Indian Oil Corporation LTD. vs Union Of India

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1980 Supreme(SC) 402

SUPREME COURT OF INDIA
A.C. GUPTA, S. MURTAZA FAZAL ALI AND P.S. KAILASAM, JJ.
Indian Oil Corporation Ltd. and another Petitioners
Versus
Union of India and others, Respondents.
Writ Petn. No. 444 of 1979, D/- 10-9-1980.
Advocates appeared
M/s. F. S.Nariman & Anil B. Dewan. Sr. Advocates (M/s. B. D.Barucha, Ravinder Narain and Talat Ansari, Advocates with them), for Petitioner: Miss A. Subhashini, Advocate (for No.1), Mr. Lal Narain Sinha, Attorney General (Mr. U. P. Singh, Advocate with him), (for Nos. 2, 3), Mr. Soli J. Sorabjee, Sr. Advocate, (M/s. V. K. Pandita and E. C. Agarwala, Advocates with him) (for No.4) and Mr. Subrata Roy Chowdhury. Sr. Advocate (M/s. Biswarup Gupta, Bhaskar Gupta, Surhind Roy Chowdhury and D. N. Gupta, Advocates with him), (for No. 5), for Respondents.

Advocates:
A.Subhashini, Anil B.Divan, B.D.BARNEHO, BHASKAR P.GUPTA, BISUIARUP GUPTA, D.M.GUPTA, E.C.AGARWAL, F.S.NARIMAN, LAL NARAIN SINHA, Ravindra Narayan, SOLI J.SORABJI, SUBRATA ROY CHOWDHURY, SURHID ROY CHOWDHURY, Talat Ansari, Udaipratap Singh, V.K.PANDITA

Headnote:
Constitution of India,1950 - Article 32 and 31 - Central Sales Tax Act - U. P. Sales Tax Act - Companies Act, 1956 - Manufacture and marketing of petroleum products - Agreement - Sell - Sales tax - First petitioner Indian Oil Corporation Limited, IOC for short, are a Government company incorporated under Companies Act, 1956 engaged inter alia in manufacture and marketing of petroleum products - Second petitioner is Managing Director and a shareholder of IOC - Union of India has been impleaded as first respondent in petition - 2nd respondent is Assistant, Superintendent of Commercial Taxes, Central Circle, Bihar - 3rd and 4th respondents are respectively State and State of U. P - 5th respondent Indian Explosives Limited are a company having their registered office at Calcutta; they have a factory manufacturing urea fertilizers - IOC have a refinery in State and also a depot - An agreement was entered into by and between IOC and the 5th respondent in terms of which IOC were to sell and 5th respondent were to buy entire quantity of naphtha required for 5th respondents fertilizer factory - Whether applying settled principle which Court have mentioned above to facts of present case sales can be said to be inter-State sales – Held, An attempt to show that some of factors present in instant case are present or absent in some case or other in which this Court held sale to be a local sale or inter-State sale hardly serves any useful purpose - As movement of naphtha commences from Barauni in Bihar, sales tax payable on sales of naphtha under agreement dated - Present petition under Article 32 of Constitution of India complaining of violation of fundamental right guaranteed by Article 31 of Constitution was not maintainable after repeal of Article 31 by Forty-Fourth Amendment of Constitution with effect from assessment orders for assessment years passed by the Sales Tax Officer, U. P. and revision proceedings initiated by Commissioner of Sales Tax, U. P. for assessment years are quashed, and respondent No. 4, State , is directed to refund to IOC sales tax collected from them on sales of naphtha to 5th respondent under agreement dated and further not to levy sales tax on sales under said agreement under U. P. Sales Tax Act - Petition allowed.

Judgment

GUPTA, J.:- In this petition under Art. 32 of the Constitution of India a dealer seeks relief from the same sales being assessed to sales tax both under the Central Sales Tax Act and the U. P. Sales Tax Act. The first petitioner Indian Oil Corporation Limited, IOC for short, are a Government company incorporated under the Companies Act, 1956 engaged inter alia in the manufacture and marketing of petroleum products. The second petitioner is the Managing Director and a shareholder of IOC. Union of India has been impleaded as the first respondent in the petition. The 2nd respondent is the Assistant, Superintendent of Commercial Taxes, Central Circle, Bihar. The 3rd and 4th respondents are respectively the State of Bihar and the State of U. P. The 5th respondent Indian Explosives Limited are a company having their registered office at Calcutta; they have a factory at Panki, Kanpur in Uttar Pradesh manufacturing urea fertilizers. IOC have a refinery at Barauni in the State of Bihar and also a depot at Panki, Kanpur. In 1966 IOC completed a pipeline from their refinery at Barauni in Bihar to Kanpur in U. P. through Patna in Bihar and Mughalsarali and Allahabad both in U. P. At their Barauni refinery IOC manufacture naphtha which is the principal raw material for production of fertilizers.

2. On February 9, 1970 an agreement was entered into by and between IOC and the 5th respondent in terms of which IOC were to sell and the 5th respondent were to buy the entire quantity of naphtha required for the 5th respondents fertilizer factory at Kanpur. Below is a summary of the different clauses of the agreement that are relevant for the present purpose; the numbers given to the different paragraphs in this summary follow the numbering of the corresponding clauses of the original agreement :

1. The agreement shall be deemed to have come into force from September 10, 1969 (when the supply of naphtha commenced) and shall remain in force till December 31, 1980. It shall continue to be in force thereafter unless terminated by either Party giving to the other not less than one years prior notice of the intention to terminate the agreement.

2. The naphtha to be supplied shall be of the specification set out in Sche. I of the agreement.

3. (i) The quantity of naphtha that the 5th respondents agree to buy and IOC agree to sell shall be 2,50,000 tonnes per annum which is the maximum rate per annum.

(iii) The naphtha shall be supplied against the buyers indents in writing addressed to the seller at the sellers Panki/ Kanpur installation.

(iv) It is agreed that the buyers requirement of naphtha for the first four years shall be 95,000, 1,70.000, 2,00,000 and 2,25,000 tonnes respectively.

(viii) In case the buyer fails to take delivery during any year the quantities of naphtha as stipulated above for reasons other than Force Majeure at their Kanpur plant, the seller shall be entitled to sell the quantity which the buyer has failed to lift. Similarly if the seller fails to deliver the stipulated quantities of naphtha during any year for reasons other than Force Majeure, at their Barauni refinery and/or the transportation system from Barauni to their Panki installation, the buyer shall be entitled to purchase the quantity not delivered in that year from other sources.

4. The supply, of naphtha to the buyer shall be made from the sellers refinery at Barauni.

5. The price of naphtha shall be exclusive of transfer charges, excise duty and all other taxes/levies which shall be recovered by the seller from the buyer at actual rates prevailing and levied by concerned agencies from time to time.

7. (i) Naphtha shall be supplied through a pipeline at the fence of the buyers fertilizer factory and the pipeline between the buyers and the sellers fences shall be constructed by the buyer at their expense.

(ii) The cost of transferring naphtha by the pipeline from the point of its manufacture to the fence of the buyers fertilizer factory shall be borne by the buyer.

8. The

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