2018 (3) TMI 1220 - HC - VAT and Sales Tax

Kerosene intended for the manufacture of LAB - Condonation of delay in filing appeal - Held that - Though it is true that no specific date is mentioned as to when this order came to the knowledge of the Government, that by itself cannot be a ground for holding that they were not entitled to condonation of delay or that the findings given by the MSTT in its order dated 9th September, 2014 either suffer from perversity or any patent illegality. If one takes into consideration the exclusion of the period of 60 days, then, there was only a delay of 9 and đ months in filing the Appeal. Considering that the facts of this case were peculiar and which has not only been recorded in the order but also admitted by RIL and BPCL, we do not think that the discretion exercised by the MSTT in condoning the delay was unjustified. Competency of the officer on special duty (OSD) to file an appeal on behalf of the State of Maharashtra - Held that - The Commissioner, being a quasi judicial authority, speaks through his DDQ order passed under Section 52 of the BST Act. This being the case, he is neither a necessary nor a proper party to the appeal. His order is only under scrutiny and examination of the MSTT and beyond that the Commissioner is not required to and nor can he state anything more than what has already been stated by him in his DDQ order - we do not find that the MSTT was at all wrong when it came to the conclusion that it was competent to entertain the appeal filed by the State of Maharashtra through its Principal Secretary (Finance) through Shri Shashank D. Mathane, officer on Special Duty, Finance Department, Government of Maharashtra. We must also note that Article 154 of the Constitution of India clearly stipulates that the executive power of the State shall be vested in the Governor and shall be exercised by him either directly or through officers subordinate to him in accordance with the Constitution. When one reads Article 154 with the Rules of Business made by the Governor of Maharashtra along with the decision of the Government of Maharashtra to prefer the Appeal, we are left with no doubt that the MSTT was fully justified in entertaining the Appeal filed by the State of Maharashtra - the appeal filed by the State of Maharashtra through the Principal Secretary, Finance Department and which was signed by Shri Shashank D. Mathane (OSD) was competent and correctly entertainable by the MSTT. The supply of Superior Kerosene KO (LABFS) by BPCL to RIL under the Agreement dated 24th August, 1992 itself was not a sale, and therefore, there was no question of there being a sales return - Held that - the first leg of the transaction was clearly a sale of Kerosene, namely KO (LABFS), by the BPCL to RIL - answered in favor of Revenue. The return stream of Kerosene (from RIL to BPCL) is only a sales return as contemplated under the provisions of the BST Act and not a sale from RIL to BPCL - Held that - The word sale has been defined in Section 2(28) to mean a Sale of goods made within the State for cash or deferred payment or other valuable consideration, and include any supply by a society or club or an association to it members on payment of a price or of fees or subscription, but does not include a mortgage, hypothecation, charge or pledge, and the words sell buy and purchase with all its grammatical variations and cognate expressions, shall be construed accordingly - the first leg of the transaction namely, supply of Kerosene by BPCL to RIL was held to be a sale and which had attained finality. The only question that had to be decided when the matter was remanded back to the Commissioner of Sales Tax was Question No.2 viz. whether the return stream i.e. return of Kerosene by RIL to BPCL (sales return Credit note No. 147857 dated May 1, 1992) would be legally allowable as sales return or whether that return will amount to purchase of Kerosene by BPCL from RIL. To only decide this question, the matter was remanded back to the Commissioner of Sales Tax. Whether the MSTT ought to have given prospective effect to its judgment as contemplated under section 52(2) of the BST Act? - Held that - the MSTT was unjustified in not granting the prospective effect to its judgment and order dated 20th January, 2015. Considering the long checkered history of the litigation between the parties, the assessment orders allowed earlier on the basis that the return stream Kerosene was a sales return/goods return and the DDQ order passed in favor of the assessee dated 11th September, 2006, we feel that this was a fit case where the MSTT ought to have exercised its discretion and granted prospective effect to its judgment and order. Petition allowed in part.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Competency of the Officer on Special Duty (OSD) to file an appeal on behalf of the State of Maharashtra.
3. Whether the supply of Superior Kerosene [KO (LABFS)] by BPCL to RIL was a sale or a contract of bailment.
4. Whether the return stream of Kerosene from RIL to BPCL is a "sales return" or a sale by RIL to BPCL.
5. Whether the judgment of the Tribunal should have prospective effect.

Detailed Analysis:

1. Condonation of Delay:
The MSTT condoned the delay in filing the appeal by the State of Maharashtra. The court noted that the DDQ order was not communicated to the Government, and hence the running of time did not arise. The court agreed with the MSTT's discretion, stating that the peculiar facts of the case justified the condonation of delay. The court found no perversity or patent illegality in the MSTT's order and upheld the decision to condone the delay.

2. Competency of the Officer on Special Duty (OSD):
The court held that the appeal filed by the State of Maharashtra through the Principal Secretary, Finance Department, and signed by the OSD was competent. The MSTT had recorded that the Secretary of the Finance Department is the head of the department and authorized to sign the order of the Government. The letter of authority from the Principal Secretary (Finance) confirmed the Government's decision to prefer an appeal. The court found no merit in the argument that the appeal was incompetent and upheld the MSTT's decision.

3. Supply of Superior Kerosene [KO (LABFS)]:
The court rejected the argument that the supply of Kerosene by BPCL to RIL was a contract of bailment. It noted that BPCL had treated the supply as a sale, and this was confirmed by the Commissioner of Sales Tax in the DDQ order. The court emphasized that the issue of whether the supply was a sale had attained finality and could not be reopened. The court also examined the agreement between BPCL and RIL and concluded that it clearly indicated a sale. Therefore, the court held that the first leg of the transaction was a sale.

4. Return Stream of Kerosene:
The court held that the return stream of Kerosene from RIL to BPCL was not a "sales return" but a sale by RIL to BPCL. It noted that the Kerosene supplied by BPCL was different from the Kerosene returned by RIL, as the returned Kerosene was denuded of N-Paraffin. The court emphasized that for a transaction to be a "sales return," the goods returned must be the same as the goods originally sold. Since the returned Kerosene was different in character and use, it could not be considered a sales return. The court upheld the MSTT's decision on this issue.

5. Prospective Effect:
The court found that the MSTT was unjustified in not granting prospective effect to its judgment. It noted the long history of litigation and the fact that assessments had been allowed in favor of RIL based on the understanding that the return stream was a sales return. The court held that not granting prospective effect would lead to reopening past assessments, which would be unfair to RIL and BPCL. The court set aside the MSTT's decision on this issue and granted prospective effect to the judgment.

Conclusion:
The court upheld the MSTT's decisions on the issues of condonation of delay, competency of the OSD, and the nature of the return stream of Kerosene. However, it set aside the MSTT's decision on the issue of prospective effect and granted prospective effect to the judgment. The court's findings on the questions referred to it were as follows:

1. The return stream of KO(LABFS) did not constitute a sales return.
2. The return of KO(LABFS) amounted to a purchase by BPCL.
3. The sale pertained to the quantum of KO(LABFS) consumed by RIL (does not arise).
4. The Tribunal did not err in condoning the delay.
5. The Tribunal ought to have given prospective effect to its order.
6. The appeal was competent and correctly entertainable by the MSTT.