SC notice to Centre, States on Gail sales tax

The Supreme Court on Tuesday issued notices to the Centre and five HBJ pipeline states on a petition by Gail (India) Ltd challenging the decision of the Sales Tax Authority in Gujarat to levy Rs 816 crore as tax for the assessment year 1998-99 on natural gas supply. A bench comprising Justice Y.K. Sabharwal and Justice H.K. Sema, while issuing the notices after hearing arguments from senior advocate K.K. Venugopal and advocate P.H. Parekh, said no coercive method be used to recover tax from Gail till further orders.

The petition challenged the demand notice of assistant commissioner, Sales Tax-Petroleum-I, Ahmedabad, asking to pay Rs 816 crore towards tax, interest and penalty for assessment year 1998-99 on its supply of natural gas through HBJ pipeline to consumers in MP, Rajasthan, UP, Haryana and Delhi. The petitioner said the assessment was made in spite of Gujarat having already collected huge sums as local sales tax from it treating them as stock transfer by Gail. It said neighbouring states have already collected additional huge sums as local sales tax separately from Gail by treating supply to consumers in their respective states as local or intra-state sales.