Gupta, J. - (1.) In this petition under Art. 32 of the Constitution of India a dealer seeks relief from the same sales being assessed to sales tax both under the Central Sales Tax Act and the U. P. Sales Tax Act. The first petitioner Indian Oil Corporation Limited, IOC for short, are a Government company incorporated under the Companies Act, 1956 engaged inter alia in the manufacture and marketing of petroleum products. The second petitioner is the Managing Director and a shareholder of IOC. Union of India has been impleaded as the first respondent in the petition. The 2nd respondent is the Assistant, Superintendent of Commercial Taxes, Central Circle, Bihar. The 3rd and 4th respondents are respectively the State of Bihar and the State of U. P. The 5th respondent Indian Explosives Limited are a company having their registered office at Calcutta; they have a factory at Panki, Kanpur in Uttar Pradesh manufacturing urea fertilizers. IOC have a refinery at Barauni in the State of Bihar and also a depot at Panki, Kanpur. In 1966 IOC completed a pipeline from their refinery at Barauni in Bihar to Kanpur in U. P. through Patna in Bihar and Mughalsarali and Allahabad both in U. P. At their Barauni refinery IOC manufacture naphtha which is the principal raw material for production of fertilizers.
(2.) On February 9, 1970 an agreement was entered into by and between IOC and the 5th respondent in terms of which IOC were to sell and the 5th respondent were to buy the entire quantity of naphtha required for the 5th respondent's fertilizer factory at Kanpur. Below is a summary of the different clauses of the agreement that are relevant for the present purpose; the numbers given to the different paragraphs in this summary follow the numbering of the corresponding clauses of the original agreement: 1. The agreement shall be deemed to have come into force from September 10, 1969 (when the supply of naphtha commenced) and shall remain in force till December 31, 1980. It shall continue to be in force thereafter unless terminated by either Party giving to the other not less than one year's prior notice of the intention to terminate the agreement. 2. The naphtha to be supplied shall be of the specification set out in Sche. I of the agreement. 3. (i) The quantity of naphtha that the 5th respondents agree to buy and IOC agree to sell shall be 2,50,000 tonnes per annum which is the maximum rate per annum. (iii) The naphtha shall be supplied against the buyer's indents in writing addressed to the seller at the seller's Panki/ Kanpur installation. (iv) It is agreed that the buyer's requirement of naphtha for the first four years shall be 95,000, 1,70.000, 2,00,000 and 2,25,000 tonnes respectively. (viii) In case the buyer fails to take delivery during any year the quantities of naphtha as stipulated above for reasons other than Force Majeure at their Kanpur plant, the seller shall be entitled to sell the quantity which the buyer has failed to lift. Similarly if the seller fails to deliver the stipulated quantities of naphtha during any year for reasons other than Force Majeure, at their Barauni refinery and/or the transportation system from Barauni to their Panki installation, the buyer shall be entitled to purchase the quantity not delivered in that year from other sources. 4. The supply, of naphtha to the buyer shall be made from the seller's refinery at Barauni. 5. The price of naphtha shall be exclusive of transfer charges, excise duty and all other taxes/levies which shall be recovered by the seller from the buyer at actual rates prevailing and levied by concerned agencies from time to time. 7. (i) Naphtha shall be supplied through a pipeline at the fence of the buyers fertilizer factory and the pipeline between the buyer's and the seller's fences shall be constructed by the buyer at their expense. (ii) The cost of transferring naphtha by the pipeline from the point of its manufacture to the fence of the buyer's fertilizer factory shall be borne by the buyer. 8. The seller shall provide at their cost storage facilities at the seller's Panki/ Kanpur installation of a capacity equivalent to not less than 30 days' requirement of the buyer. 10. (iii) Three samples of naphtha for testing will be taken 'from the seller's tank at their Panki/Kanpur installation prior to transfer in the presence of buyer's representatives at such frequency as may be mutually agreed.
(3.) According to the 5th respondent, since the commencement of supply of naphtha under the aforesaid agreement IOC went on charging from them sales tax at the rate prescribed by the U. P. Sales Tax Act on the plea that the sales were chargeable under the said Act. On or about March 16, 1974 the assessing authority under the U.P. Sales Tax Act assessed IOC to sales tax under the said Act on their total turnover for the assessment year 1969-70 including the sales of naphtha to the 5th respondent. The 5th respondent filed a writ petition in the Allahabad High Court challenging the assessment made on the basis that the sales were local and asserting that they were inter-State sales. Before the writ petition was disposed of the U. P. assessing authority assessed IOC for the assessment year 1970-71 treating the sale of naphtha to the 5th respondent as local sale. On August 27, 1975 the Allahabad High Court allowed the said writ petition quashing the impugned order of assessment to the extent it sought to levy tax under the U. P. Sales Tax Act on the sales of naphtha to the 5th respondent. The High Court held that the sales under the agreement dated February 9, 1970 were inter-State sales. IOC preferred an appeal against the order of assessment in respect of the assessment year 1970-71 and although the appeal was on grounds not relevant for the present purpose, it is necessary to refer to it because at a later stage IOC had the scope of the appeal enlarged, induced by the 5th respondent according to IOC, by including a ground that the sales of naphtha under the agreement were inter-State sales. On June 29, 1978 the 2nd respondent levied sales tax under the Central Sales Tax Act on the sales of naphtha by IOC to the 5th respondent for the assessment year 1970-71 treating them as inter-State sales. Under Section 9 of the Central Sales Tax Act the tax levied under that Act is collected in the State from which the movement of the goods commenced; in this case the movement commenced from Barauni in Bihar. IOC preferred an appeal against this order to the appellate authority. For the assessment year 1971-72 the assessing authority under the U. P. Sales Tax Act treated the sales of naphtha to the 5th respondent as inter-State sales presumably in view of the aforesaid judgment of the Allahabad High Court. This assessment order was challenged by the Commissioner of Sales Tax. U. P. in revision before the appropriate authority. For the same assessment year the Bihar authority assessed the sales on the basis they were inter-State sales. For the next assessment year 1972-73 the U. P. authority again treated the sales as inter-State sales and again the order was challenged in revision by the Commissioner of Sales Tax, U. P. The Bihar authority also treated the sales for that year as inter-State sales. Thereafter for the assessment years 1973-74 and 1974-75 somewhat surprisingly the U. P. assessing authority went back on the view taken in the immediately preceding two years and again treated the sales as local sales and the 5th respondent preferred appeals from these two orders of assessment. In this confused situation IOC filed the instant writ petition in this Court on May 1, 1979. Meanwhile the appellate authority under the U. P. Sales Tax Act dealing with the appeal preferred by IOC against the order of assessment relating to the year 1970-71 had remanded the case to the assessing authority and the assessing authority by his order dated December 20, 1979 held that the sales were local sales.;