Excise duty and concessional sales tax: purchaser-paid duty falls outside turnover, and indirect use does not defeat the naphtha concession.

Excise duty paid by a purchaser on removal of petroleum products from bonded warehouses was treated as a statutory liability and not part of the seller's sale price, so it was excluded from taxable turnover under the Kerala General Sales Tax Act. The article also states that concessional tax under section 5(3) on naphtha sales remains available when the prescribed declaration is furnished, even if the purchaser uses naphtha indirectly as fuel in producing a scheduled manufactured product such as chemical fertilisers. The stated result follows prior authority on the same issue.

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Issues: (i) Whether excise duty paid by the purchaser at the stage of removal of petroleum products from bonded warehouses formed part of the taxable turnover under the Kerala General Sales Tax Act, 1963. (ii) Whether the assessee was entitled to the concessional rate of tax on sale of naphtha under section 5(3) of the Kerala General Sales Tax Act, 1963 on the strength of the prescribed declaration, even though the purchaser used it indirectly in the manufacture of chemical fertilisers.

Issue (i): Whether excise duty paid by the purchaser at the stage of removal of petroleum products from bonded warehouses formed part of the taxable turnover under the Kerala General Sales Tax Act, 1963.

Analysis: The duty was paid by the assessee after it had become owner of the goods and while removing them from its own bonded warehouses under the Central Excise Rules. Such payment was made in discharge of a statutory liability fastened on the purchaser and not as part of the price paid to the seller. The definition of turnover under the Act brings in only the aggregate amount for which goods are bought or sold, and the excise duty so paid did not constitute a component of the purchase price.

Conclusion: The excise duty paid by the assessee was not includible in its taxable turnover. The finding was in favour of the assessee.

Issue (ii): Whether the assessee was entitled to the concessional rate of tax on sale of naphtha under section 5(3) of the Kerala General Sales Tax Act, 1963 on the strength of the prescribed declaration, even though the purchaser used it indirectly in the manufacture of chemical fertilisers.

Analysis: The controlling requirement was that the sale be to a manufacturer of goods specified in the First Schedule and that the statutory declaration be furnished. The fact that naphtha was used only as fuel for producing hydrogen, which was then used in the manufacture of chemical fertilisers, did not defeat the concession. The earlier decision on the same issue was followed.

Conclusion: The assessee was entitled to the concessional rate of tax at 1 per cent on the naphtha turnover. The finding was in favour of the assessee.

Final Conclusion: The revision challenge to both findings failed, and the assessee succeeded on both substantive questions.

Ratio Decidendi: Excise duty paid by a purchaser in discharge of a statutory liability on goods owned by it and removed from bonded warehouses is not part of the purchase price or taxable turnover, and the concessional sales-tax rate under section 5(3) is available when the statutory declaration is furnished, even if the purchaser uses the goods indirectly in the manufacture of the scheduled product.

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