Entry Tax on Transmission of Natural Gas Cannot Be Levied on Sale Price When Purchase Value Ascertainable: Allahabad HC in GAIL Case [Read Order]
The Court clarified that only where the purchase value was unascertainable could the sale price be considered for levy of entry tax. Since the purchase price in this case was determinable, including transmission charges and margins in the taxable value was legally impermissible
Allahabad High Court, GAIL, Entry Tax
Allahabad High Court, GAIL, Entry Tax
The Allahabad High Court has held that entry tax on the transmission of natural gas cannot be levied on the sale price charged to customers when the purchase value of the gas at the time of entry into the State is ascertainable.
GAIL India Ltd, a Government of India undertaking under the Ministry of Petroleum and Natural Gas, had entered into purchase agreements with ONGC for procurement of natural gas and sale agreements with consumers in Uttar Pradesh.
The company transported natural gas through its own pipeline from Gujarat to Auraiya, Uttar Pradesh, and while selling to third-party consumers, charged transmission charges, marketing margins, and applicable taxes.
The assessing authority, however, levied entry tax at 4% on the sale value, including transmission charges and margins, by treating the sales price as the “market value” under Section 2(e) of the U.P. Tax on Entry of Goods Act, 2000.
The company contended that no transmission charges were paid on the procurement of gas from ONGC, and the charges levied on buyers were outward freight, not part of the purchase value. It argued that entry tax could only be levied on the purchase value at the point of entry into the State, which was clearly ascertainable, and not on the resale price charged to customers.
Agreeing with GAIL, Justice Piyush Agrawal observed that the value of natural gas at the time of its entry into U.P. was ascertainable, and therefore, the levy of entry tax on the subsequent sale price could not be sustained.
The Court clarified that only where the purchase value was unascertainable could the sale price be considered for levy of entry tax. Since the purchase price in this case was determinable, including transmission charges and margins in the taxable value was legally impermissible.
The Court quashed the Tribunal’s order of remand and directed it to decide the matter afresh, holding that the Tribunal, as the final fact-finding body, ought to have conclusively settled the issue instead of remanding it. The revision was accordingly allowed, with the Tribunal directed to dispose of the matter within three months.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
