Gail India Ltd Vs Commissioner of Commercial Taxes (Allahabad High Court)
The Allahabad High Court, in the case of Gail India Ltd Vs Commissioner of Commercial Taxes, has addressed a key issue regarding the levy of Entry Tax on the transmission of natural gas. The court ruled that the tax cannot be levied on the sale price of the gas when its purchase value is already ascertainable. The revision petition, filed by GAIL India Ltd., a government-owned enterprise, challenged an order passed by the Commercial Tax Tribunal which had remanded the case back to the assessing authority without deciding the core issue.
GAIL, engaged in the production and trading of natural gas, argued that it procured natural gas from ONGC through a purchase agreement and then sold it to various consumers within the state of Uttar Pradesh. According to the company, the assessing authority incorrectly levied Entry Tax at a rate of 4% on the value charged by GAIL to its purchasers. This value, the authority claimed, was the “market value” and included transmission charges and marketing margins. GAIL’s counsel contended that the transmission charges were outward freight and should not be included in the value of the goods for tax purposes. They also pointed out that the pricing of natural gas is controlled by the Government of India, and that the value at which the gas was brought into the state was ascertainable, making the use of the sale price as the basis for the Entry Tax incorrect. The company also clarified that no transmission charges were paid by them on the procurement of the gas from ONGC.
