Kribhco Shyam Fertilizers Limited vs State of U.P. and Others

Heard Sri Vivek Tankha, Senior Advocate, assisted by Sri Mohd. Altaf Mansoor, counsel for the petitioner, Sri H.P. Srivastava, Additional Chief Standing Counsel for respondent Nos. 1 to 4, Sri Gaurav Mehrotra, Counsel for respondent No. 5 and Sri Desh Bandhu Bhargava, counsel for respondent Nos. 6 and 7. Through the above-captioned writ petitions under article 226 of the Constitution of India, the petitioner has prayed for the following reliefs:

(i) issue a writ, order or directions in the nature of certiorari quashing the orders dated October 25, 2012 and dated November 9, 2012 passed by respondent Nos. 3 and 4, respectively, as contained in annexure Nos. 1 and 2 to the writ petition;

(ii) issue a writ, order or directions in the nature of mandamus directing the State of U.P. to refund the claimed amount of VAT deposited by the petitioner with interest;

(iii) issue a declaration declaring the impugned action of the State authorities in declining the claim of refund as ultra vires being violative to article 265 of the Constitution of India and other statutory provisions.

(iv) such other/further relief as the honourable court may deem just and appropriate in the facts and circumstances of the case may also be granted in favour of the petitioner as against the respondents.

(v) Award the cost of the writ petition to the petitioner.

Since common question of facts and law are involved in the above-captioned writ petitions, as such, with the consent of the learned counsel for the parties, they are being decided by a common order at the admission stage itself.

Shorn off unnecessary details the facts of the case are as under:

The petitioner, who is a public limited company incorporated under the Companies Act, 1956, is registered under the Central Sales Tax Act and U.P. Trade Tax Act/U.P. Value Added Tax Act. He, is engaged in the business of manufacturing urea fertilizer and for that purpose, natural gas has been used for generating energy to their furnaces. The petitioner purchases Natural Gas from Reliance Industries Limited for using it for manufacturing urea fertilizer.

According to the petitioner, a licence was given to the Reliance Industries Ltd. by the Central Government, whereby he was permitted to market and sell the petroleum and natural gas extracted from the KG basin to various customers and a part of the product was to be given to the Government of India free of cost, once Reliance Industries Ltd. had recovered the investment made by it in the extraction process and the remaining quantity of petroleum and natural gas was to be sold by Reliance Industries Ltd. to certain customers subject to allocation of the product in their favour by the Government of India. The aforesaid licence was granted by the Government of India by means of the Production Sharing Contract (hereinafter referred to as PSU), which was entered into between the Government of India and the contractors, i.e., Reliance Industries and NIKO (NECO) Ltd., wherein article 2 of the PSC, it has been mentioned that participating interest of Reliance Industries Ltd. is 90 per cent, whereas that of NIKO (NECO) Ltd. is 10 per cent. The petitioner is one of the customers of Reliance Industries Ltd. and has entered into a Gas Sales and Purchase Agreement (hereinafter referred to as "GSPA") dated March 27, 2009 with Reliance Industries Ltd. for purchasing gas from it. Subsequently, Reliance Industries Ltd. had assigned 30 per cent of participating interest under the PSC in favour of M/s. B.P. Exploration (Alpha) Ltd. in Block KG D6 basin. Accordingly, the requisite assignment in the GSPA was also made by the Reliance Industries Ltd. vide agreement deed executed on February 28, 2011 and the same was also informed to the petitioner vide letter dated August 25, 2011.

According to the petitioner, sellers, i.e., M/s. Reliance Industries Ltd., NIKO (NECO) Ltd. and M/s. B.P. Exploration (Alpha) Ltd. are raising separate invoices with regard to the sale of natural gas to the petitioner in proportion to the participating interest of the sellers. The Commercial Tax Department issued a notice to Reliance Industries Ltd. with respect to the inter-State sale of natural gas in Uttar Pradesh to the petitioner and like consumers, treating the sale within the State of U.P., therefore, eligible to tax under the U.P. VAT Act. On that basis, on January 25, 2010, an ex parte provisional assessment order for the period April, 2009 to March, 2010 was passed by the assessing authority; holding therein that sale made by the Reliance India Ltd. to its various customers including the petitioner were intra-State sales and liable to tax under the U.P. Value Added Tax Act.

The above ex parte provisional assessment order was challenged by the Reliance Industries Ltd., which was rejected, against which, Reliance Industries Ltd. approached the Trade Tax Tribunal. The Tribunal, after hearing the parties and perusing the records, remitted the matter back to the assessing authority for passing fresh order. On remand, a show-cause notice was issued to the Reliance Industries Ltd., to which reply was tendered by the Reliance Industries Ltd. Subsequently, an assessment order dated June 11, 2010 was passed by the assessing authority u/s 25 of the U.P. Value Added Tax Act, 2008, imposing VAT on the supply of natural gas by the Reliance Industries Ltd. and its affiliates to its customers in the State of U.P. treating it as intra-State sale.

Feeling aggrieved by the assessment order dated June 11, 2010, Reliance Industries Ltd. has approached this court by filing Writ Petition No. 6281 (M/B) of 2010 ( 964674--> ). A Division Bench of this court, vide order dated July 26, 2010, as an interim measure, stayed the assessment order dated June 11, 2010. Accordingly, no VAT was charged and only Central sales tax was being charged from the customers including the petitioner. Subsequently, the said interim order dated July 26, 2010 was challenged by the State of U.P. by filing SLP (Civil) No. 24472 of 2011 before the apex court, wherein Reliance Industries Ltd. during the course of hearing on January 23, 2012 made a statement that it would deposit VAT with effect from February 1, 2012. Subsequently, the matter was relegated to this court for final hearing.

According to the petitioner, as the commercial tax authorities at Shahjahanpur had restrained the petitioner from issuing form C in pursuance of Central Sales Tax Act, to the suppliers of natural gas, i.e., respondent Nos. 5, 6 and 7 and as also on the apprehension that as per the statement given by the Reliance India Ltd. in the honourable apex court, the petitioner without being in default would be charged VAT, filed a writ petition No. 1346 of 2012 (M/B) ( 964674--> ) before this court and the same was connected to the aforesaid Writ Petition No. 6281 (M/B) of 2010 filed by the Reliance India Ltd. Ultimately, after hearing the parties'' counsel and perusing the evidence on record, a common judgment in Writ Petition No. 6281 of 2010 along with other connected matters including Writ Petition No. 1346 of 2012 (M/B) was passed on September 7, 2012 ( 964674--> ). The operative portion of the order dated September 7, 2012 is reproduced as under (page 159 in 1 VST-OL):

In view of the above, writ petition deserves to be allowed. Accordingly, a writ in the nature of certiorari is issued quashing the impugned order dated June 11, 2010 passed by the Additional Commissioner, Grade II, Commercial Tax, Lucknow as contained in annexure 5 to the writ petition with all consequential benefits. All consequential orders passed or notices issued by the respondents-State of U.P. on account of order dated June 11, 2010 are also set aside.

A writ in the nature of mandamus is issued directing the State Government to refund the tax realised in pursuance to order dated June 11, 2010 forthwith to the assessees, expeditiously.

Writ petition is allowed accordingly. No order as to costs.

After the above order dated September 7, 964674--> . passed by this court, the petitioner requested the authorities to refund value added tax deposited by the petitioner for the natural gas purchased from respondent Nos. 6 and 7, which was rejected by the Deputy Commissioner, Commercial Tax, Lucknow, vide order dated November 25, 2012, against which the petitioner approached the Commissioner, Commercial Taxes, U.P., Lucknow, who too was rejected vide order dated November 9, 2012.

Hence these writ petitions.

11 Sri Vivek Tankha, senior advocate, appearing on behalf of the petitioner submits that the judgment and order dated September 7, 2012 passed by this court was in rem and not in personam whereby this court has specifically held that the State of U.P. has neither jurisdiction nor statutory right to impose VAT on such sale transactions, which are not an inter-State sale but is an intra-State sale. He submits that the Deputy Commissioner, Commercial Tax, Lucknow, has refunded VAT amount to M/s. IFFCO which is similarly situated to the petitioner but rejected the plea of the petitioner to refund VAT to him. He further submits that Reliance Industries Ltd., NIKO (NECO) Ltd. and M/s. B.P. Exploration (Alpha) Ltd. being the sellers of natural gas and the gas received by the petitioner being subject-matter of the decision of this court dated September 7, 2012 and as such, no artificial differentiation can be created merely because two of the minor partners though were parties of the consortium headed by the Reliance Industries Ltd. but were not parties to the writ petition Nos. 6281 (M/B) of 2010 and 1346 (M/B) of 2012 ( 964674--> ).

Sri Tankha has further submitted that the petitioner has also filed an application for clarification/modification of the judgment and order dated September 7, 2012 in writ petition No. 1346 of 2012 but the same was rejected. However, it was provided that for any cause of action, option is open to the applicant to approach the appropriate forum.

Per contra, Sri H.P. Srivastava, learned Additional Chief Standing Counsel, submits that facts involved in instant writ petition and that of writ petition No. 6281 (M/B) of 2010 ( 964674--> , are not the same insofar as in the case of ( 964674--> , provisional assessment order was passed, against which first appeal and second appeal was preferred and thereafter, the matter was came up before this court and heard by a co-ordinate Bench of this court and passed the order dated September 7, 2012, whereas in the instant writ petition, neither any provisional assessment nor any final assessment order was passed and as such, without assessing the amount, the amount of refund cannot be paid to the petitioner. In support of his submission, he has relied upon the judgments of this court reported in Indodan Milk Products Vs. State of U.P., and Commnr. of Sales Tax, U.P. Vs. Hind Lamps Ltd., .

We have heard learned counsel for the parties and perused the records.

It is not in dispute that the instant writ petitioners are also purchasing natural gas from Reliance Industries Ltd. and VAT was charged by the State of U.P., which was assailed by the Reliance Industries Ltd. by filing writ petition No. 6281 (M/B) of 20101. Subsequently, the instant writ petitioners have also assailed the VAT imposed by the State of U.P. All the matters were taken up together with by a co-ordinate Bench of this court and vide order dated September 7, 2012 (2013) 1 VST-OL 1 (All)., a co-ordinate Bench of this court, after recording a finding that the sale transaction which is the subject-matter of the instant case, is not an intra-State sale but is an inter-State sale and State of U.P. lacks jurisdiction to impose tax (VAT), allowed the bunch of writ petitions with all consequential benefits; quashed the impugned order as well as all consequential orders passed or notices issued on account of impugned order; and directed the State Government to refund the tax realized in pursuance to order dated June 11, 2010 forthwith to the assessees expeditiously. Therefore, plea of the Department that in the instant case, neither any provisional assessment nor final assessment order was passed and as such, until and unless respondents are not assessed, there is no occasion for refunding the amount, has no force insofar as it is not in dispute that agreement, which was entered into between M/s. Reliance Industries Ltd., NIKO (NECO) Ltd. and M/s. B.P. Exploration (Alpha) Ltd. for supplying the natural gas to the petitioner, was by consortium, as stated hereinabove and as per the terms and conditions of the said agreement, natural gas has been supplied to the petitioner and for purchasing the natural gas, the petitioner has to pay the amount. On considering these facts, a co-ordinate Bench of this court, vide order dated September 7, 2012, observed that the sale transaction is not an intra-State sale but is an inter-State sale and as such, the State of U.P. lacks jurisdiction to impose tax (VAT). Thus, we have no hesitation to say that the benefit of the judgment and order dated September 7, 20121 is also liable to be extended to the instant writ petitioners.

The judgments, which has been relied by the counsel for the State, are not applicable in the facts and circumstances of the case. For the reasons aforesaid, we allow all the above writ petitions and quash the orders dated October 25, 2012 and November 9, 2012 contained in annexure Nos. 1 and 2, respectively, to the writ petition. The State Government is directed to refund the tax realised to the assessees, expeditiously.