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TMI Blog1997 (12) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... 96 of 1993, Civil Appeal No. 2193 of 1996, Civil Appeal No. 9183 of 1995, Civil Appeal No. 4742 of 1991, Civil Appeal No. 3442, Civil Appeal No. 3443 of 1991, Civil Appeal No. 10386, Civil Appeal No. 10387, Civil Appeal No. 10388, Civil Appeal No. 10389 of 1996, Civil Appeal No. 2253, Civil Appeal No. 2254 of 1993, Civil Appeal No. 2355, Civil Appeal No. 2356 of 1993, Civil Appeal No. 11027, Civil Appeal No. 11028, Civil Appeal No. 11029, Civil Appeal No. 11030, Civil Appeal No. 11626, Civil Appeal No. 11769, Civil Appeal No. 9158 of 1996, Civil Appeal No. 4300 of 1993, Civil Appeal No. 1699, Civil Appeal No. 1700, Civil Appeal No. 1701, Civil Appeal No. 1702, Civil Appeal No. 1703, Civil Appeal No. 1704 of 1988, Civil Appeal No. 4593 of 1989, Civil Appeal No. 8874, Civil Appeal No. 8875 of 1997, R.F. Nariman, Senior Advocate (K.R. Nambiar, Advocate, With him), for the respondent in C.A. Nos. 4596 to 4598 of 19879. H.N. Salve, Senior Advocate (Dhru Agarwal, Advocate, for Khaitan & Co., Advocates, With him), for the appellants in C.A. Nos.1699 of 1704 of 1988 B.V. Desai, Advocate, for the respondents in C.A. Nos. 5765 of 1995 and 5768 to 5772 of 1995. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Bata India Ltd. [1986] 62 STC 436, it included the cess in the purchase turnover of the dealers. This order was confirmed in appeal by the Deputy Commissioner and thereafter by the Appellate Tribunal. 4.. The revision petition filed by the dealers came up for hearing before the Kerala High Court. A Division Bench of that court was of the opinion that there was conflict between two decisions of that High Court and, therefore, the case was referred to a Full Bench. 5.. By judgment dated 29th March, 1989, the Full Bench Reported in [1989] 74 STC 56., by majority, allowed the revision petition holding that the earlier decision in Bata's case [1986] 62 STC 436 (Ker) was wrongly decided and the cess payable and paid under the Rubber Act and the Rules could not form part of the dealers' purchase turnover. In view of the importance of the point in issue the High Court granted certificate for leave to appeal this Court. Hence these appeals. 6.. In order to examine the rival contentions it is necessary to refer to the relevant provisions of the Sales Tax Act and the Rubber Act and the Rules framed thereunder. In respect of MRF the assessment years in question are 1972-73, 1976-77 and 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .. (n) rubber". The controversy being with regard to the inclusion of the cess payable under the Rubber Act, 1947, on the purchase turnover of the dealers, it is appropriate to refer to the relevant provisions, namely, section 12 of the Rubber Act, 1947, and rule 33D framed under the said Act, which are as follows: "Imposition of rubber cess.-(1) With effect from such date as may be notified by the Central Government in this behalf, there shall be levied and collected as a cess for the purposes of this Act a duty of excise on all rubber produced in India at such rate not exceeding one anna per pound of rubber so produced as the Central Government may, by the same or a like notification, from time to time fix. (2) The said duty of excise shall be payable by the owner of the estate on which the rubber is produced, and shall be paid by him to the Board within one month from the date on which he receives a notice of demand therefor from the Board. (3) The said duty of excise may be recovered as if it were an arrear of land revenue. (4) For the purpose of enabling the Board to assess the amount of the duty of excise payable by the owner of an estate under this section, (a) the Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer shall pay to the Board the amount of the duty within one month from the date on which he receives a notice of demand therefor from the Board and, if he fails to do so, the duty may be recovered from the owner or the manufacturer, as the case may be, as an arrear of land revenue. (4) For the purpose of enabling the Board to assess the amount of the duty of excise levied under this section- (a) the Board shall, by notification in the Official Gazette, fix a period in respect of which assessments shall be made; and (b) without prejudice to the provisions of section 20, every owner and every manufacturer shall furnish to the Board a return not later than fifteen days after the expiry of the period to which the return relates, stating- (i) in the case of an owner, the total quantity of rubber produced on the estate in each such period: Provided that in respect of an estate situated only partly in India, the owner shall in the said return show separately the quantity of rubber produced within and outside India; (ii) in the case of a manufacturer, the total quantity of rubber used by him in such period out of the rubber produced in India. (5) If any owner or manufacturer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The incidence of duty of excise was relatable to the production of rubber and this position did not alter after the amendment in 1960. The incidence of the cess, being in the nature of duty of excise, it was submitted, continued to be related to the production of rubber only and it was for the sake of convenience that it was thought expedient that this cess, instead of being collected from the innumerable producers of rubber could most conveniently be collected from the ultimate user thereof, namely, the manufacturer. It was submitted that the definition of "turnover" in section 2(xxvii) of the Sales Tax Act was wide enough to include the liability to pay cess under the Rubber Act as being part of the purchase turnover. 8.. The learned counsel appearing on behalf of the dealers submitted that on the correct interpretation of section 2(xxvii) of the Sales Tax Act, the aggregate of the sum by the buyer to the seller "including payment made on his behalf" would constitute a part of the turnover of the buyer for levy of sales tax. The cess which was to be paid under the Rubber Act was not required to be paid by the manufacturer on behalf of the seller because according to section 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement would be inherent in the price which is paid for the purchase of the said goods. The duty of excise is one which is directly relatable to the production or manufacture of goods but can be collected at a latter stage is now no longer open to doubt in view of several decisions of this Court some of which are R.C. Jall Parsi v. Union of India AIR 1962 SC 1281, Guruswamy and Co. v. State of Mysore [1967] 1 SCR 548, Jullundur Rubber Goods Manufacturers' Association v. Union of India AIR 1970 SC 1589, A.B. Abdul Kadir v. State of Kerala [1976] 2 SCR 690 and McDowell & Company Limited v. Commercial Tax Officer [1985] 59 STC 277 (SC). 11.. In an effort to show that the Rubber Act and the Rules framed thereunder provide that the liability to pay the cess arises only when the manufacturer uses the rubber and that the liability was not of the producer and, therefore, cess could not form part of the purchase turnover, reliance was placed on the decision of this Court in Jullundur Rubber Goods Manufacturers' Association v. Union of India [1970] 2 SCR 68, wherein, after referring to rules 33(e), 33A, 33B and 33D(1), this Court had observed at page 79 as follows: "Now the above rule seem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollect the cess from the consumer or the manufacturer. Three contentions had been raised before the court and they were as follows: "The contentions which have been raised are: (1) the duty sought to be imposed under section 12 as amended being outside the ambit of entry 84 of List I in the Seventh Schedule to the Constitution is beyond the legislative competence of the Parliament; (2) section 12(2) suffers from the vice of excessive delegation. It confers uncontrolled and unrestricted discretion upon the Rubber Board to levy upon and collect duty of excise from either the owners of the rubber producing estates or the users so called manufacturers (of rubber) without specifying the circumstances under which it should be imposed upon the one or the other nor has any guiding policy or principle been laid down in the Act for making a choice; (3) In any case, the Rules which have been framed do not satisfy the provisions of section 12(2) of the Act and do not indicate with sufficient clarity and precision on whom the levy is to be made and from whom the duty is to be collected as between the owners of the estates and the manufacturers." 14.. While dealing with the said thre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the said amount must flow from a contract to sell the goods. If, however, the seller has any statutory right to pass on any burden of any charge or levy to the buyer, then such a sum is not a part of his turnover. In this connection reliance was placed on Anand Swarup Mahesh Kumar v. Commissioner of Sales Tax [1980] 46 STC 477 (SC); [1981] 1 SCR 707. In this case the market fee was payable under a U.P. Act. The question arose whether payment of this fee could be included in the turnover of producers for assessment of sales tax under the Act. Anand Swarup's case [1980] 46 STC 477 (SC); [1981] 1 SCR 707 was considered and distinguished by a Constitution Bench of this Court in McDowell & Company Limited v. Commercial Tax Officer [1985] 59 STC 277. The decision in McDowell's case [1985] 59 STC 277 (SC) clearly supports the submissions urged on behalf of the appellant. In McDowell's case [1985] 59 STC 277 (SC) excise duty on sale of liquor was payable by the appellant-manufacturer. The appellant sold the liquor to buyers who themselves paid the excise duty directly but the department sought to include the amount representing the excise duty paid by the buyer as a part of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) and (2), the incidence of the duty arises the moment the rubber is produced. On the rubber so produced duty at a specified rate becomes payable. When the producer sells the said rubber to a licensed dealer it would be legitimate to infer that in determining the amount of price payable the incidence of the cess would be taken into account. What is purchased by the licensed dealers is rubber to which is attached a charge of cess payable at the prescribed rate. Even though the Rubber Act and the Rules framed thereunder do not contemplate that the licensed dealer has to pay the cess, nevertheless because the goods are not to be used by the licensed dealer but have ultimately to be used by the manufacturer, the transfer of the goods by the dealer to the manufacturer would occasion the realisation of the cess by the department from the manufacturer. The cess which will be so realised is the one which stood imposed by the provisions of the statute itself, viz., section 12(1), at the time when the rubber was produced and before it was purchased by the dealers or manufacturers. 18.. It is no doubt true that section 12(1) does not specifically state that the taxable person is a producer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired the licensee, namely, the wholesaler to pay the excise duty on removal of the stock by him. The contention which was raised by the manufacturer was that in view of the provisions of the Act and the said Rules, the liability to pay the excise duty lay not upon the manufacturer but upon the wholesaler, who was the licensee who was required to pay under the aforesaid rule 15(1) of the Tamil Nadu Indian- made Foreign Spirits (Supply by Wholesale) Rules, 1981. In this connection it was submitted that the manufacturer neither collected the excise duty from the wholesaler nor had they statutory or contractual authority to realise the same from it and, therefore, the manufacturers were not liable to pay sales tax on the excise duty which was neither part of the sale price nor a consideration for the sale. Repelling this contention it was held that excise duty was levied upon the goods manufactured, though its collection may be deferred to such latter stage as was administratively or otherwise most convenient. After referring to a case in Union of India v. Bombay Tyre International Ltd. (1984) 1 SCC 467, it was observed that the method of collection did not affect the essence of dut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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