State of Uttar Pradesh & Ors Vs Reliance Industries Limited & Ors (Supreme Court of India)
In , the Supreme Court considered appeals arising from a judgment of the Allahabad High Court which had quashed assessment orders passed by the State of Uttar Pradesh under the Uttar Pradesh Value Added Tax Act, 2008 in relation to the sale of natural gas extracted from the KG-D6 block by Reliance Industries Limited and its consortium partners.
The dispute concerned whether the transactions involving sale and transportation of natural gas constituted inter-State sales governed by the Central Sales Tax Act, 1956 (CST Act), or intra-State sales liable to VAT in Uttar Pradesh.
The Court began by discussing the constitutional framework governing trade, commerce, and fiscal federalism in India. It observed that India is a Union of States with economic disparities among States, and that the Constitution seeks to preserve free flow of inter-State trade and commerce while preventing protectionist taxation measures by individual States. The judgment extensively discussed constitutional provisions relating to taxation, including Articles 246, 248, 265, 269, 286, and Entries in the Union and State Lists.
The Court noted that the Government of India introduced the New Exploration and Licensing Policy (NELP) in 1999 to encourage private participation and foreign investment in petroleum exploration. Under this policy, Reliance Industries Limited formed an international consortium with Niko Limited and later BP Exploration (Alpha) Limited for exploration and production from the KG-D6 offshore block situated near Andhra Pradesh.
