The Supreme Court on Tuesday issued notices to the Centre and five states on a writ petition moved by Gas Authority of India Ltd (GAIL), challenging the levy of sales tax by state governments on the supply of natural gas through its pipelines.
The petition challenged the demand notice of the Gujarat government asking GAIL to pay Rs 816 crore towards tax, interest and penalty for the assessment year 1998-99 on its supply of natural gas to consumers in the states of Madhya Pradesh, Rajasthan, Uttar Pradesh, Haryana and Delhi.
The court directed that no coercive methods should be used to recover the tax from GAIL.
Senior counsel K K Venugopal submitted before a bench headed by Justice YK Sabharwal that the assessment was made by the Gujarat government in spite of collecting huge sums as local sales tax from it on the same transactions treating them as stock transfer by GAIL.
The petition said neighbouring states have also collected sales tax separately from GAIL by treating the supply to consumers in their respective states as local or intra-state sales.
Similar cases are pending in the court raising the question of inter-state passage of goods and multiple taxation. The Supreme Court is likely to decide the question arising from these petitions in a comprehensive manner.
