2008 (8) TMI 554 - SC - VAT and Sales Tax

Whether sale of superior kerosene oil by the appellant-Bharat Petroleum Corporation Ltd. (BPCL) to another oil company via PDS route is exempted from sales tax in terms of notification dated July 1, 2000 issued by the Finance Department, Government of Orissa? Held that - This court does not interfere in interim matters particularly when the matter concerns levy of tax. However, this is a peculiar case for two reasons, i.e., BPCL Ltd., is a public sector company in a priority sector which is obliged to sell kerosene via PDS route. The demand is for Rs. 1.34 crores (approx.) and, in the circumstances, we are of the view that to call upon BPCL at this stage to deposit a huge amount of Rs. 1.34 crores (approx.) would have a serious effect on the PDS sales. On the other hand, we are satisfied that BPCL is a substantial company. It is in a sound financial position and it can discharge its liability at a later date, if need be. In the circumstance, ends of justice would be met if the Assistant Commissioner of Sales Tax, Cuttack, is directed to hear and dispose of the first appeal pending before him within a period of three months from today

Summary

Issues:
1. Determination of exemption from sales tax for sale of superior kerosene oil via PDS route.
2. Refusal of stay application by the Assistant Commissioner of Sales Tax.
3. Revisional authority's direction to pay a sum of Rs. 65 lakhs.
4. High Court's order for payment of Rs. 20 lakhs pending appeal.
5. Interference by the Supreme Court in the interim matter due to peculiar circumstances.
6. Direction to Assistant Commissioner to expedite the appeal within three months.
7. Undertaking by BPCL to pay tax with interest if department succeeds in appeal.
8. Question of whether transactions constitute PDS sales to be determined in pending appeal.

Analysis:
The Supreme Court addressed the fundamental issue of whether the sale of superior kerosene oil by Bharat Petroleum Corporation Ltd. (BPCL) to another oil company via the Public Distribution System (PDS) route is exempted from sales tax as per a notification issued by the Finance Department of Orissa. The court noted the refusal of a stay application by the Assistant Commissioner of Sales Tax, leading to a revision where the appellant was directed to pay Rs. 65 lakhs. Subsequently, the High Court ordered BPCL to pay Rs. 20 lakhs pending the appeal process. Despite generally not interfering in tax-related interim matters, the court found this case unique due to BPCL's status as a public sector company in the priority sector, emphasizing the potential impact on PDS sales if a significant amount was deposited at that stage. The court directed the Assistant Commissioner to expedite the appeal within three months.

Moreover, BPCL provided an undertaking to pay the tax with interest if the department succeeded in the appeal. The court highlighted that the question of whether the transactions in question qualify as PDS sales would be examined by the Assistant Commissioner during the pending appeal, with a directive to refrain from coercive actions during this period. The judgment concluded by disposing of the civil appeal without any costs, outlining the specific circumstances and considerations that led to the decision, aiming to balance the interests of all parties involved while ensuring a fair and expeditious resolution of the matter.