SC upholds Rs 300-cr VAT relief to ONGC

By: | Published: August 4, 2015 1:18 AM

The Supreme Court on Monday upheld the Gujarat High Court's decision that exempted ONGC from paying value added tax (VAT) to the tune of over Rs 300 crore to the state government.

The Supreme Court on Monday upheld the Gujarat High Court’s decision that exempted ONGC from paying value added tax (VAT) to the tune of over Rs 300 crore to the state government.

A bench headed by Chief justice HL Dattu dismissed the Gujarat government’s appeal against the HC’s December 2014 order that held that ONGC can recover VAT only on subsidised rates and not on the actual realisation rates of petroleum products sold by ONGC. The HC had further said that the government has the constitutional mandate to decide the price of petroleum products.

ONGC supplies crude oil and petroleum products from its wells to oil marketing companies (OMCs) and others. While the sales invoice are raised based on the international prices, it sells crude to the OMCs at subsidised rate fixed by the Centre. However, the state department demanded VAT from ONGC on the basis of actual rates, seeking tax dues of over Rs 300 crore.

The state government in its appeal before the apex court said that the HC failed to appreciate that by discounting the price, the ONGC was sharing the losses of the IOC which cannot be categorised as discount or reduction in the price.

“By merely describing such under recovery as discount, the nature and character of transaction did not change,” senior counsel Arvind P Datar and counsel Hemantika Wahi said, adding that the reduction in price was not in the nature of any recognised trade discounts but on th directions of the GoI, therefore, this cannot be categorised as a case of trade discount.

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