SC seeks response on UP appeal in RIL gas row



New Delhi: The Supreme Court on Tuesday sought a response of the Centre and the Attorney General on Mayawati government's appeal challenging a stay imposed by Allahabad High Court on the Rs 724 crore VAT levied on Reliance Industries Limited (RIL) for sale of gas in the state.

A bench of justices Altamas Kabir and S S Nijjar sought the response after senior counsel Harish Salve, appearing for RIL, sought issuance of notices to the two as the issue involved larger question of taxation laws.

In its appeal, the UP government, through counsel Gunnam Venkateswara Rao, assailed July 26 order of the High Court staying the levy for 2009-2010 on RIL's petition without giving an opportunity to file its counter affidavit.

"It is submitted that the impugned interim order is contrary to the settled principle of law that the judicial courts should refrain from passing such interim orders, which amount to final in nature, which may or may not be passed after hearing the contesting parties.

"It is further submitted that by the impugned interim order, the Hon'ble High Court had indirectly stayed a huge amount of tax without obtaining any security from the respondent to safeguard the demand created by way of provisional assessment orders passed against the respondent (RIL)," the appeal said.

The state government said, the interim order of the high court was contrary to the law laid down by the apex court, which had in the M/S Empire Industries Ltd. Vs. Union of India (1985) case held "Governments are run on public funds and if large amount of taxes are held up during the pendency of litigations, it becomes difficult for the governments to run."

According to the state, RIL, which is engaged in extracting and refining petroleum and petrochemical products, was supplying natural gas to various fertilizer companies in Uttar Pradesh and hence, the state was entitled to levy VAT on the company in addition to the central taxes paid by the latter.

RIL had taken the plea in the high court that the transaction in question is central sale made by it from the state of Andhra Pradesh and it is not liable to pay local tax (VAT) to the state government.

PTI