Supreme Court to examine Reliance Industries plea against PNGRB order

Supreme Court to examine Reliance Industries plea against PNGRB order

The Supreme Court decided to examine Reliance Industries’ appeal challenging PNGRB’s order that allegedly exposed the Mukesh Ambani firm to conflicting demands from different Central and state tax authorities having “substantial financial consequences” of around Rs 600 crore.

A bench headed by Justice J Chelameswar admitted RIL’s appeal and posted the matter for further hearing in February.

Petroleum and Natural Gas Regulatory Board had directed Reliance Gas Transportation Infrastructure (RGTIL), the owner and operator of the East West Pipeline (EWPL), to provide open access on a ‘virtual reverse flow’ basis to the GMR Energy’s pipeline system for transportation of gas from Gujarat (West) to Andhra Pradesh (East). This, as per RIL, would change the nature and character of transactions and alter the gas supply purchase agreements (GSPAs) between it and the buyers, including IFFCO, Tata Chemicals, National Fertilisers, Gujarat Narmada Valley Fertilisers, Nagarjuna Fertilisers and Chemicals, etc.

RIL said that as there is no settled principle on which sales tax can be levied on such  transcations, it fears  that Andhra will tax it as a seller de-facto of the gas which is taken by GMR and the other states where gas is transported may also seek to tax the transaction.

The notion of ‘reverse flow’ is that while the physical flow of gas in the pipeline is in one direction, i.e., in an east-west direction, hypothetically it is assumed that the gas introduced in Gujarat by the GMR’s seller flows from west to east and is drawn by GMR Energy in Andhra. There is no statute which contemplates or creates such fiction, RIL said.

As per this, the GMR doesn’t become RIL’s customer as the gas is purchased by GMR from west coast regasification plants and physically the gas is introduced in EWPL in Gujarat, the company added.

Senior counsle Paras Kuhad, appearing for RIL argued that the order of the regulator does not clarify as to how these sales tax liabilities would be dealt with. He argued that RIL’s liability to pay sales tax would fall upon it as a supplier in the first instance and the impugned order should have made substantive arrangements protecting the company from any tax liability that may arise from PNGRB’s direction.

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