Natural Gas Can Be Equated With Petroleum Gas, To Be Taxed Under Entry 23 Of 6th Schedule Of APGST Act: Telangana High Court

In a case pertaining to the taxation of Natural Gas, the Telangana High Court has held that Natural Gas shall fall under Entry 23 of 6th Schedule, under the category of petroleum gases, and not Entry 118. The different entries change the percentage of tax levied. Justice Narsing Rao Nandikonda held that “This bench is of the firm opinion that the findings given by the Tribunal holding that the natural gas sold by the petitioner falls under entry 23 of 6th schedule is proper” The present case is a tax revision case which was filed by the petitioner under Section 22(1) of the Andhra Pradesh General Sales Tax Act, 1957 (APGST Act)and the petitioner challenged the order dated 17.10.2007 passed in T.A.No.774 of 2006, T.A.No.364 of 2007 and T.A.No.712 of 2005 by the Sales Tax Appellate Tribunal, Hyderabad. The main question of law being discussed before the Assessing Officer for consideration was whether the 'natural gas' falls under entry 118 of the 1st schedule or whether it falls under entry 23 of the 6th schedule. Proceedings Before Assessing Authority In the present case, the petitioner is a registered dealer under the Commercial Tax Department in the state and it engaged in the business of trading natural gas. The petitioner purchased natural gas from the Gas Authority of India Limited who is the first seller and the petitioner after purchasing natural gas from GAIL sells it to other legal entities. In the present case, the petitioner sold the gas to its sister entity M/s. RVK Energy Private Limited which is involved in energy generation business and the gas was being used by it. In the assessment year of 2000-2001, the petitioner claimed that the natural gas was under the purview of industrial gas where the point of levy on tax is at the point of first sale. The petitioner approached the Assessing Authority and claimed that the industrial gas falls under Entry 118 of 1st Schedule of the APGST Act, 1957 and the levy of tax being at the first point of sale which in the instant case when the sale is made by GAIL to the petitioner, the petitioner could not have been subjected to levy of tax on the sale of natural gas by the petitioner. The Assessing Authority under the APGST Act stated that the tax on gas purchased by the petitioner from GAIL is one which is classified under Entry 23 of 6th Schedule. According to the Authorities, the sale of goods under Entry 23 of 6th Schedule is leviable on tax at every point of sale in the State and so the sale of natural gas by the petitioner to other companies is also amenable to payment of tax. The petitioner's contention was rejected by the assessing officer and The rate of tax on items reflected in Entry 118 of 1st Schedule as claimed by the petitioner is taxed on 12% on the point of first sale and under Entry 23 of 6th Schedule are liable to be taxed at every point of sale in the State and rate of tax also is 16% against which the petitioner-company approached the Deputy Commissioner of Commercial Tax. The Deputy Commissioner was also in agreement that commodity of 'Natural gas' falls under entry 23 of 6th schedule and thus, held that “the levy made by the Assessing Authority is in order and does not warrant any interference and consequently appeals fail and are accordingly dismissed.” Proceedings before Sales Tax Appellate Tribunal Petitioner was aggrieved by the same and appealed to the Sales Tax Appellate Tribunal (STAT) for the Assessment Years 2000-2001, 2002 2003 and 2001-2002 vide T.A.Nos.774 of 2006, T.A.364 of 2007 and 712 of 2005. The tribunal also held the same as the previous authority. “GAIL who are the first sellers of natural gas in Andhra Pradesh and who obtain it from Oil and Natural Gas Commission of India (ONGC), after the latter has obtained the same during the process of drilling for crude petroleum, have treated natural gas as falling under Entry 23 of Sixth Schedule of APGST Act.” Proceedings before High Court The High Court bench heard the arguments and stated that entry 118 excludes the petroleum gases and the gases specified elsewhere in the schedule and it applies only to the industrial gases. Court denies petitioner's contention to fall under entry 118, due to the specific exclusion given in the entry that he is dealing with industrial gases and the usage of the natural gas is also meant for the purpose of using it in the industries The court concluded that “On careful reading of the entries with all kinds of gases, whether it is compressed, liquified or solidified, nowhere in the said entries there is a mention of natural gas. On perusal of the decisions cited by the learned counsel for the petitioner, wherein, it is specifically stated that the natural gas is made up of Carbon and Hydrogen and scientifically called as 'methane' and it is readily combustible and generates heat. It is a fossil fuel like coal and petroleum under the APGST...

Natural Gas Can Be Equated With Petroleum Gas, To Be Taxed Under Entry 23 Of 6th Schedule Of APGST Act: Telangana High Court

Siddhi Nigam

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