TaxTMI 
TaxTMI 
2017 (6) TMI 28
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....ustrial 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 is used for generation of electricity consumed for manufacturing different specie....
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....ture 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 against Certificate prescribed by the M or 1 5% 8(c) Commissioner. Natural Gas in cases other than those described in Serial no.8(a) & 8(b). M or 1 21% With effect from 4.3.2008 aforesaid notification was again amended to re-classify items in fol....
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....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 the 'Act of 2006'), under section 2(l) to mean natural gas used as fuel for vehicles, typically compressed to the pressure ranging from 200 to 250 bars in the gaseous state. Tribunal relied upon the definition given in 2006 Act while rejecting revisionist's contention that gas supplied to it is Compressed Natural Gas (CNG). Reliance upon the opinion of experts furnished for the purpose, according to which 'RLNG' supplied by GAIL to revisionist is natural gas supplied at 06 bars i.e. above atmospheric pressure of 01 bar....
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....ns 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 cannot be relied upon. The revisionist further contends that common parlance test has wrongly been relied upon by the tribunal in the facts of the present case, and that the concept itself has no applicability, in view of the observations made by the Apex Court in Gujarat State Fertilizers Company Vs. Collector of Central Excise [1997 (4) SCC 140]. The submission is that the tribunal has erred in relying upon the definition given in Act of 2006, so as to hold 'RLNG' as not being Compressed Natural Gas (CNG) so as to reverse the input t....
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....onstruction. 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 us with the other part i.e. natural gas must be other than Compressed Natural Gas (CNG). 16. Revisionist contends that natural gas remains in uncompressed form only at atmospheric pressure which is 01 bar. It is admitted that natural gas has to be compressed for carrying it from one place to another. Compression, therefore, has to be applied for natural gas to be transported by pipeline from one place to another. It is also admitted that 'RLNG' is supplied to the revisionist by GAIL at a pressure between 5 to 7 bars, which is in compressed ....
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....e 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 para 3 and 4:- "3. Now, the word "textiles" is not defined in the Act, but it is well settled as a result of several decisions of this Court, of which we may mention only a few, namely, Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola [AIR 1961 SC 1325 : (1962) 1 SCR 279 : (1961) 12 STC 286] and Motipur Jamindary Co. (P) Ltd. v. State of Bihar [AIR 1962 SC 660 : 1962 Supp 1 SCR 498 : (1962) 13 STC 1] and State of West Bengal v. Washi Ahmed [(1977) 2 SCC 246 : 1977 SCC (Tax) 278 : (1977) 3 SCR 149] that in a taxing statute words of every day use must be construed not in their scientific or technical sen....
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....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 common parlance which would be relevant. The trade or a commercial meaning or the end user test would be relevant while interpreting a taxing entry. [See: Mauri Yeast India Company Ltd. vs. State of U.P., 2008 (5) SCC 680]. It can safely be presumed that when notification was issued by the State, specifying the taxing entry, a distinct kind of natural gas was intended to be excluded from natural gas. The scientific or technical attribute of the product may have relevance for academic purposes, but for the taxing statute the exclusionary part of the natural gas would have to be construed as a distinct entity understood in its popular sense or common parlance. A definite ....
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.... 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 ultimate product of melamine and not molten urea. On the express language of the notifications, in question, it is not possible to agree with the contention of Shri Bhat, learned Additional Solicitor General that the term "fertiliser" employed by the said notification must be understood by adopting the common parlance test to be referring to soil fertiliser only." Learned counsel has also urged that since entry in the notification is sufficiently clear as such common parlance test cannot be pressed. This submission, however, cannot be accepted. Judgment in Gujarat State Fertilizers Co. (supra) dealt with an exemption notification. Parameters to interpret an exemption notificat....
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....0 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. Therefore, we have no option but to hold that the appellant was not entitled to exemption from entry tax." 20. It is the common parlance test which is of vital significance in a fiscal statute for interpreting a taxing entry where it is not defined. The exclusionary part i.e. Compressed Natural Gas (CNG) has not been defined in the notification and other parts of the entry which deals with the subject or its use would not be helpful in interpreting the exclusionary part. The common parlance test therefore would be the reliable and safe guide to understand import of the exclusionary part used in the entry. In Atul Glass Pvt. Ltd. vs. Collector of Central Excise [1986 (3) SCC 480], while elucidating common parlan....
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.... 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 India [(1985) 3 SCC 284 : 1985 SCC (Tax) 383] . The question whether thermometers, lactometers, syringes, eyewash glasses and measuring glasses could be described as "glassware" for the purpose of the Orissa Sales Tax Act, 1947 was answered by the Orissa High Court in State of Orissa v Janta Medical Stores [(1976) 37 STC 33 (Ori)] in the negative. To the same effect is the decision of this Court in Indo International Industries v. CST, Uttar Pradesh [(1981) 2 SCC 528 : 1981 SCC (Tax) 130 : AIR 1981 SC 1079 : (1981) 3 SCR 294] where hypodermic clinical syringes were regarded as falling more accurately under the entry relating to "hospital equipment and apparatus" rather than under the entry which related to "glasswares" in the UP ....
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....se 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). Liability for tax in respect of such transactions cannot be fastened on the respondent for the very good reason that the State has no power to collect or levy sales tax/purchase tax on such transactions. The U.P. Sales Tax authorities should have devised an appropriate form in this behalf. They can do so even now (as has been done under the Delhi Sales Tax Act by prescribing Form 49 to meet such a situation). Learned counsel for the appellant submits that till such a form is prescribed the respondent who claims to have entered into these transactions in the course of export as defined by sub-section (3) of Section 5 of the Act may furnish to his vendor a copy of Form-H as provided by the Central Sales Tax Act, 1956. The respondent has no objectio....
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....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. It is contended that before combustion, the CNG is significantly compressed and that an automobile vehicle receives CNG at different pressures at different places. It is contended that drop in pressure level of 200-250 bar does not render the gas something other than CNG. For the purposes, learned counsel has relied upon Regulation 110 of The Economic Commission for Europe of the United Nations (UNECE), published in the Official Journal of European Union (2015- L166) as an international standard on 30.6.2015. Learned counsel with reference to section 3 thereof submits that different parts of the vehicle receives gas at different pressure and that there are parts where gas is received at much lesser pressure. Bureau of Indian Standards also publ....
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.... 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 include helium occurring in association with such hydrocarbons;" 27. The tribunal has taken into consideration definition of compressed natural gas in the 2006 Act also for arriving at a conclusion that compressed natural gas is such gas, which is compressed to the pressure ranging from 200-250 bars in the gaseous state. According to Tribunal, such definition could be relied upon to ascertain the nature of commodity, which is required to be taxed. 28. Learned counsel for the revisionist contends that definition given in a different taxing statute could not be relied upon for imposing tax under a different fiscal statute. Reliance is placed upon judgments delivered in M/s MSCO Pvt. Ltd. vs. Union of India and others, [1985 (1) SCC 51], M/s Annapurna Carbon Industries Co vs. State of A.P. [1976 (2) SCC 273....
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....m 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 in or raw materials used by such manufacturing establishment. The object of granting such exemption is to give encouragement to factories or establishments which carry on manufacturing business. The appellant, however, relies upon the meaning assigned to the word 'industry' in the Industrial Disputes Act, 1947 in support of its case. The expression 'industry' is no doubt given a very wide definition in section 2 (j) of the Industrial Disputes Act, 1947. It reads thus: "2 (j) 'industry' means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen."" 30. I find substance in the objection of the revisionist that definition of a term given in a different taxing statute ordinarily cannot be ma....
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....atural 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" occurring in section 2(22) of the Customs Act, made following observations in para 24:- "24. According to Section 12 of the Customs Act, duty is payable on goods imported into India. The word "goods" has been defined in Section 2(22) of the Customs Act and it includes in sub-clause (c) "baggage" and sub-clause (e) "any other kind of movable property". It is clear from mere reading of the said provision that any immovable article brought into India by a passenger as part of his baggage can make him liable to pay customs duty as per the Customs Tariff Act. An item which does not fall within sub-clauses (a), (b), (c) or (d) of Section 2(22) will be regarded as coming under Section 2(22) (e). Even though the definition of the goods purports to be an exclusive one, in effect it is so worded that all tangible movable articles will be the goods for the purposes of....