Piramal Glass PVT. LTD. vs. State Of Gujarat

Held

The Court allowed the petitions, specifically qua prayer 'C'. The Court directed the respondents to forthwith process the refund claims of the respective petitioners and grant refund of the tax amount collected from the petitioners and deposited by the seller (IOCL) in accordance with law within a period of twelve weeks from the receipt of a copy of the judgment. The Court clarified that once the refund claim of the petitioners is processed, IOCL would not be entitled to claim any such refund. The Court found the stand of the respondents that refund could only be made to IOCL as legally untenable and practically unworkable, especially when IOCL had indicated that buyers were entitled to the refund. The Court noted that the petitioners were the ultimate consumers, and thus, the question of unjust enrichment did not arise. The Court made the rule absolute to the extent of allowing the refund.

Facts

The petitioners, engaged in manufacturing nylon textile yarn and fabric, purchased Liquefied Natural Gas (LNG) from Indian Oil Corporation Ltd. (IOCL) for heating purposes. Prior to GST, LNG was taxed at 15% under the Gujarat Value Added Tax Act, 2003, and petitioners could claim input tax credit after a 4% reduction. Post-GST, while their manufactured goods were under GST, LNG remained taxed under the VAT Act at 15%, preventing input tax credit. The State Government issued a remission order dated 5.9.2017, remitting tax on natural gas to 9% if used in manufacturing goods covered under GST. A condition stipulated that the selling dealer charge only 6% tax on local sales. However, IOCL charged 15% tax on inter-State sales, interpreting the remission order to disallow Form 'C' benefits, leading to the petitioners being unable to claim input tax credit.

Key Issues

1. Whether Condition No. 2 of the remission order dated 5.9.2017, which mandated charging full tax on inter-State sales of natural gas, is beyond the competence of the State Government, arbitrary, discriminatory, and violative of Article 14 of the Constitution of India? (Petitioner's contention: Yes, it is arbitrary and discriminatory as it creates an unreasonable distinction between local and inter-State sales, impacting their ability to claim input tax credit. Revenue's contention: Not recorded.) 2. Whether the State Government should be directed to clarify that availing remission on local sales will not lead to liability of tax at the full rate on inter-State sales made against C form declarations? (Petitioner's contention: Yes, a positive clarification is needed to ensure they are not penalized for availing remission on local sales. Revenue's contention: Not recorded.) 3. Whether the State Government or IOCL should refund the excess tax collected from the petitioners due to the illegal Condition No. 2 of the remission order? (Petitioner's contention: Yes, they are entitled to a refund of the differential tax collected by IOCL. Revenue's contention: Not recorded.)