Arguing before the division bench of Justices Harsha Dewani and Sonia Gokani, Chidambaram argued that Gujarat government had no jurisdiction to seek sales tax from his client, as its delivery point is 32 nautical miles away from Hazira port, Surat and not in the territory of Gujarat state.
He further argued that the company is a contractor and the sales tax can be levied on Gas Authority of India Limited (GAIL).
The Union Government identified Panna, Mukta, Tapi (PMT) field for the oil and gas exploration in 1994. B G Exploration and Production India Ltd was one of the companies which got exploration contract, alongwith ONGC and Reliance Industries.
The gas was taken to Hazira, where after conducting the gas sweetening process, it was sold to GAIL.
The state has now demanded Rs 1,500 crore in sales tax dues for 1997 to 2001 period from the three companies, on the ground that they sold gas to GAIL inside Gujarat. All three have challenged the tax levy.