2013 (6) TMI 604 - HC - VAT and Sales Tax

Reassessment proceedings - entry tax assessment - under the Gas Sale Contract , the GAIL was supplying gas to the buyers. The gas was measured by the equipments installed at the gas measuring station maintained by GAIL at the buyer s premises. The GAIL alleges that the security of the meter installed at the premises of the buyers is exclusive responsibility of the buyer concerned. If the meter was found tampered, the gas drawn beyond the metered quantity can be treated as unauthorised extraction. - The GAIL is aware of the quantities of the gas, which is alleged to be stolen by the buyers, and has raised the invoices. It is not denied that the gas was drawn, and will thus be treated to be supplied, even if the extraction was unauthorised. - The price was not paid as the quantity of the supply was not admitted. Held that - the dishonest extraction of the gas by tampering the meter, of the unmeasured supply would not prima facie fall within the definition of theft as the consent of GAIL, in supply of gas was not absent. The unauthorised extraction of gas by tampering with the meter would at best amount to criminal breach of trust. The raising of bills for supply of such unmeasured quantity of gas by tampering of meter will amount to the consent for such supply, under the contract. Additional Commissioner has not erred in law in extending the limitation for making re-assessment of the assessment years 2004-05 and 2005-06. He has given sufficient reasons supported with the grounds of his belief, that the turnover had escaped assessment on the material furnished by the assessing authority. The Deputy Commissioner, Commercial Tax has also not committed any error of law in issuing notice for re-assessment, for which he has given sufficient grounds after considering the reply given by the petitioner. - Decided against the assessee.

Summary

Issues:
1. Jurisdiction to extend limitation for re-assessment under Entry Tax Act and UP Trade Tax Act.
2. Determination of whether theft of gas amounts to sale for tax assessment purposes.
3. Validity of notices for re-assessment based on alleged theft of gas.
4. Interpretation of 'sale' under Section 2(h) of the UP Trade Tax Act.
5. Compliance with statutory provisions in issuing re-assessment notices.

Analysis:
1. The petitioner, a government undertaking, sought writs of mandamus to restrain re-assessment proceedings under Entry Tax Act and UP Trade Tax Act for assessment years 2004-05 and 2005-06. The re-assessment was based on alleged tampering of gas meters leading to theft, triggering tax liability.
2. The petitioner contended that theft of gas does not constitute a sale as per legal definitions, challenging the authority's jurisdiction to extend limitation and issue re-assessment notices. Citing precedents, the petitioner argued against treating theft as a taxable event.
3. The department justified re-assessment on the grounds of potential tax evasion due to unmeasured gas supply. It emphasized the authority's good faith belief in assessing escaped turnover, invoking legal precedent to support its position.
4. The court observed that the Gas Authority supplied gas under contracts, with measurements at buyer's premises. The responsibility for meter security lay with the buyer, and unauthorized extraction of gas was alleged due to tampering, prompting invoicing by the petitioner.
5. The court found that the authority had valid reasons to extend limitation and issue re-assessment notices, considering the facts presented. It refrained from determining if unauthorized gas supply constituted a sale, leaving the question for the assessing authority during re-assessment proceedings.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by both parties, and the court's reasoning in arriving at the decision to dismiss the writ petitions.