Gas Authority of India Ltd. Sanjay Palace vs The Commissioner of Commercial Tax, U.P. Lko.

Sudhir Agarwal, J.—Since all these revisions, i.e., Trade Tax Revisions No. 158 of 2011, 898 of 2004 and 899 of 2004 involve common questions of law, though pertain to differing assessment years, i.e., 2000-2001, 1999-2000 and 2001-2002 respectively, therefore, have been heard together and are being decided by this common judgment.

Heard Sri Bharat Ji Agarwal, learned Senior Advocate, assisted by Sri Piyush Agarwal, learned counsel for revisionist and learned Standing Counsel for appearing for Revenue.

The following questions of law are involved in this case:

(i) Whether Section 2(h) of U.P. Tax on Entry of Goods into Local Areas Act, 2007 (hereinafter referred to as "Act, 2007) having defined the value of goods as the purchase price of such goods which paid by the importer for the purchase of such goods and the applicant having admittedly purchased natural gas from ONGC Limited, Hazaria, hence the Tribunal was not justified to uphold the imposition of entry tax on the sale price i.e. the market value of the natural gas.

(ii) Whether the entry tax being payable on the value of the goods which enters into the local area of Agra hence the applicant is liable to pay the entry tax on the purchase price which the applicant has paid to ONGC Limited for the purchase of natural gas and no entry tax can be demanded on the sale price at which the natural gas is subsequently sold by the applicant to the customers which is being illegally treated as Market value by the department?

(iii) Whether u/s 4 of Act, 2007 the entry tax at the rate of 3 per cent is to be paid on the value of the goods as defined in Section 2(h) of the Entry Tax Act, hence the market value of the goods will only be taken into account when the goods have been acquired otherwise than by way of purchase?

(iv) Whether in any view of the matter, the order passed by Tribunal confirming the imposition of tax in respect of the entry tax not on the purchase price of natural gas by the applicant but on its sale price i.e. on the market value is illegal and liable to be quashed?

In order to attract entry tax, "value of goods" as defined in Section 2(h) of U.P. Tax on Entry of Goods into Local Areas Act, 2007 (hereinafter referred to as "Act, 2007) has to be taken into account. It is contended that u/s 2(c) read with 2(h) and Section 4(1) of Act, 2007, the "value of goods" means the value of any good as ascertained from original purchase invoice or bill, but in the present case, Tribunal has taken it as the sale price, i.e., at which Assessee has sold the gas inside the State, i.e., in Agra, which is not correct.

Section 2(h) of Act, 2007 talks of "value of goods" as ascertained from the original purchase invoice or bill. The charges which can be included, include value of packing material, packing and forwarding charges, insurance charges, amounts representing excise duty, countervailing duty, custom duty and other like duties, amount of any fee or tax charged, transport charges, freight charges and any other charges relating to purchase and transport of such goods in the local area in which goods are being brought or received for consumption, use or sale therein. Therefore, all the different heads of charges which are added so as to bring the goods in local area where it has to be consumed, used or sole, only can be added but the charges incurred inside local area, if any, would not come within the term "value of goods" as defined in Section 2(h) of Act, 2007. Moreover, the "value of goods" cannot be equated or identified with the sale price of the goods, by importer within local area. The "entry of goods" visualizes three kinds of import. First one, since goods are brought in a local area from any place outside such area, theretofore, the cost of purchase outside such area and all other incidental charges incurred, to bring such goods into local area can be included in the "value of goods" but the sale price of dealer/importer to its consumers would not be treated as "value of goods", which may include charges or expenses, if any, incurred inside local area and the profit margin etc. Similar is the position in respect to rest two, where the goods are brought from outside the State into the local area or from outside the Country into a local area for consumption, use or sale. The term "consumption, use or sale in a local area" has been used for the purpose of considering territorial jurisdiction of ''local area'' at which point the ''entry tax'' would be chargeable and not for any other purpose.

In my view, the decision rendered by Apex Court in State of Karnataka and Another Vs. Hansa Corporation, would be helpful in the present case wherein the Court referring to a pari materia provision, i.e. Section 3 of Karnataka Tax on Entry Goods into Local Areas for Consumption, Use or Sale therein Act, 1979, said:

The taxing event is the entry of scheduled goods into a local area. The tax becomes payable on the entry of scheduled goods in a local area. Therefore, the price of the scheduled goods at the time of entry paid by the dealer who is the importer of goods within the scheduled area would be the ad valorem price on the basis of which tax would be computed. No subsequent rise or fall in price has any relevance to the computation of the tax. The charging section says that the tax shall be levied and collected on the entry of scheduled goods in a local area at specified percentage not exceeding two per cent ad valorem. Therefore, the price of the scheduled goods at the time when the tax becomes chargeable irrespective of the fact that it would be computed at a later date when the dealer submits his return as required by the other provisions of the Act, would be the price for computation of tax. And there is no ambiguity or any vagueness in this behalf. There is thus specific guideline in the charging section itself for taking into account the price according to which tax would be computed. The High Court negatived this contention by observing that it would be open to the dealer to choose either the sale price or the purchase price whichever is favourable to him for computation of his liability to tax. This approach overlooks the specific language of s. 3 which clearly indicates what price is to be taken into account for computing the tax. When the goods are brought within the local area they have a certain price. The price may be the price which the importer of goods has paid before bringing the goods within the local area. Even if the dealer is the manufacturer of goods at a place outside the local area and brings the goods within the local area he must have determined the price of the goods. Therefore, the dealer has some specific price of the scheduled goods which are being brought within the local area at the time of entry in the local area and the entry being the taxing event that would be the price which alone can be taken into account for computing the tax ad valorem.

The above observations are attracted squarely in the present case also. In view of the above discussion, otherwise view taken by Tribunal is clearly erroneous and unsustainable. The questions formulated above, therefore are answered by observing that the expenses incurred, if any, by revisionist-assessee after transporting the goods inside the local area where it has to be consumed, used or sold, would not be a part of "value of goods" for the purpose of tax liability under Act, 2007, but it shall confine upto the stage where the goods are brought inside the local area. In other words, ''sale price'' of the goods by importer, inside the local area, cannot be identified as "value of goods" under Act, 2007. The price on which the goods are sold by revisionist-assessee to its ultimate consumers inside local area, therefore, cannot be taken as "value of goods" for the purpose of taxability under Act, 2007.

In the result, all Revisions are allowed. The orders passed by Tribunal, impugned in these Revisions, are set aside. Matter is remanded to Tribunal to pass a fresh order in accordance with law.