Trade Tax Dept targets oil companies

Vijay Sharma
Hindustan Times: 2 January, 2006

Lucknow:  The Uttar Pradesh Trade Tax Department (TTD) has slapped notices on four major public sector petroleum companies for recovery of the tax worth Rs 700 crore for the ‘business’ done by them in the state “only in seven months”, between April 2006 and October 2006.

The four companies are — Hindustan Petroleum, Indian Oil, Indo-Burma Petroleum and the Bharat Petroleum. They have been given one month’s time to deposit the amount or face legal proceedings.

The TTD has been struggling to meet the trade tax target of Rs 15,000 crore in the current financial year and if it manages to get the amount it will be a virtual lottery for it as the recovery amount of Rs 700 crore is only for seven months while it plans to impose tax since 2000, when the inter-company sale of petrol/diesel was brought under the trade tax purview.   

The State Government had amended the Trade Tax Act and subsequently a notification was issued by in 2000 and again in 2004 imposing trade tax of 25 per cent and 21 per cent besides one per cent development tax on every ‘sale’ made by one company to other.

The trade tax ‘evasion’ was detected in November last year and notices were served seeking details of inter-company sale of diesel and petrol, which were made available to the department.

The TTD found that the four companies were not paying tax on diesel and petrol sold and bought among them.

Earlier, there was no trade tax on sale of ‘petroleum products’ from one company to the other but the State Government, through the notification, separated diesel and petrol from the list of ‘petroleum products’ and imposed tax on the same.

Before the amendment in the Act, the petroleum companies were, on an average, paying Rs 400 crore per month as the trade tax only on the petrol/diesel sold on the last selling point i.e at petrol pumps after realising the same from the buyer. 

According to details available with the Trade Tax Department, Hindustan Petroleum, from April 2006 to October 2006, sold petrol worth Rs 15.65 crore to Indian Oil, worth Rs 24.34 crore to Bharat Petroleum and worth Rs 5.41 crore to Indo-Burma Petroleum but did not pay even a single penny as trade tax.

Similarly, the Indo-Burma Petroleum sold petrol/diesel worth Rs 16.17 crore to Hindustan Petroleum, worth Rs 116.17 crore to the Bharat Petroleum and worth Rs 197.47 crore to the Indian Oil during the same period but evaded trade tax on the sales.  

Trade Tax Department sources, however, said the companies were reluctant to pay the tax and were planning to move the high court on the plea that tax could not be recovered twice on the same product. They are also planning to challenge in the high court the amendments in the Trade Tax Act.