1996 (4) TMI 459 - HC - VAT and Sales Tax

Summary

Issues Involved
1. Whether the excise duty paid on petroleum products released from licensed Central excise warehouses outside the State of Kerala forms part of the purchase turnover under Section 5A of the Kerala General Sales Tax Act.
2. Whether the liability for excise duty is on the manufacturer (Cochin Refineries Ltd.) or the purchaser (Indian Oil Corporation Ltd.) when the goods are moved to warehouses outside Kerala.
3. Impact of amendments to the Central Excise Rules on the liability for excise duty and its inclusion in the purchase turnover.

Detailed Analysis

Issue 1: Excise Duty as Part of Purchase Turnover
The petitioner, Indian Oil Corporation Ltd., argued that the excise duty paid upon the release of petroleum products from warehouses outside Kerala should not form part of the purchase turnover for the purpose of Section 5A of the Kerala General Sales Tax Act. The court noted that the assessing authority included this excise duty as part of the purchase turnover, thus subjecting it to tax. The court referenced the Full Bench decision in Hindustan Petroleum Corporation's case [1993] 89 STC 106, which held that the excise duty element forms part of the purchase turnover, as it is a liability discharged by the purchaser in respect of the goods.

Issue 2: Liability for Excise Duty
The petitioner contended that the excise duty liability arises at the time of release from the bonded warehouses outside Kerala and is the responsibility of the warehouse licensee, not the manufacturer (Cochin Refineries Ltd.). The court, however, upheld the Full Bench decision, stating that the liability for excise duty is on the manufacturer at the time of removal of goods from the warehouse. The court emphasized that the excise duty is a liability of the manufacturer, and any payment made by the purchaser (Indian Oil Corporation Ltd.) is in discharge of this liability, thus forming part of the purchase turnover.

Issue 3: Impact of Amendments to Central Excise Rules
The petitioner argued that amendments to the Central Excise Rules in February 1986, particularly Rules 156(A) and 156(B), shifted the liability of excise duty to the warehouse licensee or the purchaser. The court examined these amendments and concluded that they do not alter the fundamental principle established by the Full Bench decision. The court stated that the amendments do not change the liability of the manufacturer for excise duty, and any procedural changes do not affect the inclusion of excise duty in the purchase turnover.

Conclusion
The court dismissed the tax revision cases, holding that the excise duty paid on petroleum products released from warehouses outside Kerala forms part of the purchase turnover under Section 5A of the Kerala General Sales Tax Act. The liability for excise duty remains with the manufacturer (Cochin Refineries Ltd.), and the amendments to the Central Excise Rules do not affect this liability or its inclusion in the purchase turnover. The court upheld the Full Bench decision in Hindustan Petroleum Corporation's case, affirming that the excise duty element is part of the purchase turnover and subject to tax. The petitions were dismissed accordingly.