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Commissioner of Sales Tax Vs. Esso Standard Eastern Inc. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax Reference No. 159 of 1976
Judge
Reported in[1979]43STC144(Bom)
ActsBombay Sales Tax Act, 1959 - Sections 2(28), 52 and 61(1)
AppellantCommissioner of Sales Tax
RespondentEsso Standard Eastern Inc.
Appellant AdvocateC.A. Phadkar and ;R.P. Vyas, Advs.
Respondent AdvocateR.V. Patel, Adv.
Excerpt:
- - 3. the contract between the respondent and the said gulf oil, to which we have already referred, clearly shows that under that contract the intention of the parties was that the respondent should store and blend the base lubricating oil imported by the said gulf oil and that the additives required for this would be supplied by the said gulf oil. in these circumstances, there was clearly no transaction of sale between the respondent and the said gulf oil in respect of the said additives......ltd. (hereinafter referred to as 'the said gulf oil'), whereby the respondent agreed to blend bulk base lubricating oil belonging to the said gulf oil in the respondent's blending plant at bombay. under the said contract the respondent undertook to store the base lubricating oil imported by the said gulf oil and blend and fill the products as required by the said gulf oil subject to the said gulf oil making available the additives specified by the respondent for such blending. the ministry of petroleum and chemicals, government of india, by its letter addressed to the said gulf oil advised that the said gulf oil would not be granted licence for the import of the additives required for blending the base lubricating oil. the letter dated 5th august, 1968, addressed by the said ministry of.....
Judgment:

Kania, J.

1. This is a reference under section 61(1) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the said Act'), made at the instance of the Commissioner of Sales Tax. The question referred to us for our determination is as follows :

Whether, on a true and proper interpretation of the agreement dated 23rd May, 1966, entered into between the respondent and Gulf Oil (India) Pvt. Ltd. and the subsequent development showing that the additives required for blending came to be supplied by the responded itself, the Tribunal was correct in law in holding that there was no sale of additives under section 2(28) of the Bombay Sales Tax Act, 1959, in respect of which the respondent had preferred invoice No. 729 dated 3rd December, 1968, for an amount of Rs. 26,590.03 ?

2. The facts giving rise to this reference are as follows : The respondent is registered as a dealer under the said Act. On 23rd May, 1966, it entered into a contract with Gulf Oil (India) Pvt. Ltd. (hereinafter referred to as 'the said Gulf Oil'), whereby the respondent agreed to blend bulk base lubricating oil belonging to the said Gulf Oil in the respondent's blending plant at Bombay. Under the said contract the respondent undertook to store the base lubricating oil imported by the said Gulf Oil and blend and fill the products as required by the said Gulf Oil subject to the said Gulf Oil making available the additives specified by the respondent for such blending. The Ministry of Petroleum and Chemicals, Government of India, by its letter addressed to the said Gulf Oil advised that the said Gulf Oil would not be granted licence for the import of the additives required for blending the base lubricating oil. The letter dated 5th August, 1968, addressed by the said Ministry of the Government of India to the said Gulf Oil shoes that a large amount of foreign exchange was released to the respondent for the import of the additives on behalf of the said Gulf Oil for blending finished lubricating oils for the said Gulf Oil. The respondent was thus allowed to import the necessary quantity of additives on behalf of the said Gulf Oil and required to utilise the same for the purpose of blending base lubricating oil belonging to the said Gulf Oil. The respondent by its earlier letter dated 24th February, 1967, addressed to the said Gulf Oil agreed that in respect of the additives imported by the respondent on behalf of the said Gulf Oil and used for blending the base oil for the said Gulf Oil the respondent would charge a nominal service charge of 10 per cent. on the landed value of the said additives for ordering out, clearing, transporting and storing of the said various additives required by the said Gulf Oil. The letter further stated that where locally purchased additives were used 5 per cent. would be charged as service charges in addition to the actual cost of purchase. Accordingly, the respondent issued a bill, viz., invoice No. 726, dated 3rd December, 1968, to the said Gulf Oil for Rs. 26,590.03 being the cost of the additives used in blending the base lubricating oil belonging to the said Gulf Oil. The respondent then applied to the Commissioner of Sales Tax under section 52 of the said Act for determination as to whether the supply of additives, vide the said invoice, was a sale under section 2(28) of the said Act. The Deputy Commissioner of Sales Tax, who disposed of this application, held that the transaction was a sale as contemplated by section 2(28) of the said Act. The respondent preferred an appeal against this decision of the Sales Tax Tribunal. The Tribunal held that the said transaction did not amount to a sale as contemplated under section 2(28) of the said Act. It is from this decision of the Tribunal that the aforesaid question arises.

3. The contract between the respondent and the said Gulf Oil, to which we have already referred, clearly shows that under that contract the intention of the parties was that the respondent should store and blend the base lubricating oil imported by the said Gulf Oil and that the additives required for this would be supplied by the said Gulf Oil. It was as a result of the actions of the Government of India in the Ministry of Petroleum and Chemicals, which have been set out by us above, that the required additives had to be imported by the respondent on behalf of the said Gulf Oil and utilised in blending the lubricating oil belonging to the said Gulf Oil. It is thus clear that the import of the said additives was made by the respondent as an agent of the said Gulf Oil. The parties never intended that there would be any sale of additives by the respondent to the said Gulf Oil. The said additives have been imported by the respondent on behalf of the said Gulf Oil to be used for the purpose of blending the lubricating oil belonging to the said Gulf Oil. In these circumstances, there was clearly no transaction of sale between the respondent and the said Gulf Oil in respect of the said additives.

4. In the result, the question referred to us in answered in the affirmative. The applicant to pay to the respondent the costs of this reference.

5. Reference answered in the affirmative.


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