The Supreme Court on Monday admitted a petition filed by Reliance Industries over a dispute on imposition of sales tax on purchase and return of Linear Alkyl Benzene Feed Stock (LABFS) to Bharat Petroleum after it processed it at its chemical plant at Patalganga. A bench comprising Justice B Sudershan Reddy and Justice S S Nijjar admitted the petition filed by RIL and posted the matter in July for the final hearing. The apex court also issued notice to Maharashtra state government and directed it to file a reply.

BPCL had entered into an agreement with RIL on August 24, 1992 for the supply of LABFS through a pipeline from its refinery at Mahul to the petrochemical plant of Mukesh Ambani group at Patalganga. LABFS is a raw material for the manufacture of Paraffin, which was extracted by RIL at its plant. Upon extraction, the residue, which was basically Kerosin oil, was returned to the BPCL.

On September 11, 2006 BPCL approached Commissioner of Sales Tax asking whether sales tax would not be paid on it under the Bombay Sales Tax Act, 1959.

The sales tax department replied that what was returned back by RIL to BPCL was not a purchase of kerosene by the PSU. This was challenged by the Maharashtra state government before the Sales Tax Tribunal.

On it, the tribunal on June 30, 2008 held that state government’s appeal against the order of its own commissioner was not maintainable as he was its nominee. This was challenged by the state government before the High Court, which set aside tribunal order, terming it as “manifest error” by the sales tax tribunal.

“The state is vitally interested in the collection of revenue. An error on the part of the Commissioner in the exercise of his quasi judicial powers is subject to correction by the Tribunal in an appeal filed by the state. To hold otherwise would result in a manifest miscarriage of justice and would defeat the very basis and intent of the legislature in enacting the legislation,” the High Court said.

The High Court further said, “The state which has a vital interest in securing the collection of revenue is entitled to file an appeal against an order passed by the Commissioner where that order is regarded as being contrary to law”.

This was later challenged before the Supreme Court in 2010.

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September 2021