Gauhati High Court
Bongaigaon Refinery & Petrochemicals ... vs Commissioner Of Taxes And Ors. on 17 January, 2003
Equivalent citations: (2003)1GLR524
Author: D. Biswas
Bench: D. Biswas
JUDGMENT
1. The question to be answered in this petition is whether the amount received from the Oil Pool Account maintained and administered by the Oil Coordination Committee is exigible to sales tax as per provisions of the Assam General Sales Tax Act, 1993.
2. The petitioner is a Government of India Undertaking under the administrative control of the Ministry of Petroleum and Natural Gas. It is engaged in refining the crude oil and its ancillary produces from simple petroleum fuel to sophisticated petroleum products. The petitioner is a registered dealer under the Assam (Sales of Petroleum and Petroleum Products including motor Spirits and Lubricants) Taxation Act, 1955 and Central Sales Tax Act, 1956. The petitioner Company has been served with the impugned notices dated 21.6.1994 and 22.6.1994 issued by the Senior Superintendent of Taxes Baongaigaon directing them to show cause as to why the amount of Rs. 39,88,32,905 received during the Financial Year 1985-86 from the Oil Pool Account shall not be assessed as taxable turnover. The petitioner Company has assailed the aforesaid notices in this petition.
3. I have heard Dr. A. K. Saraf, learned Senior Counsel for the petitioner and Mr. B. J. Talukdar, learned State Counsel for the respondent. It may be mentioned that the State has not filed any affidavit despite service of notice.
4. At the very beginning we may summarise the reasons on the premises of which the notices issued by the taxing authority have been challenged. The Government of India set up Oil Prices Committee to examine and recommend pricing of crude oil and petroleum products. The Government of India accepted the final report submitted by the Committee in 1976. The committee recommended that the refineries should be compensated by way of an adjustment against the Pool Account for any short fall in realization due to variation in the standard production pattern on account of specific direction from the Government. The Refineries are also required to credit its surplus to the Pool Account as and when production pattern has a favourable effect on realization. The Coordination Committee was set up for management and administration of the Pool Account. The petitioner Company is disposing of the petroleum fuel products enblock to the Indian Oil Corporation at the Ex-Refinery Prices fixed by the Government of India. Any amount received by the petitioner from the Pool Account is not a part of the sale price and is in the nature of subsidy/compensation. As such, the subsidy received cannot be construed as a part of sale price. According to the petitioner, the amount is disbursed by way of compensation for any shortfall in the realization due to variation in the pattern of production standard. Surplus realization, if any, on account of such variation is adjusted against costs and freights. It is further submitted that taxation of subsidy/compensation is beyond the legislative power of the State and levy of such taxation on subsidy will amount to violation of the Constitutional protections under Article 19(1)(g) and Article 21.
5. I have heard Dr. A. K. Saraf, learned Senior Counsel for the petitioner and Mr. B. J. Talukdar, learned State Counsel.
6. Dr. Saraf argued that the sale price would mean the money received as consideration for sale of the goods from the buyers. The petitioner having charged ex-Refinery Prices for the product sold, it is only such prices received on sale shall be exigible to sales tax. The amount received from the Pool Account cannot be treated as part of sale price and, as such, the notices issued by the Respondent No. 2 are without jurisdiction and, therefore, void. Mr. Talukdar, learned State Counsel submitted that the subsidy is given to make good the loss sustained by the petitioner due to variation in standard of production pattern and, as such, it has to be treated as a part of sale price,
7. There is no dispute that the Oil Coordination Committee set up by the Ministry of Petroleum, Government of India is the authority to fix ex-Refinery prices after consideration of various factors. Petitioner sells their refinery products to the Indian Oil Corporation, hereinafter referred to as the 'IOC', at the ex-Refinery prices fixed by the Oil Coordination Committee. The ex-Refinery prices as fixed by the Oil Coordination Committee are the same for all the Refineries in India. The petitioner realizes the ex-Refinery prices of their products sold to the IOC. The retention margin for the Refinery is ensured through various Pool Account. The Oil Coordination Committee fixes the retention prices of crude oil taking into account the prices of imported crude oil, costs of indigenous crude oil, refining costs etc. The shortfall between the ex-Refinery Prices and the Retention Prices of petroleum products is paid by the Oil Coordination Committee. The petitioner has no authority in the matter and it has to sell its products at the ex-Refinery prices as fixed by the Oil Coordination Committee with assurance of protection of the shortfall between the ex-Refinery Prices and the Retention Prices. However, as and when the Retention Price is less than the ex-Refinery Price, in that event the difference between the Retention Price and the Sale Price has to be surrendered to the Oil Pool Account. On this context, it has to be considered whether the amount received by the petitioner Refinery as subsidy/compensation could be said to be a part of sale price.
8. A Division Bench of this Court had the occasion to deal with the matter in Commissioner of Taxes and others, Appellants v. Bongaigaon Refinery & Petrochemicals Ltd., Respondent (1992) 2 GLR 404. It would be appropriate to quote herein the relevant observation of the Division Bench and the decision thereon as under :-
"12. From the above it is seen that if the retention price of refinery is less than the ex-refinery price/sale price to I.O.C., in that case the difference between the retention price and the sale price cannot be retained by B.R.P.L. and they are bound to remit the same to the oil pool/O.C.C. To illustrate, suppose, the retention price of light diesel in respect of B.R.P.L. is Rs. 1000 per KL, whereas the sale price or ex-refinery price is Rs. 1500 per KL, whereas the sale price or ex-refinery price is Rs. 1500 per KL under the Taxation Act and the Central Sales Tax Act, B.R.P.L. is required to pay taxes on Rs. 1500 but they are not allowed to retain this sum of Rs. 1500. They can only retain at the rate of Rs. 1000 per KL only and the balance amount they will have to credit/remit to O.C.C.".
"15. In view of our foregoing discussion, we are of the view that the amount received by B.R.PL. from O.C.C. being the difference of the retention price and refinery price is in the nature of subsidy or compensation and these are not liable for taxation either under the Taxation Act or the Central Sales Tax Act. We find no merit in these appeals and the appeals are accordingly dismissed. Considering the facts and circumstances of the case the parties shall bear their own costs."
9. This Court is to follow the decision as above in the given context of the case at hand, Dr. Saraf, learned Senior Counsel for the petitioner submitted that Special Leave Petition has been preferred against the Judgment of the Division Bench before the Apex Court, but as on date there is no stay in the matter.
10. That being the position, the writ petition is disposed of in the light of the decisions of the Division Bench with the observation that the amount received by the petitioner Refinery from the Oil Pool Account by way of subsidy is not exigible to sales tax. No order as to costs.