In a significant ruling, the Allahabad High Court held that ‘Regasified Liquefied Natural Gas (‘RLNG’) supplied by Gas Authority of India Ltd is not Compressed Natural Gas (CNG) so as to drive out it from taxing Entry 8(a) of Schedule IV of Uttar Pradesh Value Added Tax Act, 2008 Act.
The assessee approached the High Court against the order of the Tribunal that Compressed Natural Gas (CNG) is distinct and separate product which is used in automobiles sector, and is usually supplied at 200 to 250 bars, which was not applicable in the case of the assessee. The Tribunal was of the view that RLNG supplied to assessee by GAIL is not Compressed Natural Gas (CNG).
Assessee contended that natural gas when is compressed above atmospheric pressure, it would have to be classified as Compressed Natural Gas (CNG). They relied on the expert opinion which states that ‘RLNG’ supplied by GAIL to the assessee is natural gas at a pressure above atmospheric pressure (1.0325 bar) and could be characterized as Compressed Natural Gas.
Justice Ashwani Kumar Misra, while applying the common parlance test, found that the trade or a commercial meaning or the end user test would be relevant while interpreting a taxing entry. “It can safely be presumed that when notification was issued by the State, specifying the taxing entry, a distinct kind of natural gas was intended to be excluded from natural gas. The scientific or technical attribute of the product may have relevance for academic purposes, but for the taxing statute the exclusionary part of the natural gas would have to be construed as a distinct entity understood in its popular sense or common parlance. A definite identifiable product is to be excluded. In case Natural Gas in compressed form is to be treated as Compressed Natural Gas (CNG) then almost all category of Natural Gas which is capable of being transported (because only in compressed form Natural Gas could be transported) would get covered. What is intended to be excluded from Natural Gas thus is a particular variant of Natural Gas, in compressed form, which is identified as Compressed Natural Gas (CNG) in the trade or industry and is understood and used as such.”
It also noticed that natural gas has to be compressed for it to be transported from one place to another. The technical meaning sought to be assigned by the revisionist if is accepted, then there would hardly be any product available known as “natural gas”, inasmuch as for the natural gas to be put to use it has to be transported and for such purposes, pressure above atmospheric pressure i.e. 01 bar would have to be applied. The bench opined that applying scientific or technical interpretation, would virtually result in rendering the entry itself meaning less inasmuch as natural gas other than Compressed Natural Gas (CNG) itself would not be available to be taxed as all kinds of natural gas when delivered to end consumer would only be in compressed form and would qualify to be termed as Compressed Natural Gas (CNG).
Relying on the observations made by the Apex Court in Tata Consultancy Services vs. State of Andhra Pradesh [2005 (1) SCC 308] and Bharat Sanchar Nigam Ltd. vs. Union of India [2006 NTN (29) 307], the bench held that “for Natural Gas other than Compressed Natural Gas (CNG) to qualify as goods must have the attribute of being capable of transferred, delivered, stored, possessed. It must be deliverable. Compression is, therefore, essential for the Natural Gas to be termed as goods under Section 2(m) of the Act.”
Read the full text of the Judgment below.
