TaxTMI 
TaxTMI 
2016 (4) TMI 94
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....der dated 19.09.2013 passed by the learned Gujarat Value Added Tax Tribunal, Ahmedabad (hereinafter referred to as "Tribunal") in Second Appeal No.103/2010 in respect of the period 2004-05, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.384/2014. Tax Appeal No.380/2014 [2.1] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.91/2010 in respect of the period 2005-06, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.380/2014. Tax Appeal No.1358/2014 [2.2] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 25.03.2014 passed by the learned Tribunal in Second Appeal No.428/2013 in respect of the period 2008-09, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.1358/2014. Tax Appeal No.1359/2014 [2.3] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 25.03.2014 passed by the learned Tribunal in Second Appeal No.4....
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....3 passed by the learned Tribunal in Second Appeal No.396/2012 in respect of the period 2006-07, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.436/2014. Tax Appeal No.437/2014 [2.11] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.395/2011 in respect of the period 2006-07, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.437/2014. Tax Appeal No.468/2014 [2.12] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.393/2011 in respect of the period 2006-07, the original respondent - State of Gujarat through Commissioner of Commercial Tax has preferred the present Tax Appeal No.468/2014. Tax Appeal No.469/2014 [2.13] Feeling aggrieved and dissatisfied with the impugned judgment and order dated 19.09.2013 passed by the learned Tribunal in Second Appeal No.326/2012 in respect of the period 2007-08, the original respondent - State of Gujarat through ....
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....as sold by the respondent to GAIL? 2) Whether, in the facts and circumstances of the case, the Tribunal was right in law in holding that the sale of kerosene by the respondent herein to Oil Marketing Companies falls within the meaning of the phrase "Sales of Kerosene for domestic use sold for public distribution system" and is therefore exempt from the whole of tax under Entry 33 of the schedule to the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969 and is otherwise exempt from the whole of tax under Entry 173 of the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969, and hence no tax can be levied on the discount amount of such sale? 3) Whether in the facts and circumstances of the case, the Tribunal was right in law in holding that the sale of Liquefied Petroleum Gas by the respondent to Oil Marketing Companies falls within the meaning of the phrase "Sales of liquefied petroleum gas (domestic) as used in Entry 70 of the notification issued under section 49(2) of the Gujarat Sales Tax Act, 1969, and hence no tax exceeding 14 paise in the rupee can be levied on the Liquefied Petroleum Gas sold by the respondent in bulk to Oil....
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.... 1956 and the goods in question are kerosene and the Liquified Petroleum Gas (LPG) for domestic use. The relevant entries are as under: Sr. No. Class of Sales or Purchases Exemption Whether of whole or Part of tax _________________ Ref. to Schedule Entry for goods given exemption Conditions 33. Sales of Kerosene for domestic use sold for Public distribution system. Whole of Sales Tax _________________ II A 33 Nil 70. Sales of liquefied Petroleum Gas (Domestic) To the extent to which the amount of sales tax exceeds fourteen paise in the rupee _________________ II A 123 Nil 173. Sales of petroleum products including liquefied petroleum gas, manufactured or purchased or imported from across the customs frontiers by any of the specified companies to any other specified company. Explanation: For the purpose of the entry, "specified company" shall mean, - (i) Indian Oil Corporation Ltd.; (ii) Bharat Petroleum Corporation Ltd.; (iii) Hindustan Petroleum Corporation Ltd; (iv) IBP Company Ltd; (v) Oil & Natural Gas Corporation Ltd; (vi) GAIL (India) Ltd; (vii) Petronet LNG. Whole of tax (1) Purchasing ....
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....ing the exploration, drilling, production and selling facilities on behalf of the Joint Venture. It appears that the Natural Gas in sour form obtained through exploration activity is taken from Panna Mukta Gas Field to ONGC, Hazira, through its own pipeline network connected to various Gas Fields in Bombay High for its further transmission up to the Sweetening Plant of ONGC based at Hazira, wherein all the hydrocarbons from the sour Gas are separated to produce natural gas. That for the aforesaid processes, i.e. processing and transportation, the Joint Venture pays processing and transportation charges to ONGC, whereby natural gas gets converted into a deliverable state at the time of the sale thereof to GAIL. Apart from Natural Gas, from the above referred Oilfields, ONGC also gets Crude Oil and LPG. That the part of the said Crude Oil is being refined by ONGC itself for further sale of various petroleum products like kerosene, etc. obtained therefrom and part of the Crude Oil is being directly sold to various OMCs for the purpose of refining and sale thereof. That in the present case the respondent,herein i.e. ONGC, sells kerosene and LPG, both in bulk to various OMCs, w....
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....tax exceeds 4 paise in the rupee. As per Entry No.69 for the period between 11.06.2008 to 02.10.2008 and as per Notification dated 10.06.2008 on sales of LPG for domestic use, there was an exemption for whole of the tax and as per the Notification dated 03.10.2008 as per Entry No.69 from 03.10.2008 onwards on sales of LPG for domestic use by the consumers of the State i.e. the exemption provided for whole of the tax. That as the ONGC was of the opinion that on sales of kerosene and LPG (domestic) sold to the OMCs, they are entitled to the exemption from payment of sales tax both under the Gujarat Sales Tax Act, Gujarat Value Added Tax Act as well as Central Sales Tax Act as provided under the aforesaid entries as they are forming part of the Public Distribution System and therefore, not liable to pay the sales tax, the dispute arose between the ONGC and the State Government. According to the ONGC sale of kerosene by them to OMCs falls within the meaning of the phrase "Sales of Kerosene for domestic use sold for public distribution system" and is therefore exempt from whole of tax under Entry 33 of the schedule to the notification issued under section 49(2) of the Gujarat Sales T....
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....t herein to Oil Marketing Companies falls within the meaning of the phrase "Kerosene sold through the public distribution system" and is therefore exempt from the whole of tax under Entry 53 of the notification issued under Section 5(2) of the Gujarat Value Added Tax Act, 2003, read with Section 8(1) of CST Act; and (iv) that the inter-State sales of LPG, effected by the appellant from the State of Gujarat to other States qualify for total exemption from tax only on the ground that "intra-State sales of LPG for domestic use by the consumers of the State", is exempt from whole of tax as per Entry 69 of the schedule to the exemption notification dated 31.03.2006, as amended and issued under section 5(2) of the GVAT Act. That by impugned judgment and orders the learned Tribunal has also set aside the respective penalties imposed under the relevant provisions of the Gujarat Sales Tax Act, Gujarat Value Added Tax Act, 2003 and Central Sales Tax Act referred to hereinabove. Hence, the State has preferred the present Tax Appeals to consider the following substantial questions of law. 1) Whether in the facts and circumstances of the case, the Tribunal was right in law in holding that....
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.... from the State of Gujarat to other States qualify for total exemption from tax only on the ground that "intra-State sales of LPG for domestic use by the consumers of the State", is exempt from whole of tax as per Entry 69 of the schedule to the exemption notification dated 31.03.2006, as amended and issued under section 5(2) of the GVAT Act. 8) Whether, in the facts and circumstances of the case, the Tribunal was right in law in holding that the opponent is not liable to pay any penalty under Section 9(2A) of the Central Sales Tax Act and under Section 34(12) of the Gujarat Value Added Tax Act, 2003 and the Tribunal was right in law in directing the assessing officer to rectify the assessment order for the issue relating to interest charged if there is any calculation error in charging interest as contended." [5.0] Shri Kamal B. Trivedi, learned Advocate General has appeared with Ms. Sangita Vishen, learned AGP appearing on behalf of the State and Shri N. Venkatraman, learned Senior Advocate has appeared with Shri Nitin Mehta, learned advocate on behalf of the respondent - ONGC. [6.1] Shri Kamal Trivedi, learned Advocate General appearing on behalf of the State has veheme....
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....onsidered as part of or included in the 'sale price' as per section 2(29). It is submitted that merely because the GAIL does not make payment of charges to ONGC, the very fact that ONGC gets reimbursement towards processing and transportation charges of LPG sold in bulk to GAIL. In support of his above submissions, learned Advocate General has heavily relied upon the decision of the Division Bench of this Court in ONGC vs. Commissioner of Sales Tax in Sales Reference No.3/1998. Making above submissions it is requested to answer the aforesaid substantial question of law No.1 in favour of the Revenue and against the respondent - assessee. [6.3] It is further submitted by the learned Advocate General appearing on behalf of the State that even otherwise even on merits also the learned Tribunal has committed a grave error in holding that on sale of kerosene as well as LPG by the ONGC to OMCs, there shall be exemption from payment of sales tax / value added tax / central sales tax (exceeding 14 paise a rupee) as per the relevant Entry 33 under the Gujarat Sales Act, under Entry 53 as well as Entry 53 and Entry 69 of the Gujarat Value Added Tax Act. It is vehemently submitte....
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....stribution System. It is submitted that in the present case when ONGC sells kerosene to OMCs, there is no declared price in vogue, which is clearly established by virtue of the decision of this Court in respect of the very ONGC itself, reported in (2015) 79 VST 64. It is submitted that as held by this Court in the aforesaid decision when ONGC raises invoices at the time of actual supply of petroleum products to OMCs, price indicated there was merely provisional, temporary and adhoc and always subject to finalization once the Government of India issues final directives. It is submitted that it is further held that It is this price realized which would be the sale price and not its cost price. It is submitted that when OMCs sell kerosene to dealers, i.e. fair price shop owners, the price is the declared price as per clause 2(b) of the Order, 1993, which is not the case when ONGC sells kerosene in bulk to OMCs. [6.6] It is submitted that even as per clause 2(l) of the Public Distribution System (Control) Order, 2001, 'Public Distribution System' means a system for distribution of essential commodities to ration card holders through fair price shops, such as rice, wheat, sug....
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....ate that in the present case the ONGC claims exemption in respect of kerosene under the erstwhile Entry 33 and in respect of LPG under the erstwhile Entry 70 and alternatively under Entry 173 of the Schedule to Exemption Notification issued under section 49(2) of the erstwhile Gujarat Sales Tax Act, 1969 and under Entries 53 and 69 of the Schedule to Exemption Notification under section 5(2) of the Gujarat Value Added Tax Act, 2003. It is submitted that under the applicable State Sales Tax Legislations, the tax is imposed on transaction of 'sale' and not on 'goods'. In other words, charging event of taxation under the said legislations is 'sale' of goods from one party to another. It is submited that no sooner the said charging event takes place, then the sales tax becomes payable and the said charging event in the present case is, the first 'sale' of kerosene / LPG in bulk as effected by ONGC in favour of various OMCs, which is a companytocompany sale, for the purpose of resale. It is submitted that as submitted hereinabove, the sale by ONGC in favour of OMCs is not 'in Public Distribution System' or 'for domestic use'. It is submitt....
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....also not entitled to the benefit of the aforesaid Entry 53 in respect of Kerosene sold by it in bulk to OMCs for the purpose of resale thereof, since the said sale in favour of OMCs cannot, by any stretch of imagination, be said to be sale through Public Distribution System. It is submitted that similarly, ONGC is also not entitled to the benefit of Entry 69 referred to above inasmuch as, LPG being sold by it to OMCs in bulk is for resale thereof to various dealers and distributors and not for domestic use. It is submitted that so far as Entry 173 of the Schedule to the Exemption Notification in question is concerned, the same seeks to grant full exemption from tax liability, but subject to certain conditions. It is submitted that the ONGC does not comply with the said conditions and hence, no question arises of claiming any exemption on the part of the ONGC based upon the said Entry 173. It is submitted that apart from other conditions, the ONGC does not comply with condition No.2 specified against the said Entry 173 inasmuch as OMCs being the purchasing specified companies, do not sell the goods, i.e. Kerosene and LPG purchased from ONGC, only within the State of Gujarat. It is s....
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.... exempt from tax liability under the applicable State Sales Tax law. [6.14] Now, so far as the issue with respect to the inclusion of processing and transportation charges received by ONGC as part of the sale price of LPG sold by ONGC to GAIL is concerned, Shri Trivedi, learned Advocate General has heavily relied upon the definition of 'sale' and 'sale price' in the erstwhile Gujarat Sales Tax Act. It is submitted that in the present case the ONGC claims that it is not liable to pay sales tax on the transportation and processing charges, since neither it has raised the said charges against GAIL nor does GAIL pay the said charges to ONGC. It is submitted that however, what is being lost sight is the fact of the receipt of the said charges by ONGC in respect of the goods in question before the delivery thereof and that therefore, the said charges are necessarily required to be considered as the part of or included in 'sale price' as per section 2(29). It is submitted that merely because, GAIL does not directly make payment of charges to ONGC, the very fact that ONGC gets reimbursed towards processing and transportation charges of LPG sold in bulk to GAIL. I....
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....Act and under section 38(2) of the GVAT Act. It is submitted that in the present case the ONGC was liable for the penalty inasmuch as (i) it had failed to include the amount of processing and transportation charges as a part of sale price of gas sold; (ii) it has wrongly availed of the benefit of exemption of Entries 33 and 173 with reference to sale of Kerosene to OMCs; (iii) it wrongly availed of the benefit of concessional rate of tax with reference to LPG under Entry 70 sold by it to OMCs and not for domestic purpose; (iv) it wrongly availed of the benefit of exemption under Entries 53 and 69 with reference to sale of Kerosene and LPG in bulk to OMCs, and (v) it wrongly availed of full exemption in respect of sale of Kerosene and LPG, both in bulk, to OMCs during the course of their inter-State sale of the said products inasmuch as their intraState sale of Kerosene and LPG is not exempt from payment of tax. In support of his above submissions, Shri Trivedi, learned Advocate General has heavily relied upon the decision of the Hon'ble Supreme Court in the case of Chairman, S.E.B.I. vs. Shriram Mutual Fund and Anr. reported in AIR 2006 SC 2287 (paras 21, 22, 33 to 35). M....
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....and above the service consideration. The consideration is paid wholly by the Joint Venture partners. g. It is important to submit that GAIL is not a party, even remotely to any of these arrangement and activities. Neither the Joint Venture nor the respondent had charged or billed GAIL for these services. These charges had already formed part of the sale priced fixed and billed by the Joint Venture partners as per the Production Sharing Contract terms and billed on GAIL by Joint Venture partners on which appropriate GST/VAT has been charged. h. GAIL had settled the consideration including the taxes and the taxes had appropriately been remitted to the state government." It is vehemently submitted that the Tribunal had gone into said issue in detail and had held the following: "a. The processing and transportation charges had neither been received or receivable from GAIL to whom the gas was sold. b. The respondent had not raised any invoices nor received any amounts towards transportation and processing from GAIL. c. This fact has also been confirmed by GAIL by letter dated 25.09.2009. d. The finding that respondent had recovered transportation charges is erroneou....
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....and in favour of the assessee. [7.2] It is vehemently submitted by Shri Venkatraman, learned Senior Advocate that another question that arises for consideration is, whether on supply of kerosene and LPG to the OMCs, ONGC is eligible for tax exemption, both under the Gujarat Sales Tax Act, 1969 and under the VAT Act. [7.3] It is submitted by Shri Venkatraman, learned Senior Advocate appearing on behalf of the respondent ONGC that while interpreting the respective exemption entries and considering the availability of exemption under the relevant tax exemption entries what is required to be considered is whether the ONGC while selling the kerosene and LPG can be said to be part of the Public Distribution System or not? While selling the kerosene by ONGC to OMCs, ONGC can be said to be part of the Public Distribution System, Shri Venkatraman, learned Senior Advocate appearing on behalf of the respondent - ONGC has relied upon the provisions of Order, 1993 more particularly clause 2(f) and clause 2(j). It is submitted that the said control order is issued in exercise of its powers under section 3 of the Essential Commodities Act, 1955. It is submitted that clause 2(f) defines "....
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....allocation to Petroleum Planning and Analysis Cell of Ministry of Petroleum and Natural Gas. 11. Government Oil Companies submit claims for subsidy. 12. Petroleum Planning and Analysis Cell of Ministry of Petroleum and Natural Gas submits to the Ministry for budgetary appropriation of subsidy. 13. Government Oil Companies gives end use certificate. In support of his above submission, Shri Venkatraman, learned Senior Advocate appearing on behalf of the respondent - ONGC has relied upon certain communications issued by the Ministry of Petroleum and Natural Gas to the Director General, Petroleum Planning and Analysis Cell for allocation of kerosene for public distribution for a specified quarter; State wise allocation; communication by Petroleum Planning and Analysis Cell issued to the Regional Level Coordinators and State Level Coordinators identifying the allocation of Public Distribution System kerosene for each of the oil companies; planned upliftment of PDS kerosene from each plant of the Oil Producing Companies; price circulars issued from time to time determining the price for Public Distribution System kerosene. It is submitted that the assessable value for payment....
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.... in the case of Reliance Natural Resources Limited vs. Reliance Industries Limited reported in (2010) 7 SCC 1 that while dealing with the concept of "public trust doctrine", the Hon'ble Supreme Court has held that "the plea of the entire country have a stake in natural gas and its benefit has to be shared by the whole country". It is submitted that while dealing with the Public Trust Doctrine, it is held that resources being a gift of nature, they should be made freely available to everyone irrespective of the status in life." That the doctrine enjoins upon the Government to protect the resources for the enjoyment of the general public rather than to permit their use for private ownership or commercial purposes. That the State is the Trustee of all the natural resources, which are, by nature, meant for public use and enjoyment. That the State as a Trustee is under legal duty to protect the natural resources. He has also heavily relied upon the observations made by the Hon'ble Supreme Court in paras 114 to 118 and paras 247 to 249. [7.8] It is further submitted Shri Venkatraman, learned Senior Advocate appearing on behalf of the respondent - ONGC that in the case of Oil a....
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.... (6) Both in the case of kerosene and LPG, oil marketing companies have produced end use certificates to the effect that the products are supplied for domestic use only. This aspect is not under dispute in the whole proceedings. (7) The supplies of kerosene and LPG for domestic use are governed by subsidy schemes in the form of price discount and therefore the entire transaction is monitored by MoPNG. (8) It is a constitutional obligation on the part of the State to distribute natural resources in the best possible way and to subserve the common good. (9) As part of Directive Principles of State Policy, it is a constitutional obligation on the State to interfere and influence the fixation of prices to ensure natural resources are made available at minimum prices. (10) As part of this constitutional obligation, the Government is still subsidizing the supply of these resources even after dismantling the APM and the circulars issued by the planning and policy side, evidently seeks one of the components which influences fixation and sharing of burden is the tax structure. (11) There is an involvement of three Agencies in the whole subject matter. The Core Ministry i.e. M....
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....s part of Public Distribution System and therefore, is entitled to the exemption under the Gujarat Sales Tax Act as well as under the Gujarat Value Added Tax Act. [7.10] Shri Venkatraman, learned Senior Advocate appearing on behalf of the respondent - ONGC has vehemently submitted that the basic three Rules of interpretation of exemption notifications are (a) plain or literal construction; (b) purposive or liberal construction and (c) a combination of literal construction at the threshold to find out basic eligibility followed by liberal construction in extending the benefit. It is submitted that taking into consideration the whole conspectus referred to above, the supply of Kerosene and domestic LPG would, without any difficulty, pass even the first test viz. plain or literal construction. It is submitted that expression used under the GST regime for LPG, "sale of LPG (domestic)" which means sale for domestic use. It is submitted that expression used under section 14(va) of CST Act is "Liquified Petroleum Gas for domestic use" and under the Gujarat VAT regime for LPG is "sale of LPG for domestic" use between 11.06.2008 to 02.10.2008 and "Sale of LPG for domestic use by the c....
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....of the Kerosene by OMCs for Public Distribution System, ONGC is part of the Public Distribution System and therefore, applying the plain or literal construction, the ONGC would be entitled to benefit of exemption even for sale of Kerosene through Public Distribution System under the Gujarat VAT regime. [7.11] It is alternatively submitted that if for any reason there is any doubt or ambiguity and the plain or literal construction fail, the ONGC would pass the alternative test i.e. the purposive or liberal construction. It is submitted that the Division Bench of the Karnataka High Court in the case of Bharat Petroleum Corporation Ltd. vs. State of Karnataka [Manu/KA/1374/2010] under similar circumstances has extended the exemption of tax benefits by applying the purposive construction. It is submitted that the Government of Karnataka has exempted the sale of diesel to Fishermen for use in fishing activity. It is submitted that question arose before the Karnataka High Court as to whether the exemption from Karnataka Sales Tax would also extend to the levy of cess in the absence of a separate exemption to cess and to that it is held that "when the government in order to mitigate th....
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....tate has to fulfill its constitutional obligation under the Directive Principles of State Policy, in the said decision it is held that "when distributing levy sugar, it is obligatory on the State to focus on the capacity of the purchasers in the correct perspective, bearing in mind the circumstances in which the weaker sections of the society are placed und the necessity of providing them their basic requirements in life at a fair price. When an essential commodity is required for sustenance of such people, with their meager resources, they cannot get it, unless priced less and reserved for them in larger quantity. If they are to buy at a higher price, they would be compelled to forego it, when their chance to get sugar is limited. It is all he more necessary to enable them to have it within their means or capacity. If only the aspect of capacity has been applied in this correct perspective, it would have resulted in more sugar given to them, than to the affluent people or atleast distributing it on per capita basis". Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC has also relied on the decisions of the Hon'ble Supreme Court in the case of Union of....
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....ution System and supply of LPG for domestic use both under Gujarat Sales Tax Act and Gujarat VAT Act would qualify for exemption. [7.13] Now, so far as Central Sales Tax on inter-State CST Sales of kerosene and LPG and whether on inter-State sales of kerosene and LPG there shall be exemption or not, it is vehemently submitted by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC that it is the case of the revenue that the inter-State CST sales of kerosene and LPG would not qualify for exemptions, or same rate of tax as is applicable under the GST/GVAT. It is revenue's case that, by virtue of usage of expression "domestic use" in the case of kerosene and LPG and further incorporation of the expressions "by the consumers of the state" introduced vide the notification (GHN-45) dated 3.10.2008 the benefit, if any, can be extended only to local sales within the State of Gujarat and not under CST sale. It is submitted that for this purpose reliance was placed on section 8(2), 82(A) and 8(5) of the CST Act. It is also submitted that it was contended that the notification being conditional, the benefit of the same would not be available to the ONGC. It is furt....
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....ntral Excise, Bombay reported in (1984)4 SCC 592 to demonstrate that the exemption would not mean that the entity is not liable or leviable to tax. [7.16] It is further submitted that once it is held that on a particular sale, tax is leviable under section 6 of CST Act, one has to determine the rate of tax applicable for calculating liability of tax on inter-State sales. It is submitted that section 8 deals with rate of tax on sales in the course of inter-State trade and commerce. It is further submitted that section 8(1) states that a dealer "shall be liable to pay tax under this act, which shall be 3% of his turnover or at the rate applicable to the sale or purchase of such goods inside the appropriate state under the sales tax law of that state, whichever is lower". It is further submitted that thus, section 8 mandates that for determining the rate of tax one has to consider the rate applicable to the sale under the sales tax law of that state. It is further submitted that it may be pertinent to note that section 8(1) provided for blanket applicability of the rate of tax applicable under the respective state laws and does not prescribe any condition with respect to the applic....
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....on of these words, the rate of tax on LPG for Domestic use is not altered. It has remained Nil. Therefore, the amendment in entry 69 has no effect over applicable rate of tax on local sale of LPG for domestic use. It has remained Nil. Shri Venkatraman, learned Senior Advocate has further submitted that pursuant to the exemption the rate of tax on LPG Kerosene becomes nil under GVAT and Accordingly, as per section 8(1), the rate for the purpose of calculating tax under CST Act also becomes nil/ Exempt. It is further submitted that it is pertinent to highlight that section 8(2A) existed on the statute book till it was omitted with effect from 11.05.2002. In Statement of Object and Reasons of Finance Bill, 2002, Clause 145 seeks to amend section 8 of the Central sales Tax Act‚ 1956 so as to - i. Provide for central sales tax does not become greater than local sales tax in case of Sale of goods to the Government and registered dealer; ii. Provide for exemption from centra'l sales tax in case where goods are exempt from local sales tax" Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC has further submitted that with deletion of section 8 (2....
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....inter-state sales and thus, by no stretch of imagination, can it be said that the aforesaid expression is a condition to the exemption. Making above submissions, it is vehemently submitted that the exemption available under the State clause will be applicable to inter-State sales and accordingly the exemption under respective entries of the State exemption notification would in case of kerosene and LPG would also be available to the ONGC for its inter-State sale. Making above submissions, it is requested to dismiss the present Tax Appeals and it is requested to decide the issues / substantial questions of law in favour of the ONGC and against the revenue. [8.0] In reply to the submissions made by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC, Shri Trivedi, learned Advocate General appearing on behalf of the State has vehemently submitted that none of the documents relied upon by the learned Counsel appearing on behalf of the ONGC in support of their case that ONGC can be said to be a part of Public Distribution System, suggest the said position and support the case of the ONGC. It is submitted that on the contrary considering the Order, 1993 and....
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....ate appearing on behalf of the ONGC on the communication dated 06.04.1999 by Government of India to OMCs is concerned, it is submitted by Shri Trivedi, learned Advocate General that the said communication merely suggests that ONGC will pay excise duty not on the price at which it sells its petroleum products to OMCs, but at the price at which the OMCs would sell to the buyers. It is submitted that as such an arrangement created by the Government of India for the purpose of collection of its own tax, i.e. Excise Duty, cannot and should not bind the State Government when it seeks to levy and collect Sales Tax falling within its power flowing from the Constitution of India and that too, on the happening of the taxing events of sale of Kerosene and LPG in bulk by ONGC in favour of OMCs. It is submitted that even otherwise, under ordinary circumstances, if any concession or benefit is conferred by the Government of India in respect of levy and collection of Central Taxes, in that case, the State is not enjoined to extend similar benefits in the matter of its own taxation. [8.4] Now, so far as the reliance placed upon the communication dated 20.09.2007 issued by the Government of Karn....
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....e and LPG are precious natural resources and the constitutional provision mandates to secure the benefit flowing therefrom to various sections of the society inasmuch as Article 39(b) obligates the State to direct its policies towards securing 'that the ownership and control of material resources of the community are so distributed as best to subserve common good' and that resources being a gift of nature, they should be made freely available to everyone irrespective of status in life is concerned, Shri Trivedi, learned Advocate General has vehemently submitted that the said decision shall not be applicable to the facts of the case on hand. It is submitted that the observations by the Hon'ble Supreme Court in the aforesaid decision with respect to the public trust doctrine are as such with regard to the peculiar facts of the case wherein two Ambani brothers were fighting for implementation of an MoU arrived at between them for the purpose of sharing the gas and it was in that context the Hon'ble Supreme Court made observations in para 122. It is further submitted that as such complying with the Government's directives for making available the Kerosene and LPG....
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....he power of taxation of the State, where, there is no scope for the equitable consideration to play any role. [8.7] Now, so far as the various decisions relied upon by the learned Counsel appearing on behalf of the ONGC referred to hereinabove, Shri Trivedi, learned Advocate General has vehemently submitted that none of the decisions relied upon on behalf of the ONGC would be applicable to the facts of the case on hand and/or the same shall be of any assistance in support of the case that while selling the Kerosene and LPG for domestic use to OMCs, it can be said to be part of Public Distribution System. It is submitted that principles relating to interpretation of any notification issued under nontaxing statute cannot be made applicable while interpreting a particular exemption notification issued under any taxing statute. It is submitted that at the same time no judgment with reference to facts and circumstances of a particular case can be stated to be precedent in the matter of any case having different facts and circumstances. [8.8] Now, so far as the reliance placed upon the decision of Hon'ble Supreme Court in the case of Dalmia Dadari Cement Ltd. (Supra) by Shri Ve....
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....upra) by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC is concerned, it is submitted by Shri Trivedi, learned Advocate General that an exemption was provided in respect of various parts imported 'for use' in the manufacture of picture tubes. However, importer manufacturer was denied exemption on the ground that a small percentage of imported parts were damaged in transit and could not be used to manufacture picture tubes. It is submitted that the Hon'ble Supreme Court while allowing the said exemption by relying upon the judgment of Hon'ble Supreme Court in case of Dalmia Dadari Cements Ltd. (supra) observed "according to this decision, the object of grant of exemption was only to debar those importers/manufacturers from the benefit of the Notifications, who had diverted the products imported for other purposes and had no intention to use the same for manufacture of the specified items at any stage. It is submitted that thus, the common thread running through the aforesaid two judgments is the fact of usage of goods meant for exemption by the specified party without having diverted the said goods somewhere else. It is submitted that thus,....
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.... Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of Wood Papers (P) Ltd. (Supra) by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC is concerned, Shri Trivedi, learned Advocate General has submitted that the aforesaid judgment will also not come to the rescue of ONGC in any manner inasmuch as it simply suggests that the Exemption Notification is to be interpreted strictly to determine whether the subject is covered thereby and thereafter, full play should be given to it. It is submitted that in the present case, while strictly interpreting the Exemption Notifications in question, as demonstrated hereinabove, ONGC cannot claim that its sale of Kerosene in bulk in favour of OMCs for the purpose of resale thereof being not in bulk, is for Public Distribution System or domestic purpose and hence, strictly legally speaking, ONGC does not fall within the four corners of the Exemption Notifications in question. [8.12] Now, so far as the reliance placed upon the decision of the Karnataka High Court in the case of Sri Neelakanteshwar Oil Industries vs. State of Karnataka reported in ILR 1995 KR 52 by Shri Venkatr....
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....ted that the High Court took a view that Cess payable on such sales would also stand exempted in view of there being exemption from the payment of sales tax since collection of cess is entirely dependent on the collection of sales tax. It is further submitted that the said judgment cannot be made applicable to the present case. It is further submitted that on the contrary, it should be appreciated that the way in which the Karnataka Government had issued the exemption notification providing exemption from sales tax in respect of High Speed Diesel oil sold to fishermen to mitigate their financial distress, even the State of Gujarat has provided exemption from sales tax in respect of kerosene and LPG sold for use in public distribution system and domestic purposes, respectively. [8.15] Now, so far as the reliance placed on the decision of the Hon'ble Supreme Court in the case of Oxford University Press (Supra) by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC is concerned, Shri Trivedi, learned Advocate General has submitted that in the said case, the High Court denied exemption under section 10(22) of the Income Tax Act, 1961 to Oxford University Pr....
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....y, exemption benefit of Notification No. 247/76-Cus dated 20.8.1976 was very much available to the legally imported rough diamonds and in backdrop of the said facts, the Hon'ble Supreme Court considered the question as to whether the goods that were smuggled into the country can be read within the meaning of the expression 'imported goods' for the purpose of benefit of the Exemption Notification and as to whether the decision of the Tribunal allowing the benefit of Exemption Notification referred to above in favour of the Respondent Company was legal, more particularly in view of the finding by the Hon'ble High Court of Bombay that the Respondent company had imported diamonds of foreign origin without a valid licence. It is further submitted that ultimately, the Hon'ble Supreme Court while setting aside the aforesaid decision of the Tribunal, inter-alia held that it would be antithetical to consider that 'smuggled goods' should be read within the definition of the 'imported goods' for the purpose of the Customs Act and that therefore, the Respondent company would not be entitled to the benefit of the Exemption Notification which is otherwise mean....
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....he State' and secondly, sub-section (2A) of section 8 is now no more on a statute book. It is further submitted that apart from what is mentioned herein above, one is also required to keep in mind the provision of sub-section (1A) of section 6 of the Central Sales Act, 1966, which is set out hereunder for ready reference and as per the said provision, inter-State sale of a particular commodity is liable to sales tax, eventhough, intraState sale of the very commodity is exempt from tax liability under the applicable State Sales Tax law. Making above submissions it is requested to allow the present Tax Appeals and answer the substantial questions of law in favour of the State / Revenue and against the ONGC. [9.0] In rejoinder Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC has vehemently submitted that as such the Kerosene Control Order, 1993; PDS Control Order, 2001 and PDS Kerosene and Domestic LPG Subsidy Scheme, 2002 support the case of the ONGC and would not take the supply of kerosene from the Public Distribution System. It is submitted that a plain and simple construction of the definition contained in clause 2(j) of the Control Order, 1993 ....
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....mmends plain construction when the language is clear and unambiguous. It is submitted that in the present case the definition of Public Distribution System is very clear and unambiguous and it nowhere exclude sale of kerosene by ONGC to OMCs from the purview of Public Distribution System. It is submitted that therefore as such ratio of the said judgment supports the ONGC's case. [9.4] Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of Motiram Tolaram (Supra) on behalf of the State is concerned, it is submitted by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC that said judgment states that onus is on the respondent to prove eligibility to an exemption. It is submitted that evidence on record and intention of the policymakers in unison point towards the conclusion that the sale by the respondents to the OMCs would stand exempted. [9.5] Now, so far as the reliance placed upon the decision of Basant Agrotech (Supra) on behalf of the State is concerned, it is submitted by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC that said judgment lays down the foundation principle as....
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....ase on behalf of the ONGC that even plain construction would extend the benefit. [9.9] Now, so far as the submission on behalf of the State that the ONGC is a Navratna Company and has enormous resources and any loss arising out of payment of taxes by denying exemption is a bearable loss and since the ONGC would not be burdening the ultimate consumer, an interpretation which would advance denial is permissible is concerned, it is vehemently submitted by Shri Venkatraman, learned Senior Advocate appearing on behalf of the ONGC that the said submission is ex facie not maintainable. It is submitted that interpretation of a notification can only be on the basis of an objective criteria and never on the basis of a subjective criteria. It is submitted that tools of interpretation do not recommend ability to pay to be factored as a criteria while interpreting eligibility or ineligibility. It is submitted that therefore merely because the ONGC might be a profit making company the exemption which may be available to it cannot be denied. It is further submitted that neither capacity to pay nor capacity to absorb loss, if any, has any impact or bearing in interpreting an exemption notifi....
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....GC to various OMCs. The relevant entries with respect to the exemption claimed under the Act, 1969 in respect of sale of kerosene and sale of LPG are 33, 70 and 173. The relevant entry Nos.33, 70 and 173 of the Schedule to the exemption notification issued under section 49(2) of the Act, 1969 are as under: Sr. No. Class of Sales or Purchases Exemption Whether of whole or Part of tax _________________ Ref. to Schedule Entry for goods given exemption Conditions 33. Sales of Kerosene for domestic use sold for Public distribution system. Whole of Sales Tax _________________ II A 33 Nil 70. Sales of liquefied Petroleum Gas (Domestic) To the extent to which the amount of sales tax exceeds fourteen paise in the rupee _________________ II A 123 Nil 173 Sales of petroleum products including liquefied petroleum gas, manufactured or purchased or imported from across the customs frontiers by any of the specified companies to any other specified company. Explanation: For the purpose of the entry, "specified company" shall mean, (i) Indian Oil Corporation Ltd.; (ii) Bharat Petroleum Corporation Ltd.; (iii) Hindustan Petroleum C....
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.... Nil 69 1162008 to 2102008 (GHN32) 1062008 Sales of Liquified Petroleum Gas (LPG) for domestic use. EII87 Whole of tax Nil 69 3102008 onwards (GHN45) 3102008 Sales of Liquified Petroleum Gas (LPG) for domestic use by the consumers of the state. EII87 Whole of tax Nil From the aforesaid it appears that as per the exemption notification issued under section 49(2) of the Act, 1969 and so long as the Act, 1969 was in force, on sale of kerosene for domestic use sold for Public Distribution System the whole of the sales tax was exempted and on sale of LPG (domestic) no tax exceeding the rate of 14% can be levied. From the relevant entries of the Schedule to the exemption notification issued under section 5(2) of the VAT Act, 2003, as per Entry No.53 and on and from 02.09.2006 onwards on sale of kerosene through the Public Distribution System i.e. exemption from payment of whole of the value added tax and as per Entry No.69 pre 02.10.2008 more particularly for the period between 11.06.2008 to 02.10.2008 on sale of LPG for domestic use there was an exemption from payment of whole of tax (VAT) and as per the amended Entry No.69 for the peri....
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....otification in a taxing statute. As per the catena of decisions of the Hon'ble Supreme Court when wordings in the notification are clear and unambiguous the same has to be strictly construed and one is not expected to stretch the word or to add or subtract words in order to grant or deny the benefit of exemption. As observed by the Hon'ble Supreme Court in the case of Modi Sugar Mills Ltd. (Supra), in interpreting a taxing statute, equitable considerations are entirely out of place. It is further observed and held that the Court must look squarely at the words of the statute and interpret them. It is further observed that it must interpret a taxing statute in light of what is clearly expressed; taken impart provisions in the statute so as to supply any assumed deficiency. In the case of Novapan India Ltd. (Supra) it is observed and held by the Hon'ble Supreme Court that a person invoking an exception or exemption provision to relieve him from the tax liability must establish clearly that he is covered by the said provision. It is further held that in case of doubt or ambiguity, benefit of t must go to the State. Similar view has been expressed by the Hon'ble Supreme....
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....tablished and proved that the sale of kerosene for domestic use was for public distribution system, there shall be exemption from payment of whole of the sales tax. [12.1] The phrase "for use" came to be considered by the Hon'ble Supreme Court in the case of Dalmia Dadri Cement Ltd. (Supra). While interpreting section 5(2)(a)(iv) of the Punjab General Sales Tax Act, the Hon'ble Supreme Court has observed and held that the expression "for use" must mean "intended for use". Relying upon the decision of the Hon'ble Supreme Court in the case of Dalmia Dadri Cement Ltd. (Supra), the Madhya Pradesh High Court recently in the case of Prakash Metal Crafts Industries (Supra) has also taken the view that word "for use" would mean, "intended for use". [12.2] In the present case the kerosene sold by ONGC to various OMCs is sold for ultimate public distribution system. Therefore, the sale of kerosene by the ONGC to various OMCs is as such intended for use of public distribution system. Under the circumstances and considering the decision of the Hon'ble Supreme Court in the case of Dalmia Dadri Cement Ltd. (Supra), when the kerosene is sold by the ONGC to various OMCs which....
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....emption from payment of Value Added Tax under the VAT Act, 2003 as per Entry No.53 of the Schedule to the exemption notification dated 31.03.2006. It is the case on behalf of the ONGC that the kerosene which is sold by ONGC to various OMCs would ultimately be sold to the public at large under the public distribution system and therefore, the ONGC shall be entitled to the exemption from payment of VAT Act, 2003. In support of their submissions, the learned Counsel appearing on behalf of the ONGC has heavily relied upon various documents referred to hereinabove in support of the case on behalf of the ONGC that ONGC is part of the public distribution system. The aforesaid submissions seems to be attractive but has no substance. It is required to be noted that the kerosene which is sold to the public at large under the public distribution system is altogether in a different colour (new colour) and even after the kerosene is sold by the ONGC to various OMCs, even the form of the kerosene would be changed and there shall be further process by the various OMCs. Merely because the kerosene which is sold by ONGC to various OMCs, may be ultimately used for sale of kerosene to the public at l....
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....ition for the grant of exemption as per Entry No.53, the ONGC shall not be entitled to any exemption from payment of VAT Act, 2003 as per Entry No.53 in respect to the sale of kerosene by ONGC to various OMCs. [12.5] The learned Tribunal has as such misinterpreted the Entry No.53 and has committed a grave error in holding that in respect of the sale of the kerosene by ONGC to various OMCs, the ONGC shall be entitled to the exemption from payment of VAT Act, 2003 as per Entry No.53. We are of the opinion that while interpreting the Entry No.53 under the VAT Act, 2003, the learned Tribunal has not properly appreciated the distinction between the phrase kerosene sold "through public distribution system" and kerosene sold "for public distribution system". Under the circumstances, it is held that in respect of sale of kerosene by ONGC to various OMCs, the ONGC is not entitled to the exemption claimed as per Entry No.53 and the ONGC is liable to pay the value added tax under the VAT Act, 2003, as the kerosene sold by the ONGC to various OMCs cannot be said to be kerosene sold "through public distribution system". Accordingly the substantial question of law with respect to exemption cl....
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....imed under relevant entry No.69 is concerned, at the outset it is required to be noted that Entry No.69 is required to be bifurcated into two parts with respect to different parties. As per Entry No.69, pre 02.10.2008, more particularly for the period between 11.06.2008 to 02.10.2008 in respect of sale of LPG for domestic use, there shall be exemption from payment of whole of the VAT Act, 2003. However, for the post 03.10.2008 and 03.10.2008 onwards the said Entry No.69 has been amended and it provides that in respect of sales of LPG for domestic use by the consumers of the State, there shall be exemption from payment of the whole of the tax under the VAT Act, 2003. A different phraseology and wordings have been used in Entry No.69 pre 02.10.2008 and post 03.10.2008. For pre 02.10.2008, phrase used is "for domestic use" and for post 02.10.2008, phrase and wording used are "for domestic use by the consumers of the State". On fair interpretation of Entry No.69 for different periods we are of the opinion that so far as pre 02.10.2008 in respect of sales of LPG by ONGC to various OMCs for domestic use is concerned, the ONGC shall be entitled to exemption from payment of whole of the ta....
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.... 03.10.2008 onwards in favour of the Revenue and against the ONGC. [12.8] In view of the aforesaid discussion and for the reasons stated above, even the ONGC is not entitled to exemption from tax on the inter-State sales of LPG, effected by the ONGC from the Stat of Gujarat to other States as the exemption is available on inter-State sales of LPG for domestic use by the consumers of the State only. Under the circumstances, the ONGC is liable to pay value added tax on the inter-State sales of LPG effected by the ONGC from the State of Gujarat to other States and is not exempt from more of the tax as per Entry No.16 of the Schedule to the Exemption Notification dated 31.03.2006, as amended and issued under section 5(2) of the GVAT Act. Under the circumstances, the said substantial question of law is held against the assessee and in favour of the State. [13.0] Now, so far as the levy of penalty under Section 45(2)(c) of the Act, 1969 is concerned, Section 45(2)(c) and 45(6) read as under: "45. Imposition of penalty in certain cases and bar to prosecution. (1) ... (2) if it appears to the Commissioner that such dealer. (c) has concealed the particulars of any transact....
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....nalty ½ times the difference referred to in sub-section (5). Under the circumstances, to the aforesaid extent and on the difference of tax, as per sub-section (5) of section 45, the respondent ONGC - dealer is liable to pay the penalty as mentioned under sub-section (6) of section 45. Under the circumstances, the learned Tribunal is not justified in holding that the respondent is not liable to pay any penalty under sub-section (6) of section 45 of the Act, 1969. Under the circumstances and for the reasons stated above, the substantial question of law with respect to the liability of the respondent ONGC - dealer to pay the penalty under sub-section (6) of section 45 of the Act, 1969 is held against the assessee/dealer and in favour of the State/Revenue. [13.2] Similarly, considering sub-section (12) of section 34 of the VAT Act read with section 9(2a) of the Central Sales Tax Act, 1956, the ONGC - dealer is liable to pay the penalty on the difference of the amount of tax liability in eventuality of mentioned sub-section (12) of section 34 of the VAT Act. Under the circumstances, said substantial question of law is also held against the dealer and in favour of the Revenue. ....