This is a petition under article 226 of the Constitution by a company, called the Indian Explosives Limited, having its registered office at Calcutta. It runs a factory for the manufacture of fertilizers at Panki District, Kanpur, within the State of Uttar Pradesh. The principal raw material used in the manufacture of fertilizer is raw naphtha, refined from crude oil at the refinery of the 5th respondent, the Indian Oil Corporation Limited at Barauni in the State of Bihar. For the regular supply of raw naphtha the petitioner-company entered into an agreement with the Indian Oil Corporation Limited (hereinafter referred to as the IOC) on 9th February, 1970. The terms of the agreement, which are relevant for our purposes, are to the following effect :

(a) The duration of the agreement is for a period of 10 years beginning from 10th September, 1969, and ending on 31st December, 1970 (sic ). The agreement, however, will continue thereafter also unless it is terminated by either party by giving not less than one years notice.

(b) The naphtha to be supplied to the petitioner-company is to be of specified quality.

(c) The quantity of naphtha to be supplied will be 95,000 tonnes in the first year, 1,70,000 tonnes in the second year, 2,00,000 tonnes in the third year, 2,25,000 tonnes in the fourth year, and 2,50,000 tonnes in the sub-sequent years. The supply is to be made in parcels of agreed size against the petitioners indent in writing.

(d) Naphtha is to be supplied through a pipe-line constructed at the cost of the IOC from Barauni to Kanpur. At Kanpur it has to be first stored in the storage tank built by the IOC and from this storage tank it will be piped to the storage tanks of the petitioner.

(e) The price of naphtha is to be fixed by the Government of India, failing which it is to be fixed by mutual negotiation.

(f) Besides the price fixed or agreed, the petitioner-company has to pay to the IOC freight/transfer charges, excise duty and all other taxes including the sales tax.

(g) The cost of transfer of naphtha through pipe-lime from Barauni refinery to the petitioners factory at Kanpur is to be borne by the petitioner in addition to the price.

(h) The IOC is to provide at its own cost storage facility at Panki installation adequate to meet 30 days requirements of naphtha of the petitioner. The petitioner has to provide its own storage thanks adequate to meet 20 days requirements of naphtha. The storage tanks thus provided by the two parties are to be connected by a pipe-line.

(i) Sampling and testing is to be done in the storage tank of respondent No. 5.

For the assessment year 1969-70 the turnover of naphtha supplied by the IOC to the petitioner-company was subjected to tax under the U. P. Sales Tax Act in the hands of the IOC on the ground that the sale of naphtha had taken place at Kanpur. In accordance with the agreement the IOC has realised the amount of sales tax from the petitioner-company. The petitioner-company has been protesting to the IOC that the sales of naphtha under the agreement amount to inter-State sales and no tax is leviable under the U. P. Sales Tax Act and in the alternative sales tax can be charged only at the price of naphtha as fixed or agreed and not on the amount of freight, octroi and excise duty, etc. According to the petitioner, the IOC has not paid much heed to the petitioners protest and has been charging sales tax from the petitioner in accordance with the agreement in all its invoices sent from time to time. The petitioner made a representation to the sales tax authorities, but did not succeed. Thereupon in 1973 the petitioner filed Civil Misc. Writ No. 5562 of 1973 challenging the proposed levy of tax. That petitioner was dismissed as premature on the ground that no assessment order had yet been passed deciding any of the points raised in the writ petition. On 15th March, 1974, an assessment order for the year 1969-70 was passed by the third respondent, the Sales Tax Officer (Sp