TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 715
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....y to the Government of India and its nominees. As per letter dated 24-3- 2009 emanating from the Ministry of Petroleum and Natural Gas, Government of India, it initially nominated Mangalore Refinery and Petrochemicals Limited (MRPL), HPCL, and IOCL for lifting purchase of crude oil extracted by the petitioner from RJ-ON-90/1 Barmer. Production of crude oil started at the Mangla field of (RJON- 90/1 in district Barmer, Rajasthan) (hereinafter 'the Barmer Oil Fields) on 29-8-2009. Since then Essar oil, Reliance Industries etc. have also been nominated by the Government of India to buy crude oil from the petitioner produced at the Barmer fields. The petitioner entered into a memorandum of understanding in respect of crude oil produced in the Barmer Oil Fields with MRPL on 5-8-2009. Under the modus operandi, then obtaining, crude oil produced by the petitioner company and sold to the nominees of the Government of India was dispatched in heated insulated via road tankers from the Barmer Oil Fields to Kandla (coastal area in Gujarat) where it was stored in tanks (heated chambers) wherefrom it was thereafter loaded onto oil tankers(coastal heated tanker) for being further carried to Mang....
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.... by the Central Government. Vide letter dated 23-1-2009, the Chief counsel of the petitioner informed the Director, Petroleum Government of Rajasthan that arrangement, as required, pertaining to crude oil off take in Rajasthan would be incorporated in the COSAs with the buyers to ensure that point of sale of crude oil would remain in Rajasthan. The point of sale of the crude oil having been stated to remain in Rajasthan, the petitioner was then concerned with certain reports in the vernacular press that respondent state was seeking to impose Value Added Tax (VAT) at the rate of 4% then prevailing treating the sale of crude oil from the Barmer Oil Fields as a local sale (Intra State Sale) instead of an inter state sale-as it palpably was, on which the then extant CST @ 2% against C-form was leviable. A letter dated 8- 6-2009 in this regard followed from the petitioner to the Principal Secretary, Mines and Petroleum, Government of Rajasthan expressing its apprehension at the potential levy of VAT @ 4% treating the sale of crude oil to the Central Government's nominated buyers out side the state as local sales. It was stated that the uncertainty occasioned by the vernacular press rep....
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....quired MRPL, HPCL, IOCL to whom crude was to be sold as nominees of the Central Government under the PSC to set up Rajasthan office and get themselves registered as dealers in the State of Rajasthan. They had however refused to so do, in view of the fact that the transaction of sale of crude oil was clearly an inter state sale exigible only to CST for which they were not required to be registered as dealer/s in State of Rajasthan under the RVAT Act, 2003. Be as it may, vide letter dated 29-7-2009, the Deputy Secretary, Finance, Government of Rajasthan reiterated the State Government's stand that in view of the undertaking of the petitioner to have the point of sale for the crude oil produced at the Barmer Oil Fields in Rajasthan, the said sale with invoicing and the transfer of title of goods in the State of Rajasthan, (as alleged) was an intra state sale and hence liable to Rajasthan VAT at the rate of 4% advolerum. Disagreement on the nature of sale transactions between the petitioner and the respondent State ongoing, the petitioner company having in the meantime commenced production of crude oil in the Barmer Oil Fields under PSC dated 15-5-1995 entered into a MOU dated 5-8-20....
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....ice dated 23-9-2009. In the circumstances, the petitioner filed a determination application before the Commissioner, Commercial Tax Department. It was stated that the sale of crude oil from the Barmer Oil Fields to the nominees of Government of India, in that case MRPL with refinery situate outside state of Rajasthan-in the State of Karnataka, could in no circumstance be construed as an intra state sale but was clearly an inter state sale not exigible to RVAT @ 4% advoleum or at all, as sought to be levied but only to CST @ 2% against 'C'-form. It was submitted that the sale of crude oil to refineries nominated by the Central Government under the PSC with their refineries outside the State of Rajasthan was an obvious inter state sale on the implied but necessary condition that the crude oil in issue was to resultantly moved out of the State of Rajasthan. Hence the sale partook the character of an inter state sale under Section 3(a) of the Act of 1963. It was pointed out that at no point of time MRPL had any place of business in State of Rajasthan before or after purchasing the crude from Barmer Oil Fields. It was stated that even otherwise as per the MOU between the petitioner and ....
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....ovement of goods outside the State of Rajasthan as part of as continuous seamless and unbroken transaction. The defence to the writ petition as reflected in the reply primarily is that in view of undertaking of the petitioner under its letter dated 23-10-2008, as also indicated in the letter of 23-1- 2009 addressed to the then Chief Minister Rajasthan and subsequent communications on the issue, the sale of crude oil by the petitioner to the various nominees of the Central Government is a local sale. It has been asserted that delivery of the crude oil sold to MRPL was also at Barmer in view of the delivery point set out in clause 19.4 of the PSC dated 15-5-1995 which was at the relevant time the outlet flange of the petitioner at its delivery facility at Barmer. A completed sale as defined in Section 2(38) of the RVAT Act, 2003 thus obtained in the State of Rajasthan, and therefore, levy of RVAT @ 4% advolerum on the sale transaction was appropriate. It was submitted that the whole case set up by the petitioner seeking to treat the sale of crude to various nominees of the Government of India, albeit situate outside Rajasthan, as an inter state sale is nothing but an after thought t....
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....able under Section 83 of the Act of 2003, and therefore the petitioner has an alternative remedy for reason of which this court should eschew exercising its jurisdiction under Article 226 of the Constitution of India. The doctrine of promissory estoppel has also been pressed. It was submitted that petitioner had made a commitment by way of its undertaking dated 23-10-2008 to the Government of Rajasthan that the point of sale of the crude shall be in the State of Rajasthan such that the State would suffer no loss of revenue. It was submitted that for establishing the petitioner's project for excavation of crude oil from the Barmer Oil fields, the government provided the company land admeasuring over 8000 Bighas. Further the Right to Use (ROU) over hundred of acres of land was granted to the petitioner to lay the pipeline to Bhogat, Gujarat on the representation that the point of sale of crude oil produced would be at Barmer. The State of Rajasthan having thus facilitated the establishment of project of the petitioner at Barmer at enormous cost, the State cannot be denuded of its rights of collecting due tax under RVAT Act, 2003 on the transaction. It has been submitted that in the ....
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....nconceivable in the state of settled law. It was submitted that the law declared by the Apex Court is that even if the point of sale and delivery is in a state, but the sale occasions movement of goods out of the state, as a part of one seamless unbroken transaction, it would be an inter state sale and not a local sale. In the instant case all quantities of crude oil under contract of sale with the buyers even with the point of sale in Rajasthan, as a necessary incident occasioned the movement of good, purchased, outside the State of Rajasthan in view of undisputed fact that there is no refinery in the State of Rajasthan for processing the crude oil. The respondent State itself has in fact at all times been aware that crude oil produced at the Barmer Oil Fields and sold to the nominees of the Central Government would be as a consequence moved to the refineries outside the State of Rajasthan for being processed. It was submitted that under Article 265 of the Constitution of India no tax can be levied or collected without authority of law, and this also excludes the collection of taxes on the ground of a purported agreement/ undertaking-absent any statutory foundation for the levy in....
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....circumstances it was concluded that (i) state sales tax/ VAT would accrue to Rajasthan government in case the sale of crude oil is made for further processing within Rajasthan but (ii) CST would accrue to Rajasthan if the sale is made in Rajasthan but occasions the need to be necessarily moved to another State for refining. Response of Prem Singh Mehra to aforesaid letter as reflected in his affidavit is quite evasive and untenable. What is lopsidedly and wrongly emphasized by him in the aforesaid letter is the point of sale only overlooking the conjunctive requirement of looking as to whether the sale occasioned the movement of goods outside the State. The Principal Secretary Finance with all the legal paraphernalia as his disposal was expected to be more forthright in assisting the court. This unfortunately is not the case. CONTENTIONS: Mr. A.R. Madhav appearing with Mr. Sameer Jain on behalf of the petitioner has submitted that, under Clause 1.23 of the PSC, the point of delivery was to be the one identified by the Central Government. Initially this was the point at which the crude oil reached the outlet flange of the delivery facility of the petitioner at Barmer. Subsequentl....
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....of inter state sales. The undertaking of the petitioner was never accompanied by any commitment whatsoever on the issue of delivery point for the crude oil sold. Clause 1.23 of the PSC made it the prerogative of the Central Government to fix the different/ multiple delivery points for sale of crude oil produced in Barmer. Mr. Madhav Rao emphatically pointed out that it is inconceivable that subsequent to the Central Government deciding on 30-4-2008 that the delivery point would be at Salaya, Gujarat outside the state of Rajasthan, the petitioner could have submitted an undertaking contrary thereto on 23-10- 2008 and committed to ensuring that the delivery point for sale of crude oil from Barmer would be in the State of Rajasthan. It was submitted that the undertaking given by the petitioner on 23-10- 2008 to the State of Rajasthan and other correspondences on the subject with regard to point of sale being in Rajasthan has only entailed that crude oil would be appropriated by the nominated buyers of Government of India at Barmer and nothing more. Thereafter in terms of delivery points determined by the Central Government and governing MOU/ COSAs, the crude oil moves out of the State....
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....e as to whether the sale in issue occasioned the movement of goods from one state to another. It was submitted that in the circumstances, the crude oil produced by the petitioner at the Barmer oil fields, admittedly not capable of being utilised in state of Rajasthan as no refinery obtains for the purpose in state of Rajasthan, admittedly moved consequent to its sale outside the state of Rajasthan to Gujarat and Karnataka. This nature of the transaction thus partakes the character of an inter state sale. Even section 4 of the CST Act, 1956 which lays down when a sale can be said to have taken place in a state makes it subject to the provision of Section 3 of the CST Act, 1956. Mr. Madhav Rao then submitted that the issue in the writ petition also engaged the attention of the Ministry of Finance, Government of India wherein it was categorically stated as reflected in its letter dated 10-9-2009 that the sale of crude oil at Barmer to nominees of the Central Government for being processed by Refineries situate out side the state of Rajasthan would be an inter state sale. On the impugned order dated 9-2-2012 passed by the Additional Commissioner VAT & IT on the determination applicati....
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....e between the petitioner and MRPL being an intra state sale, is one of fact that brooks no interference at the hands of this court in exercise of its jurisdiction under Article 226 of the Constitution of India. It was submitted that the impugned order dated 9-2-2012 passed by the Additional Commissioner VAT & IT suffers from no error of jurisdiction, perversity or patent error of law apparent on the face of record, and therefore the petitioner be relegated to its alternative remedy of an appeal under Section 83 of the RVAT Act, 2003 thereagainst. It was submitted that under RVAT Act, 2003 it is the point of sale which is the incident of taxation and in the instant case as per the petitioner's own undertaking under letter dated 23-10-2008 and the subsequent letter dated 7-1-2009 the point of sale of crude oil produced in Barmer is the state of Rajasthan. Consequently the petitioner having admitted to the point of sale at Barmer, where the sale invoices are also drawn would be liable to pay VAT @ 4% on the transaction in respect of which show cause notice dated 15-9-2009 and letters dated 22-6-2009 and 29-7-2009 had been issued. Reliance has been placed on the judgment in case of Bal....
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....nd before this court which exercises equitable extraordinary jurisdiction under Article 226 of the Constitution of India. Reference in support of the contention has been made to the judgments in case of Union of India Vs. Godfrey Philips India Limited [(1985)4 SCC 369] and Kanishka Trading Vs. Union of India [(1995)1 SCC 274]. In respect of the Secretary, MOPNG, Central Government letter dated 18-8-2009 addressed to the Chief Secretary Government of Rajasthan it was first submitted that the said letter not being part of pleadings should not be taken into consideration. The further submission was that the opinion is general in nature without regard to the terms and conditions of COSAs entered by the petitioner with different buyers nominated by the Central Government for purchase of crude oil from Barmer oil fields facility or the petitioner's undertaking of 23-10-2008 and 7-1-2009 and the Director of MOPNG's letter dated 14-1-2009 stating that no loss of revenue would accrue to the State of Rajasthan from the change in the delivery point from Barmer to Salaya/ Bhogat, etc. Even while it is admitted that the opinion by the Secretary, MOPNG conveyed to the Chief Secretary of Govern....
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....maintainable. Further, this writ petition also agitates the case that the determination of sale transaction of petitioner company with regard to crude oil produced at Barmer Oil fields as a local sale by the Additional Commissioner VAT & IT under the impugned order dated 9-2-2012 is in cross hairs of multiple decisions of the Apex Court as to what constitutes in an inter-state sale and aside of being perverse the impugned order dated 9-2-2012 is also contumacious in deliberately not following the mandate of law as determined by the Apex Court. The Apex Court in the case of State of U.P. versus Mohammad Nooh [(1958)1 SCR 595], Ram and Shyam Company vs. State of Haryana [(1985)3 SCC 267] has held that where the order impugned is stated to be illegal, invalid or being contrary to settled law a petition at the instance of aggrieved party would lie before the jurisdictional High Court under Article 226 of the Constitution of India and such a petition ought not to be rejected on the ground of an alternative remedy of a Statutory Appeal. So to in Hyderabad Engineering ltd. vs State of A.P. [(2011)4 SCC 705], Oil India ltd. vs The Superintendent of Taxes [(1975)1 SCC 733], D.C.M. Ltd vs Co....
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....true that the petitioner undertook under letter dated 23-10-2008 and 7-1-2009 to ensure that point of sale would be the State of Rajasthan. This position was also recognized by the Central Government in its letter dated 18-8- 2009. But it is not at all in dispute that the crude oil excavated at the Barmer Oil fields and sold to nominees of the Central Government such as MRPL, IOCL etc. cannot be processed in State of Rajasthan for the reason that none of the nominees, who purchase the crude oil have their refineries in State of Rajasthan and for the purpose of refining the crude oil purchased to various petroleum products the crude oil has to be as of necessity and known to all concerned moves outside the State of Rajasthan occasioned by the sale. The MOU dated 5-8-2008 between the petitioner and MRPL in fact prohibits resale or use of the crude oil not only in Rajasthan but also in Gujarat and mandates it being moved out of the two states. From the facts on record it transpires that the State of Rajasthan has at all times being conscious of the fact that crude oil produced at Barmer Oil fields in the absence of refinery in State of Rajasthan would be utilized out of the State of R....
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.... regarding inter-state movement of goods; (ii) the goods must actually move from one state to another pursuant to such contract of sale, the sale being the proximate cause of movement; and (iii) such movement of goods must be from one state to another state where the sale concludes. Similarly in the instant case, after excavation of crude oil by the petitioner from Barmer Oil Fields and its sale at the delivery points identified by the Central Government the goods move in a seamless unbroken transaction through heated pipelines to the nominated buyers MRPL etc. at their refineries situate in Gujarat and Karnataka, so to when the sale to MRPL was at the Delivery Point Barmer where the sale occasioned the movement of goods to Karnataka via Gujarat by road and steamer. In the circumstances, the ingredients of inter state sale are fully made out and it cannot be held that the sale of Barmer Crude oil by the petitioner to the nominees of the Central Government-all with refineries outside the State of Rajasthan is an intra state sale. The defence of the respondent State to the writ petition overlooks the fundamental aspect of sale transaction between the petitioner and nominated buyers....