1. These first appeals have been preferred by the appellant against the direction given by the Hon'ble Supreme Court in Civil Appeals Nos.
1649-1654 of 2001 with W.P. Nos. 110,615/2000, 213/2003, 222/2004, 534 & 540/2001, Civil Appeals Nos. 926, 927, 928, 929........../2005 and SLP Nos. 6110, 6189, 6251, 6281/2002. In said matters, the Hon'ble Supreme Court has remanded the matters for being heard and dispose off by the appellate Tribunal in accordance with provision of Rule 67 of the Gujarat Sales Tax 1970. As per direction given by the Hon'ble Supreme Court this Tribunal had issued notice to Government of U.P., Government of Rajasthan, Government of M.P., Government of NCT of Delhi, Government of Haryana and Commissioner of Sales Tax Gujarat State Ahmedabad.
2. In response to the said notice Commissioner of Sales Tax to the Ahmedabad, representative of State of Haryana and State of Rajasthan being heard and filed that submissions other State have not filed that appearance.
3. Appellant was assessed provisionally for the period 1994-1995 to 1997-1998 under the Gujarat Sales Tax Act and Central Sales Tax Act and for the regular assessment period 1998-99 to 2000-2001 passed under the Central Sales Tax Act and also passed order imposing interest for the year 1994-1995 to 1999-2000 against this assessment orders appellant has approached the Hon'ble Supreme Court vide proceeding number mentioned above and the Hon'ble Supreme Court has given direction by remanding matters to this Tribunal. Notice to concern States were issued by this Tribunal and matter was heard at length.
4. In these appeals appellant had given one application for site inspection at Exhibit No. 18 and in pursuance to that order below Exhibit No. 18, this Tribunal has also conducted site inspection on 09/04/2005 at Surat and on 17/04/2005 at Bijapur in M.P. The report of site inspection had given Exhibit No. 26 and 33 respectively.
5. First of all I will narrate the case of the appellant in brief as under: 6. The appellant is a Government of India undertaking engaged in the marketing and transporting of natural gas through Hazira-Bijapur-Jagdishpur pipeline (herein after referred to as "HBJ Pipeline") covering the State of Gujarat, Madhya Pradesh, Rajasthan, Uttar Pradesh, Dehli and Haryana. The appellant is a dealer registered under the Gujarat Sales Tax Act, 1969 (herein after referred to as "the Act") as well as a dealer registered under the Central Sales Tax Act, 1956 (herein after referred to as "the Central Act"). While Oil and Natural Gas Corporation (herein after referred to as "ONGC") is a Government of India undertaking engaged in the exploration, mining and processing of natural gas and other hydrocarbon products, the appellant is a marketing body for natural gas. ONGC and joint venture of ONGC, EOGIL and Reliance Industries Ltd Sells natural gas to the appellant which in turn sells the same to various customers. The selling price of ONGC of natural gas is determined by the Government of India from time to time through its nodal Ministry of Petroleum and Natural Gas and correspondingly the appellant is also required to sell gas at the price fixed by the Government of India. The sale price is fixed by considering calorific value at 10,000 kilo calories/ cubic meter. In case the calorific value deviates at the time of actual delivery of gas the sale price is to be amended on pro rata basis. Government of India has set up a Gas Linkage Committee comprising representatives of various Ministries which decide the quota of gas for different customers on the basis of which the appellant sells the gas purchased form ONGC. The head office of the appellant situated at Delhi enters in to contracts with various customers incorporating the terms and conditions of sales on the basis of allocation of gas done by the Gas Linkage Committee. The natural gas is received by the appellant from OMGC at Haxira which is then transported by the appellant thought its HBJ pipeline first to its plants situated at Vaghodia in Gujarat in Madhya Pradesh and Pata in Uttar Pradesh. At these plants certain amount of gas is extracted and after certain processes the gas is delivered to the customers after filtration and drying process, Right from incepting of its activity the appellant is purchasing natural gas required for reselling within the State of Government by issuing declarations in form 17B and by issuing declarations in form 17 for gas transported to the plants of the appellant situated outside the State for subsequent sales to out of State customers after processing the gas at the plants. Purchases against from 17B are made without payment of any tax as per the provisions of Section 13 of the Act while purchases against from 17 are made by paying 4% tax as provided in Section 12 of the Act. Natural gas required for extraction of LPG gas and captive consumption in the Vaghodia Plant in Gujarat purchased by payment of tax at the full rate as specified in entry 7 of Schedule IIB to the Act. According when gas purchased against form 17B is resold or LPG is sold in the State of Gujarat, the appellant pays the tax payable as per provisions of the Act as per the applicable provisions of the sales tax law of the Central Act for the year 1987-88 to 1992-93 wherein the discharge of tax liability in the above manner has been accepted by the sales tax authority in the State of Gujarat as well as also of all other States where sales are made by the appellant.
7. It is submitted by Shri Sheth that appellant was assessed by the officer of the Sales Tax department carried out investigation at the premises of the appellant at Hazira on 18/8/99 and for the first time in the year 1999 a dispute was raised regarding the correctness of the claim of the appellant of stock transfer of gas purchased against declaration in form 17 by if. Appellant was assessed provisionally under Section 41B of the Act after issue of due notice. Written reply was filed by the appellant and in spite of that, provisional assessment order was passed both under the Act and Central Act by rejecting the transaction of stock transfer of gas to out of State plants have been taxed as inter-State sales in the provisional assessment orders for the period 1994-95 to 1999-00 and dues to the tune of Rs. 1,950.89 crores against the appellant.
8. His also further case of the appellant that the learned Sales Tax Officer had passed separate orders imposing interest for the period 1998-1999 to 1999-2000, the appellant was also assessed under the Central Sales Tax Act for the provision of Central Sales Tax Act for period 2000-2001.
9. It is further case of the appellant that after purchasing natural gas from O.N.G.C. It was further dealt with as under which was stated in pleading as modus of operandi of the transaction effected by the appellant during the years and dispute the same is as under: The appellant is a Government of India undertaking engaged in the marketing and transportation of natural gas through Hazira-Bijapur- Jagdishpur pipeline (herein after referred to as "HBJ Pipeline") covering the States of Gujarat, Madhya Pradesh, Rajasthan, Uttar Pradesh, Delhi and Haryana. The appellant is a dealer registered under the Gujarat Sales Tax Act 1969 (herein after referred to as "the Act") as well as a dealer registered under the Central Sales Tax Act, 1956(herein after referred to as "the Central Act"). While Oil and Natural Gas Corporation (herein after referred to as "ONGC") is a Government of India undertaking engaged in the exploration, mining and processing of natural gas and other hydrocarbon products, the appellant is a marketing body for natural gas. ONGC and joint venture of ONGC. EOGIL and Reliance Industries Ltd. sells natural gas to the appellant which in turn sells the same to various customers. The selling price of ONGC of natural gas is determined by the Government of India from time to time through its nodal Ministry of Petroleum and Natural Gas and correspondingly the appellant is also required to sell gas at the price fixed by the Government of India. The sale price is fixed by considering calorific value at 10,000 kilo calories/cubic meter. In case the calorific value deviates at the time of actual delivery of gas the sale price is to be amended on pro-rate basis. Government of India has set up a Gas Linkage Committee comprising representatives of various Ministry which decide the quota of gas for different customers on the basis of which the appellant sells the gas purchased from ONGC. The head office of the appellant situated at Delhi enters in to contracts with various customers incorporating the terms and conditions of sales on the basis of allocation of gas done by the Gas Linkage Committee. The natural gas is received by the appellant from ONGC at Hazira which is then transported by the appellant through its HBJ pipeline first to its plants situated at Vaghodia in Gujarat, Vijaipur in Madhya Pradesh and Pata in Uttar Pradesh. At these plants certain amount of gas is extracted and after certain processes the gas is delivered to the customers after filtration and drying process. Right from inception of its activity the appellant is purchasing natural gas required for reselling within the State of Gujarat by issuing declaration in form 17B and by issuing declarations in form 17 for gas transported to the plants of the appellant situated outside the State of subsequent sales to out of State customers after processing the gas at the plants. Purchases against from 17B are made without payment of any tax as per the provisions of Section 13 of the Act while purchases against from 17 are made by paying 4% tax as provided in Section 12 of the Act.
Natural gas required for extraction of LPG gas and captive consumption in the Vaghodia Plant in Gujarat is purchased by payment of tax at the full rate as specified in entry 7 of Schedule IIB to the Act. Accordingly when gas purchased against form 17B is resold or LPG is sold in the State of Gujarat, the appellant pays the tax payable as per the provisions of the Act. While in respect of sales of gas made to out of State customers the tax is paid as per the applicable provisions of the sales tax law of respective States. The appellant has been assessed under the Act and the Central Act for the years 1987-88 to 1992-93 wherein the discharge of tax liability in the above manner has been accepted by the sales tax authorities in the State of Gujarat as well as also of all other Slates where sales are made by the appellant. At the outset the appellant would like to explain the modus operandi of transactions effected by if during the years in dispute and the same is as under: (a) There were sale contracts with 218 customers situated in different parts of the country. The sale contracts specified the minimum and maximum quantity which can be purchased by and sold to each customer at the price determined by the Government of India.
(b) The HBJ pipeline is a trunk pipeline to which the three plants of the appellant one each in the State of Gujarat, Madhya Pradesh and Uttar Pradesh are connected through branch pipelines.
(c) Approximately 37 Million Metric Standard Cubic Meter Per Day [herein after referred to as "MMSCMD"] of natural gas is pumped in HBJ pipeline after its purchase from ONGC and the joint venture at Hazira. High pressure is applied at Hazira so as to flow the gas in the trunk pipeline.
(d) En-route from Gujarat to Uttar Pradesh there are Compressor Stations at Vaghodia (Guj.), Jhabua, Khera and Bijaipur all three in M.P. and Auraiya in U.P. These Compressor Stations gives pressure to the gas flowing in the pipeline so that it can move ahead at the required speed.
(e) Immediately near Hazira at a distance of less then 5 km., out of 37 MMSCMD, approximately 2 MMSCMD is sold to NTPC at Kawas and 1.5 MMSCMD to IPCL at Bharuch in the State of Gujarat.
(f) The remaining gas continues to flow in the HBJ pipeline, of which around 2 MMSCMD is flown through branch pipeline to the plant at Vaghodia. From the remaining gas, 17 MMSCMD will be taken at the plant at Vijaipur in the State of Madhya Pradesh and the balance will be flown to the plant of the appellant at Pata in the State of Uttar Pradesh.
(g) It is clarified with emphasis that except minor sales to NTPC and IPCL in Gujarat near Hazira, to no customer the gas is directly delivered from HBJ pipeline except in exceptional circumstances when there is a shut down at any of the plants of the appellant and therefore due to emergency there is a need to bye-pass the plant.
(h) At each of the plants of the appellant following processes are undertaken: (iv) Extraction of some portion of gas to be sold as LPG, Propane etc.
(v) Applying pressure again to transport the gas from the outlet of plants.
(i) The branch pipeline moving out of the plants is then connected with spur pipelines reaching to the sites of the customers.
(j) At each site of the customer there is a metering and filtering station wherein the gas received from the branch pipeline of the plant is again subjected to the following processes: (k) The above processes are undertaken at the metering station in order to have quality control of gas sold and to ensure that gas of the desired quality is sold to the customer. As a result of these processes at the metering station certain minor components of gas are converted into liquid which is drained out and thus the calorific contents are ultimately different then those fed at Hazira.
(l) The calorific contents of gas are measured at the metering station so as to determine the sale price keeping in view the price fixed by the Government of India.
10. Thus the facts of the appellant had the following salient features of the transactions abundantly clear: (a) There are large numbers of customers and the quantity of gas transported in bulk from Hazira is not with a view to meet any specific order of any customer. As a matter of fact at the time when gas is put in the HBJ pipeline, it cannot be said as to which customer will buy which quantity.
(b) If a particular customer does not appropriate gas, then the gas flowing in bulk in the pipeline will move ahead which could be appropriated by any other customer.
(c) Except in respect of sales to NTPC at Kawas and IPCL at Bharuch, to no other customer the sale of gas is made from a branch line coming out of the HBJ pipeline.
(d) The gas is first taken at plants, where it is subject to certain processes including extraction of some portion of gas to be sold as LPG and thereafter it is only to the pipe coming out of the plant the spur pipelines are attached which helps in delivering the gas to the customers.
(e) Even before finally delivering gas to the customers, the metering stations, undertake the processes of reducing pressure and removing impurities and moisture and thereby maintaining the quality of gas as per the agreement.
(f) The calorific contents of gas fed in the pipeline at Hazira are different then what is contracted with the customers and ultimately sold to them. This is because of the processes which are undertaken at the plants and metering stations.
(g) The sale price of gas will be determined only at the metering station at the site of the customer where after all the processes the calorific value of gas will be measured to fix the sale price of gas sold.11. Before meeting with the case of the appellant I first mentioned the submissions made by the respondent in these appeals on behalf of the defendant, written submissions made to the that effect. For the quantity of natural gas used within the State of Gujarat in production of LPG, the appellant pays full tax to ONGC whereas for the quantity of natural gas sold to the local customers of Gujarat, the appellant issues form-17B to ONGC. For the quantity of natural gas sent to other states, the appellant pays 4% tax and issues form 17 to ONGC. The appellant pays tax to the Government on the sales of natural gas made to the customers of Gujarat whereas no tax is paid on the quantity of natural gas sent to other states because according to the opinion of the appellant, said dispatch is stock transfer. The place of business of the appellant was visited by the officials of the department. The investigation of the records of the appellant reveled that the stock transfer shown by the appellant were not transactions of stock transfers but they were inter state sale as per the principles laid down under Section 3 (a) of the Central Act. From the system of supply of natural gas through pipeline, it was established that the movement of natural gas outside the state of Gujarat for supply to purchasers was in pursuance of pre- existing contracts entered into with those purchasers. Therefore, the transactions shown as stock transfers are not stock transfers but they are inter-state sale transactions. In view of the above legal position, the appellant is liable to pay tax on inter state sales as stated above. As the appellant had shown such transactions as stock transfers and not paid the tax legally payable, the proceedings for provisions were initiated against the appellant.
The appellant objected to the proceedings and reiterated that the transactions were stock transfers only. The submissions of the appellant were not accepted and provisional assessment orders for the period 1994-95 to 1999-2000 were passed by the Sales Tax Officer, Flying Squad-6, Gujarat State, Ahmedabad under Section 41B of the Local Act as well as under the Central Act.
12. It is further case of the respondent number one As per M.O.U.between ONGC & the appellant, ONGC has transferred their natural gas marketing functions to the appellant from 1-1-91 with existing customers. Since then, the appellant is the special purpose vehicle (SPV) for marketing/supplying natural gas to various customers. It is specifically provided in the M.O.U. under the clause of "drawal of gas" that ONGC will supply and the appellant will draw daily the quantity of gas as per existing supply contracts / arrangements between ONGC & various consumers. As soon as any agreement for supply of gas is finalized with any existing customers, the appellant would enter into new agreement. The natural gas being a scarce commodity. Central Government has set up a Gas Linkage Committee (GLC) consisting members from concerned departments of Central Government including the appellant & ONGC. The main function of GLC is to fix priority of sectors like power, fertilizer etc. to whom gas is to be allocated and quantum of gas to be supplied to each sector. Those who want to purchase natural gas has to first enter into contract with the appellant for supply of natural gas. These contracts are executed by regional and head office of the appellant with various such purchasers.
In such contract quantity of gas to be supplied is decided in advance.
Generally all the supply contracts are having identical terms. As per the contract entered into with the Tata chemicals (U.P.), and as per Article No. 2.01 of contract, period of supply is fixed and as per Article 2.02, consumer has to deposit fix amount and has to submit bank guarantee. As per Article-4 gas will be transported from the down stream flange of pipeline at the outlet of the was metering station located at the factory premises. Articles 4.05 provides that the title to gas shall pass from the seller to the buyer at the point of delivery of gas to the buyer. The point of delivery shall be at the downstream flange of the pipeline at the outlet of gas metering station. As per the Article 5, maximum quantity to be supplied and maximum quantities to be lifted by the consumer is fixed. Also there is a provision of minimum warranted off take by the consumer. Moreover, buyer has to provide the appellant periodical forecast of the quantity of gas required by him. As per Article-6 quality of gas is fixed and it can be determined by means of online Automatic Sampler Unit installed by the appellant. As per Article 9, shutdown and stoppage of supply has to be mutually discussed and planned by consumer and the appellant. After entering into contract of supply with customer, the appellant installs gas-metering station at the premises of customer and various spur pipelines are subsequently connected to main pipeline, to meet the requirement of the customer. In all the contracts, period of contract is mentioned with date of commencing the supply. There is always big span of time between date of contract and date of supply. Therefore it is not necessary that the appellant has started supply of gas with buyers with whom contract is entered into, but it can easily be construed that after completion of all formalities and technical requirement, once the supply is started than gas is supplied continuously to that customer by the appellant, except in case of unforeseen emergency like shutdown etc. Gas linkage committee allocates the gas among all consumers in pro-rata basis depending upon availability of gas from ONGC Hazira. Thus, the appellant quantified the gas in the beginning of the year about the supply of gas to the local customer of Gujarat as well as customer out side of Gujarat.
Accordingly the appellant gives written instructions to ONGC to plan out its supply of gas. In this written instruction the appellant gives the names of consumers and quantity of gas allocated. If any customer wants less gas for any reason other than pre-decided quantity, he has to inform to the appellant. In turn the appellant informs to ONGC to reduce supply accordingly. In the same way if by any reason ONGC reduce its supply, the appellant also reduce its supply to all customers proportionately and informs all customers to draw less gas in that proportion. Thus the appellant is bound to supply the gas to all consumers in the quantity, which is pre-decided, and the appellant is not free to transfer or divert. Once allocation is made by GLC, only GLC can re-allocate the gas to other consumers in proportion to quantity of gas, which is pre-allotted to any consumer who is not in a position to lift the gas due to any technical reason. This reallocation is also informed in advance to concerned customer. Thus once gas is pumped into pipeline, as per allocation or re-allocation, it cannot be diverted. The remarkable feature of transmission of natural gas in present case is that the HBJ pipeline has no open-end. The Appellant in comparison of this transmission process with flow of river is not appropriate. In present case, transmission pipeline starts from Hazira and ends up at various consumers' premises. Natural gas being an explosive commodity, there is no storage facility in the entire system.
Besides, there is no quality control system along the HBJ pipeline. Gas once flows into the pipeline cannot be reversed back, which implies that gas once flowed into the system ends up in the hands of customers only. Gas is supplied through the pipeline according to the demand forecast by the customer and supplied on a 24-hour basis. The appellant not only makes the sales but also by way of contract secures payment in form of advance and bank sureties. In fact the appellant is making huge sales without any huge risks involved in actual business but at the same time is depriving the State Government of its legitimate share of tax by alleging the sale as stock transfer which is nothing but the supply to gas to customers in accordance with their individual demands made (collectively) and alleging the sales to be Inter State on the ground that it is transferring only stock in other States to its agent or place of business whereas no agent or place of business of the appellant exists in any other State as to comply the requirements for claim of stock transfer. Therefore there is clear conceivable link between movement of goods from Hazira to consumers of outside Gujarat State and this movement is integrally connected and incidental to the contract of sale. Thus Stock transfer transactions of the appellant related to the supply to outside state customers are to be considered as inter state sale, as it fulfills all the conditions stipulated under Section 3(a) of the Central Act.
13. Shir D.M. Vasavada the learned Advocate specially appointed by the Government had also filed this written submission on behalf of the respondent. It is by way of reply to the submissions made on behalf of the appellant on 31/3/2005, according to this further submission it is further contended that ONGC sells and GAIL purchases natural, gas and supplies it to various customers. GAIL is also registered dealer under both the Acts. GAIL is a public limited company incorporated under provisions of Company Act, 1956. The appellant is discharging the functions of purchases and sales under both the Acts. Filing returns, paying tax and is liable to be assessed and is assessed under both the Acts. The appellant has made purchases against Form 17 and 17B and has also paid tax as and when necessary under the relevant Act. Supply is always by way of sale. In all the contracts with the customers GAIL is described as the "seller" and the customer is described as "buyer".
Contracts are governed by the provisions of Contract Act. There is also an Arbitration clause in all these contracts. As stated in the contracts the transactions are of sale and purchase. The appellant also issues invoices to the customers for price of the gas sold to each of them periodically. The appellant has admitted that gas is "purchased" from ONGC and it is contended that it is transferred by way of stock transfer to various states. So, once a company or any identity for that purpose is registered as the dealer it could have been registered as such only if and when if fulfils the conditions of registration as the dealer but once it is so registered it is the "dealer" for purposes of all the sections of both the Acts including for liability to pay tax if and when taxability arises. The appellant has not pleaded, at any time anywhere that it is not liable to be registered as the dealer. Gas being a precious and rare commodity, the Central Government has to ensure not only that it is properly utilised but it is not wasted and that is why it has setup a mechanism to ensure for proper extraction, utilisation and for that purpose for proper distribution of natural gas. But this is an administrative arrangement between the Central Government and GAIL. But in the eyes of law the GAIL is the dealer. So, when controlled commodity is sold than also provisions of taxing statutes will always come into pay. GAIL would be liable to pay sales tax to the State and other taxes like income tax also unless they are specifically exempted. The company also generates profit or sustains loss as per the accounting code. Its accounts have to be audited by certified accountants. Balance sheets have to be prepared and published unless specially exempted. Public sector companies like this has also to pay dividend.
14. The respondent had submitted the operation of Operating System of HBJ pipeline in his written submission as under : a. It consists of one main pipeline which is 36 in diameter. This main pipeline has several spur pipelines. These branch pipelines having different diameter, connected with the main HBJ pipeline reach to the customers premises.
b. Gas being explosive commodity pipeline is fitted with the modern sophisticated equipments. It has 3 master control room (MCR) along the HBJ pipeline such as Hazira (Gujarat). Bijapur (MP) and Baroda (UP). These 3 MCR have equipments which monitor movement and control of gas is fed in to pipeline and update off take by individual customer on online basis i.e. at any given movement at what quantity gas is supplied to customers is shown on the monitor. As and when if a consumer either off take less gas or draws more, it is immediately reflected on the monitor of MCR which helps in making necessary amendments in supply and pressure.
c. HBJ pipeline is having several compressor stations in Gujarat and other states which push the gas to the destination. As the pressure at which gas is taken is not sufficient to move it alont the entire length of pipeline. At Jhabua (MP), Khera(MP), Vijapur(MP) and Auraiya(UP) GAIL has installed compressor stations enroute the pipeline to augment the pressure of gas for the purpose of transmission and to meet the contractual pressure requirement. GAIL also charges compression charges for this purpose from customers located outside Gujarat State.
d. Entire HBJ pipeline has no open. It starts from Hazira and end up at consumers premises only. Gas once flows into the pipeline cannot be reversed back, which implies that gas once flowed into the system ends up in hands of customers only. Hence pipeline is fed with the gas required by the consumers and pipeline is not meant to store the gas.
e. From main pipeline there are spur pipeline which are extended upto the premise of consumers and GAIL is provided selected area inside the consumer premises, where GAIL establishes a metering station. This metering station consists of line filter, pressure controlling valve, flow meter and exit valve which allows gas to flow to consumer.
f. At these metering stations are connected with MCR and there are mainly three functions assigned to their (1) to open valve and to release gas to the consumers in allocated time and as per allocated pressure (2) to measure quantity of gas supplied 93) if consumer fail to lift allocated gas than immediately inform MCR to control flow, in short their main job is to see that consumer is supplied with the gas at the allocated rate, in the allocatable time. The remarkable features of this whole system are (1) In the entire system there is no storage facility (2) There is no quality control system along the HDJ pipeline. Natural gas being a natural commodity, its composition is beyond control of GAIL. In entire pipeline there is no facility to control quality of gas.
16. Other information is already given in submission provisionally made by Shri Lalitbhai Leuva on behalf of the respondent. So I do not repeat the same.
17. On the behalf of the State of Haryana written submissions were filed that appellant is registered in State of Haryana both under the Gujarat Sales Tax Act and under the Central Sales Tax Act supplies gas to its customers situated inside the State depending upon their need and requirement as and when the same arises. There are supplying points installed at the premises of the customers, which are fitted with regulators and measuring meters. There is always an employee of the appellant at the site to regulate/monitor the supply of the gas to customers. An account of supplies is kept by that employee. Invoices are accordingly raised at regular intervals on customers situated inside the State of Haryana. Assessing Authority, Sonepat (Excise and Taxation Department, Haryana) who has jurisdictional control over the dealer, that is, M/s.GAIL India Ltd. has informed vide memo No.3313/RKP, dated 31/3/2005, that supply of the gas is made to the customer as and when required by them and there are no prior orders for the supply of the gas.
18. It is further submitted that State of Haryana, which has received a notice from the Hon'ble President, Gujarat Sales Tax Tribunal at Ahmedabad, submits that Assessing Authority, Sonepat has completed assessments relating to financial year 1996-97, 1997-98, 1998-99 and 1999-2000 in accordance with the provisions of the Haryana General Sales Tax Act, 1973. The copies of the said orders are attached as Annexures R-4 to R-7. The gas which is supplied to the ultimate consumers inside the State of Haryana, remains the property of the dealer prior to its supply and that the supply of t depends upon the requirement of the customers. It is re-iterated on the basis of R-1 that there are no prior orders from Haryana customers, which occasion the movement of gas from Ahmedabad (Gujarat) to Haryana. That, movement of gas from Gujarat towards Haryana cannot be described as anything but stock transfer, that from GAIL India Ltd. to GAIL India Ltd. That, as is evident from above, there is appropriation of property in goods inside the State of Haryana. That, the dealer, M/s. GAIL India Ltd., retains right of diversion of gas (goods) with itself prior to its supply. That the Learned Gujarat Tax Authority has erred in treating the local supplies referred to in the preceding para as part of inter-state sales exigible to Central Sales Tax under the Act of 1956.
That the State of Haryana fully supports the stand of the appellant, that is, M/s.GAIL India Ltd., in so far as the supply (movement) of gas from Ahmedabad to State of Haryana was shown as being on stock transfer basis.
19. The State of Rajasthan has also filed written submission at exhibit No. 30 state of the Rajasthan support the case of the appellant and described the legal position which will be discussed at the time of meeting arguments of the all cited if pleaded, so I do not repeat that submissions in details.
20. I have also heard learned Advocate for appellant, Shri D.M.Vasavada Senior learned Advocate appearing for the Government of Gujarat and on behalf of Sales Tax Department. They have practically submitted that the facts and legal submission as narrated in written submission. The written submission consisting the facts, which I have already reproduced above. The written submission in respect of legal aspect will be discussed by me alongwith, when I will discuss points raised by both sides in there arguments.
21. Before entering into legal submission I must mentioned herewith the certain facts are an admitted facts by both sides. (1) it is an admitted position that GAIL has entered into in agreement with NTPC (2) it is an admitted position that gas purchased by appellant from ONGC is first taken to Hazira Premises Compound of GAIL where after performing certain process on it. It was put in HBJ pipeline, before that it was compressed in compressor unit and than put to underground HBJ pipeline.
(3) it is an admitted position that HBJ pipeline goes to Vaghodia in Gujarat, Jhabua in M.P., Khera in M.P., Bijapur in M.P., and Auraiya in U.P. and further near to Delhi.
22. It is not in dispute that gas put up in HBJ pipeline, some portion of the gas is supplied to Vadhodia in Gujarat HBJ plant through pipeline.
23. It is not in dispute that major quantity of the gas goes further and first comes to Bijapur in M.P. After removing the L.P.G. the remaining part of gas will go to GREP pipeline, NFL and Anta-Gadepan pipeline.
24. It is not in dispute that at customer place the gas come through pipeline installed by the appellant, there is a GAIL own station in which pipeline comes after having some process gas was supplied to the customer through station installed by appellant premises customer. So till gas is supplied to the customer, the gas remaining in custody of the appellant, it was delivered from the station install in premises of the appellant. The supply was made there and billing was done from their. So this is the practice followed by the appellant in supplying to the gas to the customer which was put up in HBJ pipeline at Hazira.
I will examine both the sides submissions in light of above admitted position.
25. Now it is main dispute of the appellant that (1) assessment carried out by the appellant for the year 1994-95 and 1995-96 are time barred (2) the assessment order for the year 1998-99 passed without issued statutory notice (3) according to appellant the gas supply to customer is branch transfer or stock transfer and claim of stock transfer was disallowed and it was wrongly tax considering such transaction at inter State sales.
26. Other minor points were raised will be meet with me at later stage.
On the side of respondent, it is main contention of the respondent that gas was moved from Hazira in Gujarat to other states on pursuance to agreement to sell entered into by GAIL and customer and so it is inter State transaction.
27. It is also submitted by Shri Vasavada Senior learned Advocate of the appellant that by giving application at exhibit 36 that dispute raised to the effect that this Tribunal has no jurisdiction to decide his matters.
28. It is also submitted on behalf of the appellant that penalty imposed, interest charged and assessment carried out in accordance with law, so, appeals be dismissed.
29. First of all out of above two sides contentions, first of all I will meet with contention raised by respondent in respect of jurisdiction.
30. Shri Vasavada submits that issue involved in these appeals is to the effect that whether transactions are branch transfer-covered under Section 6A of the Central Sales Tax Act. He has further submitted that the Government of India Ministry of Finance has issued two notifications on 17/03/2005. Out of which one notification relates to the date of which central sales tax (amendment) Act, 2001 came into force, in another notification central government has declared that authority for advance ruling constituted under Section 245C of Income Tax Act, 1961, shall also be the Central Sales Tax appellate authority to settled inter State dispute following under Section 6A read with Section 9 of the Central Sales Tax Act, 1956. He has reproduced chapter VI in his application at exhibit 36 as under:- Section 19(1) The Central Government shall constitute, by notification in the Official Gazette, an Authority to settle inter-State dispute falling under Section 6A read with Section 9 of this Act, to be known as "the Central Sales Tax Appellate Authority (hereinafter referred to as the Authority)"..............
Section 25. On and from the date when the Authority is constituted under Section 19, any proceeding arising out of the provisions contained in this Chaper- (i) which is pending immediately before the constitution of such Authority before the appellate authority constituted under the general sales tax law of a State or of the Union territory, as the case may be: or............
shall stand transferred to such Authority on the date on which it is established".
31. In view of the above two provisions, Shri Vasavdas submits that the Gujarat Sales Tax Tribunal has no jurisdiction to decide his matters as the powers are vested in Central Sales Tax Appellant Authority as constituted above. He has produced two notifications the first notification is in respect of appointment date of the Act came into force dated 17/03/2005. Than, second notification of same date is in respect of giving powers to the authority for advance ruling constituted under Section 24C of the Income Tax Act delegated further power with as Central Sales Tax Appellate Authority. So this second notification clearly shows that the authority for advance ruling constituted under Section 24C of the Income Tax Act will also worked has Central Sales Tax Appellate Authority the date on which Central Sales Tax (Amendment) Act 2001 come into force 17/03/2005.
32. The power delegated to appellate authority for advance ruling to work as Central Sales Tax Appellate Authority is given under Section 24 read with Sub-section (1) of the Central Sales-Tax Act. Section 24 is reproduced as under :- 24.(1) Notwithstanding anything contained in any other law for the time being in force and in Section 19 of this Act, the Authority for Advance Rulings constituted under Section 245-O of the Income Tax Act, 1961 (43 of 1961) shall be notified by the Central Government in the Official Gazette, with such modifications as may be necessary, to make its composition in conformity with Section 19 of this Act, as the Authority under this Act till such time an Authority is constituted under that section.
(2) On and from the date of the constitution of the Authority in accordance with the provisions of Section 19 of this Ac, the proceedings pending with the Authority for Advance Rulings shall stand transferred to the Authority constituted under that section from the stage at which such proceedings stood before the date of constitution of the said Authority.
33. It is also submitted by Shir Sheth that by notification dated 17/03/2005 the Government of India has given power to constituted under Section 245-O of the Income Tax Act, 1961 is empower or notified to work as authority to settle dispute has authority under this Act.
34. It is mentioned that this power under Section 19 is delegated or given to authority for Advance Ruling till Authority is duly constituted under Section 19 of the Central Sales Tax Act. So whatever power is granted by notification dated 17/3/2005 by Government of India to authority for Advance Ruling to settle the issue is not in capacity of Authority constituted under Section 19 of the Central Sales Tax Act.
In another word the Government of India had still not constituted a Central Sales Tax Appellate Authority.
35. So it is rightly submitted by Shri Sheth that as provided under Section 25 matters does not stands transfer to empower authority i.e.
authority of Advance Ruling. Section 25 is reproduced herewith as under :- 25. On and from the date when the Authority is constituted under Section 19 [any proceeding] arising out of the provisions contained in this Chapter- (i) which is pending immediately before the constitution of such Authority before the appellate authority constituted under the general sales tax law of a State or of the Union territory, as the (SIC) may be; or (ii) Which would have been required to be (SIC) before such Appellate Authority, shall st(SIC) transferred to such Authority on the date on wh(SIC) it is established.
36. Above provision is clearly shows that on constitut(SIC) the authority under Section 19 pending cases stands transferred t(SIC) that authority, so above discussed law and submission of both(SIC) sides reveals that by notification issued by the Government of India dated 17/03/2005, no Central Sales Tax Appellate Authority is constituted as provided under Section 19 of the Central Sales Tax Act but by that notification Authority for Advance Ruling was empower to settled issue arising out of Section 6A and Section 9 of the Central Sales Tax Act.
When Central Sales Tax Appellate Authority has provided under Section 19 of the Central Sales Tax Act is not constituted by the Government of India till than, Section 25 had no application whatsoever to pending matters. Moreover, the Hon'ble Supreme Court in exercise of extra ordinary jurisdiction under Articles 32 of the Constitution of India directed to this Tribunal to decide these appeals, within stipulated time limit and so any subsequent amendment in procedure of law cannot change of the direction given by the Hon'ble Supreme Court to this Tribunal.
37. In view of the above discussed law position I am of the view that this contention in respect of jurisdiction taken by respondent deserve to be rejected and I reject the same.
38. It is main contention of the appellant that gas supplied to the customer is branch transfer or stock transfer and claim of the stock transfer was wrongly disallowed and it was taxed as inter-state sales on pursuance of agreement to sell entered into by GAIL and customer, so it is inter-state sales transactions. This is the main contention, which will decide with the fact of these appeals.
39. Shri Sheth had taken me for certain a fact which requires to be considered, while interpreting the agreement. According to that Shri Sheth submits that the gas coming out from continental shelf or territorial wasters belongs to and vests in the Government of India. As per Article 279 of the Constitution the gas is extracted by three oil fields (1) Bombay High (2) Panna Mukta Gas Field, and (3) Tapi West gas field and brought to Hazira. The gas is extracted by three agencies namely ENRON now BRITISH GAS, RELIANCE and ONGC through pipeline gas was brought to Hazira. At Hazira it was purified by removing some impurity and entire quantity of gas, after measurement, is delivered to the appellant which compresses it through HBJ pipeline to various States. Thus gas received from ONGC and other companies is put in pipeline of the appellant, As gas is in short supply and the demand far outweighs the supply, Government of India has set up Gas Linkage Committee, which allocated gas to various customers. The customers have to apply for the same at Delhi for allocation of required quantity of gas.
40. The price of gas is also exclusively determined by Government of India. The appellant has no power to sell gas to any one accepted as per the allocation of quantity made by the Gas Linkage Committee.
Whatever, quantity received gas from ONGC, Reliance and Enron now British Gas i.e. total quantity of gas is available is put in HBJ pipeline and no part of gas which is in bulk supply is appropriated to any customer.
41. Shri Sheth submits that in view of the above stated fact appellant is acting only as a marketing agent or distribution of gas as per the directions of the Government of India 42. During the years in dispute the appellant has entered in to contracts with 218 customers. A copy of one such agreement made with NTPC, Faridabad is produced at model.
43. Now Shri Sheth contends that quantity of gas to be supplied to the customers is determined by Gas Linkage Committee. Price is also fixed by the Government of India as per Clause (x) of the price fixing order produced at annexure III of these appeals.
44. The Clause (x) term shown in Annexure III, which is notification issued by the Ministry of Petroleum and Natural Gas as can be seen from its communication dated 16/9/1997, which as under: "GAIL shall pass on the ONGC and OIL in proportion to the gas supplied by them, on a net back basis the entire proceeds of sales of gas of ONGC and OIL, after making deductions under paras (viii) & (ix) above." 45. There is reference of Clause 8 and 9, so I reproduced the same as under:- viii. Out of the consumer prices collected by GAIL, GAIL will retain the amount required to pay for the higher cost of gas purchased from the JVCs.
ix. An amount of Rs. 250 crores per year will also be deducted by GAIL from the consumer prices collected and the same shall be credited to the Gas Pool Account to continue to compensate OIL for concessional gas price in the North East to continue providing a marketing margin to GAIL to compensate GAIL/OIL for increases in the operating cost on account of inflation and for utilisation on R & D for exploration and exploitation of small fields. Any balance amount left in the Gas Pool Account after taking care of the above requirements would be transferred to the central exchequer. For the purpose of compensating OIL for concessional gas price in the North Hast the producer price of_____________ 46. On basis of this Shri Sheth submits that appellant is only marketing agent or distributing agent on behalf of the ONGC or Government of India. Shri Sheth submits that by transporting gas through HBJ pipeline and taken to various state is branch transfers or stock transfers. He submits that as under: (a) There are large number of customers to whom gas is allotted by the Gas Linkage Committee.
(b) The quantity and price of gas is determined by Gas Linkage Committee and the appellant does not have any control over fixing of the quantity and price.
(c) All the customers to whom gas is allotted do not necessarily draw the gas fed in the pipeline.
(d) Except in case of sales to some customers in Gujarat, gas fed in the pipeline at Hazira is always first received at the plants of the appellant. Gas is then subjected to the processing and extracting of some molecules to be sold as LPG gas and then flown in pipeline which is carried through spur pipelines at the installations of the customers where again at the metering station process of purification and removal of moisture is undertaken and then supplied to the customers after measurement and quality determination.
(e) At the time when gas is fed in the pipeline it is not certain as to which part of gas will be used in plants for sales as LPG and which part of gas will be sold to which customer.
(f) The quality of gas fed at the pipeline in Hazira is different from gas which is ultimately delivered to the customers.
47. So with a view to appreciate both sides arguments it is absolutely necessary to go through the Section 3A of he Central Sales Tax Act (will be referred as Central Act) which is as under:- "3. When is a sale or purchase of goods said to take place in the course of inter-State trade or commerce - A sale or purchase of goods shall be deemed to take place in the course of inter-State trade or commerce if the sale or purchase - (b) is effected by a transfer of documents of title to the goods during their movement from one State to another." Explanation 1 : Where goods are delivered to a carrier or other bailee for transmission, the movement of the goods shall, for the purposes of Clause (b), be deemed to commence at the time of such delivery and terminate at the time when delivery is taken from such carrier or bailee.
Explanation 2 : Where the movement of goods commences, and terminates in the same State it shall not be deemed to be a movement of goods from one State to another by reason merely of the fact that in the course of such movement the goods pass through the territory of any other State." 49. Shri Sheth had taken me through many judicial pronouncements interpreting Section 3 of the Central Sales Tax Act.
50. He has drawn my attention towards case decided by the Hon'ble Supreme Court in case of Tata Iron Steel Co. Limited, Bombay v. S.R.Sarkar and Ors.Balabhagas Hulaschand and Anr. v. State of Orissa reported in 37 S.T.C.207(S.C.),(3) N/s. Kelvinator of India Ltd. v. The State of Haryana reported in 32 S.T.C.629 (S.C.), (4) Commissioner of Sales Tax v. Suresh Chand Jain reported in 70 S.T.C.45 (S.C.) and (5) Commissioner of Sales Tax v. Pure Beverages Ltd. reported in S.T.R. No.1 of 1994 decided on 3/12/2004 (Guj.).
51. So this decision in which the Hon'ble Supreme Court had interpreted Section 3 of the Central Sales Tax Act the main reliance is pleaded by both sides on the decision of Balabhagas Hulaschand and Anr. v. State of Orissa 37 S. T. C. 207 (S.C.), the said judgment as part on page 215 the lordship has observed as under : "(2) That the following conditions must be satisfied before a sale can be said to take place in the course of inter-State trade or commerce: (i) that there is an agreement to sell which contains a stipulation express or implied regarding the movement of the goods from one State to another; (ii) that in pursuance of the said contract the goods in fact moved from one State to another ; and (iii) that ultimately a concluded sale takes place in the State where the goods are sent which must be different from the State from which the goods move.
52. So it is clear from the above observation to that interpret any transaction as inter state sales or transaction took place in course of inter state trade and commerce must satisfy that there must be agreement to sell with contains stipulation express and implied in respect of movement of goods from one state to another state. The goods must have moved from one state to another in pursuance of the said contract and concluded sale take places in the goods are sent and it must be different from which the goods move.
53. It is submitted by Shri Sheth that in following exigencies the movement of goods cannot be treated as inter state sales (1) if goods have moved from one state to another by the buyer after taking delivery from the seller in the State, than it could not be considered to be an inter-State sale. (2) The goods may be sent to the branch or agent for sale. If such despatch of goods is without reference to any contract, then the transaction cannot be considered to be an inter-State sale.(3) If the branch manager or agent has the discretion to give particular quantity it cannot be said that there is a link between movement of goods and sale. (4) In a particular State there may be one or two buyers who are purchasing goods from the branch, so long as the discretion remains to give a particular quantity, the transaction would not be considered to be an inter-State sale. (5) If the goods are sent to the agent for sale then it cannot be considered to be an inter-State sale. In such a situation it has to be seen that it should not be a camouflage of account. If the sale proceeds are the same for which the hundi has been drawn in advance, the assessing authority is justified in considering that an agreement was already entered into on the basis of which the sale has been effected as in the present case." 54. So keeping above discussed legal position it is argued by Shri Sheth that the gas entire gas quantity received by the appellant by way of purchases from ONGC put up in Hazira pipeline is not to the pursuance of any contract. He further submits that agreement with customer the model one agreement is produced ware entered in to with NTPC reveals that no fixed quantity was agreed to the supplied by the GAIL i.e. appellant to particular customers, price is also not fixed by GAIL. It is not in dispute that whatever gas supplies to the customer out side the State of Gujarat is supplied from HBJ pipeline reaching to the particular State. It means delivery of the gas is given to the customer of out side the State of Gujarat and so it is not a inter State sales.
55. Shri Sheth mainly submits that movement of goods from Hazira to another state is as per distribution agreement and not a contract of sale, so gas transferred from Hazira to particular state to particular customer is not attributable to any contract of sale or it is not attributed to any apportionment relevant to a contract the sale takes place after gas reaches various states out side the state of Gujarat.
56. Shir Sheth heavily relied upon the decision given by Hon'ble Supreme Court in the case of Kelvinator of India Ltd. v. State of Haryana reported in 32 S.T.C. 629(S.C). It is observed by the Hon'ble Supreme Court in that case at page 645 the said case is as under : "In our opinion, the three agreements between the appellant and the distributors were merely agreements for distribution of goods and were not agreements of sale between the parties. It cannot, in our opinion, be said that there was any movement of refrigerators from Faridabad to Delhi under a contract of sale." 57. He also submits his case is covered by illustration given by the Hon'ble Supreme Court decision in case of Balabhagas Hulaschand and Anr. v. State of Orissa reported in 37 S.T.C.207 (S.C), the lordship has observed as under.
"Case No. II. - A, who is a dealer in State X, agrees to sell goods to B but he books the goods from State X to State Y in his own name and his agent in State Y receives the goods on behalf of A. Thereafter the goods are delivered to 13 in State Y and if B accepts them a sale takes place. It will be seen that in this case the movement of goods is neither in pursuance of the agreement to sell nor is the movement occasioned by the sale. The seller himself takes the goods to State Y and sells the goods there. This is, therefore, purely an internal sale which lakes place in State Y and falls beyond the purview of Section 3(a) of the Central Sales Tax Act not being an inter-State sale." 58. As against that it is submitted by Shri Vasavada that appellant's case is covered by illustration 1, case No. 1 which is as under: "Case No. I.-A is a dealer in goods in State X and enters into an agreement to sell his goods to B in State Y. In pursuance of the agreement A sends the goods from State X to State Y by booking the goods in the name of B. In such a case it is obvious that the sale is preceded by the movement of the goods and the movement of goods being in pursuance of a contract which eventually merges into a sale the movement must be deemed to be occasioned by the sale. The present case clearly falls within this category." 59. For that whether appellant case is covered by case No. 1 and 2, it is necessary to see the certain condition of the agreement to sell. It is nowhere in dispute that appellant had entered into an agreement with his different customers and model of such agreement is produced by appellant which he had entered with NTPC and respondent has produced the copy of the agreement with TATA.60. First of all I will reproduced to meet with argument of Shri Vasavada advance for respondent, he submits that as per Article 5.01 which as under : "5.01 During the period of CONTRACT the SELLER agrees to sell and deliver the GAS at the aforesaid point of delivery to the BUYER to be used by the BUYER as feed and fuel for manufacture of fertilizer as per requirement of the BUYER from time to time subject to a maximum of 1.70 (one point seven zero) million standard cubic meters per day. SELLER may reduce the maximum quantity of 1.70 (one point seven zero) million slandered cubic meters per day to be supplied to BUYER to 1.3S (one point three Eight) million standard cubic meters per day to meet the requirement of feed (i.e. excluding fuel requirement for steam and power generation) of the BUER after giving 12 (Twelve) months notice to the BUYER. Provided for the first year of the initial supply of GAS the BUYER shall provide to the SELLER monthly forecast of the quantity of GAS required by the BUYER at least two months in advance." 61. He has further drawn my attention towards 5.03 and 6.02 which is as under: 5.03. The aforesaid quantities of GAS mentioned in Article 5.01 and 5.02 (b) are base on GAS having a net heating value________K.Cal.
per slandered cubic meter. If at a later _____________ SELLER supplies GAS to the BUYER having lower/__________healing value, the quantities of GAS transaction in Article 5.01 and 5.02 (b) would be increased/decreased correspondingly.
62. First of all I will reproduced relevant clause of agreement on which Shri Vasavada has drawn my attention.
6.01. The quantity of GAS to be delivered to the BUYER will conform to the specifications laid down in Annexure-I hereto which shall from part of this CONTRACT, Typical indicative analysis of GAS is given in Annexure-III. 6.02. The analysis of GAS to establish the quantity shall be determined normally by means of on-line automatic sampler unit to be installed by the SELLER. Chromatograph shall have facilities for recording the analysis and calorific value on continuous basis at interval to the mutually agreed upon." 63. On basis of it is argued that this is nothing but an agreement to sell entered in to by the appellant with his customers. With a view to contention of this agreement is good was moved from Hazira to various customers delivered there and sell concluded there and so as per judgment of Hon'ble Supreme Court delivered in case of Balabhagas Hulaschand and Anr. v. State of Orissa reported in 37 S.T.C.207(S.C), this agreement to sell and so it is inter-State sale and no branch transfer and so it was properly tax by the department.
64. As against that Shri Sheth submits that it is branch transfer because quantity to be supplied to the particular customers is not fixed and allotment of quantity is made by Gas Linkage Committee appointed by Ministry of Petroleum and Natural Gas in Government of India. So it is not agreement to sale but it is merely the distribution work carried out by the appellant, as per quantity fixed by the Gas Linkage Committee and price fixed by the Government of India.
65. Moreover, Shri Sheth submits that movement of goods from Hazira to various States is on account of distribution agreement and not contracts for sale. Shri Sheth submits that movement of goods is not to meet with quantity of particular customer but when bulk gas is put up in HBJ pipeline by the appellant and before it reach customer places, it under goes certain purification and compressor process. So movement cannot He said that gas transported from Hazira to particular states is on account of to meet with demand of particular customer. Therefore, movement is not pursuant to an agreement to sale. The movement of goods is not on account of said so called agreement to sale but it was transported for the distribution of the quantity fixed by Gas Linkage Committee and also to meet with quality to be supplied to particular customer.
66. The combined reading of above referred clause, of the agreement entered into with M/s. Tata Chemical Ltd. a copy of which is produced by the respondent clearly and categorically suggests that Clause 5.0 deals with maximum quantity to be supplied by the appellant to M/s.
Tata Chemical Ltd. It is also mentioned that appellant had power to reduce maximum quantity of 1.70 million standard cubic miters per day to be supplied to buyer to 1.38 million standard cubic miters per day, so the supply term is not for fixed quantity but it gets the changed as per circumstances and so power of reduced quantity is given. Further the Clause 5.02 referrers to quantity and Clause 5.03 referrers to quantity of gas to be supplied M/s. Tata Chemical Ltd gas was supplied as per heating value.
67. Moreover, Article 6.01 it is in respect of quality of the gas to be delivered to buyer and it is according to specification laid down in Annexure I. The Annexure I is as under:- The GAS shall have the following limits of composition at the delivery point:(i) Methane : Not less than 75% by volume.(ii) other Gaseous Hydrecarbons. : Not more than 20% by volume.(iii) Non-combustible gases : Not less than 8% by volume.other than Hydrocarbons(iv) Total Sulphur content as : 10 ppr vol.(Max.)H2s.(v) Moisture content : No free water will be present.(vi) Minimum Net hearing : 7700 Cal/ sodiumValue.
68. So the respondent does not prove that natural gas put up in HBJ pipeline at Hazira is of specification mentioned for Annexure I. On other hand it is constant case of the appellant that natural gas purchased from ONGC after having compressing it, it was put up in HBJ pipeline and at various stations of the GAIL i.e. appellant situated at Vijapur(MP), Auraiya(UP), Khera(MP), Jhabua(MP), Hazira(Guj.) and Vaghodia(Guj.).
69. whether in such station gas reaches to through HBJ pipeline and it further get processed, just like removing contains from gas received from HBJ pipeline, some purification process was done, LPG is taken out and thereafter again having process of compressing etc., gas will further goes to customer.
70. Above referred process clearly and categorically proves that gas put up by the appellant in HBJ pipeline at Hazira is not in pursuance to the agreement entered in to by the appellant with customer to fulfill the need of sale agreement or fulfill to said agreement. An agreement only contains the maximum quantity to supply per day and quality of which is to be supplied by the appellant to customer. So quality of gas need to be supplied to the customer is done at the various stations. So it cannot be said that natural gas moved through HEJ pipeline from Hazira the movement is on account of or in pursuance of agreement entered in to by the appellant with customer.
71. Shri Sheth also submits that it is not for the fulfillment of any particular contract, or fulfillment of particular demand of customer.
72. It is vehemently argued by Shri Vasavada on behalf of the respondent that there is no storage facility and so supply was directly made to the customer of the gas quantity moved through HBJ pipeline and so it is supply is direct result of agreement entered into at New Delhi. The site visit inspection goes to suggest that all big stations like Vijapur(MP). Auraiya(UP), Khera(MP), Jhabua(MP), Hazira(Guj.) and Vaghodia(Guj.) that natural gas moved from Hazira through HBJ pipeline in big diameter pipeline. While as gas further supplied to customer after process is over, through 18" pipeline. This shows that gas is not directly supplied to the customer from HBJ pipeline. Moreover at 5 to 6 places there is gas processing unit established by the appellant, so gas moved from Hazira pipeline first goes to that processing unit, the said pipeline can be term as storage facility. Storage facility does not mean it must be in the shape of tank or tanker. Process unit in which gas is taken and gas is processed that unit can be termed as storage facility.
73. Moreover, when gas reaches to customer places in big diameter pipeline, there is one station installed by the appellant at premises of the customer. Where same gas further proceed is done and then thereafter through 18" diameter pipeline gas further goes to supply point and from that point it was supplied to customer.
74. The above discussed fact clearly and categorically-shows that natural gas put up at Hazira in HBJ pipeline moved to customer is not on account of or on pursuance to any agreement to sale. So above discussed fact and legal position will shows that goods is not move on account of agreement entered into by the appellant with the customer.
So above discuss fact and legal position clearly and categorically shows that example 2nd will apply as given by the Hon'ble Supreme Court in his judgment delivered in case of M/s.Balabhagas Hulaschand and that example i.e. case No. 2 will governed the fact of the present case and not case No. 1 because good is not moved on account of agreement.State of Tamilnadu v. Cement Distributors (P.) Ltd. reported in 36 S.T.C. 3S9 (S.C.). in the said case while interpreting Section 3 of the Central Sales Tax, the Lordship of the Supreme Court as affirmed decision of Madras High Court and Supreme Court has upheld following observation of Madras High Court which I produced as under:- "Whereas Section 3 of the Central Sales Tax Act makes a sale of ascertained goods exigible to tax by the despatching State by reason of the movement of the goods having been occasioned under the contract, in the case of unascertained goods the despatching State has no jurisdiction to treat it and tax it as an inter-State sale merely because a movement is involved. In the latter case the situs of sale is determined on the basis of the appropriation of the goods by an overt act on the part of the seller, with or without the assent of the buyer. Thus if the goods are unascertained, then until it is appropriated to the contract by a known process, sale is not complete. Central sales tax is not leviable by the despatching State in such cases, notwithstanding inter-State movement of the goods, as they are considered in Section 4 as "out-of-State" sales." 76. So from the above discussed fact movement of goods supplied of goods goes to suggest that goods moved from Hazira to various places at which processing unit have been established by the appellant and some process was done on it. Thereafter only gas was supplied to customer through small diameters pipeline goes to suggest that goods moved from Hazira is not on account of fulfillment of any particular agreement or demand of particular customer. Gas is not of a same quality put up in HBJ pipeline which is supplied to customer.
77. Shri Sheth has also drawn my attention to many other elections of various High Courts that support contention of the appellant. Question will arise than what is status of that agreement it can be name anything but movement of goods is not on account of that agreement. So in any circumstances it cannot be said such transporter as inter state sale. Agreement can be branded as "agreement procurement of quantity or agreement to secure quantity with quality". Another question will arises whether movement of goods is branch transfer or not when it is not falling under transaction of inter state trade and commerce, than it can be name as branch transfer or stock transfer. I am not call upon to decide that name of the agreement but I am called upon to decide nature of the transaction, so on the refrain myself from giving any comment on this point but my view is firm that it is not an agreement to sale.
78. It is argued by Shri Sheth that assessment carried out by the respondent for the period 1994-95, 1995-96 is time barred because it was under taken after period of nearly 8 years, the said period more than maximum period prescribed that reassessment under Section 44 of the Act.
79. As against that is submitted by Shri Vasavada that assessment carried out under Section 41B of the Act is assessment in eye of law for the all purpose and limitation will not apply because from 1/4/94 to 31/8/98 limitation was not on statute book and so question of applying limitation period of such assessment does not arise. Appellant has also admitted in his submissions that there was no statutory time limit for passing assessment order for period of 1994-95 and 1995-96.
On going through the both sides arguments, I don't find any substance in submissions of Shri Sheth deserves and I held that principle laid down in case of M. Ravji v. State of Gujarat reported in 89 S.T.C. 228 (Guj.) will not governed fact of the present, case.
80. It is argued by Shri Sheth that assessing authority cannot resort to assessment to be carried out under Section 41B of the Act. Shri Sheth submits that though it is not pleaded in the appeal memo but it is a law point, which is can raised in oral submissions and he further submits that Section 41B is in brought on statue books with special intention for the same. The legislature has incorporated said section with a view to curb or to minimize evasion of sale tax cases, the said provision was brought. As authority has not found out any evasion made by the appellant when assessment cannot be carried out by the appellant under Section 41B of the Act and it should be carried out under general proviso of Act i.e. Section 41(3) of the Act. Shri Sheth has also drawn my attention toward case reported in 119 S.T.C. 583 the Hon'ble Gujarat High Court in case of M/s. Baliboi and Co. Ltd. the lordship has observed as under: "The petitioner- company manufactured air-conditioning package units at its factory at Udhna in the State of Gujarat and dispatch them to branches at Ahemdabad and Calcutta. It claimed that such supplies of air-conditioning package units to customers outside the State were not sales but were inter State works contracts and therefore not liable to sales tax under the State Act or the Central Sales Tax act, 1956. While the assessment proceedings under the Gujarat Sales Tax Act, 1969 were pending, the business premises of the company were searched and the books of account seized. Thereafter the Sales Tax Officer issued notices for provisional assessment. In its reply to the show cause notices issued for provisional assessments, the case of the petitioner company was that the branch transfers from State of Gujarat to destinations outside the State were inter-State works contracts and were not exigible to tax under the State Act.
The assessing officer rejecting the contention, and treating the branch transfers as sales in the course of inter-State works contract provisionally assessed the petitioner and imposed on it tax, interest and penalty in different amounts for the different periods in question. On a writ petition: Held, allowing the petition, that under Section 41B of the Gujarat Sales Tax Act, provisional assessment can be made by the Commissioner or his delegate as assessing authority only if he "has reason to believe that a dealer has evaded the tax". Neither in the show cause notice issued prior to making the provisional assessment nor in the assessment orders, had the assessing authority recorded reasons or ground for coming to the conclusion that the dealer had evaded tax. In the order effecting the sezure of its accounts books, the assessing authority found that certain works contracts were liable to be taxed under the Central Sales Tax Act which were in the nature of branch transfers. In the orders of assessment, the assessing authority had reproduced the stand taken on behalf of the dealer that "such branch transfers were mad for completing the works in accordance with the orders and specification of customers outside the State and were not sales but were merely transactions in the course of works contract." The assessing officer had also in the order of assessment, rejected the contention advanced on behalf of the petitioner that the branch transfers were inter-State works contract and not inter-State sales. He held them exigible to tax under the Central Act. It was on taking such view of law that the assessing officer provisionally assessed the petitioner and consequently imposed tax, interest and penalty on it for the different assessment periods under consideration. On the facts and legal position disclosed by the dealer, there did not exist any grounds and circumstances for the assessing officer to reasonably form an opinion that the dealer had evaded the tax. The expression "evasion of tax" conveys mens rea on the part of the dealer. The expression conveys a meaning that the dealer by infringing the law has been trying to avoid payment of tax in due time. This was not a case where the assessing officer could have resorted to the provisions under Section 41B of the Act for provisional assessment of the petitioner and imposition of tax, penalty and interest." 81. With a view to appreciate this argument of Shri Sheth it is necessary to go through that provision of Section 41B of the Act as reproduced herewith.
(1) Where the commissioner has reason to believe that the dealer has evaded the tax, he may, after taking into account all relevant materials gathered by him and after giving the dealer a reasonable opportunity of being heard, provisionally assess to the best of his judgment the amount of tax payable by the dealer.
(2) The provisions of this Act shall mutates mutandis apply to the provisional assessment as if provisional assessment were an assessment made under this Act.
82. The above provision suggest that Commissioner has reason to "believe that a dealer has evaded the tax" and provision of under Section 41B also provides that provision of this Act shall mutates apply to the provisional assessment. So provisional assessment should be require to be under taken in light of other provision of Act.
83. Now looking to the above referred case in which the expression "evasion of tax" has been explained by the lordship very well. I again reproduced the said portion as under:- "F. The expression "evasion of tax conveys mens rea on the part of the dealer. The expression conveys a meaning that the dealer by infringing the law has been trying to avoid payment of tax in due time. This was not a case where the assessing officer could have resorted to the provisions under Section 41B of the Act for provisional assessment of the petitioner and imposition of tax, penalty and interest." 84. On reading this principle, it is clear that for evasion of tax it means that dealer cannot be considered that he has evaded the tax if by infringement of law, he had try to avoid payment of tax in due time. In reported case there was no mention in the notice that the dealer held evaded the tax but in this case before me the assessing Authority had issued notice alleging that under the guise of branch transfer appellant had evaded the tax. But series of submission and letters the appellant had submitted that they have made only branch transfer. In reference to alleged evasion of tax appellant had explain at fullest and deeply that they have not evaded the tax while assessing authority had not came to the definite conclusion that appellant had evaded the tax. A branch transfer Bonafidly made is not evasion of tax. At the most it can consider as misinterpretation of provision of law because no malafide intention has been made out by assessing authority from the documents and evidence made by the appellant before assessing authority.
85. So the assessment carried out under Section 41B it is clear that authority is not entitled to carry out assessment made Section 41B of the Act. The authorities should have resorted to regular assessment to be carried out under Section 41(3) of the Act. So in conclusion assessment carried out by the assessing authority under Section 41B of the Act requires to be declared as nugatory assessment and authority should carried out regular assessment as per law.
86. It is submitted by Shri Sheth that there are factual errors in order passed by the assessing authority. He has stated that as HBJ pipeline has no open cud, so gas put up in pipeline at Hazira strait way goes to customer and it is not meant storage gas that factual error had no important at all. Because I have discussed in details in forgoing paras of my this judgment that how gas supply made by 18" sub pipeline to customer after it reaches to appellants station installed at premises of customer. When gas reaches to said install station at that time it was in 36" pipeline coming from appellant center. So factual error does not carry any important at all.
87. Regarding metering station it was heavily relied by assessing authority but on going through site inspection and report prepared by me the mitering station does not take any important roll in supply of natural gas from Hazira to the customer in other State.
88. Shri Sheth submits that assessment order passed by the assessing authority for the period 1998-99 is passed without issuing statutory notice, so it is bad in law. It is submitted by respondent that notice was issued and copy was sent notice to the appellant and copy of O.C.was produced. So from it presumption can be made that he had received notice, 89. In another word it is submitted by Shri Vasavada that appellant is not prejudice on account of alleged non service of notice as he had taken a part in assessment proceeding made submission and put his grievance so he is nowhere prejudice in allege non submission of notice.
90. The Submission of Shri Vasavada carries much weight I have go through judgment delivered by the Hon'ble Supreme Court in case of Commissioner of Sales Tax and Ors. v. Subhash and Co. reported in 130 S.T.C.97, in the said case the Hon'ble Supreme Court had a occasion to decide point of notice the lordships have observed at para 12 as under : "Whether service of notice is valid or not is sensationally a question of fact. In the instant case, learned single Judge found that certain procedures were not followed while effecting service by affixture. There was no finding recorded that such service was non est in the eye of law. In a given if the assessee knows about the proceedings and there is some irregularity in the service of notice, the direction for continuing proceedings cannot be faulted. It would depend upon the nature of irregularity and its effect and the question of prejudice which are to be adjudicated in each case on the basis of surrounding facts. If, however, the service of notice is treated as non est in the eye of law, it would not be permissible to direct do novo assessment without considering the question of limitation. There also the question of prejudice has to be considered." 91. On behalf of all minor submissions with by me in details because when I am of the view that the transactions effected by the appellant is not inter state transaction, In that eventuality matters requires to be remanded to learned assessing authority to decide tax liability of the appellant by considering branch transfer transactions as such and not as inter state transaction. Moreover, the assessment carried out by the respondent under Section 41(b) of the Act also requires to be held nugatory and in that circumstances assessing authority is requires to be directed to assessed the appellant under Section 41 of the Act. At that time the appellant will get opportunity to put up all this minor submissions before assessing authority and get decision of assessing Authority. So I do not opine myself on this minor submissions.
92. Now it is mainly submitted by Shri Sheth that for the assessment carried out for the year 2000-2001, 35% was margin was added by assessing Authority to the turnover of the purchases, Shri Sheth submits that the sale value of the goods stock transfer for year 2000-01 is Rs. 33,98,16,21,370/-, while in assessment on estimation basis. It is wrongly taken as Rs. 41,64, 63,09,126/-.
93. Shri Sheth submits that tax element was not deducted for year 2000-01 (1) He also submits that transportation charges have been wrongly added for levying tax and deduction of transportation charges was not given (2) He also submits that to produce Form C time should be given to the appellant. (3) He also submitted that set off under Rule 44 was not properly calculated in case of the appellant. (4) He also submitted that imposition of penalty in provisional assessment is illegally imposed for that it is well settled principle that penalty cannot be imposed under Section 41(13) of the Act. (5) He also submits that assessing authority wrongly imposed interest.
94. While to meet with the said issue the lordships have enumerated certain principle in para 20 as under: (i) Non issue of notice or mistake in the issue of notice or defective service of notice does not affect the jurisdiction of the assessing officer, if otherwise reasonable opportunity of being heard has been given.
(ii) Issue of notice as prescribed in the Rules constitutes a part of reasonable opportunity of being heard.
(iii) If prejudice has been caused by non-issue or invalid service of notice the proceeding would be vitiated. But irregular service of notice would not render the proceedings invalid ; more so, if assessee by his conduct has rendered service impracticable or impossible.
(iv) In a given case when the principles of natural justice are stated to have been violated it is open to the appellate authority in appropriate cases to set aside the order and require the assessing officer to decide the case de novo.
95. So looking to the above principle, I am of the view that as appellant had participated in the assessment proceeding and notice was already issued to him has submitted by the respondent. In that circumstance I am of the view that appellant is not prejudice any manner and on that count proceeding cannot be vitiated or can be said as invalid. In this case I am of the view that non submissions of notice to the appellant for the year 1998-99 does not prejudice in his defense and so it cannot be considered said assessment as illegal and in valid.
96. In view of the above stated facts and legal position. I pass following final order.
(2). The provisional assessment passed under Section 41-B are hereby set aside. The Assessing Authority is at liberty to carry out regular assessment of appellant in accordance with law.
(3). The orders imposing interest for the provisional assessment are hereby set aside.
(4). Matters are remanded to Assessing Authority with a direction to assess appellant for the transaction of branch transfer as contended by appellant as branch transfer and decide his tax liability accordingly and in accordance with law for the period 1998-99 to 2000-2001.
(5). Any amount, if, requires to be refunded to appellant, be refunded in accordance with law.