Oil pool compensation not part of sale price, as it was only a price-stabilisation payment and not buyer consideration.

Compensation received by a refinery from the oil pool account was held not to form part of the sale price for petroleum products. The refinery sold at ex-refinery prices fixed by the Oil Co-ordination Committee and had no control over that pricing structure. The pool mechanism merely adjusted shortfalls between ex-refinery price and retention price, and also absorbed surpluses, so the receipt was a compensatory payment linked to price stabilisation rather than consideration paid by buyers. It was therefore not exigible to sales tax.

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Issues: Whether the amount received by the refinery from the oil pool account as subsidy or compensation formed part of the sale price and was exigible to sales tax.

Analysis: The refinery sold petroleum products at ex-refinery prices fixed by the Oil Co-ordination Committee and had no control over that pricing structure. The oil pool account mechanism operated to compensate shortfall between the ex-refinery price and the retention price, and any surplus was also adjusted through the same pool arrangement. On that basis, the amount received from the pool account was not consideration paid by the buyer for the sale of goods, but a compensatory payment linked to price stabilization and retention margin protection. The amount therefore could not be treated as part of the sale price for sales tax purposes.

Conclusion: The amount received from the oil pool account was not part of the sale price and was not exigible to sales tax.

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