K.A. Nayar, J.

The four tax revision cases were referred to the Full Bench doubting the correctness of the Division Bench decision reported in Dy. Commissioner of Sales tax v. Burmah Shell Co. Ltd., (1981) 48 STC 37 in the background of the subsequent Full Bench decision in Madras Rubber Factory Ltd. v. State of Kerala (1989 (1) KLT 827 = (1989) 74 STC 56) and the Supreme Court decision in McDowell & Co. Ltd. v. Commercial Tax Officer (1985) 59 STC 277. The facts of the case have been stated in the referring order.

2. The tax revision cases arose out of the common order passed by the Kerala Salestax Appellate Tribunal Additional Bench, Ernakulam. The first two cases related to the assessment years 1971-72 and 1972-73, and the other two cases related to the assessment years 1975-76 and 1976-77. The common question which arises for consideration is 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 under S.SA of the Kerala General Sales Tax Act.

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 produced. Levy of excise duty is provided for in the Central Excise & Salt Act, 1944 (for short 'Act') and Central Excise Rules, 1944 (for short 'Rules'). Rule 7 requires every person who produces excisable goods or who store such goods in a warehouse to pay duty leviable at such time and place to such person as designated by the rules. R.9 provides for the time and manner of payment of duty. No excisable goods shall be removed from any place where they are produced or manufactured until excise duty leviable thereon has been paid. But such goods may be deposited without payment of duty in storeroom or other place of storage approved by the Collector under the rules or in a warehouse appointed or licensed under. R.140 of the Central Excise Rules. Such goods were kept in the bonded warehouse of CRL and the transfer was effected from the bonded warehouse to bonded warehouse of IOC and HPC and no excise duty was actually paid. In short, IOC issued regular bills to HPC indicating only the value of goods sold. Excise duty is paid only when goods are removed from the bonded warehouse of HPC.

5. HPC sold the goods inside the State after removing the same from the bonded warehouse. Salestax was imposed on such sale by HPC taking into account excise duty element as well. The assessee also despatched goods outside the State of Kerala after paying excise duty on such removal. The assessee has not offered for assessment the amount representing excise duty paid on the bonded purchase of goods which were transferred out of the State of Kerala. The assessee took the view that it is liable to pay purchase tax only on the price paid to the IOC and as the payment of excise duty was made by it directly to the Government, it will not form part of the purchase price of oil paid to the IOC. The assessing authority did not accept the contention of the assessee and, therefore, levied purchase tax under S.SA of the Keral