2017 (6) TMI 28 - HC - VAT and Sales Tax

Levy of entry tax - Regasified Liquefied Natural Gas i.e. RLNG - Whether RLNG sold to revisionist by Gas Authority of India Ltd. (GAIL) is Compressed Natural Gas (CNG) , so as to oust it from the purview of taxing Entry 8(a) of Schedule IV of Uttar Pradesh Value Added Tax Act, 2008 or otherwise? Held that - The product to be taxed vide Entry 8(a) is natural gas, other than Compressed Natural Gas (CNG), when sold to an industrial unit of a registered dealer, for use in the process of manufacture of taxable goods other than non-vat goods against certificate prescribed by the Commissioner. The taxing entry not only defines the product but also sufficiently deals with its user and use. Law is however settled that while defining a taxing entry the words are not to be interpreted in its technical sense, but has to be understood in its popular sense - 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 - 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 is the common parlance test which is of vital significance in a fiscal statute for interpreting a taxing entry where it is not defined. The exclusionary part i.e. Compressed Natural Gas (CNG) has not been defined in the notification and other parts of the entry which deals with the subject or its use would not be helpful in interpreting the exclusionary part. The common parlance test therefore would be the reliable and safe guide to understand import of the exclusionary part used in the entry. What is meant by Compressed Natural Gas (CNG), in common parlance? - Held that - The mere fact that part of Automobile component energized by CNG receives gas at 21.5 bar would not mean that CNG is treated in common parlance or in trade or industry as natural gas supplied at a pressure of 21.5 bar. Compressed Natural Gas (CNG) in common parlance is usually understood as natural gas used to energize transport vehicle with least environmental damage caused. The department as well as the Tribunal do not appear to have erred in holding that Compressed Natural Gas (CNG) is the gas used for energizing vehicle in the transport sector, particularly when revisionist itself treated it so and no other illustration is brought on record to show that natural gas supplied upto 10 bar (revisionist receives natural gas at 6-7 bar) is known and understood in the industry or common parlance as CNG. The court must avoid construction on the language of statute which would render a part thereof devoid of any meaning or application. RLNG supplied by GAIL to the revisionist is not Compressed Natural Gas (CNG) so as to oust it from taxing Entry 8(a) of the Act, and the Tribunal has not erred in holding it so. No other point has been pressed - revision application dismissed - decided against assessee.

Summary

Issues Involved:
1. Whether 'Regasified Liquefied Natural Gas' (RLNG) sold by GAIL to the revisionist qualifies as 'Compressed Natural Gas' (CNG) under the Uttar Pradesh Value Added Tax Act, 2008.

Detailed Analysis:

1. Nature of RLNG and its Tax Classification:
The primary issue is whether RLNG, sold by GAIL to the revisionist, is classified as CNG, thereby excluding it from Entry 8(a) of Schedule IV of the Uttar Pradesh Value Added Tax Act, 2008. RLNG is a form of natural gas that is first liquefied, transported, and then re-gasified. The revisionist, a public limited company, uses RLNG for generating electricity at its industrial unit. The Gas Supply Agreement specifies that the gas is delivered at a pressure above atmospheric pressure (between 5 to 7 bars).

2. Tribunal's Findings:
The Tribunal held that RLNG is not CNG, relying on the definition of CNG in the Petroleum and Natural Gas Regulatory Board Act, 2006, which describes CNG as natural gas typically compressed to pressures ranging from 200 to 250 bars and used as fuel for vehicles. The Tribunal concluded that RLNG supplied at 6 bars does not meet this definition and is therefore taxable under Entry 8(a) of Schedule IV, which taxes natural gas other than CNG at 5%.

3. Revisionist's Argument:
The revisionist contended that any natural gas compressed above atmospheric pressure should be classified as CNG. They argued that the authorities and Tribunal misconstrued the entry and relied on various Supreme Court judgments to assert that taxing statutes must be strictly construed, and any ambiguity should benefit the taxpayer. They also presented expert opinions suggesting that RLNG supplied at 6 bars qualifies as CNG.

4. Common Parlance Test:
The court emphasized the common parlance test, which states that words in a taxing statute should be understood in their popular sense. The court noted that in common parlance, CNG is understood as the gas used in the automobile sector, typically compressed to 200-250 bars. The court found that the revisionist itself had treated RLNG as natural gas other than CNG and paid tax accordingly until October 2014, indicating that RLNG is not commonly understood as CNG.

5. Reliance on Other Statutes:
The court acknowledged the revisionist's objection to the Tribunal's reliance on the definition of CNG in the Petroleum and Natural Gas Regulatory Board Act, 2006. However, the court found that such definitions could be of persuasive value and noted that GAIL, the supplier, also did not consider RLNG as CNG.

6. Conclusion:
The court concluded that RLNG supplied by GAIL to the revisionist does not qualify as CNG and is therefore taxable under Entry 8(a) of Schedule IV of the Uttar Pradesh Value Added Tax Act, 2008. The Tribunal's decision was upheld, and the revision was dismissed.

Final Judgment:
The revisionist's claim was rejected, and RLNG was held to be taxable as natural gas other than CNG under Entry 8(a), with the court affirming the Tribunal's interpretation and application of the common parlance test.