The excise duty paid by the assessee is not liable to be included in the taxable turnover, and the assessee is entitled to the benefit of the concessional rate of taxation at 1 per cent for the turnover relating to sales of naphtha.

BALAKRISHNA ERADI, C.J.

The State of Kerala represented by the Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam, is the revision petitioner in these two connected revision petitions filed against the common order dated 28th February, 1979, passed by the Kerala Sales Tax Appellate Tribunal, Trivandrum, dismissing Tribunal Appeals Nos. 959 and 960 of 1977 filed before it by the State.

2. The assessee is M/s. Burmah Shell Oil Storage and Distributing Company Ltd., and the second appeals disposed of by the Tribunal arose out of the assessments to sales tax under the Kerala General Sales Tax Act, 1963 (hereinafter called the Act), made against the assessee for the assessment years 1974-75 and 1975-76. Two questions were raised before the Tribunal by the State in these second appeals. The first question was whether the excise duty paid to the Central excise department on petroleum products purchased by the assessee was liable to be included in the taxable turnover of the assessee for the two assessment years. The second question was whether the assessee was entitled to the benefit of the concessional rate of tax at 1 per cent on the turnover relating to the sale of naphtha inasmuch as it has produced open declaration in the prescribed form from the purchasing dealers as prescribed under section 5(3) of the Act.

3. The relevant facts which lie in a short compass are not in dispute. The assessee-company purchased petroleum products from the Indian Oil Corporation's refinery at Cochin and they were delivered by pipelines to tanks owned by the assessee and licensed as bonded warehouses by the Central excise authorities. The Indian Oil Corporation had billed the assessee only for the actual value of the products sold and excise duty was not charged by the Indian Oil Corporation nor was it shown as part of the sale price. The products so purchased were stored by the assessee in their storage tanks at the Ernakulam installation, which, as already mentioned, are licensed under rule 140 of the Central Excise Rules to store bonded stocks. On every occasion when the assessee-company received petroleum products into those tanks it executed surety bonds in form B4 prescribed under the Central Excise Rules undertaking to pay the excise duty in respect of the goods so received. Duty was thereafter paid by the company as and when the products were removed from those tanks as prescribed under rule 157 of the Central Excise Rules. The amount of duty paid by the assessee was calculated on the basis of the rates prevailing at the time of withdrawal of the products from the tanks and not at the rate which was in force at the time of the purchase of the products from the Indian Oil Corporation. The assessee-company became the owner of the products when it had obtained the delivery of the same through the pipelines into its storage tanks and it was in the capacity as the owner of the products that it had executed the bond to pay the duty on its own behalf under the statutory provisions contained in the Central Excise Rules.

4. The assessing authority while completing the assessment of the assessee-company for the years aforementioned included in the taxable turnover the amount of excise duty paid by the assessee on the basis that those amounts formed part of the purchase turnover of the petroleum products. The assessing authority also rejected the claim of the assessee that in regard to the sales turnover of naphtha it was liable to be taxed only at the concessional rate of 1 per cent in view of its having filed declaration from the purchasing dealers as required under section 5(3) of the Act read with rule 28 of the Rules. In the opinion of the assessing authority the assessee was not entitled to the benefit of the concessional rate of tax, because the final product, viz., chemical fertilisers, manufactured by the purchaser, did not contain naphtha in any form.

5. Aggrieved by the assessments so made against it, the as