Oil and Natural Gas Commission vs Commissioner of Sales Tax

@

Mukesh R. Shah, J.—The present sales tax reference is made by the Gujarat Sales Tax Tribunal at the instance of the applicant-M/s. Oil & Natural Gas Commission, Vadodara, under section 69 of the Gujarat Sales Tax Act, 1969 (hereinafter, referred to as "the Act"), to consider and answer the following questions for our opinion:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the amount of ''transportation charges'' (as discussed in the Statement of the case) from part of the turnover of sale assessable to tax under the Gujarat Sales Tax Act, 1969, for the assessment years 1977-78, 1978-79 and 1979-80?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal is right in holding that the provision relating to interest under section 47(4A) of the Gujarat Sales Tax Act, 1969, was rightly invoked in the assessment of the year 1979-80 by the sale tax authorities in respect of the amount relating to the price difference applicable to the year 1979-80?"

The dispute is with respect to the assessment years 1977-78, 1978-79 and 1979-80. That the assessee-ONGC, a Government of India undertaking and a registered dealer under the provisions of the Act, submitted a consolidated return under the registration certificate held for Ahmedabad, and therefore, was being assessed by the Sales Tax Officer, Ahmedabad. That the assessee was assessed by the Assistant Commissioner, Sales Tax, Ahmedabad, under the provisions of section 46A of the Act, relating to the aforesaid assessment years. That during the assessment year 1977-78, the Sales Tax Officer, in the draft assessment order, proposed to charge extra tax and interest of Rs. 53,48,063. Objections were invited, as required under the provisions of the law, and the assessee filed the same. At that time, the assessee disputed the levy of tax in respect of transportation charges through pipeline of crude oil that was sold by the assessee to its sole purchaser, i.e., the Indian Oil Corporation. The assessee also objected to the charging of interest under section 47(4A) of the Act, in respect of the ad hoc payment made on account of sanction of higher rate of gas by the Government of India in respect of the adjustment of Rs. 24,35,432, which were paid in excess in the year 1976-77 and which adjustment was allowed to be made by a refund payment order. The learned Assistant Commissioner did not accept any of the contention on the aforesaid points and passed the order of assessment as proposed by the Sale Tax Officer. The AO levied tax in respect of the transportation charges through pipeline of crude oil that was sold by the assessee to its sole purchaser-IOC. The assessee was also levied interest under section 47(4A) of the Act, in respect of the ad hoc payment made on behalf of sanctioned higher rate of gas by the Government of India, accordingly.

Feeling aggrieved and dissatisfied with the assessment orders passed by the AO, the applicant preferred appeal before the Deputy Commissioner of Sales Tax, Ahmedabad. The Deputy Commissioner, i.e., the first appellate authority, confirmed the tax imposed on transport charges.

Feeling aggrieved and dissatisfied with the aforesaid, the applicant preferred revision being Revision Application No. 52 of 1988, against the order passed by the Sales Tax Officer. The Sales Tax Officer had proposed to charge interest under section 47(4A) of the Act for late payment of tax on the ground that certain ad hoc payments were made by the assessee on the ground of subsequent price-increase by the Government of India. The assessee, therefore, preferred first appeal, and thereafter, the revision before the Tribunal. That the learned Tribunal relied upon a decision of the honourable Supreme Court in Hindusthan Sugar Mills Vs. State of Rajasthan and Others, , and held against the applicant, observing that the transport charges through pipeline of crude oil that was sold to sole purchaser, i.e., IOC, shall be forming part of the "sale price", and therefore, the applicant-ONGC would be liable to pay the sales tax on the same.

Now, so far as the imposition of interest under section 47(4A) of the Act is concerned, considering the provisions of the said section, the learned Tribunal has also held the same against the applicant, observing that the applicant is liable to pay the interest under section 47(4A) of the Act, in respect of the amount from September 14, 1981, i.e., the date on which the Government of India revised the prices and the learned Tribunal rejected the contention/submission on behalf of the applicant that they were liable to pay the interest under section 47(4A) from the date on which the IOC made the payment to them, i.e., May 6, 1982. Thereafter, at the instance of the applicant-ONGC, the learned Tribunal has referred the aforesaid questions to this court for its opinion under section 69 of the Act.

Now, so far as question No. 1 is concerned, i.e., whether on the facts and in the circumstances of the case, the Tribunal is right in holding that the amount of "transportation charges" (as discussed in the Statement of the case) forms part of the turnover of sale assessable to tax under the Gujarat Sales Tax Act, 1969, for the assessment years 1977-78, 1978-79 and 1979-80, Shri Kaji, learned advocate appearing on behalf of the applicant, has vehemently submitted that the definition of "sale price" contained in section 2(29) of the Act does not include freight or the transportation charges. It is, further, submitted by Shri Kaji that as per the definition of "sale price", defined under section 2(29) of the Act, "sale price" includes amount of consideration paid or payable to dealer for any sale made including any sum charged for anything done by the dealer in respect of the goods at the time or before the sale thereof. It is submitted that, therefore, in the definition of "sale price" under section 2(29) of the Act, there is no specific inclusion of freight and/or transport charges. Shri Kaji, learned advocate, has tried to distinguish the decision of the honourable Supreme Court in Hindusthan Sugar Mills Vs. State of Rajasthan and Others, and has relied upon another decision of the honourable Supreme Court in Hyderabad Asbestos Cement Products Ltd. Vs. State of Andhra Pradesh, .

Making the above submissions, it is requested that question No. 1 be answered in favour of the applicant and against the Revenue.

As against this, Shri Jaymin Gandhi, learned Additional Government Pleader, appearing on behalf of the respondent-State, has vehemently submitted that so far as question No. 1 referred to this court is concerned, the same is squarely covered by the decision of the honourable Supreme Court in the case of Hindusthan Sugar Mills Vs. State of Rajasthan and Others, . It is submitted that, as such, it is not in dispute that the applicant received amount of transportation charges from the IOC. It is submitted that, therefore, whatever is received by the applicant-ONGC from the IOC, the same was required to be included in the "sale price", and therefore, it is rightly included in the "sale price" and consequently, the AO has rightly taxed the applicant on the said amount also. Therefore, it is requested to answer the question No. 1 against the applicant-assessee and in favour of the Revenue.

Now, so far as question No. 2 with respect to the charging of interest under section 47(4A) of the Act on the amount of ad hoc payment made on the ground of sanction of higher rate of gas by the Government of India in respect of the adjustment of Rs. 24,35,432, which were paid in excess in the year 1976-77 and which adjustment was allowed to be made by a refund payment order, it is submitted by Shri Kaji, that as such, at the time when the applicant filed returns for the relevant years, they paid the tax on the amount which they had received from the IOC. However, subsequently, the Government of India revised the rate of supply of gas on September 14, 1981, and therefore, thereafter the applicant immediately, on receipt of the difference of amount from IOC on May 6, 1982, deposited the additional tax on the same with the Department. It is submitted that, therefore, when the rate of gas was revised retrospectively from the year 1979-80, and thereafter, the applicant received said revised amount from IOC on May 6, 1982, the applicant paid the interest on the revised price with effect from May 6, 1982. It is submitted, therefore, as such, there was no default on the part of the applicant, and therefore, the Sales Tax Officer/adjudicating authority ought not to have charged interest under section 47(4A) of the Act with effect from September 14, 1981. Making the above submission, it is requested to answer question No. 2 in favour of the assessee and against the Revenue.

On the other hand, Shri Gandhi, learned Additional Government Pleader, has submitted that in the facts and circumstances of the case, the authority has rightly charged interest on the additional/revised price with effect from September 14, 1981. It is submitted that the liability to pay the tax and/or eventuality to pay the tax under the sales tax would arise on the date on which the sale takes place. It is submitted that, therefore, when the Government of India revised the prices retrospectively in the assessment year 1979-80, with effect from September 14, 1981, at least, the liability to pay the sales tax on the revised prices, so far as the applicant is concerned, would arise from that date, i.e., September 14, 1981. It is submitted that, therefore, the contention on behalf of the applicant that they are liable to pay the interest on the revised price with effect from May 6, 1982, i.e., the date on which the IOC paid the revised price to the applicant, is rightly rejected by the AO as well as by the learned Tribunal. It is, therefore, submitted that under the circumstances, no error or illegality has been committed in charging interest on the revised prices under section 47(4A) of the Act with effect from September 14, 1981. Making the above submission, it is requested to answer question No. 2 in favour of the Revenue and against the applicant-assessee.

Heard learned advocates for the respective parties, at length. Now, so far as question No. 1 referred to this court is concerned, i.e., whether the transportation charges through pipeline of crude oil transported by the applicant-assessee''s pipeline to the refinery of M/s. IOC, can be included in the "sale price" or not and whether the applicant-assessee was liable to pay the tax on the same or not, it is required to be noted that, as such, and it is an admitted position that the applicant received the said amount of transportation charges from the IOC. Section 2(29) of the Act defines "sale price" as under:

"2. Definitions.--

(29) ''Sale price'' means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation when such cost is separately charged and includes,--

(a) in relation to--

(i) the transfer, otherwise than in pursuance of a contract, of property in any goods,

(ii) the transfer of the right to use any goods for any purpose (whether or not for a specified period),

(iii) the supply of goods by any unincorporated association or body of persons to a member thereof,

(iv) the supply by way of or as part of any service or in any other manner whatsoever, of goods, for food or any other article for human consumption or any drink (whether or not intoxicating),

the amount of cash, deferred payment or other valuable consideration paid or payable therefore;

(b) in relation to the transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract, such amount as is arrived at by deducting from the amount of valuable consideration paid or payable to a person for the execution of such works contract, the amount representing labour charges for such execution;

(c) in relation to the delivery of goods on hire purchase or any system of payment by installments, the amount of valuable consideration payable to a person for such delivery."

Therefore, any amount received and/or recovered by the applicant-assessee may be even transportation charges or any other amount received is required to be included in the "sale price". Identical question came to be considered by the honourable Supreme Court in the case of Hindusthan Sugar Mills Vs. State of Rajasthan and Others, . While considering, somewhat, similar provisions in the Rajasthan Sales Tax Act, the honourable Supreme Court has observed and held that the amount of freight formed part of the "sale price" within the meaning of the first part of the definition of the term in section 2(p) of the Rajasthan Sales Tax Act and section 2(h) of the Central Act, so includable in the turnover of the assessee.

Even, the case of Hyderabad Asbestos Cement Products Ltd. Vs. State of Andhra Pradesh, , upon which the reliance has been placed on by Shri Kaji, it was a case, wherein, under the terms of the contract, there was no obligation on the part of the company to pay the freight and the price which received by the company for the sale of goods was invoice amount less freight. To that the honourable Supreme Court has held that only that amount, which is received by the seller, is required to be included in the turnover. Meaning thereby, any amount received by the company for the sale of the goods, inclusive of the freight, is required to be included in the turnover of the assessee.

In view of the above, when the applicant admittedly received the amount of transportation charges through pipeline of crude oil that was sold by the assessee to its sole purchaser, i.e., IOC, from IOC the same was required to be included in the "sale price" and is rightly included in the "sale price". It is, therefore, rightly held that the applicant is liable to pay the tax on the same.

Under the circumstances, question No. 1 is answered against the applicant-assessee and in favour of the respondent-Revenue. Now, so far as the interest charged under section 47(4A) of the Act on the ad hoc payment made by the applicant-assessee on the ground of subsequent increase in price by the Government of India with effect from September 14, 1981, i.e., question No. 2, is concerned, it is required to be noted that and it cannot be disputed that, as such, the liability to pay the sales tax and/or eventuality to pay the sales tax would be at the time of sale. Therefore, the liability to pay difference in gas price as per the Central Government revised prices on September 14, 1981, would arise from that date, i.e., September 14, 1981, and that the dealer was liable to pay the tax on the revised prices on and with effect from September 14, 1981. The contention on behalf of the applicant that they received the revised amount from the IOC on May 6, 1982, and therefore, they are liable to pay the interest with effect from May 6, 1982, cannot be accepted. In a case, it may happen that the buyer may pay the amount of sale consideration to the seller subsequently. As observed hereinabove, the liability or eventuality to pay the sales tax on the date on which the sale has taken place and any liability to pay tax would not depend upon the payment made by the buyer. Under the circumstances, the petitioner is rightly charged with the interest on the revised price/ad hoc amount of gas with effect from September 14, 1981. Under the circumstances, even question No. 2 is also answered against the applicant-assessee and in favour of the Revenue. The reference is answered and disposed of, accordingly.