{"id":92807,"date":"2010-01-22T00:00:00","date_gmt":"2010-01-21T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/w-p-nos-9356-93571998-vs-the-asst-commissioner-on-22-january-2010"},"modified":"2016-10-21T15:23:08","modified_gmt":"2016-10-21T09:53:08","slug":"w-p-nos-9356-93571998-vs-the-asst-commissioner-on-22-january-2010","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/w-p-nos-9356-93571998-vs-the-asst-commissioner-on-22-january-2010","title":{"rendered":"W.P. Nos.9356 & 9357\/1998 vs The Asst. Commissioner on 22 January, 2010"},"content":{"rendered":"
Madras High Court<\/div>\n
W.P. Nos.9356 & 9357\/1998 vs The Asst. Commissioner on 22 January, 2010<\/div>\n
       \n\n  \n\n  \n\n \n \n IN THE HIGH COURT OF JUDICATURE AT MADRAS\n\nDATED:         22.01.2010\n\nCORAM:\n\nTHE HONOURABLE MR.JUSTICE K.K.SASIDHARAN\n\nW.P. Nos.9356 & 9357\/1998\nM\/s.Madras Refineries Ltd.,\nManali, Chennai.\t\t\t\t...\tPetitioner in both writ petitions\n\t\t\t\t\tVs.\n1.The Asst. Commissioner \nCentral Assessment Circle IV,\nIV Floor, PAPJM Building,\nGreams Road,\nChennai 600 006.\n\n2.The State of Tamil Nadu,\nrep. By its Secretary,\nCommercial Taxes and Religious\nEndowments Department,\nFort St.George, Chennai-9.\n\n3.The Union of India \nrep. By its Secretary to Government,\nMinistry of Finance, New Delhi\n\n4.The Oil Coordination Committee,\nMakers Chamber IV,\nNariman Point, Mumbai.\n\n5.M\/s.Indian Oil Corporation,\nG-9, Ali Yavar Jung Marg,\nBandra East, Mumbai 400 051.\n\n6.M\/s. Hindustan Petroleum Corporation Ltd.,\nCorridor Road, Mahul, Mumbai.\n\n7.M\/s.Hindustan Petroleum Corporation Ltd.,\n17, Jamshedji Tata Road,\nMumbai 400 020.\n\n\n8.M\/s.Bharat Petroleum Corporation Ltd.,\nBharat Bhavan 4 & 6, Currimbhoy Road,\nBalard Estate, Bombai 400 038.\n\n9.M\/s.Cochin Refineries Ltd.,\nP.B.No.2, Ambalamugai,\nErnakulam District,\nKerala 682 302.\n\n10.The Union of India,\nrep. By Secretary to Government,\nMinistry of Petroleum and Natural Gas,\nShastri Bhavan, New Delhi.\t\t...  Respondents in both writ petitions\n\n\n\tW.P.No.9356\/1998 filed under Art.226 of the Constitution of India praying for a Writ of Certiorarified Mandamus calling for the records of the first respondent in CST 2087\/92-93 and quash the order dated 30.03.1998 and direct the first respondent not to impose any sales tax in respect of the loan transactions effected by the petitioner on the basis of the instructions of fourth respondent constituted by the 10th respondent inasmuch as there is no element of sale involved in such transactions so as to bring them within the purview of the sales tax laws.\n\n\tW.P.No.9357\/1998 filed under Art.226 of the Constitution of India praying for a Writ of Prohibition prohibiting the first respondent from imposing any sales tax in respect of the loan transactions effected by the petitioner on the basis of the instructions of the fourth respondent constituted by the tenth respondent inasmuch as there is no element of sale involved in such transactions so as to bring them within the purview of the sales tax laws.\n\n\tFor petitioner \t\t: \tMr.R.L.Ramani, Senior counsel\n\t\t\t\t\tfor M\/s.Chandran, Karuppiah and Ramani\n\n\tFor Respondents \t: \tMr.Haja Nazirudeen, Spl. G.P. (Taxes)\n\t\t\t\t\tfor respondents 1 and 2.\n\n\t\t\t\t\tMr.M.Ravindran, Additional Solicitor General,\n\t\t\t\t\tfor Mr.J.Ravindran, Asst. Solicitor General,\n\t\t\t\t\tfor respondents 3, 4, and 10.\n\n\t\t\t\t  \tMr.C.Natarajan, Senior Counsel,\n\t\t\t\t\tfor Mr.N.Inbarajan,\n\t\t\t\t\tfor respondents 5 to 9.\nCOMMON ORDER\n\tThe dispute relating to the taxability of the transaction regarding import of crude oil and the related loan transactions by a Public Sector Organization as per the directions of the Oil Coordination Committee is the issue involved in this writ petition.\n\nW.P.No.9356\/1998 :-\n\t2. W.P.No.9356\/1998 is directed against the proceedings of the Assistant Commissioner Central Assessment Circle IV, Chennai, in CST 2087\/92-93 dated 30.03.1998, levying sales tax on the loan transaction involving the petitioner company and the other oil Companies. Since the very assessment order impugned in this writ petition has been set aside subsequently by remitting the matter to the Original Authority, the said writ petition has become infructuous. Therefore, it is the substantive writ petition in W.P.No.9357\/1998 which alone survives for adjudication.\n\nW.P.No.9357\/1998 :-\n\t3. The petitioner seeks a Writ of Prohibition to prohibit the first respondent from imposing sales tax in respect of loan transactions effected by it on the basis of the instructions of the Oil Coordination Committee constituted by the Government of India.\n\nBackground<\/pre>\n
 facts :-\n<\/p>\n
\t4. The petitioner is a Government of India undertaking established for the purpose of carrying on business of refining of crude petroleum oil and manufacturing and marketing of petroleum products.\n<\/p>\n
\t5. The Government of India with a view to coordinate import and allocation of crude oil, formulated a scheme to be implemented by the Oil Coordination Committee, Mumbai. The Oil Coordination Committee, the fourth respondent in the writ petition, formulated a scheme whereby and whereunder, the Indian Oil Corporation, Mumbai, the fifth respondent herein was appointed as a Canalizing Agent. The scheme primarily consists of the imported oil being loaned from one oil Company to another under the auspices of the Oil Coordination Committee and Indian Oil Corporation. As per the scheme, crude oil that is imported into the country is apportioned between various refineries which includes the petitioner, Cochin Refineries Limited, Hindustan Petroleum Corporation Ltd., Indian Oil Corporation Ltd. and Bharat Petroleum Corporation Ltd. The scheme was conceived by the Oil Coordination Committee and the entire procedure regarding the import and lending the same to the oil Companies in proportionate to the orders were devised meticulously with a view to keep the petroleum prices uniform throughout the country.\n<\/p>\n
\t6. The scheme provides that all imports of crude oil into the country should be in the account name of M\/s.Indian Oil Corporation Ltd. Bill of Lading will be prepared in the name of the individual oil Companies indicating the principal account of Indian Oil Corporation. The consignment of crude oil would be received by the importing Company or it will be allocated to any other oil Company subject to the allocations made by the Oil Coordination Committee from time to time. Some times, it would so happen that the entire cargo would be allotted to the bill of lading holder or in part to the bill of lading holder with the reminder being allotted to some other oil Company or in the alternative the entire cargo may at times be allocated to any other oil Company as per the direction of the Oil Coordination Committee. After such import, the bill of lading Company has to pay the FOB Value in Indian currency to the Canalizing Agent viz., the Indian Oil Corporation Ltd. within thirty days from the bill of lading and the said period is known as the “due date”. In the event the cargo was received in part or in full, by or allocated to an oil Company other than the bill of lading holder, the said oil Company would be required to deposit with the bill of lading holder Company an amount equivalent to the value of cargo received by them. This transaction partakes the character of a loan of crude oil against a security deposit from the bill of lading holder to the actual receiver\/allottee of the crude oil. The cargo so received by the allottee oil Company is thereafter returned to the bill of lading holder once a fresh cargo of crude oil is imported with the bill of lading in their name. Therefore, in case the oil Corporation takes crude oil on loan from a bill of lading holder, such quantity has to be returned to the bill of lading Company from whom the oil was taken on loan basis. When there was such a return, the security deposit made by the allottee oil Company would be returned back to them by the bill of lading holder Company. The import and the allocation of imported crude oil would be monitored by the Oil Coordination Committee at its monthly meeting. The Oil Coordination Committee at its meeting would nominate the oil tanker and the quantity of oil that has to be imported into the country. Thereafter, one of the oil Companies would be nominated the bill of lading holder Company and the quantum of oil imported would be allocated to either the bill of lading holder Company in full or in part with the other part being allocated to some other oil Company. The instructions in that regard would be issued by the Indian Oil Corporation ltd., in view of their position as the Canalizing Agent.\n<\/p>\n
\t7. The transaction was considered as a loan transaction at all point of time. The Sales Tax Authorities in all the other States exempted the transaction as it was only a loan transaction. But a different interpretation was given to the transaction by the Sales Tax Authorities in the State of Tamil Nadu.\n<\/p>\n
\t8. While the matters stood thus, the first respondent as per the assessment order dated 30.03.1990, overruled the objection filed by the petitioner against imposition of tax on loan transaction and passed an assessment order on 30.03.1990. The petitioner has filed an appeal against the said assessment order. According to the petitioner, the first respondent has no jurisdiction to assess the transaction as sale and as such, filed this writ petition to prohibit the authorities from proceeding with the assessment in respect of loan transaction.\n<\/p>\n
The Defence :-\n<\/p>\n
\t9. The first respondent filed a counter in answer to the contentions raised in the affidavit filed in support of the Writ Petition. The attack was mainly on the ground of availability of alternative remedy. The principal contentions raised in the counter affidavit of the first Respondent reads thus :-\n<\/p>\n
\t(a) The petitioner is an assessee on the file of the Central Assessment Circle IV, at Chennai. During the assessment year 1992-93, the Assessing Officer passed an Order of assessment on 30.03.1998 by treating the alleged crude oil loan transactions of the petitioners, totalling Rs.14,08,90,30,185\/- as Inter-state taxable sales not covered by “C” forms, and levied tax at 8% and penalty at 150% under Section 9(2)(A) of the CST Act, 1956 read with Section 12(5)(iii) of the TNGST Act, 1959.\n<\/p>\n
\t(b) Petitioner has filed the instant Writ Petitions during July 1998. However, even before initiating the Writ proceedings they have filed a statutory appeal on 30.04.1998 itself before the Deputy Commissioner (CT) Appeals. The Appellate Authority as per Order dated 30.03.2000, remanded the matter to the first Respondent for fresh consideration and to decide the taxability of the loan transactions.\n<\/p>\n
\t(c) Since the petitioner has already availed the alternative remedy provided under statute, W.P.No.9356\/1998 is not maintainable. Since the assessment Order has already been set aside and the matter was remanded to the Assessing Authority, the very Writ Petition in W.P.No.9356\/1998 has become infructuous.\n<\/p>\n
\t(d) There is no case made out for a writ of prohibition. The assessment Order has already been set aside to consider the taxability of the loan transaction afresh.\n<\/p>\n
\t(e) The first Respondent as per proceedings dated 01.02.2009, called upon the petitioner to furnish documents for the purpose of deciding the matter afresh as per the direction of the Appellate Authority. The said notice was challenged in W.P.No.11301\/2008. The writ petition was disposed of as per order dated 30.04.2008 whereby and whereunder, the Assessing Authority was permitted to go ahead with the assessment proceedings and to pass final orders, but not to give effect to the same pending appeals.\n<\/p>\n
Supporting counter affidavits
\nM\/s. Hindustan Petroleum Corporation Ltd. :-\n<\/p>\n
\t10. Sixth respondent  Ms.Hindustan Petroleum Corporation Ltd., in their detailed counter demonstrated that the transaction was nothing but a loan transaction outside the purview of local sales tax or Central Sales Tax. The material averments in the counter affidavit would read thus :-\n<\/p>\n
\t(a) The Central Government was empowered to direct oil Marketing Companies to supply one or more petroleum products at any place in India as per the provision of the Essential Commodities Act, 1955, which also gives power to the Government of India to regulate the import and supply of petroleum products.\n<\/p>\n
\t(b) The Government of India constituted Oil Coordination Committee as a wing of the Ministry of Petroleum and Chemicals to regulate the price, supply and distribution of petroleum products. The Government Order was published in the gazette on 14.07.1975.\n<\/p>\n
\t(c) The scheme  evolved by the Oil Coordination Committee provides for appointing M\/s.Indian Oil Corporation as Canalizing Agent. However, the power to allocate petroleum products as well as its re-allocation vested only with the Oil Coordination Committee. The said committee in its meeting would assess the requirement of the concerned oil Company and allocate crude oil. The procedure was evolved also on account of the fact that the allocation of crude oil may not necessarily correlate to the actual requirement, due to delay in shipment, or force majeure or unforeseen circumstances. Therefore, the Oil Coordination Committee evolved this procedure for diversion of crude from one refinery to another and for its return from allottee refinery to another as a loan transaction and for its return of loan from the allottee refinery to the lending refinery. Allottments and diversions by way of loan were made by the Oil Coordination Committee exercising statutory power.\n<\/p>\n
\t(d) Every month, a crude slate meeting would take place at the office of the Oil Coordination Committee, Bombay. In the crude slate meeting, the total requirement of crude for each and every refinery for the ensuing month would be ascertained after taking into account the stock of crude with each refinery at the beginning of the month and production for that month. Most of the crude requirement of the country is procured under term contract entered into by the Government of India on Government to Government basis. The rest of the crude requirement of the country is procured on spot purchase basis. Under the term contract basis, crude is uniformly supplied by the foreign supplier to various refineries located in India as decided by Oil Coordination Committee at the crude slate meetings.\n<\/p>\n
\t(e) The Oil Coordination Committee would enter into an agreement called “Contract of Affreightment ” (COA) with Shipping Corporation of India under which all the oil tankers of Shipping Corporation of India would be chartered by Oil Coordination Committee. The freight and demurrage rates for all the oil tankers also would be worked out by the Oil Coordination Committee and it would be communicated to the refineries. Upon payment of the freight and demurrage charges by the respective refineries as part of the crude cost, the same would be reimbursed by the Oil Coordination Committee to the respective refineries.\n<\/p>\n
\t(f) The Indian Oil Corporation was nominated by the Government of India for procurement of crude on behalf of all the other public sector oil Companies in India. Accordingly, IOC places purchase order with State Oil Marketing Companies of the respective countries with whom term contracts have been entered into by the Government of India. In respect of spot purchases, tenders would be floated by Indian Oil Corporation and based on the lowest tenders, orders would be placed for purchase of crude. Tankers belonging to the Shipping Corporation of India would be sent to different foreign load ports of the countries to whom purchase orders have been placed by the Indian Oil Corporation on the loading dates specified in consultation with the foreign supplier. Bill of lading would be prepared in the names of various oil Companies including Indian Oil Corporation at the load port as per the decisions taken in the monthly crude slate meeting for different oil Companies as bill of lading holder. However, the invoices would be made only on Indian Oil Corporation. The names of the bill of lading holder would be advised by Indian Oil Corporation shipping Department to the foreign supplier immediately after the crude slate meeting conducted by Oil Coordination Committee. On the basis of the decision taken in the crude slate meeting, individual oil Companies would arrange for provisional insurance cover for the crude for which they are nominated as bill of lading holder.\n<\/p>\n
\t(g) Once the tanker is loaded at foreign load port, details with regard to quantity, supplier’s name, load port, grade etc. would be received by Indian Oil Corporation Shipping Department from the foreign supplier. Indian Oil Corporation in turn would forward the above details to the bill of lading holder Company or to the bill of lading holder and the crude receiving Companies in case crude was shared by more than one Company besides bill of lading holder as per the allocations made at the crude slate meeting. There are cases where the entire crude load was received by another oil Company instead of bill of lading holder in which case the oil tanker would not touch the bill of lading holder port at all. This would still be treated as loan from bill of lading holder to the receiving Company.\n<\/p>\n
\t(h) The Oil Coordination Committee has formulated the scheme in such a way that the transactions would be adjusted subsequently whenever fresh allotment was made to a particular oil Company. Therefore, the transaction was devised only in public interest and there was no allotment of sale in the said transaction warranting imposition of Local as well as Central Sales Tax.\n<\/p>\n
Views of the Government of India :-\n<\/p>\n
\t11. The Government of India through the Ministry of Petroleum and Natural Gas filed a detailed counter affidavit indicating the reasons for creating a body in the name and style of “Oil Coordination Committee” and the nature of transactions relating to import of crude oil.\n<\/p>\n
\t12. The counter affidavit reads thus :-\n<\/p>\n
\t(a) The Oil Coordination Committee was constituted by the Government of India as per resolution dated 14.07.1975. Consequent to the dismantling of the Administered Pricing Mechanism (APM), the Oil Coordination Committee has been wound up by the Government with effect from 01.04.2002 vide Government of India Gazette Notification dated 28.02.2002.\n<\/p>\n
\t(b) Government of India considered the interim report filed by the Oil Prices Committee. The said committee recommended that an Oil Coordination Committee should be set up for administering the Pool Account, to decide on allocation of crude oil and monthly production patterns and to coordinate transportation arrangements for crude oil imports and coastal movements. The report was accepted by the Government and as per resolution dated 14.07.1975, Oil Coordination Committee was constituted.\n<\/p>\n
\t(c) The Oil Coordination Committee was a prominent mechanism consisting of the Secretary to the Government, Ministry of Petroleum, a representative of the Ministry of Finance (Department of Expenditure), Chairman, Indian Oil Corporation, Chairman and Managing Director, HPCL, Chief Executives of Burmah Shell, Caltex, MRL, CRL, IBP and AOC and with the Joint Secretary, Department of Petroleum as Member Secretary. The Secretariat would have the full time services of the experts of refineries, marketing and distribution, including transportation. The Oil Pool Account was meant to maintain uniform ex-storage selling price of petroleum products at all refinery locations in the country. The Petroleum Products (Supply and Distribution) Order, 1972 and the Essential Commodities Act empowered the Central Government to issue appropriate directions in respect of supply of petroleum products throughout India.\n<\/p>\n
\t(d) Indian Oil Corporation Ltd. was appointed as Canalizing Agent to import crude oil and to effect the allocation as per the decision taken by the Oil Coordination Committee. The Oil Coordination Committee as per its decision taken on 16.10.1979 and 03.04.1980, had set down the procedure to be followed for Loan Transactions of Crude Oil between the Oil Companies. It was only the Oil Coordination Committee which allocated crude oil. It was provided that the value itself would be subject to adjustment in the Crude Oil Price Equalization Account (COPE) which was part of the overall Oil Pool Account.\n<\/p>\n
\t(e) The mechanism and procedure for loan transactions of crude oil ensured that crude oil loan adjustments among oil Companies took place on quantity to quantity basis irrespective of the value or the type of crude oil given or taken on loan basis. The principal accounts were (i) Crude oil received on loan account and its return, and (ii) An account for security deposit and operation of a pool account. Variations in values, including differential in FOB and freight, were adjusted as per the norms in the Crude Oil Price Equalization Account (COPE) and C&F pool account respectively maintained by Oil Coordination Committee.\n<\/p>\n
\t(f) The transactions were neither sale within the meaning of Local Sales Tax Act nor an inter-state sale within the meaning of the Central Sales Tax Act. The allocations were made beyond the customs barrier and there was no occasion for the vessels to touch the Tamil Nadu Port so as to tax the transaction, treating it as a local sale or a sale in the course of inter-state trade.\n<\/p>\n
\t(g) Individual Oil Companies had no say in these transactions and the loan transactions were in vogue for nearly two decades upto March 1998. Oil Companies acted only as per the direction of the Oil Coordination Committee. The main purpose underlying the coordination of the import of crude oil was to take advantage of the price and to conserve precious Foreign Exchange reserve of the Country. The entire chain of transactions under the crude oil loan transaction scheme as a whole, was only to preserve and maintain uniform price for petroleum products and to save considerable foreign exchange. No other State in the country was imposing tax on loan transaction except the State of Tamil Nadu.\n<\/p>\n
Submissions :-\n<\/p>\n
\t13. The learned Senior Counsel for the petitioner made submissions extensively with facts and figures to justify the contention that the transaction was nothing but barter or loan transaction and there was no element of sale. The principal contentions are as follows :-\n<\/p>\n
\t(i) The petitioner is a Government owned Corporation and is a State within the meaning of Article 12 of the Constitution of India. The Administered Pricing mechanism was performed only by the Government of India and the petitioner has no role in any of the decisions. It was only the Indian Oil Corporation who acted as the canalizing agent and the allocation was made only by the Oil Coordination Committee. The petitioner was acting only as per the direction of the Oil Coordination Committee. The allocation of crude oil was decided by the Oil Coordination Committee and in case the petitioner was appointed as the bill of lading Company, they were bound to import crude oil, and to give on loan basis to another Company as per the direction of the Oil Coordination Committee. Therefore, the petitioner has no choice in the matter.\n<\/p>\n
\t(ii) The transaction in question was only a loan transaction. There was no element of sale. The petitioner never took delivery of the crude oil for the purpose of lending the same to another oil Company on the basis of the allocation and re-allocation made by the Oil Coordination Committee. As per the guideline issued by the Oil Coordination Committee, each allotted oil Company would receive the allotted quantity of oil from the tanker upon clearance by payment of relevant customs duties, wharfage etc. effected by the respective oil Companies at their respective ports by surrendering the bill of entry available with them. At times it may so happen that the ship would have delivered crude to the co-allottee Company, even before the petitioner Company, as the bill of lading holder Company, which loans the crude, took delivery of the crude. Therefore, there was no question of treating the transaction as a sale in the State of Tamil Nadu.\n<\/p>\n
\t(iii) The sale is also not liable under the Central Sales Tax, treating it as an inter-State sale. The allocation and re-allocation by way of loan transactions were all done and materialized beyond the customs barrier and as such, there was no element of inter-State sale.\n<\/p>\n
\t14. The learned Senior Counsel appearing for the respondents 5 to 8 supported the case of the petitioner. According to the learned Senior Counsel, both under common law and Statute Law, to constitute a transaction of sale there should be an agreement, express or implied, relating to goods to be completed by passing of title in those goods. The transaction in question has no characteristics of a sale and in fact, it was a simple loan transaction between two oil Companies and that too as per the direction of the statutory body appointed by the Government of India.\n<\/p>\n
\t15. Transaction was not between two private Companies. It was only the Oil Coordination Committee who decides at all point of time to allocate and re-allocate the crude oil to the oil refineries. Therefore, it was not possible for one refinery to give crude oil to another refinery. The individual oil refineries have no say in the matter and they were acting only as per the dictate of the Oil Coordination Committee. Therefore, there was no question of one Company entering into a sale transaction with another Company with respect to crude oil.\n<\/p>\n
\t16. The sale invoices issued by various suppliers of crude oil clearly indicates the way in which the allocation and re-allocation were made by the Oil Coordination Committee. The invoice also shows the cancellation of previous allocation and the factum of re-allocation made to a different refinery. Therefore, at no point of time, the ship with the crude oil entered the customs barrier so as to treat the same as one under the local sales tax or under the Central Sales Tax. The transactions happened in high seas and at times even before the ship leaves the port of origin.\n<\/p>\n
\t17. The learned Senior Counsel took me through various documents to substantiate the contention that the transaction was purely a loan transaction not subject to local as well as Central Sales Tax.\n<\/p>\n
\t18. The learned Additional Solicitor General made extensive submissions explaining the constitution of the Oil Coordination Committee and the procedure adopted for allocation as well as re-allocation of crude oil. The learned Additional Solicitor General would submit that the Government took a conscious decision in the interest of general public to procure crude oil by a particular machinery so as to ensure uniform distribution of petroleum products throughout India. The Government was of the view that in case orders were placed for import of crude oil on bulk basis, it would reduce the freight charges. This also enabled the Government to make a bargain for best price. Therefore, larger public interest was behind the decision taken by the Government for evolving the petroleum price mechanism. The learned Additional Solicitor General also made detailed submissions with regard to the working of the system and according to him, the transaction was considered only as a loan transaction by all the States in the Territory of India and it was only in the State of Tamil Nadu, the assessing Authority, without ascertaining the real nature of the transaction, attempted to assess it as a sale transaction.\n<\/p>\n
\t19. The learned Special Government Pleader (Taxes) challenged the very maintainability of the writ petition. He would contend thus :-\n<\/p>\n
\t(i) The first respondent was exercising statutory functions as Assessing Authority under the Tamil Nadu General Sales Tax Act as well as under the Central Sales Tax Act, and as such, he was having jurisdiction to consider the assessment and to decide the nature of transaction. Therefore, the question of granting a writ of prohibition does not arise.\n<\/p>\n
\t(ii) The petitioner has got an appeal remedy by way of filing an appeal in case the Original Authority negatives the plea regarding the nature of transaction. Therefore,the writ petition is clearly not maintainable.\n<\/p>\n
\t(iii) The petitioner has suppressed the fact that they have already filed a writ petition before this Court in W.P.No.11301\/2008 wherein the learned Judge was pleased to direct the Assessing Authority to go ahead with the assessment proceedings. In such circumstances, it was not proper on their part to prosecute this writ petition.\n<\/p>\n
\t(iv) The assessment order challenged in W.P.No.9356\/1998 was set aside on appeal and the Original Authority was directed to decide the matter afresh. Therefore, it was open to the petitioner to produce all the documents before the Assessing Authority to substantiate their contention that the transaction was not sale.\n<\/p>\n
Subsequent events :-\n<\/p>\n
\t20. When these two writ petitions came up for hearing before this Court on 2 July 2008, the learned Judge found that the dispute was essentially between the State Government and the Central Government through the statutory Corporation and as such, the matter has to be placed before the High Power Committee to arrive at an amicable solution. The learned Judge also found that in similar circumstances, Division Bench of Kerala High Court as per order in W.A.Nos.1557, 1637, 1395 and 1734 of 2002, directed the Cabinet Secretary of the Government of India to constitute a committee to workout a solution between the Government organizations. Accordingly, the learned Judge passed the following order :-\n<\/p>\n
\t“5. The present case is more similar to the direction issued by the Kerala High Court. While this Court is not hesitant to decide the legal issues involved in these writ petitions, in view of the fact that all the respondents including the petitioner are all various statutory Corporations and wings of the Government, this Court is of the view that the subject matter of the writ petitions should be first discussed in the meeting convened by the parties to the dispute and then depending upon the consensus or difference arrived at such meeting, this Court shall finally dispose of the matter.\n<\/p>\n
\t6. In that view of the matter, this Court hereby directs the Cabinet Secretary of the Government of India to convene a meeting of the Secretary of the Ministry of Petroleum, Secretary of Ministry of Finance as well as the Chief Executive Officers of various Oil Corporations and also to send an invitation to the State Government of Tamil Nadu represented by the Secretary to the Government, CT & RE Department and discuss the issue focussed in the writ petitions and take a decision on this matter. The deliberations of the said committee including, if any final decision is taken or difference recorded should be submitted in the form of Report to this Court, within a period of eight weeks from the date of receipt of a copy of this order.\n<\/p>\n
\t21. In accordance with the directions of this Court, the Cabinet Secretary convened a meeting of all the Oil Companies and the Government. The first meeting was held on 29.07.2008. The State of Tamil Nadu was represented by the Secretary, Commercial Taxes & Religious Endowments. The meeting was attended by the Secretary (Coordination), Cabinet Secretariat, Director of Petroleum & Natural Gas and other higher officials of the Ministry of Petroleum and Natural Gas, Cabinet Secretary as well as Additional Legal Adviser, Department of Legal Affairs. The Petroleum Corporations were represented by their Managing Director as well as officers in the level of General Manager. In the said meeting, the Secretary to the Government, Commercial Taxes and Religious Endowments, Government of Tamil Nadu, submitted his views that the transaction was essentially a sale in view of the presence of essential ingredients for a sale like (i) a buyer and a seller; (ii) a commodity or good; (iii) transfer of property in the good from the buyer to the seller under a contract; (iv) price or money as consideration for the transfer under a contract of sale or purchase. The Cabinet Secretary was of the view that the arrangement was essentially one of barter and it was not a sale. It was unanimously decided that the matter should be looked into afresh by the Commercial Taxes Department and to decide as to whether the transaction was one of sale or barter. The representatives of the petitioner Company were asked to approach the Commercial Tax Department with documents to substantiate their contention that the transaction was only a loan and not sale.\n<\/p>\n
\t22. Subsequently a meeting was held in the Chambers of Secretary, Commercial Taxes and Registration Department on 07.08.2008 as a follow up action. The said meeting was attended by the Secretary and other officials of the Department of Commercial Tax as well as the representatives of the oil Companies. It was decided to constitute a Technical Team of six officers  three from the Commercial Taxes Department and the three from the Chennai Petroleum Corporation Ltd., to scrutinize the records relating to the transaction of oil which are said to be available with the Corporation and which were not produced earlier. The technical team were directed to scrutinize the records within ten days commencing from 18 August 2008.\n<\/p>\n
\t23. The petitioner as per their letter dated 21 August 2008, produced the required documents before the technical team. The further details sought for by the technical team were furnished subsequently as per correspondence dated 11 September 2008 and 7 October 2008.\n<\/p>\n
\t24. The Cabinet Secretary convened second meeting on 10.10.2008 at New Delhi. The said meeting was attended by the Secretary to the Government, Commercial Tax Department, Chennai and other officials of the Ministry of Petroleum and Natural Gas, Ministry of Legal Affairs as well as higher officials representing the oil Companies. The committee took note of the constitution of the scrutinizing committee and the documents produced by the petitioner before the said committee. In the said meeting, the Secretary to the Government, Commercial Tax Department, Government of Tamil Nadu submitted that the transaction needs further critical examination by the Department and as such, the Department requires some more time to finalize its reconsidered view about the nature of transactions. Accordingly, the matter was adjourned so as to enable the Government of Tamil Nadu to look into the matter.\n<\/p>\n
\t25. The Cabinet Secretary convened a third meeting on 20.11.2008. The meeting was attended by the Secretary to the Government, Commercial Tax Department, Government of Tamil Nadu and the officials of the Petroleum Corporation besides the Secretary and other officials of the Ministry of Petroleum and Natural Gas and other higher officials of the Cabinet Secretariat. The meeting discussed the matter once again and ultimately the committee observed that there was no consensus among the parties as to whether the disputed transactions were loan or sale and as to whether endorsement of the bill of lading was necessary to claim exemption from levy of tax under Section 5(2) of the Central Sales Tax Act and non-endorsement vitiated the legality of the transactions. Therefore, the parties were requested to inform the High Court so as to proceed further to decide the writ petition on merits. Accordingly, the writ petition was taken up for hearing.\n<\/p>\n
Discussion :-\n<\/p>\n
\t26. The petitioner is a Public Sector Oil Refinery. Respondents 5 to 9 are also engaged in refining Petroleum Products as well as in the distribution of petroleum products throughout the territory of India. Petroleum is an essential commodity. Price of all other commodities directly relate to the price of petroleum products. Any increase in the cost of petroleum would naturally increase the cost of other products. Therefore, the Government enacted the Petroleum Act, 1934 to consolidate and amend the law relating to the import, transport, storage, production, refining and blending of petroleum. Section 4 of the Act empowers the Government to frame rules for the purpose of regulating the import and distribution of petroleum products. Section 4(b) of the Petroleum Act, 1934 enables the Central Government to regulate the import of petroleum.\n<\/p>\n
\t27. The Government of India constituted a committee known Oil prices Committee as per resolution dated 16 March 1974 under the Chairmanship of Dr.K.S.Krishnaswamy, Executive Director, Reserve Bank of India, Bombay. The Committee was asked to study the pricing policy of petroleum products and related matters and to recommend general principles of pricing policy of petroleum products and other connected matters. The committee conducted an extensive study of the petroleum market and submitted their detailed report. The Government of India considered the report submitted by the Expert Committee and passed a resolution on 14 July 1975, the main points of which reads thus :-\n<\/p>\n
\t(i) Prince of indigenous crude oil should be based on the long run social marginal cost of crude.\n<\/p>\n
\t(ii) The refinery should be the primary pricing points and the prices at upcountry depots or installations should be determined on the basis of the prices at the nearest refinery plus the cost of transportation by the cheapest means of transport.\n<\/p>\n
\t(iii) Oil Coordination Committee should be set up to administer the Pool Account for the purpose of deciding the allocation of crude oil and monthly production patterns and coordinating transportation arrangements for crude oil imports and coastal movements. The Oil Coordination Committee will consist of a Secretary, Department of Petroleum, a representative of the Ministry of Finance (Department of Expenditure), Chairman, I.O.C., Chairman and Managing Director, HPCL, Chief Executives of Burmah Shell, Caltex, MRL, CRL, IBP and AOC and with the Joint Secretary, Department of Petroleum as Member Secretary.\n<\/p>\n
\t(iv) The Secretariat of the Committee should have the full time services of the experts of refineries, marketing and distribution, including transportation. In view of the complexity and number of Pool Accounts to be administered, there should be a full-fledged wing for Accounts\/Finance.\n<\/p>\n
\t28. In accordance with the decision taken by the Government of India, as per resolution dated 14 July 1975, Oil Coordination Committee was constituted.\n<\/p>\n
Procedure for Loan Transactions :-\n<\/p>\n
\t29. The Oil Coordination Committee followed a procedure known as “Procedure for Loan Transactions of Crude Oil Between the Oil Companies”. The salient features of the loan transactions of crude oil reads thus :-\n<\/p>\n
\t(i) When a full parcel of crude is loaned by one Company to another, the receiving Company will have to account for the full parcel against the bill of lading. The loaning Company should advise the receiving Company the full details as per the bill of lading. The receiving Company should escalate the receipted quantity by 0.5% and the remaining quantity as compared to the bill of lading quantity should be claimed from the carrier.\n<\/p>\n
\t(ii) When a part of cargo is received as loan from one Company by another Company against the bill of lading for the full parcel, the Company receiving loan parcel should advise the actual receipted quantity as per their out turn to the last port of call and would apportion the net loss on the basis of the total receipt as per the out turns. The loss to be claimed on the carrier by the final port of discharge will be arrived at by escalating the out turns by 0.5% and deducting this quantity from the bill of lading quantity.\n<\/p>\n
\t(iii) When loans are effected from parcels having more than one bill of lading, the receipted out turn quantities should be advised to the last port of call and the net ocean loss in excess of 0.5% would be arrived at by the last port of call on the basis of advises received from the earlier party of call will put up the claim on the carrier for the net loss.\n<\/p>\n
\t(iv) The FOB value as per the bill of lading rounded off to the nearest 1000 should be deposited by the receiving Company with the Company in whose name the bill of lading stands, one day before the due date of payment. All relevant details in this regard should be provided by the loaning Company.\n<\/p>\n
\t(v) The Company in whose name the bill of lading stands should insure for the cargo for the complete voyage. The receiving Company should deposit the freight rounded off to the nearest 100 at the COA rate applicable to each port of discharge as per bill of lading within three days from the date of discharge. Penalty duty for ocean loss in excess of permissible limit would be the responsibility of the carriers.\n<\/p>\n
\t(vi) The Companies concerned should settle loan\/ repayments between themselves on the lines suggested in the scheme. Any differentials in the FOB and freight should be adjusted in the Crude Oil Price Equalization Account (COPE) accounts as per the norms and “C” & “F” Pool Account respectively.\n<\/p>\n
\t(vii) The practice of issuing separate memorandum of agreement for each loan transaction is considered avoidable and only a request letter need be issued by the Companies requiring loan to the loaning Company. The terms and conditions for such loans will be as per the procedure prescribed by the Oil Coordination Committee.\n<\/p>\n
\t30. The Ministry of Petroleum, Chemicals and Fertilizers on the basis of Industry Meeting held between March 2 and 4, 1981, advised the recipient oil Companies to deposit the equivalent rupee amount of dollar FOB cost of crude with the bill of lading holding Company on the due date of remittance by the bill of lading holding Company by means of a bank transfer using the State Bank of India exchange rate prior to three days in advance of the date of payment applicable to the derived bill of lading quantity. On repayment of the loan quantity either in full or part, the loan repaying Company shall receive back the proportionate FOB deposit from the loaning Company which was paid to them when the loan transaction took place. The deposit shall be returned on the loan repaying Company on the date of their remittance to their supplies by bank transfers.\n<\/p>\n
\t31. The Oil Coordination Committee was monitoring the entire crude oil import. The various documents produced by the petitioner in the typed set of papers shows the continuous monitoring by the Oil Coordination Committee. The pending stock position at different refineries were taken into consideration for the purpose of allotment and re-allotment. To take an illustration, the minutes of the meeting of Oil Coordination Committee dated 29.04.1987 shows that the allocation made to some of the oil Companies were cancelled and it was re-allocated to other oil Companies depending upon their requirement.\n<\/p>\n
\t32. The core issue to be decided in this matter is as to whether the subject transaction was a loan transaction or a sale within the meaning of Section 2 (n) of the Tamil Nadu General Sales Tax Act and Section 2(g) of the Central Sales Tax Act, 1956.\n<\/p>\n
\t33. Section 2(n) of the Tamil Nadu General Sales Tax Act defines sale thus :-\n<\/p>\n
\t\"    \"Sale\" with all its grammatical variations and cognate expressions means every transfer of the property in goods (other than by way of a mortgage, hypothecation, charge or pledge) by one person to another in the course of business for cash, deferred payment or other valuable consideration and includes  \n\t(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;\n\t(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; \n\t(iii) a delivery of goods on hire-purchase or any system of payment by installments;\n\t(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;\n\t(v) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;\n\t(vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration,\n\tand such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and a purchase of those goods by the person to whom such transfer, delivery or supply is made.\n\n\n\t34. Section 2(g) of the Central Sales Tax Act defines \"Sales\" thus :-\n\t\"Sale\" with its grammatical variations and cognate expressions, means any transfer of property in goods by one person to another for cash or deferred payment or for any other valuable consideration, and includes -\n\t(i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;\n\t(ii) a transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;\n\t(iii) a delivery of goods on hire-purchase or any system of payment by installments;\n\t(iv) a transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;\n\n\t(v) a supply of goods by any un-incorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration;\n\t(vi) a supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any during (whether or not intoxicating), where such supply or service, is for cash, deferred payment or other valuable consideration,\n\tbut does not include a mortgage or hypothecation of or a charge or pledge on goods.\"\n\n\t35. Definition of sale under the Tamil Nadu General Sales Tax Act shows that for a transaction to attract or suffer tax under the Act, the transaction should fulfil the following criteria :-\n(i) buyer and a seller; \n(ii) commodity or good; \n(iii) transfer of property in the good from the buyer  \n       to the seller under a contract; \n\n(iv) price or money as consideration for the  transfer\n      under a contract of sale or purchase.\n\n\t36. The question is as to whether the loan transaction contains any of the above elements of sale.\n\n\t37. In order to consider the issue as to whether the transaction was one of barter or sale, it is necessary to consider the nature of import involved in the matter.\n\n\n<\/pre>\n
\t38. The Government of India constituted the Oil Coordination Committee for the purpose of administering the Pool Account, to decide the allocation of crude oil; monthly production patterns; coordinating transport arrangements for crude oil imports and coastal movements. The Central Government was within their statutory powers to constitute a Statutory Committee to monitor the import of crude oil and allocation of the same between the oil refineries. The Central Government was committed to maintain uniform ex-storage selling price of petroleum products at all refinery locations in the country. In case the individual oil refineries were permitted to import crude oil  into India, there would be no uniform price in India with respect to the petroleum products. The price of petroleum products sold by a particular Company would depend upon the actual price incurred by it for procurement of crude oil and to refine the same for the purpose of distribution. The individual import of crude oil by individual oil Companies would also result in unequal distribution of petroleum products. It would so happen that one oil Company would be in possession of excess stock and on the other hand, another oil Company situated in a less distant place would be short of petroleum products. All these vital factors were taken note of by the Government of India and it was only in the said background, the Oil Coordination Committee was constituted and that too after an in-depth study of the matter by the expert committee.\n<\/p>\n
\t39. The Oil Coordination Committee appointed M\/s.Indian Oil Corporation Ltd. as the Canalizing Agent. The said Corporation was expected to assess the requirements of different refineries during the Monthly Crude slate Meetings. The allotment would be made by the Oil Coordination Committee by taking note of the refinery stock and crude oil afloat and the subsequent allotment would be made based on the purchases made under the Term Contract or Spot Market Purchase with Overseas Market. Since allocations of crude oil to individual refineries may not necessarily correlate with the actual requirement due to delay in shipment, or force majeure or unforeseen circumstances, diversion of crude oil from one refinery to another refinery was necessitated. In order to regulate these transactions by way of lending from one refinery to another as a loan transaction, and for return of loan from the loanee refinery to the lending refinery, a scheme called “Loan Transactions of Crude Oil” was evolved by the Oil Coordination Committee. The allotment of crude oil and loan transactions were administered by none other than the Oil Coordination Committee. The Oil Coordination Committee adopted a prescribed procedure to operate the loan transaction and for continuous monitoring.\n<\/p>\n
\t40. The individual oil refineries have no independent role in the matter of allocation or re-allocation of crude oil. The quantity to be imported has to be only decided by the Oil Coordination Committee. It was only the process of import which would be done by the Indian Oil Corporation, viz., the Canalizing Agent. In the crude slate meeting convened in the office of the Oil Coordination Committee at Bombay every month, the total requirement of crude for each and every refinery for the ensuing month would be ascertained after taking into account the stock of crude with each refinery at the beginning of the month and production for that month. Most of the crude requirement of the country would be procured under term contracts entered into by the Government of India on Government to Government basis. It was only the rest of the crude that would be procured on spot purchase basis. Under term contract basis, crude was uniformly supplied by the foreign supplier to various refineries located in India as decided by Oil Coordination Committee at the crude slate meetings. The agreement in this respect with the Shipping Corporation of India would be entered into by the Oil Coordination Committee and this contract is known as Contract of Affreightment. It was only in pursuance of this contract, the Oil Coordination Committee charters the oil tankers of the Shipping Corporation of India. The freight and demurrage rates for the oil tankers were worked out by Oil Coordination Committee and communicated to all the refineries. Upon payment of the freight and demurrage charges by the respective refineries as part of the crude cost, the same was reimbursed by Oil Coordination Committee to the respective refineries.\n<\/p>\n
\t41. As a Canalizing Agent, Indian Oil Corporation was placing purchase orders with the State Oil marketing Companies of the respective countries with whom term contracts had been entered into by the Government of India. So far as spot purchases are concerned, tenders were floated by Indian Oil Corporation and based on the lowest tenders, orders were placed for purchase of crude. Once tenders were finalized, tankers owned by Shipping Corporation of India were sent to different foreign load ports of the countries to whom purchase orders had been placed by the Indian Oil Corporation in consultation with the foreign supplier. The bill of lading would be prepared in the name of the concerned oil Companies to whom crude oil was allotted by Oil Coordination Committee at its monthly crude slate meeting. Invoices were made only on Indian Oil Corporation by showing the bill of lading Company also in the invoice. It was only the Indian Oil Corporation’s Shipping Department which advises the foreign supplier about the names of the bill of lading holder, immediately after the crude slate meeting conducted by the Oil Coordination Committee.\n<\/p>\n
\t42. The procedure adopted by the Oil Coordination Committee further shows that once the tanker was loaded at foreign load port, details with regard to quantity, supplier’s name, load port, grade etc. was sent to the Indian Oil Corporation’s Shipping Department from the foreign supplier. Indian Oil Corporation in turn advises the above details to the bill of lading holder Company or to the bill of lading holder and the crude receiving Companies where the crude was shared by more than one Company besides bill of lading holder, as per the allocations made by the Oil Coordination Committee. It was open to the Oil Coordination Committee to change the allocation or to revise the same. In case the Oil Coordination Committee was of the view that there should be re-allocation of crude oil, in such cases, in respect of the bill of lading holder, the crude oil would be re-located to another refining Company and in which event, the oil tanker would not even touch the port of discharge of the bill of lading holder. This transaction would be treated as loan to the receiving Company. The details furnished in the counter affidavit filed on behalf of Government of India also shows that the very same oil tanker which discharged the crude at the port of the bill of lading holder Company would not call at the port of the other receiving Company but instead, the quantity allocated to the other receiving Company would be transshipped to some other oil tankers in the mid sea which discharged the crude to the receiving Company. The quantity so discharged would also be treated as loan from the bill of lading holder to the receiving Company.\n<\/p>\n
\t43. The modalities adopted by the Oil Coordination Committee in respect of the crude oil issued on loan account shows that it was a transparent procedure. The salient features of the crude loan account are the following :-\n<\/p>\n
\t(i) Before the arrival of the tanker at disport, the receiving Company (either bill of lading holder or other than bill of lading holder) used to get the delivery order from the shipping Company for the quantity to be received as per the earlier allocation at the crude slate meeting of the Oil Coordination Committee. The shipping Company would file import manifest with Customs for the quantity to be delivered. On the basis of the delivery order received from the Shipping Corporation of India and the import manifest filed by the Shipping Corporation of India, the clearing agent of the individual oil Companies used to file the Bill of Entry with Customs and Import Applications with port authorities for the quantity to be delivered from the concerned tanker. Customs duty and wharfage amount were paid by the receiving Company at the respective ports on the import manifested quantity. If the tanker discharged the entire crude at one disport, then the tanker sailed for the next load port for loading future cargo. If the tanker discharge was only a part crude cargo, then it would sail for the next disport to discharge the balance crude as decided at the crude slate meeting. The crude oil receiving Company used to prepare the crude intake certificate with the help of the professional surveyor, on completion of discharge from the tanker, which was counter-signed by the Central Excise Authorities and the shore receipt quantity were advised by the receiving Company to the bill of lading holder Company. Crude oil received by oil Companies other than the bill of lading holder oil Company was treated as loan from the bill of lading holder to the other oil Companies. Bill of lading Company would be given thirty days of credit period in respect of crude transactions. The bill of lading holder has to settle the entire crude oil cost in Indian Rupees to the Indian Oil Corporation in whose favour the foreign supplier has to state the entire crude cost. The Indian Oil Corporation would in turn settle the crude cost in US Dollars to the foreign supplier on the date mentioned in the invoice. The freight has to be paid only by the bill of lading holder on completion of discharge and on receipt from the Shipping Corporation of India. Since the transaction involves huge financial implications, the bill of lading holder would take security deposits towards FOB  and freight cost from the receiving Companies in respect of the quantity loaned by them. The value of the crude given on loan would be shown in the books of the bill of lading holder as “crude oil issued on loan account” and corresponding security deposits given would be shown as “Deposits received from other oil Companies”.\n<\/p>\n
\t(ii) The crude given on loan would not form part of the crude oil stock in the books of the bill of lading holder. In the books of the receiving Company, the value of the crude oil received on loan would be shown as “Crude oil received on loan account” and corresponding security deposits given would be shown as “deposits with other oil Companies”. When the other oil Company was nominated as bill of lading holder and the earlier bill of lading holder nominated as the receiving Company, the crude received on loan was either fully or partly returned, depending on the quantity allocated. Similarly, depending upon the quantity of the crude returned, the security deposit amount earlier made would be returned by the first bill of lading holder.\n<\/p>\n
\t(iii) The crude oil loan adjustments were floated for more than one reason. It ensures that crude oil loan adjustments among oil Company takes place on quantity to quantity basis irrespective of the value or the type of the crude oil given or taken on loan basis. Variations in values, including differential in FOB and freight were adjusted as per the norms in the Crude Oil Price Equalization Account [COPE] and C&F pool account respectively maintained by Oil Coordination Committee. In case the Company returning crude oil incurred higher cost of purchase on acquiring the quantity, that Company was required to make a claim on the COPE account for the differential value.\n<\/p>\n
\t44. The crude oil issued on loan accounts appears to have more than one advantage. In case the bill of lading Company gives a certain percentage of concession to another oil refinery by charging at a particular price and while returning the said quantity, cost of import of the crude oil by the loanee refinery was more, it would increase the cost of the crude oil. Because of this loan transaction, it would enable the Company returning the crude oil to claim the differential value from the Oil Coordination Committee by making a claim on the crude oil. Therefore, there would be no gain or loss for any of the oil Companies.\n<\/p>\n
\t45. The Companies involved in all these transactions are public limited Companies. The transactions are fair and transparent. The system of loan transactions were not introduced by the individual oil Companies, including the petitioner. It was a system evolved by the Government of India through a statutory body constituted as early as in the year 1975. The system was in practice not only in the State of Tamil Nadu but also in all other States in the territory of India. Administered Pricing Mechanism was in vogue till 01.04.2002. Therefore, between 14.07.1975 and 28.02.2002, the import of crude oil was monitored only by the Oil Coordination Committee.\n<\/p>\n
What is the nature of this transaction :-\n<\/p>\n
\t46. The books of accounts produced by the petitioner did not disclose the transaction as sale or purchase. It was so because the quantity alone was the matter and it was not the price or type of crude oil.\n<\/p>\n
\t47. The shifting of place in the transaction by way of allocation and re-allocation were made only by the Oil Coordination Committee constituted by the Government of India. Shifting of place were not under the contract of sale. There was no money factor in the transaction. It was an occasional movement on the basis of the allocation and re-allocation made by the Oil Coordination Committee on account of the exigencies of maintaining refinery stocks.\n<\/p>\n
\t48. When the deposit was taken by the bill of lading Company and crude oil was received by the borrower Company, it was not purchase in the hands of the borrowing Company.\n<\/p>\n
\t49. There was no question of local sale in the matter. Allocation and re-allocations were made by the Oil Coordination Committee and it would be effected even before the ship enters the territorial waters of India and in any case, it would be concluded before the ship enters the customs barrier.\n<\/p>\n
\t50. The transaction would not fall under the term “sale” within the purview of the Tamil Nadu General Sales Tax or under the Central Sales Tax Act. The loan received by the borrower Company would at the most only be a purchase in the course of import. The crude oil delivered either by way of fresh loan or settlement of earlier loan was by direct shipment from overseas countries into the refineries. Even if the transaction were considered as one of purchase by the loanee Company, it could only be in the course of import as the documents of title and the Bill of Entry were entered into by the bill of lading Company. The products were delivered directly by ocean-going vessels into the refineries of the bill of lading Company and the documents like bill of lading were transferred under Section 5(2) of the Central Sales Tax Act, 1956. In such event, there would be no sale or purchase within the State of Tamil Nadu.\n<\/p>\n
\t51. When the crude was returned to settle a loan or was delivered on loan, there was also a direct shipment from an overseas port of shipment to the receiving refinery transferring documents. Even in such cases, the transaction was by way of movement from an overseas port into the discharging port in any part of the country not even touching the territory of Tamil Nadu.\n<\/p>\n
\t52. In case the oil refinery situated in the State of Tamil Nadu delivered crude oil by repayment of loan to another oil Company situated in another State by shipment, even then it was not a sale and by no stretch of imagination, it could be treated as a sale in the State of Tamil Nadu.\n<\/p>\n
\t53. When the oil refinery at Chennai receives crude oil after this particular discharge at ports in other States, still there would be no purchase by the refinery situated in Tamil Nadu under the Tamil Nadu General Sales Tax Act, 1959.\n<\/p>\n
\t54. The Sales Tax Department appears to have taken the crude oil deposit account maintained by the petitioner and figures containing crude oil loan deposit account as sales and purchases.\n<\/p>\n
\t55. The documents as found in the typed set of papers as well as the pleadings clearly shows that the transit directions were given when the vessels were afloat for discharging the crude oil to refineries outside the State of Tamil Nadu.\n<\/p>\n
\t56. There was no question of sale of imported crude oil by the petitioner. In fact, it was not possible for the petitioner to import crude oil at their instance. The system of uniform import was introduced by the Government on account of multiple reasons. The Government found that in case individual orders for small quantities were placed, there would be no scope for bargaining by the individual oil refineries. It would also involve higher transportation cost. In case orders were placed by a Canalizing Agent for larger quantity, they would be in a position to bargain for a better price. Similarly, transportation cost also would be considerably reduced. The Central Government in their earnest efforts to maintain uniformity in the price of petroleum products evolved this unique scheme. There was also another advantage for this system as some ports in India like the port of Haldia and Cochin have no storage facility for storing such huge quantity of crude oil. Therefore, by way of monitored allocation, the demand of oil refineries in those places were also met.\n<\/p>\n
\t57. The petitioner or the other oil Corporations have no option in this transaction. It was not possible for the oil Corporations to engage in the sale or purchase of crude oil. The petitioner by giving loan of crude oil on deposit and by receiving crude deposit, was acting only as a post office. In fact, the role of a bill of lading holder in the matter of granting loan was only as an agent of the Oil Coordination Committee. Import was always made in the name of Indian Oil Corporation, being the Canalizing Agent.\n<\/p>\n
Authorities on the point :-\n<\/p>\n
\t58. In Minerals and Metals Trading Corporation of India Ltd. vs. Sales Tax Officer and others<\/a>, 1998 (111) STC 434, the issue before the Supreme Court was the import made by the appellant Corporation as a Canalizing Agent for and on behalf of Steel Authority of India Limited as the actual user.\n<\/p>\n
\t\tMinerals and Metals Trading Corporation of India Ltd. was functioning as a canalizing Agent for import and export of minerals and metals. SAIL requested MMTC on 31 March 1991 to register the import of 15,000 m.t. of tin mill black plate coils for production of electrolytic tin plates. SAIL opened a letter of credit directly in favour of the exporter. SAIL was shown as the consignee. On 2 August, 1991, MMTC placed a purchase order with the foreign Company  for and on behalf of SAIL. MMTC then wrote to SAIL enclosing a copy of its purchase order and informed about the delivery of material by high seas by endorsement and transfer of shipping documents in favour of SAIL. It was also informed that SAIL has to make arrangements for clearing the cargo, including arrangements for clearance thereof from customs and that the responsibility for payment of import duties, port charges and other expenses subsequent to sale on high seas also would be on SAIL’s account. Subsequently, the appellant forwarded the documents with due endorsement thereon to SAIL to get the goods cleared. The vessel arrived at Paradeep port on November 11, 1991 and the bill of entry in respect of the said coils was submitted and processed by SAIL. Sales Tax Officer levied sales tax and rejected the plea made by MMTC that the sale was in the course of import covered by Section 5(2) of the Central Sales Tax Act, 1956. The matter was challenged before the High Court. However, the High Court dismissed the writ petition. The Supreme Court allowed the appeal filed by MMTC and set aside the Assessment Order. While deciding the issue the Supreme Court placed reliance on an earlier decision of the Supreme Court in J.V.Gokal & Co. (Private) Ltd. Vs. Assistant Collector of Sales Tax (Inspection) [1960 (11) STC 186] wherein it was held that in the commercial world a bill of lading represents the goods and the transfer of it operates as the transfer of goods and the delivery of the bill of lading while goods are afloat was equivalent to the delivery of goods themselves. The Supreme Court found that the sale made by MMTC in favour of SAIL was a sale in the course of import and therefore, not liable to sales Tax either under the local tax or under the Central Sales Tax Act. The relevant observation would read thus :-\n<\/p>\n
\t“11. The facts aforestated, based upon documents, show that the bill of lading had been endorsed in favour of SAIL while the consignment of the said coils was still upon the high seas. The sale, therefore, was a sale in the course of the import of the said coils into the territory of India; it was effected by transfer of the documents to the said coils before they had crossed the limits of the customs station at Paradeep port. The position would be the same in respect of the goods sold to Paradeep Phosphates Ltd.\n<\/p>\n
\t13. The aforesaid sales being covered by the provisions of the latter part of Section 5(2) read with Section 2(ab) of the Central Sales Tax Act, they are sales in the course of import and not liable to sales Tax.”\n<\/p>\n
\t59. In Deputy Commissioner (C.T.) Coimbatore vs. lakshminarayana Textiles (P) Ltd. And another, 1971 (28) STC 288 (MDS), the issue before a Division Bench of this Court was as to whether the cotton borrowed by the assessee from another person, who had imported the same under the actual user’s license, after obtaining permission from the Textile Commissioner was a sale or a loan transaction.\n<\/p>\n
\t\tIn the said case, the assessee borrowed certain quantity of cotton from one Valliappa Textiles who had imported the cotton under the actual user’s license. The borrowing was permitted by the Textile Commissioner who directed that the loan should be returned in the shape of cotton and that neither of the transactions should be treated as sale. The plea of loan transaction was rejected by the Assessing Authority and the transaction was treated as sale. However, the Sales Tax Appellate Tribunal found that it was only a loan transaction. The Division Bench on a consideration of the transaction confirmed the findings rendered by the tribunal holding that the transaction does not amount to sale.\n<\/p>\n
\t60. In State of Tamil Nadu vs. McDowell and Co. Ltd.<\/a> 1997 [105] STC 172, the issue before the Supreme Court was as to whether deposit made by the distributor for the purpose of safe custody of bottles and refund of the same while returning the bottles amount to sale so as to include in the turnover for the purpose of sales tax.\n<\/p>\n
\t\tThe assessee before the Supreme Court was a distributor of liquour for the principal (brewer). It was customary for the principal to show in the bills issued to the assessee, separately the price, the tax payable thereon and the deposits for the bottles in which the liquour was sold. In the sale notes it was specifically stated that empty bottle deposit is refundable against the return of the bottles at the brewery. In the bills issued to the assessee the price of the liquour was separately shown and sales tax was added to it. Thereafter, with reference to the number of bottles supplied, a separate charge was made. The assessee, in turn, similarly charged his customers, at the same rate, for the deposit of the bottles; and when the bottles were returned, the assessee refunded the amount of deposit and if there was any shortage of bottle, the deposit was not refunded. When the assessee received back the bottles it returned them to the principal and got back its deposits and if there was any shortage of bottles, the deposit to that extent was forfeited by the principal. This transaction was treated as a sale by the Sales Tax Department by including the turnover to the total for the purpose of sales tax. When the matter was challenged before the High Court, it was held that the transaction was a clear case of deposit and it was not a sale. The Supreme Court confirmed the decision of the High Court by rejecting the contentions made on behalf of the State. The relevant paragraph reads thus :-\n<\/p>\n
7. If the States contention is accepted that sale of bottles took place when the bottles with beer were supplied by the manufacturer to the wholesaler and again by the wholesaler to the consumers, then it will have to be held that sale of bottles also took place when the consumers returned the bottles to the dealers. Therefore, the consumers will be liable to pay sales tax when they return the bottles by taking back the deposits. This proposition was countered by arguing that there was a single-point tax on sale of bottles. If that be so, then the charge of tax, if any, would fall on the first sale by the principal, i.e., United Breweries Limited. The assessee was a middleman and could not be made liable to pay sales tax on account of sale of the bottles to the retailers or the consumers in any event.”\n<\/p>\n
\t61. In Commissioner of Income Tax, Andhra Pradesh vs. M\/s.Motors and General Stores (P) Ltd., AIR<\/a> 1968 SC 200, the issue before the Supreme Court was was to whether the transaction in question was a sale or exchange. The assessee Company agreed to sell their Cinema Theatre for certain money consideration. Document was executed purporting to be a deed of exchange. In pursuance of the agreement to sell the cinema house with all its equipment and machinery, fittings etc. for a consideration of Rs.1,20,000\/-, the Assessee Company executed a deed in favour of the vendee and consideration for the same was received by the assessee Company in the shape of transfer of 5 per cent tax-free cumulative preference shares held by the vendee. The deed recited separate valuations for the immovable property, movable property and the good will of the business. The ultimate question for decision was whether the transaction in question was a sale within the meaning of the second proviso to Section 10(2)(vii), Income Tax Act so that the amount by which the written down value exceeded the amount for which the assets were actually sold could be included in the taxable profits of the assessee. The Supreme Court considered the issue in the light of the definition as contained under Section 10(2)(vii) of the Income Tax act and Section 54 of the Transfer of property Act and held that the transaction was in essence one of exchange and it was not sale. The Supreme Court further observed that if the consideration was not money, it would be in the nature of exchange or barter and not sale. The observation reads thus:-\n<\/p>\n
\t“(3) Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.\n<\/p>\n
\t(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred.
\n\tSection 2(10) of the Sale of Goods Act defines price as meaning the money consideration for a sale of goods. The presence of money consideration is therefore an essential element in a transaction of sale. If the consideration is not money but some other valuable consideration it may be an exchange or barter but not a sale.”\n<\/p>\n
\t62. The facts demonstrated in this case clearly shows that at no point of time, there was a sale or purchase within the territory of the State of Tamil Nadu. Transactions always represented goods in the high seas at the time of determination\/designating the lending refinery. Similarly, transit directions were issued by the Oil Coordination Committee and its Canalizing Agent – Indian Oil Corporation, when the vessels were afloat for discharging crude oil to refineries and as such, lending was made when the vessels were outside the State of Tamil Nadu. The crude oil delivered either by way of fresh loan or settlement of earlier loan was always by direct shipment from overseas countries into the refineries. There was no occasion to discharge the crude oil from the refinery of the petitioner at Chennai to different destinations in other States. Copies of the invoices and the bill of lading as found in the typed set of papers clearly shows the allocation and re-allocation made by the Oil Coordination Committee.\n<\/p>\n
\t63. Invoices were raised only in the name of the Indian Oil Corporation Ltd. being the Canalizing Agent. Re-allocation letter as found in page 6 of the typed set No.3 shows that the earlier allocation made in favour of Indian Oil Corporation, Vandiar was cancelled and the crude oil was re-located to BPC Bombay, CRL Cochin, IOC Haldia, Madras Refinery Ltd., Madras, and HPC  Vizag. The ship involved in the said transaction was SAMCO EUROPE and the load port was Kharg Island and the port of discharge was shown as Bombay, Madras, Cochin, Vizag and Haldia. The invoice shows that even before the ship entered the territorial waters of India, allocation and re-allocation were made by the Statutory Authority. Therefore, there was no question of sale or purchase within the territory of the State of Tamil Nadu. Even if the Assessing Authority considers this as a purchase, it would only be in the course of import.\n<\/p>\n
\t64. Article 286 of the Constitution of India places restriction as to imposition of tax on sale or purchase of goods. Article 286 reads thus :-\n<\/p>\n
286. Restrictions as to imposition of tax on the sale or purchase of goods.\n<\/p>\n
(1) No law of a State shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place –\n<\/p>\n
(a) Outside the State; or<\/p>\n
(b) In the course of the import of the goods into, or export of the goods out of, the territory of India.\n<\/p>\n
[(2) Parliament may by law formulate principles for determining when a sale or purchase of goods takes place in any of the ways mentioned in clause (1).\n<\/p>\n
[(3) Any law of a State shall, in so for as it imposes, or authorises the imposition of, –\n<\/p>\n
(a) A tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce; or<\/p>\n
(b) A tax on the sale or purchase of goods, being a tax of the nature referred to in sub-clause (b), sub-clause (c) or sub-clause (d) of clause (29A) of article 366,<\/p>\n
Be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify.]]<\/p>\n
\t65. There is no dispute that Article 286 (1)(b) prohibits the State from imposing tax on sale or purchase of goods where such sale was in the course of the import of the goods into, or export of the goods out of, the territory of India. When the sale or purchase takes place in the course of import, there was no question of imposing tax by the State. Therefore, even if the transaction was taken as purchase by the loaning state, treating the bill of lading Company as a seller, it would not enable the State to impose tax as it was only in the course of import.\n<\/p>\n
Whether the petitioner is entitled to a writ of prohibition:-\n<\/p>\n
\t66. Writ of prohibition is a judicial writ, issued by a superior to an inferior Court thereby preventing the inferior Court from usurping jurisdiction with which it is not legally vested. This writ is issued primarily to compel the Courts and quasi judicial authorities to keep them within their limits of jurisdiction. The question is as to whether writ of prohibition could be issued by this Court in the matter.\n<\/p>\n
\t67. It is trite that the Assessing Authority is a creature of the statute. The Assessing Authority is defined under Section 2(c) of the Tamil Nadu General Sales Tax Act, as any person authorized by the Government or by an authority empowered by them, to make any assessment under the Tamil Nadu General Sales Tax Act. Section 12 of the Tamil Nadu General Sales Tax Act deals with the procedure to be followed by the Assessing Authority. The assessment in respect of a dealer shall be on the basis of the return relating to his turnover submitted in the prescribed manner within the prescribed period under law. The Assessing Authority is a quasi judicial authority. In case the dealer fails to submit his returns or if the return submitted by him appears to the Assessing Authority to be incomplete or incorrect, it would be open to the Assessing Authority to assess the dealer to the best of its judgment. Therefore, the entire matter was at large before the Assessing Authority. The jurisdiction of the authority to make an assessment flows from the provisions of the Tamil Nadu General Sales Tax Act as well as under the provisions of the Central Sales Tax Act, 1956. Even in cases wherein sale was exempted, from the purview of Sales Tax there is a requirement for furnishing return. The issue has to be decided only by the Assessing Authority and he has to decide as to whether the sale was exempted.\n<\/p>\n
\t68. The petitioner essentially challenges the decision taken by the Assessing Authority to treat the transaction as one of sale instead of loan. The petitioner is an assessee on the file of the first respondent. It was not only the so called sale in the name of loan which was the subject matter of assessment proceedings before the first respondent. The entire transaction pertaining to the petitioner for the assessment year was the subject matter of assessment proceedings before the first respondent. The assessment order impugned in W.P.No.9356\/1998 shows that the petitioner has effected inter-State sales, sale of LPG, sale of Matchwax, Sale of Matchwax, Sale of Paraffin, sale of Propylene Herditta, sale of MEK Feet Stock, sale of Hexane and sale of Scrap and they have filed ‘C’ forms for those sales. The petitioner has also claimed exemption in respect of stock transfer to the State of Kerala. According to the petitioner, they have transferred Paraffin Wax to their own refinery at Cochin and as such, exemption was claimed by filing “F” declaration. It was only the crude oil lending which was mainly objected to by the Assessing Officer. Therefore, the assessment order was in respect of all the transactions done by the petitioner for the assessment year in question. In such circumstances, it cannot be said that the Assessing Authority was not having the jurisdiction to go ahead with the assessment proceedings. The question is as to whether the finding rendered by the Assessing Authority as to whether the transaction was a sale or a loan was correct. Merely because the Assessing Authority has taken a decision to treat the transaction as sale, it cannot be said that he was not having the jurisdiction to take a decision in the matter. The correctness of the decision taken cannot be equated with absence of jurisdiction.\n<\/p>\n
\t69. In Arun Kumar and others vs. Union of India and others<\/a>, 2006 [286] ITR 89 (SC) = (2007) 1 SCC 732, the Supreme Court explained the concept of jurisdiction thus :-\n<\/p>\n
“84. From the above decisions, it is clear that existence of jurisdictional fact is sine qua non for the exercise of power. If the jurisdictional fact exists, the authority can proceed with the case and take an appropriate decision in accordance with law. Once the authority has jurisdiction in the matter on existence of jurisdictional fact, it can decide the fact in issue or adjudicatory fact. A wrong decision on fact in issue or on adjudicatory fact would not make the decision of the authority without jurisdiction or vulnerable provided essential or fundamental fact as to existence of jurisdiction is present.\n<\/p>\n
\t70. In Y.Narayana Chetty and another vs. The Income Tax Officer, Nellore and others, AIR 1959 SC 213, the Supreme Court observed that in case the assessee was having a grievance that the course adopted by the Income Tax Officer in making orders of fresh assessment was irregular and illogical, it has to be corrected as it relates to the merits of the order, and by no stretch of imagination it could be said to be a writ under Article 226 of the Constitution of India.\n<\/p>\n
\t71. In S.Govinda Menon vs. Union of India and<\/a> another, AIR 1967 SC 1274, the Supreme Court considered the nature of a writ of prohibition and the legal position was indicated thus :-\n<\/p>\n
\t“5.The jurisdiction for grant of a writ of prohibition is primarily supervisory and the object of that writ is to restrain courts or inferior tribunals from exercising a jurisdiction which they do not possess at all or else to prevent them from exceeding the limits of their jurisdiction. In other words, the object is to confine courts or tribunals of inferior or limited jurisdiction within their bounds. It is well settled that the writ of prohibition lies not only for excess of jurisdiction or for absence of jurisdiction but the writ also lies in a case of departure from the rules of natural justice. It was held for instance by the Court of Appeal in King v. North  that as the order of the Judge of the Consistory Court of July 24, 1925 was made without giving the vicar an opportunity of being heard in his defence, the order was made in violation of the principles of natural justice and was therefore an order made without jurisdiction and the writ of prohibition ought to issue. But the writ does not lie to correct the course, practice or procedure of an inferior tribunal, or a wrong decision on the merits of the proceedings. It is also well established that a writ of prohibition cannot be issued to a court or an inferior tribunal for an error of law unless the error makes it go outside its jurisdiction. A clear distinction must therefore be maintained between want of jurisdiction and the manner in which it is exercised. If there is want of jurisdiction then the matter is coram non judice and a writ of prohibition will lie to the court or interior tribunal forbidding it to continue proceedings therein in excess of its jurisdiction.\n<\/p>\n
\t72. The assessing authority was acting only within his jurisdiction. It is true that his finding on the issue as to whether the transaction was a sale or a loan was erroneous. However, it cannot be said that he proceeded to act without or in excess of jurisdiction. Similarly, it cannot be said that his act was beyond the provisions of the Tamil Nadu General Sales Tax Act or the Central Sales Tax Act. In case the Assessing Authority took a wrong decision or his finding was perverse, the remedy was not a writ of prohibition but it was only a writ of certiorari. Therefore, the petitioner is not entitled for a writ of prohibition.\n<\/p>\n
How to mould the relief :-\n<\/p>\n
\t73. Article 226 of the Constitution of India empowers the High Court to issue writ or direction or order in the nature of prohibition, quo warranto, mandamus or certiorari for the enforcement of any of the rights conferred by Part III of the Constitution and for any other purpose. This Article is couched in the widest possible terms inasmuch as the High Court is given jurisdiction to issue directions, orders or writs, including writs in the specified category. Therefore, the question is as to whether the High Court is empowered to issue an appropriate writ when it is found that the writ as prayed for by the petitioner could not be issued in the facts of the case.\n<\/p>\n
\t74. In District Collector, Erode District, Erode and others vs. M.Ponnusamy,<\/a> 2001(2) MLJ 458, Division Bench of this Court held that the High Court was within its powers to grant appropriate relief. The observation reads thus :-\n<\/p>\n
\t26. …. The High Court, under Article 226 of the Constitution, has the discretion to frame a proper order and appropriate relief which would suit the exigencies of the case and the Court cannot dismiss the petition on a mere ground that proper relief has not been asked for.”\n<\/p>\n
\t75. In  Dwarka Nath v. ITO, AIR 1966 SC 81, the Supreme Court indicated the jurisdiction under Article 226 thus :-\n<\/p>\n
\t“4. This article is couched in comprehensive phraseology and it ex facie confers a wide power on the High Courts to reach injustice wherever it is found. The Constitution designedly used a wide language in describing the nature of the power, the purpose for which and the person or authority against whom it can be exercised. It can issue writs in the nature of prerogative writs as understood in England; but the scope of those writs also is widened by the use of the expression nature, for the said expression does not equate the writs that can be issued in India with those in England, but only draws an analogy from them. That apart, High Courts can also issue directions, orders or writs other than the prerogative writs. It enables the High Courts to mould the reliefs to meet the peculiar and complicated requirements of this country. Any attempt to equate the scope of the power of the High Court under Article 226 of the Constitution with that of the English Courts to issue prerogative writs is to introduce the unnecessary procedural restrictions grown over the years in a comparatively small country like England with a unitary form of government to a vast country like India functioning under a federal structure. Such a construction defeats the purpose of the article itself. To say this is not to say that the High Courts can function arbitrarily under this Article. Some limitations are implicit in the article and others may be evolved to direct the article through defined channels.\n<\/p>\n
\t76. The power of the High Court exercising jurisdiction under Article 226 of the Constitution of India is very wide. The very fact that the High Court is given powers to issue not only the prerogative writs but also writs “for any  other purpose” clearly shows that the jurisdiction is not confined to prerogative writs alone. It is true that there are certain self-imposed limitations on the powers of the High Court to issue writs. When a litigant approaches the High Court with a prayer to issue a particular writ and on an examination of the material facts, if it is found that he is not entitled for the said writ, it is open to the High Court to issue an appropriate writ. The attempt of the Court in such cases should be to mould the relief rather than dismissing the writ petition on account of a formal defect in couching the prayer. Technicalities have no say in exercising the writ jurisdiction by the High Court. The Courts are functioning only for rendering justice. It should be the attempt of the Courts to avoid multiplicity of proceedings. To the extent possible, the litigant should not be driven to file another round of litigation which would involve delay and expense besides developing animosity to the very justice delivery system. The Court should assist in resolving the disputes between the parties. It should also be the attempt of the Courts to discourage the tendency of litigants to file series of litigations with respect to concluded matters and to pass on the legacy of such litigation to the future generation. The writ jurisdiction is essentially an equity jurisdiction and the ultimate goal is to render substantive justice. It is not the form but only the substance which is material. Therefore, the writ Court has got a duty to mould the relief in an appropriate manner without driving the litigants from pillar to post.\n<\/p>\n
\t77. The next question is as to what should be the appropriate writ which could be issued in this matter.\n<\/p>\n
\t78. The factual matrix demonstrated in this writ petition clearly shows that the transaction in question was only a loan or barter and it was never intended to be a sale. There was no seller as well as purchaser and the transaction was not proceeded by a contract. There was also no transfer of property involved in the matter on the basis of a contract. Therefore, the Assessing Authority was clearly in error in concluding that the transaction was one of sale. There is no necessity to scan the factual materials further in this case in view of the clear stand taken by the Government of India. The petitioner and other oil Companies are all Public owned oil Corporations. There is no private motive involved in this transaction. The Government has spelt out its policy and the idea behind the constitution of the Oil Coordination Committee. The larger public interest alone weighed with the Government in taking a decision to adopt a policy to centralize the import of crude oil and to appoint the Indian Oil Corporation Ltd. as the Canalizing Agent. The petitioner was acting only as an agent of the Oil Coordination Committee. It was not possible for the petitioner to take an independent decision in the matter. They have to get crude oil for the Companies nominated by the Oil Coordination Committee. Similarly, they have to receive oil from oil Company as per the allotment made by the Oil Coordination Committee. Therefore, the transaction was not one initiated by the petitioner. They were always on the receiving end. It is true that during the initial stages, the entire regulations were not before the Assessing Authority. In fact, the Assessment order does not contain any discussion about the constitution of the Oil Coordination Committee and the procedure evolved by the committee in the matter of import of crude oil and the allocation and re-allocation on loan basis.\n<\/p>\n
\t79. There is also no question of relegating the parties to the appellate remedy or to approach the Assessing Authority once again to consider the matter afresh. As per the orders of this Court, Cabinet Secretary convened a meeting between the representatives of the petitioner industry as well as the officials of the Government of Tamil Nadu. In the said meeting, the Secretary, Department of Commercial Taxes, Government of Tamil Nadu, categorically stated that the transaction was a sale. It was only in such circumstances, the attempt made by the Cabinet Secretary to settle the issue failed and the parties were directed to approach the High Court once again to resolve the issue.\n<\/p>\n
\t80. When the higher officials of the Tax Department has taken a concrete decision on the basis of the inputs received from the authorities of the Sales Tax Department, no officer in the hierarchy in the Department of Commercial Tax would take a decision contrary to the opinion expressed by the Secretary himself. In fact, the opinion expressed by the Secretary was not his personal opinion. It was the opinion formed by the Department with the advice of the legal wing. Therefore, the question of the Original Authority considering the matter afresh would be a empty formality. In such circumstances, and in the light of the deliberations of the meeting convened by the Cabinet Secretariat and the decision taken at the meeting to resolve the dispute through Court process, I am of the view that appropriate declaration has to be issued by this Court with respect to the transaction in question.\n<\/p>\n
\t81. In P.J.Irani vs. State of Madras and<\/a> another, AIR 1961 SC 1731, the Supreme Court observed that the power of the High Court under Article 226 is not limited to the issue of writs falling under particular groupings such as the certiorari, mandamus, etc. as these writs have been understood in England, but the power is general to issue any direction to the authorities viz., for enforcement of fundamental rights as well as for other purposes.\n<\/p>\n
\t82. The Supreme Court in V.S.Menon vs. Union of India and<\/a> another [AIR 1963 SC 1160] held that it was open to a Government servant to seek a declaration under Article 226 of the Constitution of India that his compulsory retirement is tantamount to removal from service by way of penalty.\n<\/p>\n
\t83. In S.R.Tewari vs. The District Board, Agra and<\/a> another, AIR 1964 SC 1680, one of the issues before the Supreme Court was as to whether the Court would be justified in granting a declaration about the invalidity of the action taken by the statutory body terminating the employment of a servant. The Supreme Court rejected the contention of the statutory body that it was not within the jurisdiction of the Court to issue such a declaration. The following paragraphs would make the position clear :-\n<\/p>\n
7. The question whether the court would be justified in granting a declaration about the invalidity of the action of a statutory body terminating the employment of a servant was raised before the House of Lords in Vine v. National Dock Labour Board. The plaintiff a dock worker in the reserved pool, under the scheme set up under the Dock-Workers (Regulation of Employment) Order, 1947 failed to obey an order to report for work with a company of stevedores and the local board instructed their Disciplinary Committee to hear the case against the plaintiff. The committee terminated the employment of the plaintiff giving seven days notice, and this decision was confirmed by the appellate board. The plaintiff then claimed in an action instituted by him a declaration that his purported dismissal was illegal, ultra vires, and invalid, and also damages for wrongful dismissal. The trial court granted the declaration, and also damages. The court of appeal set aside the declaration. The House of Lords restored the declaration, for in their view the purported dismissal was a nullity, since the local board had no power to delegate its disciplinary functions. Prima facie, jurisdiction of the court in an appropriate case to declare an order passed by a statutory body, even if the order relates to the termination of the employment of a servant of the body, may not be denied.\n<\/p>\n
8. The contention raised by counsel for the Board that a petition for a declaration that the employment of the appellant was not lawfully terminated and on that account the Board be commanded to treat the appellant as lawfully in service cannot be maintained, must be rejected. The jurisdiction to declare the decision of the Board as ultra vires exists, though it may be exercised only when the court is satisfied that departure is called for from the rule that a contract of service will not ordinarily be specifically enforced.\n<\/p>\n
\t84. The transaction in question was a kind of adjustment among the oil Companies which took place on quantity to quantity basis irrespective of the value, or the type of the crude oil given or taken on loan basis. The oil Companies, including the petitioner, were acting only as per the directions of the Government of India. Since the Petroleum product is an essential commodity, the petitioner Company has no say in the matter and every thing was monitored by the Central Government under the administered pricing regime. The larger public interest alone weighed with the Central Government in taking a decision to adopt a policy to centralize the import of crude oil. The Central Government was also empowered to make regulations with respect to import as per Section 4 (b) of the Petroleum Act.\n<\/p>\n
\t85. Neither the petroleum Companies nor the State Governments have any say in the matter regarding import of petroleum product or its distribution. The Central Government was expected to maintain uniform petroleum price throughout the territory of India. None of the States attempted to collect sales tax on the transaction. In case one among the states started collecting sales tax under Local or Central Sales Act on the loan transaction, treating it as a sale, it would cause serious implications as the petroleum cost would be higher in those States which took the crude oil on loan from the refinery situated in the State of Tamil Nadu. The allocation as well as re-allocation were made before the ship entered the territorial waters of India. Therefore, there was no question of sale taking place within the jurisdiction of the State of Tamil Nadu so as to enable the sales tax authorities to treat the transaction as sale and to collect sales tax either under the Tamil Nadu General Sales Tax Act or under the Central Sales Tax Act. Therefore, necessarily, the transaction has to be treated as one of loan or barter and not sale.\n<\/p>\n
\t86. In the result,\n<\/p>\n
(a) \tW.P.No.9356\/1998 is dismissed as infructuous.\n<\/p>\n
(b) \tW.P.No.9357\/1998 is allowed. There will be a writ of declaration declaring the transaction in the name and style of “Procedure for Loan Transactions of Crude Oil Between the Oil companies” pursuant to the procedure adopted by the Oil Coordination Committee as a simple barter or loan transaction without the element of sale.\n<\/p>\n
(c) \tThere is no order as to costs.\n<\/p>\n
tar<\/p>\n
To<\/p>\n
1.The Asst. Commissioner
\nCentral Assessment Circle IV,
\nIV Floor, PAPJM Building,
\nGreams Road,
\nChennai 600 006.\n<\/p>\n
2.The Secretary,
\nCommercial Taxes and Religious
\nEndowments Department,
\nFort St.George, Chennai-9.\n<\/p>\n
3.The Secretary to Government,
\nMinistry of Finance, New Delhi<\/p>\n
4.The Oil Coordination Committee,
\nMakers Chamber IV,
\nNariman Point,
\nMumbai.\n<\/p>\n
5.M\/s.Indian Oil Corporation,
\nG-9, Ali Yavar Jung Marg,
\nBandra East,
\nMumbai 400 051.\n<\/p>\n
6.M\/s. Hindustan Petroleum Corporation Ltd.,
\nCorridor Road, Mahul,
\nMumbai.\n<\/p>\n
7.M\/s.Hindustan Petroleum Corporation Ltd.,
\n17, Jamshedji Tata Road,
\nMumbai 400 020.\n<\/p>\n
8.M\/s.Bharat Petroleum Corporation Ltd.,
\nBharat Bhavan 4 & 6, Currimbhoy Road,
\nBalard Estate, Bombai 400 038.\n<\/p>\n
9.M\/s.Cochin Refineries Ltd.,
\nP.B.No.2, Ambalamugai,
\nErnakulam District,
\nKerala 682 302.\n<\/p>\n
10.The Secretary to Government,
\nMinistry of Petroleum and Natural Gas,
\nShastri Bhavan,
\nNew Delhi<\/p>\n","protected":false},"excerpt":{"rendered":"
Madras High Court W.P. Nos.9356 & 9357\/1998 vs The Asst. Commissioner on 22 January, 2010 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 22.01.2010 CORAM: THE HONOURABLE MR.JUSTICE K.K.SASIDHARAN W.P. Nos.9356 & 9357\/1998 M\/s.Madras Refineries Ltd., Manali, Chennai. … Petitioner in both writ petitions Vs. 1.The Asst. Commissioner Central Assessment Circle IV, IV Floor, […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,13],"tags":[],"class_list":["post-92807","post","type-post","status-publish","format-standard","hentry","category-high-court","category-madras-high-court"],"yoast_head":"\nW.P. Nos.9356 & 9357\/1998 vs The Asst. 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