LexOIL AND NATURAL GAS COMMISSION versus STATE OF BIHAR AND OTHERS
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
354
A
OIL AND NATURAL GAS COMMISSION
v.
STATE OF BIHAR AND OTHERS
August 24, 1976.
B
[A. N. RAY, C.J., N. L. UNTWALIA AND P. N. SHINGHAL, JJ.]
c
D
•
F
'G
H
Sales Tax-~11pply of crude di/ by Oil and Nc•rura/ Gas Commission from
Assam to refinery of Indian Oil Corpom1:ion in Bihar--Supp/y under directions
of Goremment at price fixed by Gover11111e11t-Jf inter-.<tatc sale liable to
\..
Ccnlral Sales Tax.
'I
Under the Oil and N•:·'.ural Gas Commission Act, 195§, it is the business
of the Oil and Natural Gas Commission to plan, promo:e, orga·nise and impfe.
ment programmes for the development of petroleum resources and the produo-
fon and sale of petroleum produ:ts produced by it and \O perform rnch functions
as the Centrnl Government may, from time to time, assi'.,ln to it.
Under s. 29'
of the Act, the Commissio·n shall be deemed to be a Company, liable for any
tax or fee. levied by the Central or State Government.
S·ection 31 empowers
the Central Government to make rules prescribing the conditions subject to
which, and the mode ini which, contracts may be entered .into by or on b~half
of the Commissio·n.
The Commission is engaged in the b119iness of producing
crude oil in Assam and supplying it 101 the refineries of the Indian Oil Cof]ilOra-
tion at Gauhati in Assam and Barauni in Bihar.
I~ was deddeid by the .Govern-
ment of India and agreed to by the CoQ1111.ission,, that the crude is deemed
hot'onally to.be delivered only to Barauni Refinery and not to Gauhati Refinery,
and tlrnt payment of Sales-tax by the Commission is to be on the ·same principle.
The Commission however chall~nged, in u petition to this Court, its liabi-
lity to pay any sales.tax either under the Central Sales Tax Act to the State
of Assam or the State Sales Tax to the State of Bihar, on the ground,
that,
in supplying crude oil to the Corporation 'there was no contract of safe between
the Commission and the Corporation, because, the supply was pursuant to
directions and orders of the Central Government and the Commission had no
volition or freedom in the matter.
The Commlssioh also contend•,d that
assum'.ng that they are sales they are inte11-state sales, under the Cen'.ral Sales
Tax Act, 1956, and the State of Bihar was not competent to levy any Statei
sales-tax.
HELD : ( 1) The supplies of crude oil by the Commission to the Barauni
Refinery of the Corporation satisfy all the ingredients· of a sale a·nJ amount
to sales by the Commission to the Corporation. [356 A]
(a) Statutory order'1 regulating the s·i1ppl.y and distribuf.on of goods by "nd
between the pz·rties under Control Orders do not absolutely impinge on the
freedom to enter into contract. [357 CJ
( b) Directions, decisions and orders• of ag1encies of the Government to
control production and supp1y of· commodities, may fix the person who has
to carry them out, the parties to whom the goods are to be supplied, . and
the price at which, and the time during which they are to be supplied.
Jn
such cases it cannot be said that compulsive directioh9 rob the transactions of
the ch~rnder of agreement.
There is privity of contract between the parties.
the statute supplying the rnnsensus and the modality of consensus. [357 D-E]
( c) Such a transaction is a valid transfer of. property for consideration ahd
the Jaw presumes assent when there is transfer of goods from one to the
other. [357 Fl
(d) Also. a sale may not require the consensual element and there may
be a compulsory sale of property under a statute for a price fixed against the
owner's will. (357 Fl
f
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A_
OIL & NATURAL GAS COMMISSION V. BIHAR (Ray, C.J.)
355
(e) Delim:ting areas for transactions or denoting parties or price for' .trans-
actions are all within the area of individual freedom of contract wilh 11m1ted
choice by reason of ensuring the greatec.t good for the greatest number by
achieving proper supply as standard or fair price. [357. G]
(f) The tra'nsact'ons in substance represent the, outgoing of the business . ·
and the price would come into computation of profits. [357 G]
A
Solar J1111g Sugar Mills Li{/ .. Etc. v. State of Mysore & Ors. [1972] 2 S.C.R.
228 followed.
B
(2) The movement of crude oil from Assam to Barauni in Bi'har is pursuant
to and as an incident to the contract fat. sa'le between the Commiss'o'n and the
Corporation.
The sales are the.ref'ore inter-state sales and under the Central
Sales-tax Act only the State of Assam iExcerpt shown. Read the full judgment & AI analysis in Lexace.