1978 (12) TMI 171 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of relevant entries in the Gujarat Sales Tax Act, 1969 regarding the taxation of liquefied petroleum gas (LPG) sold in bulk.

Detailed Analysis:
The case involved the taxation of LPG sold in bulk by an assessee company under the Gujarat Sales Tax Act, 1969. The assessee contended that LPG should be taxed under entry 32 of Schedule II-Part A as a petroleum product rather than under entry 88 of the same schedule as an inflammable gas supplied in closed containers. The Deputy Commissioner of Sales Tax initially held that LPG fell under entry 88, considering tank-trucks as closed containers. However, the Gujarat Sales Tax Tribunal disagreed, stating that entry 88 required the gas to be supplied in closed containers by the vendor, which was not the case with bulk sales poured into tank-trucks. The Tribunal concluded that LPG should be taxed under entry 32 as a petroleum product, overturning the Deputy Commissioner's decision. The State of Gujarat appealed the Tribunal's decision, leading to the present reference to the High Court for interpretation of the relevant entries.

The High Court analyzed the definitions and requirements of entry 32 and entry 88 of Schedule II-Part A. It acknowledged that LPG is a petroleum product and an inflammable gas, meeting the criteria of both entries. However, the crucial distinction lay in entry 88's requirement of the gas being supplied in closed containers. The Court emphasized that the legislative intent behind entry 88 was to tax inflammable gases supplied in closed containers to consumers, such as small cylinders, due to the unique handling and distribution methods of such gases. The Court highlighted that the Act taxes sales by vendors, indicating that the supply in closed containers should be by the vendor, not the purchaser. Therefore, the Court reasoned that bulk sales of LPG poured into tank-trucks did not meet the criteria of entry 88, as the gas was not supplied in closed containers by the vendor.

The High Court refrained from delving into other aspects of the case, focusing solely on the interpretation of the relevant entries. It concluded that the Tribunal's decision to tax the LPG under entry 32 as a petroleum product was legally sound. The Court held that the LPG sold in bulk form, poured into tank-trucks, did not fall under entry 88 but was appropriately classified under entry 32 of Schedule II-Part A. Consequently, the Court answered the reference in favor of the assessee, directing the State of Gujarat to bear the costs of the reference proceedings.

In summary, the High Court's judgment clarified the distinction between the taxation of LPG as a petroleum product under entry 32 and as an inflammable gas supplied in closed containers under entry 88 of the Gujarat Sales Tax Act, 1969. The decision underscored the legislative intent behind the entries and upheld the Tribunal's ruling that bulk sales of LPG poured into tank-trucks did not meet the criteria of entry 88, warranting taxation under entry 32 instead.