Indian Oil Corporation Ltd. vs. Commissioner of Trade Tax, U.P., Lucknow, [2012] 47 VST 66 (All)

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Sales Tax-Sale Price-Goods Kept in Bonded Warehouse by The Manufacturer Outside the State- Excise Duty Paid by The Purchaser Outside the State-Forms Part of Turnover-section 2(h) of the Central Sales Tax Act, 1956.

Facts:
The company had transferred petroleum products from its bonded warehouse to bonded warehouse of other marketing companies situated outside the State of UP and excise duty was paid by the purchaser of goods when goods were removed from the bonded warehouse. The assessing authorities included the amount of excise duty paid by the purchaser in turnover of sales and levied tax under the CST Act. The assessment order passed by the assessing authority was confirmed by the Tribunal. The petitioner company filed a petition before the Allahabad High court against the order passed by the Tribunal.

Held
The excise duty is leviable on the manufacture of product and it is at the point of removal. No goods can be removed from the factory or warehouse without the payment of duty. Therefore the initial liability to pay the excise duty was on the manufacturer while removing goods from the factory to its warehouse. However, if the permission is granted to remove the goods from the factory or warehouse to another warehouse licensed u/s. 140 belonging to some other person, without payment of duty, the duty is payable on the clearance of goods from such warehouse. In such circumstances the payment of duty is only deferred or extended from the stage of removal of goods from the factory to warehouse of the manufacturer or purchaser, but the liability to pay the excise duty, which is chargeable and payable under the act, by the manufacturer does not cease. The incidence of excise duty is directly relatable to manufacture but its collection can be deferred to later stage as a measure of convenience or expediency.

The court after following various decisions of the SC held that the excise duty paid by the purchaser is liable to be included in sale price for the purpose of the levy of tax under the Central Sales Tax Act, 1956.