Decided on May 15,1998



Girija Jagannath, Member (A) - (1.) THESE three appeals are filed by the same appellant against the orders passed by the Deputy Commissioner (CT) Kakinada, in respect of the assessment orders passed by the Commercial Tax Officer, Aryapuram, Rajahmundry. As common issue is involved in all the three appeals, they are taken up together for disposal by way of a common disposal. Particulars of the said appeals are as follows: The appellant was originally assessed on Nil turnovers granting exemption of the entire turnover as claimed by it on the ground of second sales of gas allegedly 'purchased' from ONGC. The Deputy Commissioner (CT) after going through the memorandum of understanding (MOU) between O.N.G.C, and the appellant, came to the conclusion that there was no 'sale' between O.N.G.C, and appellant and that the latter acted merely as a Marketing agent of the former collected the stipulated consumer price from the consumer and passed it on to the O.N.G.C, who was its principal. Accordingly, the first sale of gas took place in the hands of the appellant and the turnover arrived on the basis of the consumer price had to be taxed at 10 per cent + addl. tax and surcharge. The appellant is aggrieved by the revisions, as according to it, the first sale in the State took place in the hands of the O.N.G.C, and the turnover based on the producer's price collected by the O.N.G.C. alone was liable to tax and such tax was indeed recovered from the appellant by the O.N.G.C. at the time of sale to it. Needless to say, that the whole controversy is on account of the consumer price being greater than the producer's price and it is the tax on the differential amount which is the bone of contention. O.N.G.C. was already assessed by the very same assessing officer on the turnover relating to the sale of gas based on the producer's price realised by the O.N.G.C The appellant is therefore aggrieved and has assailed these revisions before us.
(2.) THE point to be considered is, whether the appellant acted as agent of O.N.G.C, while selling gas and whether the disputed turnovers represent first sale of gas within the State liable to tax under the A.P.G.S.T. Act. Counsel for the appellant delineated the role and functions of the appellant, a statutory corporation. It was established to augment, create, establish, set -up necessary plants, equipment and infrastructure facilities including utilities and provide services for the utilisation of natural gases. The appellant did not manufacture gas, but purchased gas from O.N.G.C, the manufacturer and sold it to customers as an independent principal. The assessing authority categorically found that the sale of natural gas by the appellant was second sales and such a finding was unassailable. The Deputy Commissioner erroneously considered the appellant as an agent of O.N.G.C. based on the terms of the Memorandum of understanding (M.O.U.) and certain correspondence relating to the settlements of gas burst while occurred on 30th May, 1992 in the Narsapur -Kovvur pipeline. The O.N.G.C. was already assessed on sale of gas to the appellant. As long as such assessments were not disturbed, it was not open to the Department to bring to tax the same turnovers in the hands of the appellant. Appellant relied on the Supreme Court decision in the case of State of Karnataka v. Ayyanahalli Bakappa & Sons : (1988) 7 APSTJ 172 (SC) for this proposition. Merely because, the price of natural gas is regulated by the Government of India and certain elements embedded in the sale price were passed on to the O.N.G.C. the legal relationship of the appellant with the O.N.G.C. did not amount to that of Agent and Principal.. It was actually one of a vendor and vendee and not that of a principal and agent. Counsel for the appellant in this connection relied on the decision of the Supreme Court in the case of Oil & Natural Gas Commission v. State of Bihar : (1976) 38 STC 435 (SC). Even the incident of Gas burst at Kovvur proved the 'Principal to Principal' relationship between O.N.G.C. and the appellant. The appellant had to pay for the gas lost in its custody which proves the title of the gas vested with the appellant, the O.N.G.C. in fact issued a bill for the amount of gas lost in the burst.
(3.) THE learned counsel for the appellant drew our attention to explanation -III to Section 2(1)(n) defining 'sale' under A.P.G.S.T. Act, which was interpreted by the Supreme Court in the case of Sri Tirumala Venkateshwara Timber & Bamboo Firm v. Commercial Tax Officer, Rajahmundry in, 21 STC p.312. He urged that the sale by the appellant was an independent transaction subsequent to the first sale by O.N.G.C. within the State. He further cited the decision of the Supreme Court in the case of The Bhopal Sugar Industries Limited v. Sales Tax Officer, Bhopal (40 STC pages 42 and 44) and contended that 'A contract of agency differs essentially from a contract of sale inasmuch as an agent after taking delivery of the property does not sell it as his own property but sells the same as the property of the principal and under his instructions and directions. Further more, since the agent is not the owner of the goods, if any loss is suffered by the agent he is to be indemnified by the principal. The appellant was indeed the owner of gas in its custody and so far as the gas lost in the burst which occurred in the Narsapur -Kovvur Pipe Line, it had to recompense the vendor i.e., O.N.G.C. as if it had purchased gas from the latter. Counsel for the appellant also relied on the Minimum off -take Clause which stipulated that the appellant was to be billed for the contracted minimum quantity per day charging even for the short fall in off -take. Such terms clearly brought out the vendor, vendee relationship. The billing and payment clauses as set out in the M.O.U. also were that of principal to principal. The appellant was also bound to pay interest on delayed payments which would not have been the case had the appellant truly been O.N.G.C.'s agent. He also cited the affidavits filed in response to the interrogatories emanating from their Lordships of the A.P. High Court in the writs filed by the appellant. He vehemently contended that the revision was liable to be set aside.;

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