TaxTMI 
TaxTMI 
2017 (6) TMI 28
X X X X Extracts X X X X
X X X X Extracts X X X X
.... G.P. Coils/Strips and G.C. Sheets at its industrial unit located at Industrial Area, Sahibabad, Ghaziabad. For energising its plant, revisionist uses 'RLNG', after purchasing it from GAIL, pursuant to a Gas Sale Agreement, executed from time to time. One such agreement dated 20th February, 2013 is on record. 3. Natural Gas supplied to the revisionist by GAIL is imported. The process followed for the purpose, as detailed in this petition, is as under:- (i) Natural Gas is first liquefied at the place of origin i.e. Dahej in Qatar and termed as Liquefied Natural Gas (LNG). (ii) LNG is then transported in shipping tankers to India. (iii) LNG is re-gasified at Liquifaction Terminals near port of import, and such re-gasified 'LNG' is called 'RLNG'. (iv) RLNG is compressed at Compression Stations at/near the port of import for its transportation through pipelines; intermediate compressing stations are setup along the pipeline maintained for compression of natural gas for its transportation. (v) RLNG, a natural gas, is then supplied to revisionist at the pressure specified in the Gas Supply Agreement. Such natural gas....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....2008, as under:- "10 (a) Natural gas other than Compressed Natural Gas (CNG) when sold to registered dealer for use in the process of manufacture of any taxable goods against the certificate prescribed by the Commissioner; 10(b) Natural gas other than Compressed Natural Gas (CNG) in cases other than those described in Serial No.10(a)." The entry was again amended and categorized distinctively vide notification dated 4th March, 2008, w.e.f. 1.1.2008. Schedule IV was amended vide notification dated 29.9.2008, with retrospective effect, and Entry 10 became Entry 8. The substituted entry reads as under:- Sl. No. Name & description of goods Point of tax Rate of tax 1 2 3 4 8(a) Natural Gas when sold to an industrial unit of a registered dealer for use in the process of manufacture of taxable goods other than non­vat goods against Certificate prescribed by the Commissioner. M or 1 5% 8(b) Natural Gas when sold to registered dealer for use in the process of manufacture by an industrial unit situated in Taj Trapezium Area ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d reversed input tax credit under Section 14 of the Act of 2008, in proceedings undertaken for different periods from 2011-2012 to October, 2014. The assessee preferred a first appeal. The appellate authority remanded the matter to the assessing authority to determine question as to whether the gas supplied by GAIL to revisionist is Natural Gas other than Compressed Natural Gas (CNG), or is it 'Compressed Natural Gas (CNG)'. The first appellate authority also directed to verify from Gas Authority of India Ltd. the purpose and nature of gas supplied by it to the revisionist. Being aggrieved, the assessee preferred a second appeal before the Tribunal. Gas Authority of India Ltd. was also impleaded as a party to ascertain the nature of gas supplied by it. GAIL has submitted its stand supporting the revenue, which is on record. Tribunal has concurred with the view taken by the assessing authority and rejected assessee's second appeal. 8. Tribunal noticed that 'Compressed Natural Gas (CNG)' is not defined in the Act. 'Compressed Natural Gas or CNG' however is defined in the Petroleum and Natural Gas Regulatory Board Act, 2006 (hereinafter referred to as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....guous and open to two interpretations, the benefit is liable to be given to the subject. Learned counsel has also relied upon the judgments of the Apex Court in Polestar Electronics (P) Ltd. Vs. Additional Commissioner [1978 (1) SCC 636]; Assessing Authority-Cum-Excise and Taxation Officer, Gurgaon and another Vs. East India Cotton Mfg. Co. Ltd., Faridabad [1981 (3) SCC 531]; Mathuram Agrawal Vs. State of M.P. [1999 (8) SCC 667]; Kalyan Roller Flour Mills Pvt. Ltd. Vs. Commissioner of Commercial Taxes, A.P. [2014 (16) SCC 375]; Hansraj & Sons Vs. State of J & K [2002 (6) SCC 227], and Padma Sundra Rao (dead) and others Vs. State of T.N. and others [2002 (3) SCC 533]. 11. Reliance is also placed upon the components, which exist in the concept of tax, so as to submit that if any of the component is missing then tax would not be leviable. The legislative history is also pressed, so as to contend that entire natural gas was subsequently reclassified, so as to exclude compressed natural gas, which is a generic name given to all kinds of gases that are in compressed form. It is also argued that while interpreting an entry in a taxing statute, the provisions given in other enactments c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng parts; (i) natural gas; (ii) other than Compressed Natural Gas (CNG); (iii) sold to an industrial unit of a registered dealer; (iv) for use in the process of manufacture of taxable goods other than non-vat goods against certificate prescribed by the Commissioner. The first two parts i.e. Natural Gas and other than Compressed Natural Gas (CNG) defines the nature of product to be taxed, whereas part III deals with its user whereas part IV provides for its use. All four parts of the taxing entry have to be assigned meaning to ascertain its proper construction. User and use i.e. Part III and IV of the entry do not create much difficulty inasmuch as it specifies that the product is to be sold to an industrial unit of a registered dealer and that it must be used in the process of manufacture of taxable goods other than non-vat goods against certificate prescribed by the Commissioner. Applicability of these two parts, in this case, is not in doubt. Part I and II thus needs consideration. 15. The product sold to revisionist is natural gas other than Compressed Natural Gas (CNG). There is no issue between the parties on the proposition that 'RLNG' is a natural gas. This leaves....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(i) The RLNG gas being supplied by GAIL to BSL is under pressure/compression, and (ii) The RLNG being received by BSL from GAIL at the "Tap off and Receiving Terminal" at BSL may be called as natural gas in compressed form." 17. The reports of the experts are also to the effect that 'RLNG' supplied by GAIL to the revisionist is natural gas at a pressure above atmospheric pressure (1.0325 bar) and could be characterized as Compressed Natural Gas. The argument of learned counsel for the revisionist as also the opinion of experts clearly supports the proposition that 'RLNG' supplied to the revisionist is natural gas in compressed form. This characterization is with reference to technical attribute of the product. It is based upon scientific analysis and defines product in its technical sense. Law is however settled that while defining a taxing entry the words are not to be interpreted in its technical sense, but has to be understood in its popular sense. In Porritts and Spencers (Asia) Ltd. vs. State of Haryana [1979 (1) SCC 82], while dealing with an entry of taxing statute not defined in the Act, the Apex Court has been pleased to observe as under in p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ute is not to be construed according to the strict or technical meaning of the language contained in it, but is to be construed in its popular sense, meaning, of course, by the words ''popular sense' that which people conversant with the subject-matter with which the statute is dealing would attribute it." So also the Supreme Court of Canada said in Planters Nut and Chocolate Co. Ltd. v. King [(1951) 1 DLR 385] while interpreting the words "fruits" and ''vegetables' in the Excise Act. "They are ordinary words in every day use and are, therefore, to be construed according to their popular sense". The same rule was expressed in slightly different language by Story, J., in 200 Chests of Tea[(1824) 9 Wheaton (US) 430, 438] where the learned Judge said that: "the particular words used by the Legislature in the denomination of articles are to be understood according to the common commercial understanding of the terms used, and not in their scientific or technical sense, for the Legislature does ''not suppose our merchants to be naturalists, or geologists, or, botanists'." (emphasis supplied by me) 18. It is the use of term in commo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d denote only a soil fertiliser which could be utilised by the agriculturist for improving his agricultural yield. It is difficult to appreciate this contention. As noted earlier, the notification in terms seeks to encompass in its coverage goods of the description falling under Chapters 25, 27, 28, 29 and 31 or 32 of the Tariff Act. When there is an express reference in the notification covering the goods, amongst others, those referred to in Chapter 31 and as Chapter 31 in its turn includes chemical fertilisers, it is difficult to appreciate how despite such an express reference in the notification, the supposed common parlance test can be adopted. In fact, such was not the contention of the department even before the CEGAT or for that matter before the Assistant Collector or the Collector (Appeals). The only stand of the department was that Exemption Notification No. 40 of 1985 would not apply to ammonia as it had resulted in the final product melamine which was not a fertiliser and the intermediate product of molten urea was utilised in a continuous process of manufacture and, therefore, it must be held that ammonia was captively consumed for the purpose of manufacturing the ul....
X X X X Extracts X X X X
X X X X Extracts X X X X
....v. CCE and Customs [Hansraj Gordhandas v.CCE and Customs, AIR 1970 SC 755 : (1969) 2 SCR 253] held that: (Novopan India Ltd. case [Novopan India Ltd. v.CCE and Customs, 1994 Supp (3) SCC 606] , SCC p. 614, para 16) "16.... such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification i.e. by the plain terms of the exemption." (Hansraj Gordhandas case [Hansraj Gordhandas v.CCE and Customs, AIR 1970 SC 755 : (1969) 2 SCR 253] , AIR pp. 758-59, para 5) 17. It is a different matter that once the conditions contained in the exemption notification are satisfied and the assessee gets covered by the exemption notification, for the purpose of giving benefit notification has to be construed liberally. However, in the present case, the appellant has not been able to cross the threshold and to find entry under the Notification dated 31-3-1993 for the reasons mentioned above. There....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is descriptive of the mirror in that glass has been used as a medium for manufacturing the mirror. The basic or fundamental character of the article lies in its being a mirror. It was observed by this Court in Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan [(1980) 4 SCC 71 : 1980 SCC (Tax) 548 : AIR 1980 SC 1552 : (1980) 3 SCR 1109] which was a case under the sales tax law: (SCC pp. 75-76, para 7) "... In determining the meaning or connotation of words and expressions describing an article or commodity the turnover of which is taxed in a sales tax enactment, if there is one principle fairly well settled it is that the words or expressions must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. It is they who are concerned with it, and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted." That was also the view expressed in Geep Flashlight Industries Ltd. v. Union of India [(1985) 22 ELT 3] . Where the goods are not marketable that principle of construction is not attracted: Indian Aluminium Cables Ltd. v. Union of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bar and having regard to the provision contained in sub-section (3) of Section 5 of the Act has not been devised under the aforesaid Rules. It was under these circumstances that the respondent has furnished to his vendors form III-A which is not appropriate except in regard to purchases made for sales of undressed hides as such within the State or in the course of inter-State trade. But the mere fact that such a form has been given will not empower the State to collect or levy the sales tax/purchase tax in respect of a transaction in the course of export which satisfies the aforesaid tests prescribed by Section 5 (3) of the Central Sales Tax Act. It would be unconstitutional in view of the constitutional bar to levy tax on sales in the course of export regardless of the fact whether an appropriate form is used or not. The transactions entered into by him which are such on which sales tax/purchase tax cannot be levied on account of the constitutional bar read with sub-section (3) of Section 5 of the Central Sales Tax Act cannot become exigible to tax merely because a wrong form is used (particularly when the appropriate form has not been devised by the Rule making authority). Liabil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st cannot now be permitted to say that in common parlance 'RLNG' is Compressed Natural Gas (CNG). The Tribunal appears to be right in holding that once the assessee itself treated 'RLNG' to be natural gas other than Compressed Natural Gas (CNG) by purchasing product against Form D till October, 2014, it accepted the product as being natural gas other than Compressed Natural Gas (CNG). The authorities and the Tribunal were of the view that persons connected with the trade and industry in common parlance understood Compressed Natural Gas (CNG) as the gas supplied to energize vehicles in the transport sector. It is usually compressed between 200 bars to 250 bars and is materially distinct from natural gases supplied at much less pressure. Nothing is otherwise brought on record to show that natural gas in compressed form used for other purposes is also referred to or understood in common parlance as CNG, even when it is delivered at pressures below 10 odd bar. 24. Sri Rahul Agrawal, learned counsel for the revisionist has made sincere efforts to persuade the Court that supply of natural gas at 200-250 bars is not essential for the natural gas to be construed as CNG. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ribunal insofar as reliance was placed upon the definition of CNG given in Act of 2006. It is contended that definition of CNG given in the Act of 2006 cannot be relied upon for the purposes of interpreting Compressed Natural Gas (CNG) in the notification issued. Compressed Natural Gas (CNG) admittedly is not defined under the Act. However, Compressed Natural Gas is defined under Section 2(l) of the 2006 Act, in following words:- "2(1) compressed natural gas or CNG means natural gas used as fuel for vehicles, typically compressed to the pressure ranging from 200-250 bars in the gaseous state." Natural Gas is also defined under Section 2(za) in following words:- "(za) "natural gas" means gas obtained from bore-holes and consisting primarily of hydrocarbons and includes- (i) gas in liquid state, namely, liquefied natural gas and degasified liquefied natural gas, (ii) compressed natural gas, (iii) gas imported through transnational pipelines, including CNG or liquefied natural gas, (iv) gas recovered from gas hydrates as natural gas, (v) methane obtained from coal, seams, namely, coal bed methane, but does not inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....statutory instrument and more so when such statute or statutory instrument is not dealing with any cognate subject. Craies on Statute Law (6th Edn.) says thus and page 164: "In construing a word in an Act caution is necessary in adopting the meaning ascribed to the word in other Acts. "It would be a new terror in the construction of Acts of Parliament if we were required to limit a word to an unnatural sense because in some Act which is not incorporated or referred to such an interpretation is given to it for the purposes of that Act alone." Macbeth v. Chislett [1910] A.C. 220, 223." 5. When the word to be construed is used in a taxing statute or a notification issued thereunder it should be understood in its commercial sense. It is well known that under the law levying customs duties sometimes exemptions are given from the levy of the whole or a part of customs duty when the goods in question are sold either in the form in which they are received or in a manufactured or semi manufactured state to a manufacturing establishment for purposes of using them in manufacturing finished or semi- finished goods in order to lessen the cost of machinery or equipment employed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; in State of Uttar Pradesh. 32. It is admitted to the parties that natural gas has to be compressed for it to be transported from one place to another. The technical meaning sought to be assigned by the revisionist if is accepted, then there would hardly be any product available known as "natural gas", inasmuch as for the natural gas to be put to use it has to be transported and for such purposes, pressure above atmospheric pressure i.e. 01 bar would have to be applied. The scientific or technical interpretation, as relied upon by the revisionist, would virtually result in rendering the entry itself meaning less inasmuch as natural gas other than Compressed Natural Gas (CNG) itself would not be available to be taxed as all kinds of natural gas when delivered to end consumer would only be in compressed form and would qualify to be termed as Compressed Natural Gas (CNG). An interpretation to an entry in a taxing statute which may lead to absurd consequences must give way to an interpretation which would give a reasonable meaning to it. In Associated Cement Companies Ltd. vs. Commissioner of Customs [2001 (4) SCC 593], the Apex Court while considering the definition of "goods" occ....