SC Holds Natural Gas Supply an Inter-State Sale – U.P. Lacked VAT Jurisdiction

Case Details: State of Uttar Pradesh vs. Reliance Industries Ltd. (2026) 42 Centax 282 (S.C.)

Judiciary and Counsel Details

• • J.K. Maheshwari & Atul S. Chandurkar, JJ.
  • S/Shri Dinesh Dwivedi, Sr. Advocate, Vikas Singh Jangra, Nishant Singh, Narendra Pandey, Sauvik Singh, J. Tarun Kumar, Ankit Khatri, Advocates & Bhakti Vardhan Singh, AOR, for the Appellant.
  • Dr Abhishek Manu Singhvi, S/Shri Kavin Gulati, Sr. Advocates, Shubhranshu Padhi, Ashwin M. Dave, Ketan Dave, Rishit Badiani, Avishkar Singhvi, Vishnu Sharma A.S., Nidhiram Sharma, Pranav Giri, Yashrath Misra, Tushar Bhardwaj, Sarad Kumar Sunny, Vikrant Kumar, Madhav Binzani, Pratibha Singh, Ms Ruby Singh Ahuja, Ms Ravneet Kaur Malik, Devang Kumar, Abhyuday Mishra, Advocate, K.R. Sasiprabhu, Naveen Kumar, Ms Nidhi Mohan Parashar, Shailendra Swarup, M/s. Karanjawala & Co., Dr N. Visakamurthy, Ms Devina Sehgal & Sahil Bhalaik, AORs, for the Respondent.

Facts of the Case

The assessee challenged the levy of VAT by the State of Uttar Pradesh on supply of natural gas on the ground that the transactions constituted inter-State sales under section 3 of the Central Sales Tax Act, 1956. The record showed that natural gas was supplied pursuant to Gas Sales and Purchase Agreements (GSPA) under which delivery and transfer of title took place at Gadimoga in Andhra Pradesh. Separate Gas Transportation Agreements (GTA) were executed by the buyers for transportation of gas through common carrier pipelines from Andhra Pradesh to Uttar Pradesh, during which the gas was co-mingled and re-metered at Auraiya in Uttar Pradesh. The department treated re-metering and delivery at Auraiya as conferring jurisdiction upon the State of Uttar Pradesh to levy VAT on the transactions. The matter was placed before the Supreme Court.

Supreme Court Held

The Hon’ble Supreme Court held that the sale of natural gas stood concluded at Gadimoga, Andhra Pradesh, where delivery was effected and title in the goods passed in terms of the GSPA. The Court observed that transportation through common carrier pipelines, co-mingling of gas, and re-metering at Auraiya were merely incidents of transportation and did not alter the character of the transaction as an inter-State sale under section 3 of the Central Sales Tax Act, 1956. Further, it was observed that co-mingling of gas was a statutory requirement under the Petroleum and Natural Gas Regulatory Board Act, 2006 and the regulations governing common carrier pipelines, and therefore movement of gas through such pipelines could not convert the transaction into an intra-State sale liable to VAT in Uttar Pradesh. The Hon’ble Supreme Court therefore held that the State of Uttar Pradesh lacked jurisdiction to levy VAT under the Uttar Pradesh Value Added Tax Act, 2008.

List of Cases Reviewed

• • Reliance Industries Ltd. v. State of U.P. — Writ Petition No. 6281 of 2010, decided on 7-9-2012 by Allahabad High Court — Affirmed [Paras 3, 17, 18, 19, 82]

List of Cases Cited

• • Bengal Immunity Co. Ltd. v. State of Bihar — (1955) 1 SCC 763 — Referred [Paras 21, 54, 55]
  • Commissioner v. Dilip Kumar and Company — 2018 (361) E.L.T. 577 (S.C.) — Noted [Para 58]
  • Hoechst Pharmaceuticals Ltd. v. State of Bihar — (1983) 4 SCC 45 — Noted [Para 30]
  • Hyderabad Engineering Industries v. State of A.P. — (2011) 4 SCC 705 — Relied on [Paras 22, 75, 76]
  • Intellectuals Forum v. State of Andhra Pradesh — AIR 2006 SC 1350 — Relied on [Para 88]
  • Jindal Stainless Ltd. v. State of Haryana — (2017) 12 SCC 1 — Noted [Paras 37, 45]
  • M.C. Mehta v. Kamal Nath — (1997) 1 SCC 388 — Relied on [Para 88]
  • Manganese Ore (India) Ltd. v. Regional Assistant Commissioner of Sales Tax — (1976) 4 SCC 124 — Relied on [Para 84]
  • Peoples Natural Gas Co. v. Public Service Commission — 270 U.S. 550 (1926) — Relied on [Para 85]
  • Pioneer Urban Land and Infrastructure Ltd. v. Union of India — 2019 (8) SCC 416 — Noted [Para 63]
  • Reliance Industries Ltd. v. Union of India — (2014) 11 SCC 576 — Referred [Para 9]
  • Reliance Natural Resources Ltd. v. Reliance Industries Ltd. — (2010) 7 SCC 1 — Referred [Para 8]
  • Sedco Forex International Drill Inc. v. Commissioner of Income-tax — (2005) 12 SCC 717 — Relied on [Para 65]
  • Sree Sankaracharya University of Sanskrit v. Dr. Manu — (2023) 19 SCC 30 — Relied on [Para 66]
  • State of Andhra Pradesh v. National Thermal Power Corporation — (2002) 5 SCC 203 — Relied on [Para 74]
  • State of Andhra Pradesh v. NTPC — (2002) 5 SCC 203 — Referred [Para 22]
  • State of Bombay v. United Motors (India) Ltd. — (1953) 1 SCC 514 — Referred [Paras 52, 53]
  • State of Gujarat v. Gas Authority of India Ltd. — SCA No. 12980 of 2007, decided on 31-7-2018 by Gujarat High Court — Distinguished [Para 87]
  • State of Kerala v. Attesee (Agro Industrial Trading Corporation) — 1988 (38) E.L.T. 720 (S.C.) — Noted [Para 73]
  • Synthetics and Chemicals Ltd. v. State of U.P. — (1990) 1 SCC 109 — Noted [Para 31]
  • Tata Iron and Steel Co. Ltd. v. S.R. Sarkar — 1960 SCC OnLine SC 106 — Relied on [Para 83]
  • Union of India v. Deoki Nandan Aggarwal — 1992 Supp (1) SCC 323 — Noted [Para 59]

List of Departmental Clarification Cited

• • Ministry of Finance Office Memorandum dated 21-7-2015 [Para 64]
  • Office Memorandum dated 3-5-2015 [Para 66]