INDIAN OIL CORPORATION LTD. versus STATE OF ASSAM AND ORS.

Citation: [2006] SUPP. 9 S.C.R. 712 · Decided: 27-11-2006 · Supreme Court of India · Bench: ASHOK BHAN · Disposal: Disposed off

Judgment (excerpt)

A 
INDIAN OIL CORPORATION LTD. 
v. 
ST A TE OF ASSAM AND ORS. 
NOVEMBER 27, 2006 
B 
[ASHOK BHAN, AL TAMAS KABIR AND DAL VEER BHANDARI, JJ.] 
Sales Tax: 
Assam General Sales Tax Act, 1993-Explns. I & If to s.8(1) rlw Rule 
C 12 of the Assam General Sales Tax Rules, 1993-Appellant-company, 
registered dealer under the Act, purchased petroleum products from a Refinery 
& Petrochemicals company (BRPL) on payment of sales tax and thereafter 
re-sold the same at prices f u:ed by the Central Government-Dispute regarding 
liability of Appellant to pay sales tax-Held: Re-sale by appellant was to be 
D treated as first sale within the meaning of the Act r!w the Rules since the re-
sale price exceeded purchase price by more than 40'Ya-However, as Appellant 
had paid sales tax on purchase from BRPL, sales tax would be leviable only 
on the difference of the re-sale price and purchase price-Directing Appellant 
to pay sales tax on entire resale amount would amount to double taxation. 
E 
Appellant-company, a registered dealer under the Assam General Sales 
F 
Tax Act, 1993 purchased petroleum products from a Refinery & 
Petrochemicals company (BRPL) on payment of sales tax as per provisions of 
the Act and thereafter sold the same at prices fixed by the Central 
Government. The prices so fixed included "surcharge" which the Appellant 
was required to collect from the buyers and deposit to the 'Oil Pool Account'. 
The difference between the "purchase price" and the "sale price" 
received/retained by the appellant was much less than 40%; however, if the 
'surcharge' was included in the "sale price" the difference became more than 
40%. As per Explanation 1 to Section 8(1)(a) of the Act read with Rule 12 of 
G the Assam General Sales Tax Rules, 1993, if the resale price of a dealer 
exceeded 40% of the purchase price, the resale was deemed to be first point 
sale within the State. 
The question which arose for consideration before this Court is whether 
sale by the appellant company was to be treated as first sale within the meaning 
712 
INDIAN OIL CORPRN. LTD. v. STA TE OF ASSAM 
713 
of Section 8(l)(a) of the Act read with Rule 12 of the Rules since the resale A 
price exceeded 40% of the purchase price and that inasmuch as the appellant 
company had paid sales tax on purchase of petroleum products from BRPL, 
sales tax would be leviable only on the difference of the resale price and 
purchase price and not on the entire resale amount. 
Disposing of the appeal, the Court 
B 
HELD: 1.1. A conjoint reading of Section 8(1) of the Assam General 
Sales Tax Act and Explanations I & II clearly lead to the conclusion that the 
second point of sale was shifted as first point of sale if the resale price of a 
dealer exceeded 40% of the purchase price. Admittedly, resale price in the 
instant case exceeded 40% of the purchase price, therefore, the resale price C 
was deemed to be the first point sale. (722-F) 
1.2. According to the scheme of the Act, particularly sub-section (1) of 
Section 8 did not envisage double taxation in the same State. In the instant 
case, the appellant company had paid sales tax on purchase of petroleum D 
products from the BRPL. In that event, according to the scheme of the Act, 
the sales tax would be leviable only on the difference of the resale price and 
purchase price since under sub-section (1) of Section 8 of the Act, tax is levied 
at the first point sale. The appellant company had purchased goods from the 
BRPL and admittedly paid sales tax on the said purchase. According to the 
clear construction of the provisions of the Act, the appellant was now under E 
an obligation to pay sales tax only on the difference amount between purchase 
price and the entire sale price. Directing the appellant company to pay sales 
tax on the entire amount resold would amount to double taxation. 
(722-G-H; 723-A] 
Mis Advance Bricks Company v. Assessing Authority, Rohtak & Anr., F 
[1987] Supp SCC 650, referred to. 
2. However, it was clearly alleged by the Respondents that the appellant 
company had collected sales tax from the consumers through various dealers 
on the entire resale price, but instead of depositing the entire collected sales 
tax with the Respondent State Government had misappropriated it. In case G 
what is alleged is correct then the appellant company cannot be permitted to 
retain the amount collected towards sales tax from the consumers on the entire 
sales. The amount, if any, collected had to be de

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