Setback to Vedanta Ltd: Bombay HC Denies Form-C on HSD as Usage Extended Beyond Mining Operations [Read Order]

In a recent setback for Vedanta Ltd, the Bombay High Court (Goa Bench) dismissed its writ petitions seeking the benefit of concessional purchase of High Speed Diesel (HSD) against Form-C under the Central Sales Tax Act, 1956 (CST Act).

The petitions, filed by Vedanta Ltd and its group company Sesa Mining Corporation Ltd, challenged the denial of Form-C by the Goa Commercial Tax Department for procurement of HSD from Reliance Industries Ltd. at concessional CST rates.

Vedanta argued that though the GST regime commenced from 1 July 2017, petroleum products like HSD remained outside GST’s ambit and thus continued to be governed by the CST and VAT laws, allowing continuation of Form-C benefits.

The company contended that its mining operations required bulk HSD consumption for extraction, processing, and transport of iron ore, all of which constituted part of “mining activity” as defined by the Supreme Court in Chowgule & Co. Pvt. Ltd. v. Union of India and CIT v. Sesa Goa Ltd.. It further submitted that its CST registration had not been cancelled, hence it continued to qualify as a registered dealer entitled to Form-C.

The State of Goa, represented by the Advocate General, argued that Vedanta had ceased to be a “dealer” under the CST Act post-GST introduction, as its registration under the Goa VAT Act had become infructuous from 01.07.2017.

The authorities also found that substantial quantities of HSD procured against Form-C were resold to private truck operators and contractors transporting iron ore, rather than used directly for mining operations.

This, the State contended, amounted to resale and not consumption for mining, disqualifying Vedanta from concessional purchase benefit.

The Division Bench of Justices Bharati Dangre and Nivedita P. Mehta observed that while Form-C issuance continued to be valid for petroleum products excluded from GST, the benefit under Section 8(3)(b) of the CST Act extended only to goods used directly in mining operations.

The Court distinguished Chowgule’s ratio, holding that Vedanta’s use of HSD extended beyond extraction and processing, covering resale to transporters, which was outside the ambit of “use in mining.”

According to the court, “none of the parties have paid attention to the goods for which the registration is granted, namely, HSD and petrol, which is used for running and maintenance of machinery for mining and processing iron ore for sale i.e. restricting its use to the machineries and had it been a case that the registration was specifically obtained for the vehicles, the certificate could have said so but, it only restricts the HSD and petrol used for running and maintenance of the machinery and it is not possible to segregate the two terms running and maintenance as they are used qua ‘machinery for mining and for processing of iron ore for sale’ indicating that the petrol or diesel which is utilized for operation of the machinery for mining and processing of iron ore for sale, would be entitled for the benefit of concessional rate and not otherwise.”

Rejecting Vedanta’s plea, the Court held that the concessional rate benefit cannot be availed for HSD utilized or resold beyond direct mining operations and upheld the tax authorities’ orders denying Form-C issuance.

“As far as Writ Petition in Sesa Goa Limited is concerned, we find the certificate for registration is for ‘goods’ ‘fuel’, which include HSD but since we find that the application of the company is refused only on the ground that in the new regime, the Company is not entitled for issuance to Form ‘C’”, concluded the bench.

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