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Chidambaram argues against state tax in Gujarat high court
September, 25th 2014

Former home and finance minister, P Chidambaram, appeared before Gujarat high court on Wednesday on behalf of British Gas in a multi-crore sales tax assessment case.

The state government has issued tax notices to British Gas and two other companies — ONGC and Reliance Industries Ltd — for bringing gas to Hazira from the Panna-Mukta-Tapi (PMT) field, where they got the contract from the Centre for capital investment and exploration. According to the contract of crude exploration, ONGC was allocated 40% share in the crude-stock while the two other companies were given 30% share each.

After conducting the gas sweetening process at Hazira, it was sold to the Gas Authority of India Limited (GAIL).

The state government assessed the sales tax of around Rs 1,500 crore from 1997 to 2001 on the three contractors while stating that the gas was delivered and sold to GAIL from the territorial region of Gujarat. When Value Added Tax (VAT) Act came into force in 2004-05, the state government initiated the assessment of the sales tax and issued notice to the three contractors.

Appearing for the company, Chidambaram argued that Gujarat government has no jurisdiction to seek sales tax from the 'B G (British Gas) Exploration and Production India Limited' because the delivery point is located 32 nautical miles away from Hazira port in Surat, and hence it does not fall within the territory of the Gujarat.

Chidambaram further argued that the gas is technically an import, as it could have gone anywhere in the world but due to contract obligation with GAIL, it was brought to Hazira.

Further hearing is kept on Thursday.

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