Inclusion of Excise Duty in Purchase Turnover for Taxation

The excise duty paid by the petitioner, an oil company, for goods transferred outside Kerala was held to be part of the purchase turnover liable to tax under section 5A of the Kerala General Sales Tax Act, 1963. The court ruled that the excise duty paid by the petitioner was in discharge of the liability of the manufacturer, Cochin Refineries Limited (CRL), and therefore should be included in the purchase turnover. The decision in Deputy Commissioner of Sales Tax v. Burmah Shell Oil Storage and Distributing Company Ltd. was overruled, and the tax revision cases were dismissed.

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Issues Involved:
1. Whether excise duty paid by the petitioner in respect of goods transferred outside the State of Kerala formed part of the purchase turnover liable to tax u/s 5A of the Kerala General Sales Tax Act, 1963Rs.

Summary:

Issue 1: Inclusion of Excise Duty in Purchase Turnover

The core question is whether excise duty paid by the petitioner for goods transferred outside Kerala forms part of the purchase turnover liable to tax u/s 5A of the Kerala General Sales Tax Act, 1963. The assessee, an oil company, contended that excise duty paid directly to the government should not form part of the purchase price paid to IOC. However, the Tribunal held that excise duty paid by the assessee is in discharge of the liability of the manufacturer, Cochin Refineries Limited (CRL), and thus includible in the purchase turnover.

The Court examined the provisions of the Central Excise Act and Rules, highlighting that excise duty is a duty on the production or manufacture of goods. The Tribunal found that the bond executed binds the assessee to pay excise duty, which is primarily the liability of the manufacturer. The Supreme Court's decisions in cases like McDowell & Company Limited v. Commercial Tax Officer [1985] 59 STC 277 and Hindustan Sugar Mills Ltd. v. State of Rajasthan [1979] 43 STC 13 were cited, emphasizing that excise duty forms part of the consideration for the sale of goods and is includible in the turnover of the manufacturer, even if paid by the purchaser.

The Court concluded that excise duty paid by the petitioner was in discharge of the liability of CRL and, therefore, it forms part of the purchase turnover for the purpose of section 5A of the Kerala General Sales Tax Act. The decision in Deputy Commissioner of Sales Tax v. Burmah Shell Oil Storage and Distributing Company Ltd. [1981] 48 STC 37 was overruled, and the tax revision cases were dismissed.

Conclusion:

The excise duty paid by the petitioner is part of the purchase turnover liable to tax u/s 5A of the Kerala General Sales Tax Act, 1963, as it discharges the liability of the manufacturer, CRL.

Petitions dismissed.

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