Hindustan Petroleum Corporation Ltd v. Commissioner of Vat Delhi & Ors

it IN THE HIGH COURT OF DELHI AT NEW DELHI + SALES TAX APPEAL NOS.7. 10, 14, 16,23.25.2712012 Reserved on: 17th February. 2012 Date of Decision:27th Februarv, 2012 HINDUSTAN PETROLEUM CORPORATION LIMITED Throush Mr. s.K. Basaria, sr. Advo""ij'flffi"fli1: Ashok K. Bhardwaj, Mr. A.P. Vinod & Mr. Manish Hirani. Advocates. VERSUS r] COMMISSIONER VAT DELHI & OTHER.....Respondents Through Mr. H.C. Bhatia, Advocate. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE R.V. EASWAR SANJIV KHANNA. J.: For detailed order see Sales Tax Appeal No. 6/2012 titled Hindustan Petroleum Corporation Limited versus Commissioner VAT Delhi and Other pronounced today. 4-l/,-- ., L tL (SANJrV KHANNA) JUDGE lnl \\4.,,nq. (R.V. EASWAR ) JUDGE ffiRyRY 27'2012 ttr lN T'!-{E'"1-tlG[-l COIJR.T OF DE!-[-ll AT FiE\ftt Dt=[-l-{l % , ---l HINDUSTAN PETROLEUM CORPORATION LIMITED ...Appellant Through Mr. S.K. Bagaria, Sr. Advocate with Mr. Ashok K. Bhardwaj, lMr. A.P. Vinod & Mr. Manish Hirani, Arlvocates-VERSUS COMMISSIONER VAT DELHI & OTHER.-- -.ResponcJents Through Mr. H.C. Bhatia, Advocate. :' S,AI-ES TAX APPEAL hlOS.8, 11. 17.18,2'l ,22,28 E 3AI2W12 .: INDIAN OIL CORPORATION LIMITED ...Appellarrt Thror"rgh Mr. S.K. Bagaria, Sr. Advocate with Mr. Ashoi< K. Bhardwaj, Mr. A.P. \/irrod-,& IVlr. Manish Hirani. Advocates. ;l . VEIRSUS COMMISSIONER VAT DELHI & OTHER.....Respondents Through lvi. u.C. Bhatia, Advocate. SALES l-AX APPETA!.- [VOS.9. 12,'13,15,'19,24.26 8,29 12fr12, BI-IARAT PETROLEUM CORPORATION LIMITED ...Appellant Through Mr. S.K. Bagaria, Sr. Advocate with Mr. Ashok K. Bhardvi'aj, Mr. A.P. Vinod & I\/r. Manish Hirani, Advocates. VERSUS COMMISSIONER VAT DELHI & C)TFIER.....Respondents Through Mr. H.C. Bhatia, Advocate. Salcs l'ax Appeal l'Jos. 6-30/2t-r12 "t l)agrt 'l tll 'l 2 $AI-ES TAX AFPEAI-r{OS. 6. 7, 10, 'n4, X6, 43,25,27',12W1?- fr -*w.q4 g. -mr w-.*-:$ir'r -'-y . - tr-r.-?-itrqr- . {t SALES TAX APPEAL NIO.2O|20'I2 INDO BURMA PETROLEUM CORPORATIONI LIMITED rh ro u s h ffi .i- [ Bf, 3illfu :[, liH"l# ift Manish Hirani, Advocates. VERSUS coMMtSSIONER VAT DELHI & oTHER.....Respondents Through Mr. H'C. Bhatia,' Advocate' G0RAFT/I: tr-{ON'BLE MR,. JUSTICE SAI\IJlV Kl-lAtrll\il4 I-{OI{'BLE MR. ..!USTICE R.V. EASVIIAR. SANJNV KI-IANI{A, J.: Indian oil corporation Limited, Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited and lndo-Burma Petroleum corporation Limited have filed the present appeals under section B'1 of the Dellri Value Added Tax Act, 2OO4 (Act, for short) impugning the order clated 1't Decembe r,2011 passed by the Appellate Tribunal Value Added Tax (tribunal, for short). li is submitted that the present appeals raise substantial questions of law as iqterpretation.of proviso to Section 2(1)(zd) of the Act is required and the interpretation placed by the tribunal is vitiated and inc"irrect' Sales Tax Appeal Nos. 6-30/2012. Page 2 ol 12 .C

¶2The facts are not in Government undertakings petroleum products.

¶3Value Added Tax (vAT, for short) on ad valorem rate is payable on the said Products. ,4. On 1=t June, 2006, Government of India increased rates of petrol and high speed diesel by Rs.4l and Rs.2/- respectively from midnight of 5/6th June, 2006. This increase would have caused and resulted in ad valorem increase in VAT @ 0'66 paise per litre of petrol and 0.22 paise per litre of diesel.

¶5With a view to grant some relief in the price rise to the consumers, who had to pay the enhanced price of petrol and diesel, Government of NCT of Delhi issued Memorandum No' F.1(13yptIA/AT/AcU2OO6]2OG} dated ?0'n June, 2006 to the following effect: "ln pursuance of the ordinance dated

20.06.2006 (copy enclosed) promulgated by the Lt. Governor of the National Capital Territory of Delhi, Value Added Tax shall not be charged with immediate effect on the lncremental prices (including the duties and levies charged thereon by the Central Government of petrol and diesel as has been announced by the Government of India with effect from 6th June 2006-Sales 'fax ApPeal Nos. 6-30/2012 [)agc 3 of 12 dispute. marketing The appellants petrol, diesel are and t'l Therefore Diesel and Petrol shall be sold in National Capital Territory of Delhi bv not taking into account the component of the Value Added Tax on the increased price with immediate effect, meaning therebv that VAT shall continue to be charged on the pre-revised prices of diesel and petrol till further Notification in this reqard." (emphasis suPPlied)

¶6Thereafter, on 21't June, 20CG an ordinance was promulgated by the Lieutenant Governor inserting a proviso to the definition of the word "sale price" in Section 2(1Xzd) The said Section after insertion of the provisg reads:-i "(zd) "sale price" means the amount paid or payable as valuable consideration for any sale, including-

(i) the amount of tax, if any, for which the dealer is liable under section 3 of this Act;

(ii) 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 including hire charges, interest and other charges incidental to such transaction;

(iii) in relation to transfer of the right to use any goods for any purpose (whether or not for a specified period) the valuable consideration or hiring charges received or receivable for such transfer;

(iv) any sum charged for anything done by the dealer in respect of goods at the. time of , or before, the deliverY therer,Tf; Sales Tax Appeal Nos. 6-30/2012 Page 4 ol 12 ,O/ o

(v) amount of duties levied or leviable on the goods under the Central Excise Act,1944 (1 of tO++) or the Customs Act, 1962 (52 of 1962), or the Punjab Excise Act, 1914 (1 of 1914) as extended to the National Capital Territory of Delhi whether such duties are payable by the seller or artry other person; and

(vi) amount received or receivable by the seiler by way of deposit (whether refundable or not) which has been received or is receivable whether by way of separate agreement or not, in connection with, or incidental to or ancillary to the sale of goods,

(vii) in relation to works contract means the amount of valuable consideration paid or payable to a dealer for the execution of the works contract; less -

(a) any sum allowed as discbunt which goes io' red-u"e tlre sale price according to the practice, normally, prevailing in trade;

(b) the cost of freight or delivery or the cost of installation in cases where such cost is separately charged; and the words "purchase price" with all their grammatical variations ; and cognate expressions, shall be constrlled accordingly; Provided that an amount equal to increase in the prices of petrol and diesel (including the duties and levies charged thereon by the Central Government) taking effect from the 6th June 2006 shatt not form part of the sale price of petrot and diesel dold on and after 'the date'of promutgation of this Ordinance till such date as the Government may', bY notification in the Official Gazette, direct: l)age 5 of 12 Sales Tax APPeal Nos. 6-30/2012 n^' I O 1' fii' Provided further that the first proviso sha// ' not take effect titl the benefit'is passed otl to the consumers. Explanation:-A dealer's sale price always includes the tax payable by it on making the sale, if anY;" (The proviso for the sake of convenience has been highlighted in italics.)

¶7On 30th November, 2006, there lVas partial roll back of prices enhanced with effect from 6th June, 2006. The prices were again rolled back to pre 6th June, 2006, with effect from 16th February, 2007. B. The contention of the appellants, which has been rejected by the tribunal, is that the proviso inserted to section 2(1)(z) should be interpreted in the manner that the benefit of reduction of 0.66 paise per litre of petrol andO'22 paise per litre of diesel continued even after partial roll back on 30th November, 2006 and full roll back with effect from 16th February, 2007' In other words, the appellants submitted that even when the prices of petrol and diesel were restored back,to the prices as on sth June, 2006, the appellants were entitled to reduction in vAT @ Sales Tax APPeal Nos. 6-30/2012 i.l. ; t

0.66 paise and 0.22 paise per litre of petrol and dieset on 1ft; \-v VAT payable on ad valorem basis. g. The aforesaid contention of the aipellants is based upon the expression "an amount equal to increase in prices of petrol and diesel" and the stipulation in the proviso that the benefit thereunder shall Continue till such date as the Government may by notification in the official gazette direct. In this connection, it is submitted that a notification dated sth. June' 2007 was issued in the official gazette and as per the said notification, the Lieutenant Governor had directed that from the said date, the proviso shall ceased to be effective. Thus, the appellants submit that benefit of 0.66 paise on petrol and 0.22 paise on diesel on the ad valorem VAT continued till sth June, 2OO7 '

¶10we may reproduce below the qeasoning given by the tribunal to reject the said contention raised by the appellants:- "17. ....Tax is to be paid as per Sec' 4 of the Act on the taxable turhover' Taxable turnover is to be computed hs per Sec' 5 r/w Sec. 2(1Xzm) of the Act' Sec' 2(1Xzm) tall<s about the 'sale price'. 'Sale price' is defined bY sec-2(1)(zd) as a valuable consideration fon any sale including . amount of tax payable under the Act' (emphasis in bold) Thus if a state Govt' wants to give relief against the price Sales Tax APPeal Nos. 6-30/2012 PageT of 12 ( ,l increased by the Central Gijvt. the it could only do so by not charging tax on the increased portion but for doing so it had to exclude the increased portion from the purview of the expression 'valuable consideration for any sale'- ln our considered view purpose of the Govt of NCT of Delhi in. introducing the proviso in question, when considered from the plain language of the proviso, was to direct the appellant dealers to continue to pay the VAT as if there was no increase in the prices by the Central Govt. ln our considered view, the act of the Govt. of NCT of Delhi in introducing the proviso in question, by no stretch of imagination, could goad the appellants to embark upon an exercise in reducing the basic price fod calculating the VAT, as argued by the Ld. Counsels for the appellants because simple meaning of this proviso is that oil companies were not rgquired to include the increased component as a part of sale consideration under sec' 2(1)(zd) of the Act. Wherr the increased component was not to be' a part of sale consideration under sec. 2(1)(zd) of the Act, the obviously the appellants were not to charge VAT on the same as Per the definition of the term 'sale price' which came to be controlled by introduction of the proviso in question. When there was no effect of the increased component, in the liability to pay VAT then it was immaterial when there was complete role back or when the Notification was issued as per this proviso' Thus in our considered view, the submission of the Ld' Counsels for the appellants that the meaning of this proviso was that appellants shall continue to follow the deduction till another notification was issued which was in fact issued in June 2007 anq oil companies stopped taking benefit of tire proviso after Sales Tax Appeal Nos. 6-30/20'12 Page B of '12 {bt' this notification in June 2007 ' is without any merit. -..." ll.Weareinagreementwiththeaforesaidconc|usionfor the reasons and discussion below' i

¶12The term ,sale price' has beeni' defined to mean the i amountpaidorpayab|eaSva|uableconsiderationwhich includes the amount of tax' if ?ny, ,!"U of central excise' ,i customsdutyetc'The|astpartofithemainsub-section stipulates that words 'purchase price' and all their grammatical variationsandcognateexPressions,'shallbeconstrued accordingly. The proviso which was incorporated on 21't June' 2006,hastobegivenanorma|andnaturalmeaningkeepingin mindthecontext,objectandreasonforitsinsertionand incorporation.Section2(1)(zd)hastobereadinentiretyto understandtheeffectandpurportoftheproviso.Further,the proviso cannot be read in a piecemea! ignoring the middle paft t' thereof and with reference to the first part and as the last part of t the proviso. The central or the middle portion of the proviso specifically states that there was increase in prices of petrol and diesel by the Central Government With effect from 6th June' 2006. The Proviso stiPulates increase in Prices of Petrol and Sales -Tax APPeal Nos. 6-30/2012 that bn amount equal to the diese[iwith effec, u"T,:", "1;1"' o 2006 shall not form part of the sale prices of petrol and diesel sold on or after the date of promulgatiori of the ordinance. The ; intention and object was clear that there should not be ad valorem increase of VAT on account of increase in prices by the Central Government.with effect from 6th June, 2006 and this enhancement shall not form part of the sale price of petrol and diesel. Therefore, when there was a partial and thereafter a complete roll back of the enhanced price and the prices of petrol and diesel were restored back to the pre 6th June, 2006 level with effect from 30th November, 2006 and 16th February,2007, respectively, the benefit of the proviso iobviously ceased to be partly or fully applicable and operate. The proviso only protected and gave exemption in respect of enhanced ad valorem VAT i payable on account of increase in prides of diesel and petrol from 6th June, 2006 and this increase was not to form part of the prices of petrol and diesel. On this increase, no additional ad valorem VAT was payable. The proviso did not say that ad valorem VAT will not be payable and applicable on the pre 6th June, 2006 prices on petrol and diesel. vAT as was payable on the pre 6th June, 2006 prices, whether before or after 21't June, 2006. 'lt continued to remain payable' and. was not effected' Sales Tax Appeal Nos. 6-30/2012 I,age 10 o.f 12 -, r' When from 16th February, -2007 the enhanced prices were completely rolled back, the VAT was payable as per the selling price. Benefit under the proviso ceased to be applicable with effect from the said date, as the prices increased with effect from 6th June, 2'006, were rolled back. The enhancement of prices, in respect of which proviso was inserted, lvas withdrawn and thus the benefit under the proviso came to an'end-

¶13The notification dated 5th June, 200,7 issued in terms of the proviso does not help the appellarits. The proviso itself stipulated that the Government by a notification in the official gazette can withdraw the concession. Thus, the state Government had retained their right to ask the appellants to pay enhanced VAT on the basis of enhanced/increased sale price with effect from 6th June, 2006 by issue of a notification and an amendment to the Act was not necessary. The last parl of the proviso was to operate and was applicable in a different situation. This does not mean that the prroviso has to be read in a manner that it is applied even after the roll back of the prices of petrol and diesel to the pre 6th June, 2006 tevei' Sales Tax Appeal Nos. 6-30/2012 t'age 1t of tZ \,

¶14VVe do not find that any substantial question arises for . consideration in the present appeals and the same are accordingly dismissed. No costs' J.. ]n i'' FEBRUA av }'l'izotz vKR / Sales Tax APPeal Nos. 6-30/2012 -4 -/(-) .l/, l.' Lt -. (sAl{Jlv KHANINA) JUDGE It IU ^,-^ . (R.v. EASWAR ) JUDGE Page 12 ot 12