The division bench of Supreme Court of India stayed the order of the Gujarat high court declining exemption from tax on the inter ¬State sales of LPG.
The order came from an appeal filed by Essar Oil Ltd for exemption from paying value added tax (VAT) on kerosene and LPG.
A bench comprising of Justice A. K. Sikri and Justice N. V. Ramana admitted Essar Oil’s appeal. The Gujarat government had sought to recover nearly Rs.600 crore in VAT from Essar.
The oil refinery submitted that state governments cannot levy VAT on products sold under the public distribution system and oil marketing companies selling for domestic use also should be taxed accordingly.
In the impugned order, the high court observed that, ONGC is not entitled to exemption from payment of Sales Tax in respect of Kerosene under Entry 33 in as much as ONGC sells Kerosene to OMCs in bulk and not in Public Distribution System for resale thereof to various dealers. Similarly, ONGC is not entitled to the benefit of Entry 70 in respect of LPG inasmuch as, sale of LPG in bulk by ONGC to OMCs is for the purpose of resale thereof and not for domestic purpose. The petitioner is also not entitled to the benefit of the aforesaid Entry 53 in respect of Kerosene sold by it in bulk to OMCs for the purpose of resale thereof, since the said sale in favour of OMCs cannot, by any stretch of imagination, be said to be sale through Public Distribution System.
Read the full text of the order below.
