M/S Gas Authority Of India Limited ... vs State Of U.P. Thru' Secretary Tax & ...
2011 Latest Caselaw 1130 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

					A.F.R.
 
					Judgment reserved on 04.4.2011
 
Judgment delivered on 18.4.2011
 

 
	      WRIT TAX NO. 409 OF 2011
 
       M/s Gas Authority of India Limited  v. State of UP & ors
 
				AND
 
		       WRIT TAX NO. 410 OF 2011
 
       M/s Gas Authority of India Limited   v. State of UP & ors
 

 
Hon'ble Sunil Ambwani, J.

Hon'ble Kashi Nath Pandey, J.

1. We have heard Shri Bharat Ji Agrawal, assisted by Shri Shubham Agrawal for the petitioner. Shri S.P. Kesarwani, Additional Chief Standing Counsel appears for the Commercial Tax Department.

2. The Gas Authority of India Limited (in short the GAIL)-the petitioner is a Government of India undertaking controlled by Ministry of Petroleum and Natural Gas. In Writ Petition No. 410 of 2011, the petitioner has prayed for a writ of mandamus or prohibition restraining the Deputy Commissioner (Assessment), Sector-11, Commercial Taxes, Agra, from proceeding with re-assessment proceedings under Entry Tax Act for assessment years 2004-05 and 2005-06 in pursuance to the notices dated 14.3.2011, and further to quash the order dated 8.3.2011 passed by the Additional Commissioner, Grade-I, Commercial Taxes under Entry Tax Act for the same assessment years, extending the period of limitation. By Writ Petition No. 409 of 2011 the petitioner has prayed for a writ of mandamus or prohibition restraining and prohibiting the Deputy Commissioner (Assessment), Sector-11, Commercial Taxes, Agra from proceeding with re-assessment proceedings under Section 21 of the UP Trade Tax and for the assessment years 2004-05 and 2005-06 in pursuance to the notices dated 14.3.2011. It has also prayed for quashing the order dated 8.3.2011 passed by the Additional Commissioner, Grade-1, Commercial Tax for the same assessment years extending the period of limitation.

3. The GAIL supplies natural gas (a notified item) delivered to the buyers on the measurements at the Gas Measuring Station, located at the buyer's premises. The value of the gas supplied under the contract is measured by the flow meter installed at the Gas Measuring Station of the GAIL in the buyer's premises.

4. The orders extending the limitation have been passed after issuing notices to GAIL and giving opportunity of hearing in extending the limitation by orders dated 8.3.2011 on the ground that GAIL has issued bills to the consumers of Rs. 15, 88, 35, 715/-, for having consumed the gas by tampering with the meter, which falls within the definition of sale and on which the entry tax and commercial tax is payable.

5. During the inspections relating to the assessment years 2004-05 and 2005-06 the officers of GAIL detected that 13 customers had indulged in tampering of the meter. The safety and security of the meter at the premises of the buyer is the exclusive responsibility of the buyer. The GAIL found that by tampering the gas has been unauthorisedly drawn. The GAIL required the buyers to pay the amount of approximate consumption of gas, in terms of the, 'Gas Sale Contract'. The buyers disputed the tampering of the meter. They also disputed that the gas was stolen by them.

6. The GAIL on the advise of Solicitor General of India, raised the invoices in respect of the quantity, which was alleged to be stolen by the buyers on the tampering of the meters. The invoice also included the penalty in terms of 'Gas Sale Contract'. Only one of such customer accepted the receipt of the gas. The remaining 12 customers neither accepted the tampering, nor the delivery of unmeasured gas. They have not paid the price of either the supply of the gas, nor have admitted the gas to be drawn unauthorizedly by tampering of the meter.

7. In the arbitration proceedings in respect of two buyers namely M/s Pioneer Glass Works and M/s Advance Glass Works, the Arbitrator has given an award against the GAIL, holding that the charge of GAIL is not proved, and that these two buyers did not tamper with the installed meters. The arbitration proceedings in respect of other buyers are still pending at different stages. It is stated by Shri Bharat Ji Agrawal that GAIL has taken up the matter to challenge the award, against the two firms.

8. The GAIL paid tax in respect of customer, who had accepted the delivery of gas, on the invoice raised in December, 2007. The Trade Tax Department accepted and there was no dispute in respect of that, for the assessment year 2007-2008.

9. A notice under Section 21 (2) of the UP Trade Tax Act was issued by the Additional Commissioner, Grade-I, Commercial Taxes, Agra Zone, Agra extending the limitation for making the assessment for the assessment years 2004-2005 and 2005-2006, separately for Entry Tax and Commercial Tax. The petitioner gave a reply to the notice on 24.2.2001, alleging that it had raised the bill allegedly on the ground of theft, on the tampering of the meter, but the customers did not accept that any theft was committed by them. It is stated that inspite of the reply filed by the GAIL, the Additional Commissioner, Grade-I, Commercial Taxes, Agra Zone, Agra by his order dated 8.3.2011 has not only extended the limitation for making re-assessment of Entry Tax and Commercial Tax, but has also recorded a finding that since a bill has been raised by the petitioner in respect of the quantity of the gas, hence it amounts to sale. On the basis of the order extending the limitation the Deputy Commissioner, Commercial Tax has issued notices for assessment years 2004-05 and 2005-06 under the UP Trade Tax Act for making re-assessment on the ground that in respect of the gas, which was stolen and for which the invoice was raised for Rs. 15, 88, 35, 715/- in the assessment year 2004-2005, and Rs. 10, 36, 58, 105/- in the assessment year 2005-2006, the petitioner is liable to be taxed and to be re-assessed under Section 21 of the Act.

10. Shri Bharat Ji Agrawqal submits that under Section 2 (h) of the UP Trade Tax Act the sale is defined:-

" (h) 'Sale' with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration and includes-....."

11. Shri Agrawal submits that under Section 3 (1), which is the charging Section, the liability of tax is on the turnover of sales or purchase and the rates of tax are provided under Section 3-A. In order to become taxable, there has to be a complete transaction of sale. The theft of gas does not amount to sale, inasmuch as neither the delivery of the gas was accepted by the buyers nor any payment was made in respect of the stolen quantity. The amount in the invoice cannot be included as turnover under Section 2 (1) of the Act. He submits that whether stolen gas can be treated as sale and whether the amount under the invoice can be included in the turnover is a transitional fact, which needs to be decided by the Court. The amount under the invoice cannot be treated as the amount which escaped assessment to issue notice for reassessment.

12. Shri Bharat Ji Agrawal has relied upon judgments of the Constitution Bench of Supreme Court in State of Rajasthan vs. Rajasthan Chemists Association (2006) 6 SCC 773 and Hyderabad Asbestos Cement Products Limited vs. State of Andhra Pradesh 24 STC 487 in submitting that there could be no contract of theft of gas. The theft does not amount to sale and thus the notice under Section 21 can be challenged, on the ground that the authority has no jurisdiction to extend limitation and issue notice for reassessment.

13. Shri S.P. Kesarwani appearing for the department submits that re-assessment can be made, if the competent authority believes the existence of such facts, on which the income can be said to have escaped assessment. The existence of such belief, is to be in good faith. This sufficiency of the evidence on the ground of such belief cannot be challenged at this stage. He relies upon observations of the Supreme Court in Commissioner of Sales Tax vs. Bhagwan Industries AIR 1973 SC 370 (para-9), to such effect.

14. In the present case, prima facie we find that 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. The GAIL raised the bills and referred the dispute under the contract to the arbitrator, to arbitrate over the demand raised by it for unauthorised extraction of the unmeasured quantity of gas. On these facts, at this stage, we do not find that the reasonable belief of the competent authority for the Entry Tax or Commercial Tax that the sale had escaped the assessment, was not bonafide.

15. We are not required, at this stage, to adjudicate whether the supply of gas, which was not measured by the meter installed by the GAIL, was not a sale. It is not denied that under the 'Gas Sale Contract', the GAIL was required to supply the gas, on the price to be paid by the buyer to the seller. The point of delivery was the gas measuring station. The gas was to be supplied by pipeline to be provided and maintained by the buyers at no risk and cost. The unmeasured supply of gas on account of tempering of the meter cannot at this stage, be treated to be theft, nor such allegation was accepted by the Arbitrator in the award. The GAIL was not required to raise bills, if it treated the supplies to be theft. The GAIL has also challenged the award for payment of the amount raised under the invoice.

16. A person is sought to have committed theft, as defined under Section 378 of the Indian Penal Code 1860, when he intends to take dishonestly any movable property out of the possession of any person without that person's consent, or moves that property in order to such taking. In the present case 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.

17. We do not find that the Additional Commissioner, Grade-I, Commercial Tax, Agra Zone, Agra has 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.

18. The respondents have not committed any error of law in exercise of their jurisdiction in extending the limitation, and issuing notice for the re-assessment of Entry Tax and Commercial Tax, nor their opinion, at this stage, that the turn over escaped assessment can be said to suffer from lack of bonafides.

19. We make it clear that we have not adjudicated the question as to whether the unauthorised, unmeasured supply of gas to the buyers was sale within the meaning and as defined under the UP Trade Tax Act. The question is left open to be considered by the assessing authority at the time of re-assessment.

20. Both the writ petitions are dismissed.

Dt.18.4.2011

RKP/