1976 (8) TMI 130 - SC - VAT and Sales Tax

Court upholds sales tax on crude oil supplies despite Central Govt orders

Oil and Natural Gas Commission Versus State of Bihar and Others

The Court determined that the supplies of crude oil by the petitioner to the Corporation were subject to sales tax as they constituted valid sales ... Whether the transactions between the Commission and the Corporation amounted to a sale? Held that:- Appeal dismissed. The delivery may be in Assam or in Bihar at Barauni but the movement of goods is the result of contract and as an incident to the agreement between the Commission and the Corporation. The State of Assam has lawfully levied the Central sales tax on the petitioner. The State of Assam is entitled to levy Central sales tax on the petitioner. The Commission has been paying sales tax since the commencement of sales. It is made clear that it is open to the Commission to make applications for refund, if any, in accordance with the sales tax law. Issues:1. Whether the supplies of crude oil made by the petitioner to the Corporation are exigible to sales tax.2. Whether the transactions between the petitioner and the Corporation amount to a sale.3. Whether the sales are inter-State sales under the Central Sales Tax Act.4. Whether the State of Bihar is competent to levy sales tax.5. Whether the State of Assam is entitled to levy Central sales tax.Analysis:1. The petitioner argued that the supplies of crude oil to the Corporation are not subject to sales tax as they are made pursuant to directions/orders of the Central Government, implying no contract of sale exists. The Court examined various documents, including correspondence between the parties and meeting minutes, to determine the nature of the transactions. The Court found that the transactions indeed constituted a sale of crude oil by the petitioner to the Corporation, as per the principles established in previous judgments.2. The Court referred to the Salar Jung Sugar Mills case, which outlined that even transactions under statutory orders controlling production and supply of goods can still involve a valid agreement. It emphasized that the transfer of property in such cases is not void or voidable, as there is privity of contract between the parties. Applying these principles, the Court concluded that the transactions in the present case amounted to a sale of crude oil by the petitioner to the Corporation.3. Regarding the classification of the sales as inter-State sales under the Central Sales Tax Act, the Court noted that the movement of crude oil from Assam to Barauni was pursuant to a contract for sale. This movement constituted inter-State trade, affirming that the sales were indeed inter-State sales.4. The State of Bihar's competence to levy sales tax under section 16(5) of the Bihar Sales Tax Act was also questioned. The Court dismissed the contention, stating that the State of Assam was entitled to levy Central sales tax on the petitioner, who had been paying sales tax since the commencement of sales. The judgment clarified that the petitioner could seek refunds in accordance with sales tax laws.5. The Court highlighted the statutory functions of the petitioner under the Oil and Natural Gas Commission Act, emphasizing its engagement in the business of producing and supplying crude oil. The Court affirmed that the supplies to the Corporation constituted sale transactions fulfilling all requirements of a sale, including those of inter-State trade. The judgment concluded by dismissing the writ petition and directing each party to bear its own costs.This detailed analysis of the judgment showcases the Court's reasoning and application of legal principles to resolve the issues raised in the case regarding the sales tax liability of the petitioner in supplying crude oil to the Corporation.