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TMI Blog1992 (12) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner in respect of goods transferred outside the State of Kerala formed part of the purchase turnover liable to tax under section 5A of the Kerala General Sales Tax Act, 1963? 3.. The assessee is an oil company dealing in petroleum products. The petroleum products in question were manufactured by Cochin Refineries Ltd. (for short "CRL"), another oil company. CRL is permitted to store the manufactured products, without payment of duty, in bonded warehouse and it did so. CRL sold the goods to Indian Oil Corporation (for short "IOC") and IOC in turn sold the products in question to the petitioner, viz., Hindustan Petroleum Corporation (for short "HPC"). There was no sales tax payable by oil companies in respect of sale of petroleum products if the sale is from one oil company to another oil company. CRL, IOC and HPC are all oil companies and therefore, no question of payment of tax arose in the sales of petroleum products by CRL to IOC and IOC to HPC. 4.. Petroleum products manufactured by CRL are excisable goods and CRL therefore, has to pay excise duty at the rate set forth in the First Schedule of the Central Excise Act as it then stood, per kilolitres of the goods produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal held that excise duty paid by the assesseecompany is in discharge of the liability of the manufacturer, the Cochin Refineries Limited. The Tribunal found that when assessee-company paid excise duty leviable, it was only discharging its contractual obligations arising out of the bond executed under the Central Excise Rules. In that view of the matter, excise duty paid is includible as part of the purchase turnover liable to be taxed under section 5A of the Act. It is against those decisions of the Tribunal the above tax revision cases were filed. 6.. Indisputably the assessee is liable to purchase tax under section 5A in respect of the petroleum products despatched by the assessee outside the State. The only question is whether the excise duty paid by the assessee will also form part of the purchase turnover. Admittedly, the assessee-registered dealer, in the course of its business, purchased from another registered dealer, IOC, goods which are liable to tax under the Kerala General Sales Tax Act and despatched the same outside the State in circumstances in which tax is payable under section 5A of the Kerala General Sales Tax Act. Therefore purchase tax has to be paid b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a store-room or other places of storage approved by the Collector under rule 27 or rule 47 or a warehouse appointed or licensed under rule 140. We are not concerned with rule 27 in this case. Rule 47 states that the manufacturer shall provide a store-room or other place of storage at his premises for depositing goods made on the same premises without payment of duty. If the manufacturer undertakes to pay duty on all such goods and clears them immediately on completion of manufacture the Collector may exempt him from providing such store-room or other place of storage. Every such store-room or place shall be declared by the manufacturer and approved by the Collector. Further, where the provisions of Chapter VII of the Rules have been extended by the Central Government by notification in the Official Gazette to any excisable goods, every such store-room or other place of storage in the premises of factory manufacturing such goods shall be deemed to be a warehouse licensed under rule 140. There is a requirement on the manufacturer to maintain an entry book in proper form wherein he has to write and enter in the proper column the date of deposit, removal, full description, quantity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods may be stored and in what manner such warehouse shall be secured by lock and may require the keeper of the public warehouse of the licensee to furnish bond with such surety for such amount and under such conditions binding himself to pay the duty on the goods deposited therein and safe removal of such goods from warehouse to warehouse and for due observance of the terms and conditions of the Act and the Rules. Sub-rule (2) of rule 140 says that the Central Government by general or special order, may declare any premises to be a refinery and on such declaration such refinery shall be deemed to be a warehouse and therefore, the provisions of Chapter VII will apply in relation to the goods processed or manufactured in such refinery. Rule 155 clearly says that every bond executed under rules 140 and 164 in respect of such goods shall, unless the Collector deems a fresh bond to be necessary, continue in force notwithstanding the subsequent removal of such goods to another warehouse. Rule 164 relates to bond for goods lodged in a public warehouse. Rule 156A prescribes the procedure in respect of goods removed from one warehouse to another. The consignor in such case will present the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the former decision, held that excise duty paid directly to the excise authorities of the State or deposited directly in the State exchequer in respect of Indian liquor by the buyers thereof before removing it from the distillery or from the bonded warehouse and not included in the sale bill issued by the manufacturer or the owner of the bonded warehouse could not form part of the turnover liable to tax under the Andhra Pradesh General Sales Tax Act, 1957. The Supreme Court held in the case, after considering the nature of the excise duty being a duty on the production or manufacture of goods produced or manufactured within the country: "In the instant cases, the excise and countervailing duties did not go into the common tills of the appellants and did not become a part of their circulating capital. We are, therefore, of the view that the sales tax authorities were not competent to include in the turnovers of the appellants the excise duty and the countervailing duty which was not charged by them but was charged by and paid directly to the excise authorities by the buyers of the liquors as stated above." Following the above decision of the Supreme Court, in Burmah Shell's ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Excise Act, the Rules framed thereunder and the pronouncements referred to above, we are of the view that the conclusion of this Court at page 921 of the Reports [at page 158 of [1977] 39 STC 151 (SC)] that intending purchasers of the Indian liquors who seek to obtain distillery passes are also legally responsible for payment of the excise duty is too broadly stated. The 'duty' was primarily a burden which the manufacturer had to bear and even if the purchasers paid the same under the Distillery Rules, the provisions were merely enabling and did not give rise to any legal responsibility or obligation for meeting the burden." In the second McDowell's case [1985] 59 STC 277 (SC) the buyers of Indian liquor from the McDowells Distillery released the liquor after making payment of excise duty whereupon the bill of sale or invoice was prepared by the distillery showing the price of liquor by excluding excise duty. The account of McDowell's also did not contain any reference to the excise duty paid by the purchaser. Nevertheless, the company was required to include excise duty paid by the purchaser in the taxable turnover of the company. It is in that connection the second McDo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected by the seller when the sale is made is not very material. Since ultimately excise duty has to be paid to the Government, it may be unnecessary to collect excise duty alone from the oil company, when there is no requirement to collect sales tax from it. The Supreme Court, thereafter, ultimately held as follows: Obviously the case relates to Shinde Brothers v. Deputy Commissioner, Raichur [1967] 1 SCR 548; AIR 1967 SC 1512.-Ed. "We are, therefore, clearly of the opinion that excise duty though paid by the purchaser to meet the liability of the appellant, is a part of the consideration for the sale and is includible in the turnover of the appellant. The purchaser has paid the tax because the law asks him to pay it on behalf of the manufacturer." In McDowell Company Limited v. Commissioner of Commercial Taxes [1987] 67 STC 436 the same question arose before the Division Bench of the Andhra Pradesh High Court, viz., inclusion of excise duty payable by the manufacturer in the turnover for the purpose of assessment to sales tax. The court held that excise duty formed part of the turnover and was exigible to tax. The question whether cess payable and paid to the Rubber Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Ker); 1986 KLT 833. The levy of cess (excise duty) as per section 12(1) and 12(2) of the Act (after the amendment) read along with rule 33-D has made a vital departure. The incidence of the levy is not on the producer or owner of the estate. The liability is cast on the manufacturer alone. In this view of the matter, we are of the view, that after the amendment of the Act in 1960, the scheme of the Act is to levy the duty on the manufacturer (alone) and collection is also made from him (alone). The levy cannot be said to be 'charged' on the production of goods sold. It cannot form part of the sale consideration of the producer or the grower of rubber." All the decisions regarding the nature of excise duty have been considered in paragraph 5 of the said decision to show that excise duty is a levy upon the manufacturer or producer in respect of the manufacture or production though the collection can be deferred to a convenient stage without altering the essential character of the levy. But the levy and collection of the cess was provided for under section 12(2) read with rule 33-D of the Rubber Act and the Rules. The Full Bench held that cess will not form part of the purchase tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained in the Distillery Rules or the Central Excise Rules are merely enabling provisions and will not give any obligation for meeting the burden. The test to show what exactly is the purchase turnover, one has to look at the consideration paid or payable by the purchaser. Excise duty in any case will be a part of the consideration payable by the purchaser. After referring to the decision reported in Hindustan Sugar Mills case [1979] 43 STC 13 (SC), Love v. Norman Wright (Builders) Ltd. [1944] 1 All ER 618 and Paprika Ltd. v. Board of Trade [1944] 1 All ER 372, the Madras High Court came to the conclusion that it would make no difference whether the amount of excise duty is included in the price charged by the dealer or is shown as a separate item in the bill or whether the consideration paid by the purchaser will be the actual sale consideration plus the excise duty. Even if excise duty is not included in the sale bill, in so far as the payment of excise duty is the legal liability of the manufacturer, it would certainly form part of the purchase consideration of the purchaser. The High Court held as under: "From the above extracts from the judgment of the Supreme Court, in se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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