We, therefore, have to look into the decisional law. The aforesaid decisions unambiguously laid down that where situs of sale has not been fixed or covered by any legal fiction created by the appropriate legislature, the location of sale would be place where the property in goods passes. The Constitution Bench held, that it was the passing ....
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....Gadimoga. XIX SALES OF GOODS ACT 195. Learned Senior Counsel appearing for the State while defending the impugned judgment and order of assessing authority relied upon different provisions of the Sales of Goods Act and submits that the agreement does not mention the exact quantity of gas and the gas does not exist at the time of agreement and is unascertained goods. Appropriation takes place only in the State of U.P. He relied upon the provisions contained in Section 6 and 23 of the Sales of Goods Act. Section 6 provides where the contract of sale is a future goods, when there shall be contract for sale of goods. Section 23 provides that where there is a contract for sale of unascertained or future goods by description and goods in a deliverable state, it is unconditionally appropriated to the contract, either by seller with the assent of the buyer, the property passes to the buyer. 196. Learned counsel relied upon Section 18 of the Act which provides that where there is contract for the sale of unascertained goods, no property in the goods shall be transferred to the buyer unless and until the goods are ascertained. Argument advanced by the learned Senior Counsel does not seem ....
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.... buyer, it shall be inter-state trade in terms of Section 3 of the CST. It is further observed that while considering the provisions contained in Sales of Goods Act, the provision contained in Section 8 and 23 should not be considered separately but they should be considered keeping in view the definition of goods given in section 2 of the Sales of Goods Act, 1930 and other provisions. Section 5 deals with how the contract of sale is made. Section 6 deals with the existing or future goods. Section 11 relates to stipulations as to time. Section 15 deals with sale by description. Section 16 deals with the conditions as to quality or fitness. Section 19 deals with passing of property passes in goods. In case the entire material on record alongwith GSPA and Regulation 2008 are considered, there appears to be no reason to disbelieve that the parties intended to pass natural gas in the hands of buyer at Gadimoga. 201. Section 21 of the Sales of Goods Act provides that specific goods should be kept in deliverable state after due processing and removing the raw materials. Reliance supplied the lean gas to the buyer through its own machinery set up at Gadimoga. Entire processing is done ....
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.... were delivered to the buyer in terms of contact with RGTIL through its pipeline at Gadimoga. 207. There is one other aspect of the matter. Though the Sales of Goods Act regulates the contractual obligation but when a question relates to inter-state sale, then primacy should be given to the construction of different provisions of Central Sales Tax Act not the Sales of Goods Act. Central Sales Tax is special enactment to regulate the inter-state sale whereas the Sales of Goods Act is general law. 208. Generalia Specialibus Non Derogant is well recognized principle of construction of statutory provision. " Generalia Specialibus Non Derogant has been applied by the courts:- One type of case that frequently comes up before courts is the one that involves a general law and a special law dealing with some aspect dealt with by the general law. In such a case the question is whether the general law, to the extent dealt with by the special law, is impliedly repealed. 209. In Begal Immunity Co. Ltd. vs State of Bihar reported in AIR 1955 SC 662, Hon'ble Supreme Court held (per Venkatarama Ayyar,J): One of the applications of the rule of harmonious construction is that a law generally de....
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....rinciple is stated at p. 168 thus: A general later law does not abrogate an earlier special one by mere implication Generalia Specialibus non derogant, or in other words, where there are general words in a later Act capable or reasonable and sensible application without extending them to subjects specially dealt with by earlier legislation, you are not to hold that earlier and special legislation indirectly repealed, altered, or derogated from merely by force of such general words without any indication of a particular intention to do so. In such cases it is presumed to have only general cases in view, and not particular cases which have been already otherwise provided for by the special legislation. 214. In Anandji Haridas and Co. (P) Ltd. v. S.P. Kasture reported in AIR 1968 SC 565, the Hon'ble Supreme Court held: The special provision must be taken silently to exclude all cases falling within it from the purview of the more general provision. Section 11(4) (a) of C.P. & Berar Sales Tax Act (21 of 1947) specially provides for the initiation of proceedings against a registered dealer who has not furnished returns in respect of any period by the prescribed date. Having made thi....
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....les 269, 297 and 286 of the Constitution. 218. These broader principles of law have been considered by the Constitution Bench of Supreme Court in the case reported in (1993) 1 SCC 364 Gannon Dunkerley & Co. vs. State of Rajasthan where in it has been held that the legislative power of the State under Entry 54 of the State List is subject to two limitations; one flowing from the entry itself which makes the said power subject to the provisions of Entry 92-A of List I, and the other, flowing from the prohibition contained in Article 286. The location of the situs of the sale in sales tax legislation of the State, would therefore, have no bearing or the chargeability of tax on sales in the course of inter-State trade or commerce since they fall outside the field of legislative competence of the State Legislatures and will have to be excluded while assessing the tax liability under the State legislation. The Central Sales Tax Act is a composite law enacted under Entry 92-A of List 1 readwith clause (1) of Article 269 as well as under clause (3) of Article 269, Clause (2) of Article 286 and sub-clause (a) of clause (3) of Article 286. The State Legislature cannot so frame rule as to co....
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....ted by the petitioner as well as respondent no. 5 M/s Indo Gulf Fertilizers and others that the natural gas drawn from KG D6 basin is brought on shore at RIL Terminal where it is processed to remove condensate and moisture. The processed natural gas consists of 98% of Methane (CH-4) and traces of Nitrogen, Ethane, Propane and Butane. After processing of the gas, lean gas is extracted and in terms of agreement (Ext. 3), the buyers is entitled for natural gas containing minimum of 80% Methane. The East-West Pipeline of RGTIL goes upto Ankot, Gujrat. At Hazira, the natural gas from ONGC, is brought on shore and transported through GAIL pipeline (known as HBJ) pipeline. Processing is done by GAIL to remove the condensate. The processed gas is put in HBJ pipeline of GAIL alongwith natural gas from trunk East-West Pipeline of RGTIL at Ankot, Gujrat. The gas in the pipeline of GAIL when reaches Vijaypur, is drawn by GAIL Plant where Butane and Propane and traces of other higher hydrocarbons are removed/extracted for manufacture of LPG. Thereafter gas reaches Pata, where GAIl has a Petrochemical Plant for the manufacture of High Density Poly Ethylene (HDPE). 222. The GAIL extracts Ethane,....
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....e in quantity than what had been handed over to Shipper through RGTIL at Gadimoga. Submission is that because of commingling of gas and increase of quantity, the finding recorded by the assessing authority imposing VAT does not suffer from any perversity and illegality. Argument advanced by the learned counsel does not seem to be correct under the facts and circumstances of the present case, that too, where the controversy relates to sale and purchase of natural gas. It is necessary to consider the quality of gas and international practice as well as scientific views with regard to measurement and transport of gas from one place to another. 225. According to Oxford Dictionary of Science, 6th Edition 2010, gas has been defined as under:- "Gas:-A state of matter in which the matter concerned occupies the whole of its container irrespective of its quantity. In an *Ideal gas, which obeys the *gas laws exactly, the molecules themselves would have a negligible volume and negligible forces between them, and collisions between molecules would be perfectly elastic. In practice, however, the behaviour of real gases deviates from the gas laws because their molecules occupy a finite volume, ....
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.... and Practice, Third Edition by Peter Roberts, definition of gas has been given as under:- "Gas is a shorthand term for those hydrocarbon (or petroleum) deposits which occur naturally in a gaseous or a mixed gaseous and liquid state, consisting primarily of methane, ethane, propane and then the progressively heavier hydrocarbon fractions of butane, hexane, heptane and octane. This is natural gas, which at the point of production is often called raw gas, and can be distinguished from the synthetically produced mixtures of methane and other gases which are derived from the distillation of coal (often called town gas or syn-gas). 229. Shri R.N.Trivedi, learned Senior Counsel invited attention to a Book dealing with sale and gas transport agreement principle and practice (Third Edition) written by Peter Roberts seems to be relevant for adjudication of controversy. 230. Learned author (supra) while considering the Behaviour of Gas observed as under:- "Gas is a fluid (that is, dynamic rather than liquid) body composed of molecules is constant and chaotic motion. Gas is highly compressible but equally it will expand to fill any vessel in which it is placed. The behaviour of gas with r....
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....ference atmospheric pressure in various technical and operational provisions. Because atmospheric pressure varies with temperature and elevation above sea level an arrangement might specify its own particular definition of atmospheric pressure." 232. Thus, measurement in terms of British Thermal Unit seems to be will recognized scientific method to measure gas which has been accepted under the GSPA. With regard to purification precess of raw gas prior to delivery to the buyer or putting it into gas pipeline for transportation, the author (supra) noted the procedure adopted for purification alongwith its calorific value, relevant portion of which is as under:- "Notwithstanding this the raw gas stream can, prior to its delivery to the buyer or into a gas pipeline for transportation, undergo several process in order to modify its constitution: (i) Impurities removal- the raw gas stream could be treated in order to remove any impurities, or at least to reduce those impurities to commercially and/or operationally acceptable levels. (ii) Liquids Stripping- the interest of the seller in extracting hydrocarbon fractions other than methane prior to the delivery of gas to the buyer will ....
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....r calorific values (rich gas). The calorific value of a gas stream increases as the molecular weight increases, with the heavier hydrocarbon fractions having greater calorific values. Thus, the net calorific value of methane is 909 Btu/scf, and this figure rises progressively to give 1,618 Btu/scf for ethane, 2,316 Btu/scf for propane and so on. Gas required by a buyer as feedstock for combustion in a gas-fired power plant is typically bought by reference to its calorific value rather than by reference to volume, because the turbines through which the gas will be combusted will be designed to consume gas within a specified range of calorific values. Consequently, the calorific value of gas is more important to the buyer than the volume of gas which is delivered. The gas (or LNG) sales arrangements in this instance will therefore, dictate in the gas (or LNG) specification provisions a range of calorific values within which the buyer will require the seller to deliver gas (or LNG). The calorific value of a particular quantity of gas ( or LNG) will be determined by the chemical composition of that gas (or LNG). Where the value then, unless the calorific value of the gas stream (or L....
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....ich may necessitate the delivery of increasead physical volume of gas and hence sales arrangements could contain a provision to the effect that wherever in a specified period the average calorific value of delivered falls down below a certain level then the seller's gas under delivery obligation will be adjusted correspondingly. Provision has been made in the GSPA by using word 'shortfall'. Conversely, there will be reduction in physical volume of gas and to meet out such requirement, proper arrangement may be made in the agreement. 234. Learned author (supra) after considering the 'Flow Control' and 'Pressure Control' of natural gas when delivered through pipeline noted that the seller may require a delivery tolerance and shortfall tolerance in the gas sales arrangements in order to account for over-deliveries or under-deliveries, to quote relevant portion:- "It may be that at the delivery point the flow of gas can be controlled by either party by the deployment of a valve which is configured to do so. Alternatively, the ability of gas to flow freely could effectively be controlled by either party maintaining certain gas pressure differentials in their respective facilities. Whe....
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....er of custody, title and risk in arrangements for the sale of goods, such that these components can be considered and applied individually. The GSA (or SPA) might seek to exclude certain implied conditions which would otherwise apply to define the transfers of title, custody and risk under GSA (or SPA). The GSA (or SPA) might also set up a regime whereby the seller indemnifies the buyer for claims and liabilities associated with the gas (or LNG) prior to the transfer of title and the buyer indemnifies the seller for claims and liabilities after the transfer of title. In a cross-border pipeline gas sale, where teh delivery point is within the buyer's territory and the seller has to transport the gas to that delivery point, a formulation which is sometimes used is one where title to the gas will pass to the buyer at a defined border point and risk of loss of or damage to (and custody of) the gas will remain with the seller up to the delivery point: The passing of title at the border point is intended to promote the suggestion that the seller is exporting gas to (but is not conducting business within) the buyer's territory and that the buyer (not the seller) is importing gas, which....
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....egree Fahrenheit at an absolute pressure of 14.696 per square inch. The buyer entered into contract with GAIL whereby the unit of measurement of gas is MMBtu per day GCV (Gross Calorific Value) amounting of 8949 MMBtu. According to learned counsel NCV and GCV are different methods of measurement and according to scientific parameter GCV is higher by about 11% as compared to NHV (Net Calorific Value). 240. Shri Prashant Chandra, learned Senior Counsel appearing for the Tata Chemicals invited attention to bills and delivery receipts on record which reveal that in terms of agreement, the delivery of natural gas is done keeping in view the Net Calorific Value and delivery by the petitioner (reliance) is done on the basis of Net Calorific Value in terms of GSPA whereas at the receding end, it is delivered to Shipper in terms of Gross Calorific Value. Apart from above, attention has been invited to Regulation 10 of 2008 Regulation which provides that more than one shipper can hold capacity at any entry or exit point. The Shipper may release the capacity in favour of other Shipper to the extent of capacity booked. It further provides that the nomination of natural gas for transportation....
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....of goods in terms of GSPA and not on its quality. 244. In a case reported in 1997 (7) SCC 531, State of U.P. Vs. Universal Exporters and others, Hon'ble Supreme Court considered Rule 12 with regard to Form C. It is held that right of the state government to collect trade tax (in the present case) VAT is rebutable. The dealer is required to furnish the State authorities a declaration from the purchasing dealer in such form and manner within such period as may be prescribed and for that under Rule 12-A (5), the Sales Tax Officer has been empower to issue blank form in this behalf if he is satisfied that requisition in that behalf is "genuine and reasonable". In the present case, Form C was issued to the buyers which has been given to the petitioner at the time of delivery of gas at Gadimoga. No finding has been recorded by assessing authority with regard to misrepresentation of fact or cooking a false case to avoid VAT. In the case of Universal Exporters (supra) Hon'ble Supreme Court observed as under:- "That the Sales Tax Officer may satisfy himself that the requisition for the blank forms is genuine and reasonable does not empower him to pre-judge the issue as to whether or not t....
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.... (supra) while interpreting the contractual obligation under present dispute seems to be misconceived and not sustainable. The judgment does not seem to be applicable under the facts of the present case. 247. The case of Tata Iron & Steel Co. Ltd. (supra) has been considered at appropriate place in this judgment and requires no repetition, That judgement too is also not applicable to the facts of the present controversy keeping in view 2008 Regulation (Supra), which is subsequent enactment having statutory force. The GSPA was entered into between the parties in terms of statutory provisions under 2008 Regulation. Balabhagas Hulaschand (supra) or the Tata Iron & Steel Co. Ltd. (supra), makes no difference. 248. The case of Tata Engineering and Locomotive Co. Ltd. (supra) relates to dispute where sales of motor vehicle was in question and not natural gas regulated by 2008 Regulation. Otherwise, in the case of Tata Engineering (supra) their Lordships held that it was duty of the assessing authority to examine each individual transaction and then decide whether it constituted a inter-state sale eligible to tax under the provisions of the Act. Since the Assistant Commissioner (assess....
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....d recorded a finding, then, it is not open for this Court to take a contrary view. It may be noted that in the case of Tata Iron and Steel Co. Ltd (supra) relied upon by learned Senior Counsel for the State of U.P. it is held by Hon'ble Supreme Court that mere contract not followed by the sale shall render the contract unenforceable. Meaning thereby, there must be actual sale. In the present case, there has been actual sale of natural gas transported to outside the state, hence, it does not extend any help to learned counsel for the State of U.P. Otherwise also, overall reading of these judgements (supra) do not make out a case to ignore section 3 of CST Act in present controversy. 252. The case of Madras Marine and Company (supra) also deals with business with regard to import of ship chandlers. The plea taken was that goods were on-board the ship and exported outside the country and could not be consumed before they reached the high seas. Plea taken was that the sale of goods took place in the territorial water of India and not within the State of Tamil Nadu, hence not exigible to sales under the General Sales Tax Act, 1959. Supreme Court held that sale took place when appropr....
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....f Section 4 of CST Act while interpreting the State enactment with regard to tangible goods and not natural gas regulated by 2008 Regulation. While concluding the finding, their Lordships clarified the position with regard to State enactment and Central enactment in the following words:- "On this doctrine of incorporation once we have written this section 4(2) of the Central Act in the Explanation to section 2(28) of our Act, we would have thereafter no occasion to refer to the Central Act from which this incorporation was done and as to its purpose or context. Therefore, so far as our present Act is concerned, if the Legislature did not lack the legislative power to fix situs of the sale as distinguished from the taxing power, which it lacks because of the inclusion of certain sales under Article 286 of the Constitution, it cannot be held that we should construe the Explanation to section 2928) as being confined to and as applicable only to cases other than those which fell within section 3 or 5 of the Central Act. In fact, so far as the context of the present is concerned and especially of the relevant provisions regarding the authorization, the 'turnover of sales' under section....
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....supra) the definition of sale given in the Sale of Goods Act shall not be applied. Their Lordships held, to quote :- "It is not possible to accept this contention for more than one reason. In the first place, the definitions of 'sale' and 'agreement to sell' in the Sale of Goods Act, 1930 would not apply to the expression 'sale' occurring in the Central Sales Tax Act, 1956, wherein the expression 'sale' has been defined in Section 2 (g) for the purpose of that Act ................. In Balabhagas Hulaschand case this Court in the context of the question as to when a sale could be said to take place in the course of inter-state trade or commerce gave an extended meaning to the word 'sale' as defined in Section 2 (g) and as used in Section 3 (a) and 4 (2) (a) and (b) of Central Sales Tax Act, 1956 and what was said by this Court was that the word 'sale' as used in Section 3 (a) and Section 4 (2)(a) and (b) was wide enough to include not only a concluded contract of sale but also an agreement of sale provided that the later stipulated that there was a transfer of property or movement of goods; the ratio of that decision will be inapplicable to Section 5 (3) which deals with the quest....
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....aningless or irrelevant and cannot be relied upon while deciding the present controversy. These agreements are outcome of the statutory provisions (supra) and neither can be ignored nor misinterpreted to give them different meaning, than, what emerges from the plain reading of the agreements. 262. After hearing learned counsel for the parties, it appears that the cases have been cited keeping in view the observation made by Hon'ble Supreme Court under the particular facts and circumstances of the case and judgments are in personam and not in rem. It is well settled law that the judgment should be read in reference to context vide 2002 (4) SCC 297 Grasim Industries Limited v. Collector of Customs; 2003 SCC (1) 410 Easland Combines v. CCE; 2006 (5) SCC 745 A. N. Roy v. Suresh Sham Singh and 2007 (10) SCC 528 Deewan Singh v. Rajendra Prasad Ardevi. Majority of the cases relied upon by the learned Senior Counsel for the State of U.P. or even by some of the petitioner's counsel deal with the Sales of Goods Act and contractual obligations thereon. The provision contained in 2008 Regulation and other statutory enactments in the last decade dealing with exploration, sale and purchase of ....
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....nd excise, to pay the debts and provide for the common defence and general welfare of the United States. (2) To borrow money on the credit of the United States. (3) To regulate commerce with foreign nations, and among the several States and with the Indian tribes. (4) To establish an uniform rule of naturalization and uniform laws on the subject of bankruptcies throughout the United States. (5) To coin money, regulate the value thereof, and of foreign coin, and fix the standards of weights and measures. (6) To provide for the punishment of counterfeiting the securities and current coin of the United States. (7) To establish post offices and post roads. (8) To promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. (9) To constituted tribunals inferior to the Supreme Court. (10) To define and punish piracies and felonies committed on the high seas, and offences against the law of nations. (11) To declare war, grant letters of marque and reprisal, and make rules concerning captures on land water. (12) To raise and support armies, but no appropriations of money t....
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.... a foreign power, or engage in war, unless actually invaded, or in such imminent danger as will not admit of delay." 268. A combined reading of Sections 8 and 10 of Article 1 reveals that the Congress has been given power to impose duty and collect tax to regulate commerce with foreign nations but under sub-section 2 of Section 10, in certain circumstances, State has been empowered to impose tax. 269. It is not necessary to deal with American Constitution in detail but there appears to be difference between the power conferred on the State Legislature and power conferred on the Congress. In America, State Legislature seems to have been conferred power to some extent to interfere with inter-state commerce. So far as inter-state trade is concerned, the basic feature as defined by American Supreme Court is, "it has occasioned the movement of goods from one state to other State." Shri Sunil Gupta, learned counsel referred certain cases of American Supreme Court and Canadian Court of Appeal. It shall be appropriate to consider some cases. 270. When the State of Oklahoma restricted the rights with regard to purchase and distribution of natural gas to consumers through pipeline, the Am....
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....commingling, the two are undistinguishable. But the proportions of both in the mixture are known, and that of either readily may be withdrawn without affecting the transportation or sale of the rest. So, or all practical purpose the two are separable, and neither affects the character of the business as to the other." 274. Aforesaid proposition has been reiterated by American Courts in the cases reported in (1947) 331 U.S. 682 Interstate Natural Gas Co. vs. Federal Power Com'n, (1954) 347 U.S. 672 Phillips Petroleum Co. vs. Wisconsin, (1983) 463 U.S. 319 PSC vs. Mid-Louisiana Gas Co., (1986) 806 F. 2d 275 Consolidated Oil & Gas, Inc. vs. Federal Energy Regulatory Commission. 275. The controversy with regard to fungible goods and commingling of gas was the subject-matter of consideration in one other case reported in 2008 WL 4648 330 (Okla, October 21, 2008) In re: Assessment of Personal Property Taxes Against Missouri Gas Energy. 276. In brief, the fact in dispute was with regard to gas distribution company which purchased natural gas from different suppliers located in Kansas, Taxas and Oklahoma and contracted with Panhandle pipeline company for transportation of gas to its cus....
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....commodity does not affect ownership unless the parties intend to transfer title. The way the system works, each shipper is simply entitled to a volume of gas thermally equivalent to that which it placed into storage regardless of where it was placed when stored or from where it is taken when removed from storage. However, it is held that it shall be inter-state commerce vide (1977) 430 US 274 Complete Auto Transit vs. Brady. 280. In case the present controversy is considered in the light of aforesaid case, then because of transfer of title of gas by the petitioner in favour of shipper/buyer in terms of GSPA, PSA and GTA, the ownership shall be transferred to the respondents (shipper) and being transferred out of state, it shall be inter-state trade. 281. Again in 270 S.W. 3d 208 (Tax appl. 2008) Peoples Gas, Light and Coke Co. vs. Harrison Central Appraisal District, the buyers and sellers conduct at commercial points was taken into account while holding that fungible and ethereal nature of natural gas makes it possible to ascertain the physical location of a given portion of natural gas at any moment. Pipeline cannot identify particular volume of gas as belonging to a particular....
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....ip of the Canadian natural gas during its transit through the U.S. and the commingling of Canadian and American gas on the American part of the pipeline are not relevant to determine the purpose of the delivery from one place in Canada to another place in Canada. These facts form an intrinsic part of the economic reality of transporting natural gas via pipeline through the United States. This economic reality was very much in the mind of the drafter of the legislation and found its way in the terms used by Parliament." 283. Now, considering the various judgments of American Supreme Court and Federal Court of Appeal, Canada with regard to inter-state sale of fungible goods, i.e., natural gas in commingled form, there appears to be no room of doubt that the movement of gas in pursuance of covenant outside the State makes it an inter-state sale. In India, it occasioned only after movement of lean gas or natural gas in pursuance to covenant by transfer of property to the shipper but in America it may be earlier to it. 284. A large number of cases and Dictionaries have been cited by Shri Sunil Gupta with regard to law on the subject laid down by American Supreme Court and court of app....
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.... Sales Tax Act, 1956 are applicable to a transfer of property in goods involved in the execution of a works contract covered by Article 366(29-A)(b). (3) While defining the expression 'sale' in the sales tax legislation it is open to the State Legislature to fix the situs of a deemed sale resulting from a transfer falling within the ambit of Article 366(29-A)(b) but it is not permissible for the State Legislature to define the expression "sale in a way as to bring within the ambit of the taxing power a sale in the course of interstate trade or commerce, or a sale outside the State or a sale in the course of import and export. (4) The inter-state sale shall be either governed by Section 3(a) of the Act where it has occasioned the movement of goods from one State to other or under Section 3(b) if it is affected by transfer of document of title after such movement has started and before the goods are actually delivered to make a transaction taxable under CST Act. The transaction must be a sale as defined in Section 2 (g) of CST Act taking place in the course of inter-state trade or commerce in any of the manner provided in clause (a) and clause (b) of Section 3. (5) where situs of ....
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....d with regard to sale consideration or payment of gas to the petitioner in lieu of processing in Gujrat or on account of alleged variation in the volume of gas at Orai. Hence, it shall not be intra-state sale. GSPA and GTA being executed in terms of 2008 Regulation to meet the constitutional requirements suffers from no infirmity or illegality. There is no material on record and no material has been discussed or finding has been recorded by the assessing authority that GSPA and GTA were executed in violation of any statutory provision or on unfounded ground or are farce to avoid the tax rather; they are in tune with 2008 Regulation and PSA. The assessing authority had not considered the constitutional provision as well as various provisions of Central Sales Tax Act, 2008 Regulation and guidelines of 2006 issued by the Government of India (supra). Hence the judgement suffers from perversity and vice of arbitrariness and is an instance of non-application of mind to the statutory provision. (13) The GSPA and GTA being executed in pursuance to statutory provisions (supra) and PSA cannot held to be irrelevant. They cannot be ignored while adjudicating the present controversy with regar....
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.... of Haryana;2009 (8) SCC 235, State of Maharashtra Vs Swanstone Multiplex Cinema Pvt Ltd and 1999 (9) SCC 620, Belsund sugar company ltd. Vs. State of Bihar, does not create any hurdle in the way of assessee to claim refund of taxes claimed by him. In Swanstone Multiplex (supra) while considering unjust enrichment their Lordships held that doctrine may be invoked even if there is no statutory provision. State is not entitled to unjustly enrich itself with the huge amount of illegally collected duty. 289. It would be travesty of justice in case the tax realised under the garb of VAT Act is not refunded to the assessee by the State Government. There appears to be blatant abuse of power by the State authorities while imposing the VAT. In Swanstone multiplex (supra) their Lordship of Hon'ble Supreme Court observed as under:- "The statute must be interpreted reasonably. It must be so interpreted so that it becomes workable. Interpretation of a statute must subserve a constitutional goal. A statute of this nature, in our considered opinion, cannot be interpreted in such a manner so as to enable an entrepreneur to get undue advantage to the effect that he would collect tax from the cine....