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TMI Blog2006 (6) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... ter referred to as "the Act", for short). The petitioner-company is a Government of India enterprise and the President of India holds 51.01 per cent of the total number of shares. As the petitioner has no refinery in the State of Karnataka, it either purchases petroleum products from other oil companies in the State of Karnataka or receives by way of inward stock transfer from its refineries located outside the State, or it imports from outside the country. In the case on hand, the petitioner had purchased the petroleum products, viz., furnace oil and bitumin from Mangalore Refinery and Petro Chemicals Limited ("MRPL", for short) and sold them to other oil companies such as Indian Oil Corporation Limited (IOCL), Bharat Petroleum Corporation Limited (BPCL) and Indo-Burma Petroleum Company (IBP) in the State of Karnataka. By the order, annexure A, dated July 29, 2004, the reassessment of taxes was done under section 12A of the Act and consequently, petitioner was levied tax payable under section 6-B of the Act which was not levied in the earlier order of assessment. Subsequently, the order at annexure B came to be passed against the petitioner levying penalty under section 12A(1-A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, the sale by one oil company to another oil company shall not be deemed to be a sale by the first or the earliest of successive dealers in the State but the sale by the latter company to another person not being an oil company shall be deemed to be the sale by the first or the earliest of successive dealers in the State liable to tax." Explanation II to section 5(3)(a) of the Act enumerates various oil companies for the purpose of the second proviso to section 5(3)(a) of the Act. Explanation II reads thus: "Explanation II. For the purpose of the second proviso to clause (a), the expression 'oil company' namely: (a) The Indian Oil Corporation Limited; (b) The Bharath Petroleum Corporation Limited; (c) The Hindustan Petroleum Corporation Limited; (d) Indo-Burma petroleum Company; (e) Mangalore Refinery and Petrochemicals Limited; and includes any other oil company which the Government of Karnataka may by notification, specify." The petitioner is one of the oil companies named in Explanation II. It is not in dispute that the petitioner purchases products of petroleum from another oil company, viz., Mangalore Refinery and Petrochemicals Limited (MRPL), which is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner purchases petroleum products from MRPL, because of the deeming provision as contained in second proviso to section 5(3)(a) of the Act, the sale made by the MRPL to the petitioner cannot be treated as a sale because it is a sale by one oil company to another oil company. Thus, in law, petitioner cannot be said to be a purchaser, so also if the petitioner sells petroleum products to other oil companies, the same also would not be the sale in the eye of law in view of the unambiguous wordings contained in second proviso to section 5(3)(a) of the Act. By the operation of second proviso to section 5(3)(a) of the Act, it is deemed that the sales of petroleum products effected by MRPL to the petitioner are not to be construed as sales by the first or the earliest of successive dealers in the State. Likewise and again, by the application of the said second proviso, the petitioner's sales of petroleum products to other oil companies such as IOCL, BPCL and IBP, are not to be construed as made by the first or the earliest successive dealers in the State. The word "resale" is not defined in the Act. However, it is always open for the courts to give a meaning as is understood in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 5(3)(a) of the Act. Sri R.V. Prasad, learned counsel appearing on behalf of the petitioner has brought to the notice of the court the budget speech presented by the Finance Minister. Portion of the budget speech presented by the Finance Minister on the floor of the House on March 21, 2002 for the budget year 2002-03 with respect to the object in introducing section 6-B of the Act, reads thus: "177. VAT entails multi-point levy of tax at all points of production and distribution. The second and subsequent dealers in the trade channel who are currently paying a nominal non-passable turnover tax of one per cent would have to pay tax under VAT which could be higher but collectable. As an intermediate measure and to prepare dealers for a smooth transit to VAT, I propose to introduce a collectable resale tax of 1.5 per cent. Most of the commodities, which are totally exempt from tax on their second and subsequent sales, however, are proposed to be exempt from this new levy. This collectable new levy should induce the entire trade to issue bills on all their sales." From the speech presented by the Finance Minister, it can be seen that section 6-B of the Act is enacted with an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or a statutory exemption from liability to pay the sales tax could have been granted by saying so by a suitable wording of the proviso. The proviso could have said that sale by a handloom or a power-loom weaver, etc., of silk fabrics manufactured by him shall not be taxable under clause (c) of section 5(3). The proviso has clearly declared that such a sale is not a 'sale' at all for the purposes of the State Act. It will be straining the language of the proviso and the legal effect to be given to the deeming provision to say that there can be a purchase without a sale. If there was no sale, the consideration paid by the purchaser cannot be a sale price. If so, the main part of section 6 itself will not be attracted. In these circumstances, we are constrained to hold that this is not a case where the petitioners 'purchased' any taxable goods in circumstances in which no tax under section 5 was leviable on the 'sale price' of such goods, referred in section 6 of the State Act. 8.. Mr. Santhosh Hegde, learned Senior Counsel, appearing for some of the petitioners relied on the principle governing the interpretation of a legal fiction. The learned counsel referred to the observation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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