2024 (7) TMI 462 - HC - VAT and Sales Tax

Liability of the petitioner to pay Turnover Tax (TOT) on sales to Oil Marketing Companies (OMCs) - whether the petitioner-ONGC is liable to pay TOT on the turnover of sale made to OMCs in view of the provisions of Section 10A read with entry No. 173 in schedule II of Section 49 (2) of the Act or not? - statutory exemption as per entry No. 173 under Section 49 (2) of the Gujarat Sales Tax Act, 1969 - HELD THAT - The sale made by the petitioner-ONGC to oil marketing companies was exempted as per Entry No. 173 as notified by the Government in the year 1988 under Section 49 (2) of the Act granting exemption from payment of whole or any part of the tax payable under provisions of the Act which includes the TOT as per Section 2 (32) of the Act. Section 10A inserted with Gujarat Sales Tax Amendment Act, 1988 provides for levy of TOT, however, in view of the contention of the petitioner that the provisions of Section 49 (2) would override the provisions of Section 10A as once the exemption is granted from the provisions of the levy tax under the Act, the TOT cannot be accepted even on the assumption that the turnover tax is a single point levy, however, single point levy of tax is provided in Section 9 of the Act for the declared goods and there is no provision for single point of levy of sales tax, general sales tax and TOT except for the declared goods. On perusal of Section 10A, it appears that the turn over tax is leviable on the taxable turnover of taxable goods beyond a prescribed threshold and any dealer whose taxable turnover crosses the threshold at whatever stage was liable to pay TOT. As per Section 10A (2) (f) for the purpose of calculating amount of tax payable under Sub-section (1) of Section 10A i.e. TOT, the sales of goods wholly exempted payment of tax under Section 49 was to be deducted and not to be considered as a part of the taxable turnover for levy of the TOT but after the amendment with effect from 01.04.1993, clause (f) of Sub-section (2) of Section 10A was deleted and as a result of such amendment, the TOT would be payable on the sales of goods exempted under Section 49 of the Act so far as calculation of the taxable turnover of taxable goods under Section 10A was concerned. The provision of Section 10A would be applicable on the goods which are taxable but for exemption granted under Sub- section (2) of Section 49. Therefore, the turnover of sales made by ONGC to OMCs which are otherwise exempted under Section 49 (2) of the Act would be considered as a taxable goods for the purpose of Section 10A to include in taxable turnover if the total turnover of the dealer exceeds Rs. 50 lakhs. Admittedly, the total turnover of ONGC is exceeding Rs. 50 lakhs and therefore, the taxable turnover would include the taxable goods irrespective of whether such goods are exempted vide entry No. 173 as per the notification issued pursuant to Section 49 (2) of the Act. Thus, no interference is required to be made in the impugned order passed by the respondent No. 2 and the Tribunal - petition dismissed.

Summary

Issues Involved:

1. Exemption from Turnover Tax (TOT) under Section 49 (2) of the Gujarat Sales Tax Act, 1969.
2. Applicability of amendments to Section 10A of the Gujarat Sales Tax Act, 1969.
3. Double taxation and single point tax concept.
4. Legislative intent and statutory interpretation.
5. Remission of TOT paid by Oil Marketing Companies (OMCs).

Issue-wise Detailed Analysis:

1. Exemption from Turnover Tax (TOT) under Section 49 (2) of the Gujarat Sales Tax Act, 1969:

The petitioner, engaged in the business of selling petroleum products, claimed exemption from TOT under Entry No. 173 of Section 49 (2) of the Gujarat Sales Tax Act, 1969. This entry exempted sales of petroleum products between the petitioner and OMCs from any tax under the Act. The petitioner argued that since these sales were exempted from tax, they should also be exempt from TOT as defined under Section 2 (32) of the Act.

2. Applicability of amendments to Section 10A of the Gujarat Sales Tax Act, 1969:

The controversy arose due to the amendment to Section 10A of the Act, effective from 01.04.1993, which deleted clause (f) of Sub-section (2) of Section 10A. This deletion meant that sales exempted under Section 49 (2) were no longer excluded from the calculation of taxable turnover for the purpose of assessing TOT. The Tribunal upheld this amendment, stating that the legislative intent was to include such exempted sales in the taxable turnover for TOT purposes.

3. Double taxation and single point tax concept:

The petitioner contended that TOT was intended as a single point tax, payable at the last point of sale between OMCs and end users. Since OMCs had already paid TOT on their sales to end users, the petitioner argued that levying TOT on their sales to OMCs would result in double taxation. The Tribunal rejected this argument, stating that the amendment to Section 10A clearly intended to include exempted sales in the taxable turnover, thus making the petitioner liable for TOT.

4. Legislative intent and statutory interpretation:

The Tribunal and the Court emphasized the importance of legislative intent and statutory interpretation. The amendment to Section 10A was introduced to mobilize additional resources by including sales exempted under Section 49 (2) in the taxable turnover for TOT purposes. The Court cited several Supreme Court decisions to support the view that subsequent legislative amendments supersede earlier exemptions and notifications.

5. Remission of TOT paid by Oil Marketing Companies (OMCs):

The petitioner argued that since OMCs had already paid TOT on their sales to end users, they should be entitled to a remission of the TOT paid by the petitioner. The Court held that it was the responsibility of the OMCs to claim such remission from the respondent-authority, not the petitioner. The Court directed the respondent-authority to consider the remission proposal made by the Sales Tax Commissioner to the Additional Chief Secretary (Finance Department) Government of Gujarat.

Conclusion:

The Court concluded that the petitioner was liable to pay TOT on the turnover of sales made to OMCs, irrespective of the exemption under Section 49 (2). The amendment to Section 10A, effective from 01.04.1993, clearly included such exempted sales in the taxable turnover for TOT purposes. The petition was dismissed, and the order passed by the respondent No. 2 and the Tribunal was upheld. The Court also directed the respondent-authority to consider the remission proposal for OMCs.