M/S INDIAN OIL CORPORATION LIMITED vs. COMMR.OF SALES TAX

C.A. No.-005287-005287 - 2007Supreme Court07 August 2008Bench: S.H. KAPADIA B. SUDERSHAN REDDY6 pages

For Respondent: KIRTI RENU MISHRA

AI SummaryRemanded

What did the Supreme Court hold?

The Supreme Court, while acknowledging that it normally does not interfere in interim matters concerning tax levy, found these cases peculiar. The Court noted that both IOC and BPCL are public sector companies obligated to sell kerosene via the PDS route. It was of the view that demanding a substantial deposit at this stage would have a serious effect on their PDS sales. Conversely, the Court was satisfied that both companies are substantial and financially sound, capable of discharging their liability later if required. Therefore, to meet the ends of justice, the Court directed the Assistant Commissioner of Sales Tax, Cuttack, to hear and dispose of the pending first appeals within three months. The Court also recorded undertakings from both appellants to pay the tax due with interest if the department succeeded. The Court explicitly stated it was expressing no opinion on whether the transactions constituted PDS sales, leaving this to be decided by the Assistant Commissioner. Pending the appeal, no coercive steps were to be taken against the appellants.

What were the facts?

The Supreme Court was hearing appeals filed by Indian Oil Corporation Ltd. (IOC) and Bharat Petroleum Corporation Ltd. (BPCL) against orders of the High Court. The core issue was the exemption from sales tax on the sale of Superior Kerosene Oil by these public sector undertakings to other oil companies via the Public Distribution System (PDS) route, as per a notification dated July 1, 2000, issued by the Government of Orissa. Both appellants had moved applications for stay before the Assistant Commissioner of Sales Tax, Cuttack, which were refused. Aggrieved, they approached higher authorities, and subsequently, the High Court directed IOC to pay Rs. 75 lakhs and BPCL to pay Rs. 20 lakhs pending the disposal of their appeals before the Assistant Commissioner. The total demand in dispute was approximately Rs. 1.94 Crores for IOC and Rs. 1.34 Crores for BPCL.

What were the issues?

1. Whether the sale of Superior Kerosene Oil by the appellant oil companies (IOC and BPCL) to another oil company via the PDS route is exempted from sales tax in terms of the notification dated July 1, 2000, issued by the Finance Department, Government of Orissa? (Question of law and fact, concerning the interpretation and applicability of the notification). Assessee (IOC/BPCL) Contentions: - The sales are made via the PDS route and are therefore eligible for exemption under the notification. - Imposing a significant deposit amount at an interim stage would severely impact their PDS sales operations. - They are substantial companies with sound financial positions, capable of meeting any eventual liability. - They have provided an undertaking to pay the due tax with interest if the department succeeds in the appeal. Revenue Contentions: - The transactions in question do not constitute PDS sales, implying they are not eligible for the exemption. (This contention was noted by the Court but not elaborated upon as it was to be decided by the lower authority).

Which sections of the Income-tax Act were involved?

Orissa Sales Tax Act, 1947

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.5287 OF 2007 M/s. Indian Oil Corporation Ltd. ...Appellant(s) Versus Commr. of Sales Tax & Ors. ...Respondent(s) O R D E R The fundamental issue which arises for determination in a pending statutory Appeal No.AA-174/CUIE/2006-07/CT before the Assistant Commissioner of Sales Tax, Cuttack-I Range:Cuttack, Orissa, is whether sale of Superior Kerosene Oil by the appellant-Indian Oil Corporation Ltd. (IOC) to another oil company via PDS route is exempted from sales tax in terms of notification dated 1st July, 2000 issued by the Finance Department, Government of Orissa. Before the Assistant Commissioner of Sales Tax, Cuttack-I, an application for stay was moved. It was refused. Aggrieved by the decision refusing stay, the interim matter was carried to the Commissioner of Commercial Taxes, Cuttack, Orissa. Stay was refused also by the Commissioner. Hence, a Writ Petition came to be filed by the appellant Company. By the impugned order, the High Court directed the appellant IOC 1 to pay a sum of Rs.75 lakhs pending hearing and final disposal of the appeal by the Assistant Commissioner of Sales Tax. Hence this Civil Appeal. Normally, this Court does not interfere in interim matters particularly when the matter concerns levy of tax. However, this is a peculiar case for two reasons, i.e., IOC Ltd. is a public sector company in a priority sector which is obliged to sell kerosene via PDS route. The demand is for Rs.1.94 Crores (approx.) and, in the circumstances, we are of the view that to call upon IOC at this stage to deposit a huge amount of Rs.1.94 Crores (approx.) would have a serious effect on the PDS sales. On the other hand, we are satisfied that IOC is a substantial company. It is in a sound financial position and it can discharge its liability at a later date, if need be. In the circumstance, we are of the view that ends of justice would be met if the Assistant Commissioner of Sales Tax, Cuttack is directed to hear and dispose of the First Appeal pending before him within a period of three months from today. Before concluding, we may also record that IOC through its counsel has given an undertaking to this Court that in the event of the Department succeeding in the appeal pending before the Assistant Commissioner of Sales Tax, Cuttack, it 2 will pay the tax due with interest in accordance with the provisions of the Orissa Sales Tax Act, 1947. Before concluding, we may point out that, according to the Department, the transactions in question do not constitute PDS sales. This question will also have to be gone into by the Assistant Commissioner of Sales Tax, Cuttack, in the pending First Appeal. We express no opinion in that regard. Pending First Appeal, however, no coercive steps to be taken. Civil Appeal is disposed of accordingly. No order as to costs. ...................J. (S.H. KAPADIA) ...................J. (B. SUDERSHAN REDDY) New Delhi, August 07, 2008. 3 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.4933 OF 2008 (Arising out of S.L.P.(C) No.5658/2007) M/s. Bharat Petroleum Corp. Ltd. ...Appellant(s) Versus Commr. of Sales Tax & Ors. ...Respondent(s)

O R D E R Leave granted. The fundamental issue which arises for determination in a pending statutory Appeal No.AA-302/CUIE/2006-2007/CT before the Assistant Commissioner of Sales Tax, Cuttack-I Range: Cuttack, Orissa, is whether sale of Superior Kerosene Oil by the appellant-Bharat Petroleum Corporation Ltd. (BPCL) to another oil company via PDS route is exempted from sales tax in terms of notification dated 1st July, 2000 issued by the Finance Department, Government of Orissa. Before the Assistant Commissioner of Sales Tax, Cuttack-I, an application for stay was moved. It was refused. Aggrieved by the decision refusing stay, the interim matter was carried by the appellant herein in revision to the Commissioner of Commercial Taxes, Cuttack, Orissa. The Revisional Authority partly allowed the Revision Petition and 1

directed the appellant to pay a sum of Rs.65 lakhs. Being aggrieved, a Writ Petition came to be filed by the appellant Company. By the impugned order, the High Court directed the appellant-BPCL to pay a sum of Rs.20 lakhs pending hearing and final disposal of the appeal by the Assistant Commissioner of Sales Tax. Hence this Civil Appeal. Normally, this Court does not interfere in interim matters particularly when the matter concerns levy of tax. However, this is a peculiar case for two reasons, i.e., BPCL Ltd. is a public sector company in a priority sector which is obliged to sell kerosene via PDS route. The demand is for Rs.1.34 Crores (approx.) and, in the circumstances, we are of the view that to call upon BPCL at this stage to deposit a huge amount of Rs.1.34 Crores (approx.) would have a serious effect on the PDS sales. On the other hand, we are satisfied that BPCL is a substantial company. It is in a sound financial position and it can discharge its liability at a later date, if need be. In the circumstance, we are of the view that ends of justice would be met if the Assistant Commissioner of Sales Tax, Cuttack is directed to hear and dispose of the First Appeal pending before him within a period of three months from today. Before concluding, we may also record that BPCL through 2

its counsel has given an undertaking to this Court that in the event of the Department succeeding in the appeal pending before the Assistant Commissioner of Sales Tax, Cuttack, it will pay the tax due with interest in accordance with the provisions of the Orissa Sales Tax Act, 1947. Before concluding, we may point out that, according to the Department, the transactions in question do not constitute PDS sales. This question will also have to be gone into by the Assistant Commissioner of Sale Tax, Cuttack, in the pending First Appeal. We express no opinion in that regard. Pending First Appeal, however, no coercive steps to be taken. Civil Appeal is disposed of accordingly. No order as to costs. ...................J.

(S.H. KAPADIA)

...................J. (B. SUDERSHAN REDDY) New Delhi, August 07, 2008. 3

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