1978 (12) TMI 172 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of sales tax law regarding the transaction of additives between two parties.

The judgment delivered by the Bombay High Court in this case involved a reference under section 61(1) of the Bombay Sales Tax Act, 1959, initiated by the Commissioner of Sales Tax. The primary issue was whether a transaction involving the supply of additives for blending lubricating oil constituted a sale under section 2(28) of the said Act. The facts revealed that the respondent had entered into a contract with Gulf Oil (India) Pvt. Ltd. to blend base lubricating oil, with the understanding that additives would be supplied by Gulf Oil. However, due to government restrictions, the respondent ended up importing and utilizing the additives on behalf of Gulf Oil. The Court analyzed the contract between the parties and concluded that there was no intention for a sale of additives, as the respondent acted as an agent of Gulf Oil in importing and using the additives for blending. Therefore, the Court held that no sale of additives occurred between the parties.

The Court emphasized that the contract's intention was for the respondent to blend the lubricating oil belonging to Gulf Oil, with additives to be supplied by Gulf Oil. The import of additives by the respondent, as mandated by the government, was done as an agent of Gulf Oil. The Court highlighted that the parties never intended for a sale of additives to take place, as the additives were specifically imported for blending lubricating oil owned by Gulf Oil. Consequently, the Court determined that the transaction did not constitute a sale under the relevant provisions of the Bombay Sales Tax Act, 1959. The judgment clarified that the absence of intent for a sale, coupled with the circumstances of additive importation and usage, led to the conclusion that no sale of additives occurred between the respondent and Gulf Oil.

In conclusion, the Court answered the reference question in the affirmative, stating that there was no sale of additives under the Bombay Sales Tax Act, 1959, in the context of the transaction between the respondent and Gulf Oil. The Court directed the applicant to bear the costs of the reference, ultimately affirming that the transaction did not fall under the purview of a sale as defined by the relevant legal provisions.