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State of Uttar Pradesh & Ors. v. Reliance Industries Limited & Ors.

Civil Appeal · 2026 INSC 491Decided 15 May 2026
C.A. No.-003910-003910 - 2016
Justice J.K. Maheshwari · Justice Atul S. Chandurkar

Background

Reliance Industries, along with international partners, extracted natural gas from the KG-D6 block off the Andhra Pradesh coast under a government-approved Production Sharing Contract, and sold the gas to buyers at a delivery point in Gadimoga, Andhra Pradesh, from where it was transported through a common carrier pipeline (operated by GAIL) to Uttar Pradesh. The Uttar Pradesh tax authorities treated the transaction as a local sale taxable within the state and raised a tax assessment, but the Allahabad High Court (Lucknow Bench) quashed that assessment and ordered a refund, holding the sale to be an inter-State transaction. The State of Uttar Pradesh appealed to the Supreme Court, along with three connected appeals involving other gas buyers (Tata Chemicals, Kribhco Shyam Fertilizers, and Indian Farmers Fertilizers Cooperative).

Decision Breakdown

The Supreme Court held that title to the gas passed to the buyer at the metering and delivery point in Gadimoga, Andhra Pradesh, where the sale was legally concluded under the Gas Sales and Purchase Agreement; the subsequent commingling of gas in the common pipeline and re-metering at Auraiya, Uttar Pradesh were merely incidents of transportation and did not shift the taxable situs. The Court found that GAIL, as transporter, never acquired title to the gas and was not a seller, distinguishing the case relied upon by the State. It also rejected the State's public trust doctrine argument, holding that doctrine governs environmental resource management and cannot be stretched to create state taxing jurisdiction over a transaction that the Constitution exclusively assigns to the Union as an inter-State sale under Section 3 of the Central Sales Tax Act. Finding no error in the High Court's reasoning, the Court dismissed the State's appeal and the three connected appeals.

Lesson Learnt

For determining whether a sale is inter-State (and thus outside a single state's taxing power), what matters is where title and possession of the goods actually pass under the contract, not where the goods are ultimately physically delivered after transportation through a common pipeline or carrier.

Official source (sci.gov.in)View Judgment (PDF)

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