n No 74 of 1975
LN Sinha Sol
General of India and B Datta for the Petitioner
A K Sen B P Singh Shambhu Nath Jha and UP Singh for the Respondents For State of Bihar R 1 and R 2 D Mookherjee and SK Nandy for the Respondent State of Assam R 3 and R 4
The Judgment of the Court was delivered by RAY CJ
The Petitioner in this Writ Petition raises the question that the supplies of crude oil made by the Petitioner Oil and Natural Gas Commission referred to as the Commission to Indian Oil Corporation Limited referred to as the Corporation are not exigible to Salestax either by the State of Assam or the State of Bihar under the or the Bihar Sales Tax Act respectively
The petitioner contends that the supplies by the Commission to the Corporation are pursuant to directionsorders of the Central Government and therefore there is no Contract of sale
The petitioner in particular contends that the Com mission is obliged to supply to the Corporation and the petitioner has no volition or freedom in the matter
The petitioner therefore contends that there is no contract of sale between the Commission and the Corporation
The second contention of the petitioner is that if it be held to be sales these are inter state sales under section 3a of the and the State of Bihar is not competent to levy Sales tax under section 165 of the Bihar Sales Tax Act
In order to find out as to whether the transactions between the Commission and the Corporation amounted to a Sale it is necessary to ascertain the correct facts
The letter dated 15 June 1968 is important
It is written by the Corporation to the Commission
The Corpora tion States as follows I am writing to confirm that Indian Oil Corporation would be in a position to receive 300 tonnes a day of Lakwa crude via the Oil Pipeline any time from today
We would also wish you to augment the supplies so as to reach about a 356 million tonnes per annum as soon as possible
The above 300 tomes will be in addition to the  supplies that we are receiving currently from OIL Oil India Ltd and by rail from Rudrasagar
Kindly arrange to supply full analytical data regarding the crude that you would be sending from Lakwa
I would also suggest that the pricing arrangement may also be worked out regarding the supply and intimated to us if necessary after consulting OIL
 The next important document relates to the Minutes of the meeting held at the Office of the Chairman of the Corpo ration at New Delhi on 8 August 1968
The representatives of the Corporation the Commission and Oil India Limited were present
Crude oil supplied both by the Commission and Oil India Limited come through the pipeline belonging to Oil India Limited to refineries at Gauhati and Barauni belonging to the Corporation
The manner of measurement and of payment for crude is ascertained by the Corporation from the Commis sion and Oil India Limited
At the meeting held on 18 October 1968 the Central Government representatives and representatives of the peti tioner Oil India Limited and the Corporation were present
It was decided that crude oil which was being delivered to the refineries of the Corporation at Gauhati and Barauni is a mixture of Oil India Limited crude and the Commission crude
Oil India Limited would send the bills for the entire quantities of crude so delivered giving the bifur cation of crude belonging to Oil India Limited and the Commission with API gravity of each
The document dated 23 February 1968 records the price of crude oil purchased by the Corporation from the Commis sion and the basis on which payment should be made
Another document dated 17 February 1969 written by the Central Government to Oil India Ltd shows that crude oil would be supplied to the Barauni Gauhati and Digboi refin eries as mentioned therein
For the Barauni Refinery Oil  India would supply a certain quantity and the Commission the balance
In case the Commission s supply fell short it would be made good by Oil India Limited
For the Gauhati Refinery certain quantity would be supplied by Oil India Limited and the remainder would be deemed to have been supplied by the Commission
The requirements of Digboi refinery would be met by Oil India Limited
The next document is dated 7 August 1973 incorpo rating the Minutes of the meeting held on that day at the Ministry of Petroleum  Chemicals to discuss the Sales Tax liability of the Commission crude Sold to the Corporation
The representatives of the Ministries of Petroleum  Chemi cals and of Finance the Commission and Oil India Limited were present
After discussion it unanimously decided that whatever principle had been adopted in the past for computation of pipeline tariff payable by the Commission should also be adopted 357 for payment of Sales tax by the Commission
Since for tariff computation all of Commission s crude is deemed notionally to be delivered to Barauni Refinery and none to Gauhati Refinery the Sales tax liability of the Commission would also accrue on the principle that all of its crude was being sold to Barauni Refinery
The Commission is described by the Solicitor General to be a statutory body which has no option either with regard to the production or supply and the directions and decisions of the Government leave no choice with the Commission in regard to supplies
This Court in Salar Jung Sugar Mills Ltd Etc
vs State of MysOre  Ors
C laid down the following proposi tions First statutory orders regulating the supply and distribution of goods by and between the parties under Control Orders in a State do not absolutely impinge on the freedom to enter into contract
Second directions deci sions and orders of agencies of the Government to control production and supply of commodities may fix the parties to whom the goods are to be supplied the price at which these are to be supplied the time during which these are to be supplied and the persons who has to carry out these direc tions
In such cases it cannot be said that compulsive directions rob the transactions of the character of agree ment
The reason is that the transfer of property which constitutes the agreement in spite of the compulsion of law is neither void nor voidable
It is not as result of coer cion
The statute supplies the consensus and the modality of consensus is furnished by the statute
There is privity of contract between the parties
The other third fourth fifth and sixth propositions are these
Third such a transaction is neither a gift nor an exchange nor a hypothecation nor a loan
It is a trans fer of property from one person to another
There is con sideration for the transfer
There is assent
The law presumes the assent when there is transfer of goods from one to the other
Fourth a sale may not require the consensual element and that there may in truth be a compulsory sale of property with which the owner is compelled to part for a price against his will and the effect of the statute in such a case is to say that the absence of the transferor s con sent does not matter and the sale is to proceed without it
In truth transfer is brought into being which ex facie in all its essential characteristics is a transfer of sale
Fifth delimiting areas for transactions or denoting parties or denoting price for transactions are all within the area of individual freedom of contract with limited choice by reason of ensuring the greatest good for the greatest number of achieving proper supply at standard or fair price to eliminate the evils of hoarding and scarcity on the one hand and ensuring availability on the other
Sixth after all the transactions in substance represent the out going of the business and the price would come into computation of prof its
Judged by the principles laid down by this Court in Salar Jung Sugar Mills  case which is a decision by a seven Judge Bench there 1 1972 2 SCR 228
358 is no doubt that the transactions in the present case amounted to a sale of crude oil by the Commission to the Corporation
It is true that the Government decided and directed the Commission to supply to the Indian Oil Corpora tion at a price to be fixed but the transaction is in course of business conducted by the Commission
It is the business of the petitioner under the statute to plan promote organise and implement programmes for the development of petroleum resources and the production and sale of petroleum products produced by it and to perform such functions as the Central Government may from time to time assign to the Commission
These are the functions of the Commission under section 14 of the Oil  Natural Gas Commission Act 1959
Further section 29 of the Act states that the Commission shall be deemed to be a Company within the meaning of any enactment for the time being in force providing for the levy of any  tax or fee by the Central Government or a State Government and shall be liable to pay such tax or fee accordingly
Section 31 contemplates power of the Central Government to make rules inter alia prescrib ing the conditions subject to which and the mode in which contracts may be entered into by or on behalf of the Commis sion
The provisions of the Oil  Natural Gas Commission Act show that the Commission is engaged in the business of producing crude oil in Assam and the supply of the crude oil
The supply to the Corporation is a sale transaction fulfilling all the ingredients of a sale
The supply of crude oil by the Commission to the Barauni Refinery of the Corporation is also a sale in the course of inter state trade
The movement of crude oil from Assam to Barauni is pursuant to the Contract for sale of crude oil
The directions given by the Government are because of the character and constitution of the Commission
Direc tions and decisions do not detract from the sale of crude oil by the Commission to the Corporation
These statutory Corporations work in collaboration with the Central Govern ment particularly the Ministries of Petroleum and Finance for policy and planning
The State of Bihar raised a feeble contention that it was not an inter State sale
The delivery may be in Assam or in Bihar at Barauni but the movement of goods is the result of contract and as an incident to the agreement between the Commission and the Corporation
The State of Assam has lawfully levied the Central Sales Tax on the petitioner
The State of Assam is entitled to levy Central Sales Tax on the petitioner
The Commission has been paying Sales Tax since the commencement of sales
It is made clear that it is open to the Commission to make applications for refund if any in accordance with the Sales Tax Law
For the foregoing reasons the Writ Petition is dis missed
Parties will pay and bear their own costs
VPS Petition dis missed


Summary:
Under the  it is the business of the Oil and Natural Gas Commission to plan promote organise and implement programmes for the development of petroleum resources and the production and sale of petroleum products produced by it and to perform such functions as the Central Government may from time to time assign to it
Under section 29 of the Act the Commission shall be deemed to be a Company liable for any tax or fee levied by the Central or State Government
Section 31 empowers the Central Government to make rules prescribing the conditions subject to which and the mode in which contracts may be entered into by or on behalf of the Commis sion
The Commission is engaged in the business of produc ing crude oil in Assam and supplying it to the refineries of the Indian Oil Corporation at Gauhati in Assam and Barauni in Bihar
It was decided by the Government of India and agreed to by the Commission that the crude is deemed no tionally to be delivered only to Barauni Refinery and not to Gauhati Refinery and that payment of Sales tax by the Commission is to be on the same principle
The Commission however challenged in a petition to this Court its liability to pay any sates 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 sale 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 Commission also contended that assuming that they are sates they are inter state sales under the  and the State of Bihar was not competent to levy any State sales tax
HELD 1 The supplies of crude oil by the Commission to the Brauni Refinery of the Corporation satisfy all the ingredients of a sale and amount to sales by the Commission to the Corporation
356 A a Statutory orders regulating the supply and distribu tion of goods by and between the parties under Control Orders do not absolutely impinge on the freedom to enter into contract
357 C b Directions decisions and orders of agencies of the Government to control production and supply of commod ities may fix the person who has to carry them out the parties to whom the goods are to be supplied and he price at which and the time during which they are to be supplied
In much cases it cannot be said that compulsive
directions rob the transactions of the character of agreement
There is privity of contract between the parties he statute supplying the consensus and the modality of consensus
357 D E c Such a transaction is a valid transfer of property for consideration and he law presumes assent when there is transfer of goods from one to the other
357 F d Also a sale may not require the consensual element and there may compulsory sale of property under a statute for a price fixed against the owner s will
e Delimiting areas for transactions or denoting par ties or price for transactions are all within the area of individual freedom of contract with limited choice by reason of ensuring the greatest good for the greatest number by achieving proper supply as standard or fair price
357 G 
f The transactions in substance represent the outgoing of the business and the price would come into computation of profits
357 G Salar Jung Sugar Mills Ltd Etc
v State of Mysore  Ors
1972 2 SCR 228 followed
2 The movement of crude oil from Assam to Barauni in Bihar is pursuant to and as an incident to the contract for sale between the Commission and the Corporation
The Sales are therefore inter state sales
and under the Central Sales tax Act only the
State of Assam is entitled to levy central sales tax on the Commission
358 G