TMI Blog1975 (11) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturer, who, in its turn, would send to the purchaser a certificate known as proof strength certificate. Thereupon the customerbuyer applies to the excise authorities for the grant of transport permit in his own name and deposits the requisite sum of excise duty into the Government treasury and obtains a challan. Thereafter, the concerned excise authorities would issue the transport permit in the name of the buyer who sends the transport permit and the challan to the manufacturer. The manufacturer raises the invoice and despatches the goods and issues the sale bill in respect of the transaction to the customer. But, however, the amount of excise duty paid by the customer or buyer to the Government in his own name does not find a place in the sale bill. For the assessment year 1970-71, a sum of Rs. 80,307.30 was claimed to have been paid by the petitioner's customers directly towards excise duty payable in respect of the excisable articles, namely, alcohol and liquor, sold by the petitioner during the year. The petitioner, therefore, claimed that as the excise duty of Rs. 80,307.30 has been paid by the purchasers themselves of their own accord in their own right and has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeal. The further appeals, i.e., Tribunal Appeals Nos. 331 of 1973 and 5 of 1974, preferred by the assessee to the Sales Tax Appellate Tribunal against the orders of the Assistant Commissioner dismissing its appeals for the assessment years 1970-71 and 1969-70 are without success. Hence, these two tax revision cases. The sum and substance of the contentions advanced by Sri P. Venkatarama Reddi, Sri S. Dasaratharama Reddi and Sri Challa Seetharamaiah, the learned counsel for the assessee-petitioners in this batch of cases, is four-fold: (1) Excise duty paid by a buyer directly to the excise authorities in respect of liquor or any excisable article purchased by him from a distiller or manufacturer does not constitute the sale price payable to the seller towards goods supplied and, therefore, it does not form part of the assessees' turnover. (2) A transaction of sale of liquor is completed at the distillery at a point of time when the transport permit is sent by the seller to the buyer and the seller obtains the invoice when the goods are earmarked for the buyer and, therefore, excise duty is exigible on liquor at the point of transport or removal from the godown but not ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter of excise duty. The Andhra Pradesh State Legislature enacted section 21 of the Excise Act by virtue of the powers conferred on it under entry No. 51 of List 11 (otherwise known as State List) of the Seventh Schedule to the Constitution, which reads thus: "Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics; but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry." It is pertinent to notice that under entry No. 84 of List 1 of the Seventh Schedule to the Constitution, the Parliament is competent to make any law in respect of duties of excise on tobacco and other goods manufactured or produced in India and that power is specifically indicated to be not in existence in so far as alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics are concerned. The Andhra Pradesh State Legislature, therefore, undoubtedly po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purchaser of liquor from the manufacturer that is liable under law to pay the excise duty. If it is the manufacturer that is statutorily liable to pay excise duty, it matters little whether it is paid by himself or anyone on his behalf and the payment of excise duty by any one other than the manufacturer must be deemed in law to be for and on behalf of the manufacturer. Hence, the excise duty may be paid either by the manufacturer or instead of him, the dealer or the purchaser who intends to take delivery of liquor. It must not be forgotten that it is always open to the manufacturer to pay the requisite duty himself and obtain the transport permit and deliver the goods after receiving the sale price inclusive of the excise duty and other amounts incurred therefor and include the same in the bill of sale. In other words, he can pay excise duty and pass on the same to the buyer as part of the sale consideration. There is no prohibition under law preventing the manufacturer from paying the excise duty, but, on the other hand, section 21 imposes a statutory liability and obligation on the manufacturer to pay excise duty. Section 21, no doubt, does not specify the person who i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point at which the tax is to be levied, viz., at the point of purchase, and in so far as items (i) and (ii) are concerned at the point of purchase by the last dealer who buys in the State and with respect to items (iii) and (iv) at the point of first purchase in the State. No doubt there is an omission to specify that it is the purchaser who is to pay at the point of purchase, an omission which if the draftsman had been careful would not have created this problem. All the same the intention appears to us to be clear, in seeking to impose the tax on the purchaser." Hence, the mere omission to specify the name of the manufacturer or distiller as the person liable to pay excise duty in section 21 would not absolve him from his liability to pay excise duty on the goods manufactured in his factory. We may add that the same conclusion would follow even if we apply the test of nature and character of excise duty. The creation of a charge, or incidence of taxation, of excise duty turns upon the provisions of the very charging section in the statute and no rule-making authority can, without proper legislative competence, make any law in that regard. The State Government, by virtue of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Federal Court has been approved by the Privy Council in Governor-General in Council v. Province of Madras[1945] 1 S.T.C. 135 at 141-142 (P.C.); A.I.R. 1945 P.C. 98 at 101. The learned Lord Simonds, speaking for the Judicial Committee, ruled: "........a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods not on sales or the proceeds of sale of goods The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may,......... in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale. But that method of collecting the tax is an accident of administration: it is not of the essence of the duty of excise, which is attracted by the manufacture itself." The law on this subject has been settled by the Supreme Court in R.C. Jall v. Union o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like taxes on property and income." The Aforesaid decisions are authorities for the proposition that excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country whereas sales tax is a tax on a sale or purchase of goods. Though both excise duty and sales tax are levied with reference to goods, they are different imposts. In the case of excise duty, the imposition is on the act of manufacture or production whereas in the case of sales tax it is on the act of sale or purchase. The two taxes may in one sense overlap but in law there is no overlapping. The imposition of each of the aforesaid two imposts is different from the machinery and methods provided in the respective statutes or the Rules made thereunder for its collection. As observed by Venkatarama Ayyar, J., in Bengal Immunity Co. Ltd. v. State of Bihar[1955] 6 S.T.C. 446 at 619 (S.C.).: "A power to tax is a matter of substantive law, whereas the machinery sections providing for the execution of that power, such as assessment, and collection of tax, pertain to the domain of adjectival law, and the two are distinct and separable. It is elementary law that the power t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very of the liquor from the distillery or godowns must be construed to be one paid for and on behalf of the manufacturer who is statutorily liable to pay the same. The mere payment of the excise duty by the buyer even before actual delivery of the liquor and his conduct in applying for distillery pass as well as transport pass or permit from one place to another would not in any way alter the legal position. True, as submitted by Mr. Challa Seetharamaiah, that an applicant for distillery pass shall be responsible for the correct calculation and full payment of the excise duty on liquor removable under a pass in form D-6 and also rules 82 to 84 of the Andhra Pradesh Distillery Rules, 1970. In fact, some of the purchasers of liquor herein have applied for and obtained distillery passes and transport permits on payment of excise duty. We are unable to agree with the petitioners that excise duty is exigible at the point of transport or removal. Rules 3, 4, 5, 6, 76(a) and (b) and 79 to 84 of the Andhra Pradesh Distillery Rules, on which strong reliance has been placed, may be noticed. Section 72 of the Excise Act empowers the State Government to make rules for carrying out all or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reas rule 81 provides for an application for distillery pass for removal of spirit or liquor to be made in writing to the distillery officer and accompanied by a challan in original in support of payment of excise duty therefor and the certificate or permit required under the Rules. Rule 82 provides for obtaining a challan for presentation with the cash at a treasury or sub-treasury of a district and presentation of the treasury receipt in token of his having paid the duty. The distillery officer, thereupon, shall affix it to the counterfoil of form D-6. Rule 83 makes an applicant for a distillery pass responsible for the correct calculation and full payment of excise duty due upon spirit removed. Rule 84 empowers the distillery officer to issue the spirit under a pass in form D-6 if he is satisfied that the applicant is entitled under the rules to remove spirit and that the requisite excise duty has been paid. He shall send a duplicate pass to the Excise Superintendent of the district of destination. The rules referred to above are no doubt statutory but none of them alter the legal effect of the statutory liability of the manufacturer to pay the excise duty on the liquor or spiri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (1) thereof comes into play. Rules 16, 17 and 18, which provide for transport permits would not in any way come to the aid of the petitioners in support of their contention that excise duty is chargeable at the point of removal or transport of liquor or spirit but not at the stage of manufacture or production. We shall now advert to the contention of the petitioners that the amount of excise duty has not been included in the bills of sale issued by the manufacturers and, therefore, it does not form part of the "turnover" defined under section 2(s) of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as the Sales Tax Act), and, consequently, sales tax is not exigible in respect of excise duty. By virtue of item No. 26 of the First Schedule to the Sales Tax Act, all liquor other than country liquor is taxable at the point of its first sale in the State. The liquor produced or manufactured by the petitioners is Indian-made foreign liquor, which falls under item No. 26 of the First Schedule and it is the first sale of such liquor that is taxable. Sales tax, no doubt, is payable or chargeable on the total turnover of a dealer. All the petitioners herein are dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of the "turnover". There may be cases where the parties agree to pay and receive the total consideration or sale price partly in cash and partly in kind. The payment may be either before, or at, or after the transaction of sale. There may or may not be a bill of sale. Stress is on the total amount charged by the seller and paid by the buyer towards the consideration for the transaction of sale. The seller may direct the buyer to pay a part of the sale consideration directly to him or to anyone as per his direction or towards his liability. The heart of the matter is what is the detriment to the buyer in so far as the transaction of sale is concerned. Admittedly, the consideration or sale price for the goods must invariably proceed from the purchaser. Therefore, what exactly has been spent by the buyer towards the transaction of sale or purchase is material for the purpose of determining the total sale price or consideration. In addition to the sale price, charity or dharmam is also being collected from the purchasers as a matter of trade usage in some transactions. So also processing and packing charges and sales tax payable by the dealer are collected. In such an event, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natha Sastri, J., who spoke for the court, observed thus: "The consideration proceeding from the buyer is the money which he has to part with and pay to the seller. The detriment to the buyer is the whole of the sum of money he has to pay the seller for, and on the occasion of, the sale and that is the consideration for the sale which should enter into the computation of the 'turnover'. The dealer may collect and the purchaser may pay in meal or in malt. The invoice or bill of the seller might show the price of the goods and the amount of sales tax separately but the purchaser has to pay the consolidated amount of the bill as consideration for the purchase, that is to say, as the price of the goods. As observed by the Supreme Court in State of Bombay v. United Motors[1953] 4 S.T.C. 133 (S.C.).-the decision has not been upset on this point by the Bengal Immunity Co.'s case[1955] 6 S.T.C. 446 (S.C.).-the incidence of sales tax is really on the consumer and it is, in substance, a tax imposed on the goods on the occasion of sale. The ultimate economic incidence of the sales tax is on the consumer or the last purchaser and whatever he pays for the goods is paid only as price, that is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Sales Tax[1971] 28 S.T.C. 331 (S.C.). (, wherein the same view has been reiterated. In George Oakes (P.) Ltd. v. State of Madras[1962] 13 S.T.C. 98 at 101 (S.C.). , it was held that sales tax shall be calculated on the total amount received by the dealer including the tax at 3 paise per rupee and if there is any additional tax collected, that should also be taken into account. The learned Judge, Hidayatullah, J. (as he then was), speaking for the court, observed thus: "........... the word 'price' in so far as the purchaser is concerned, includes the tax also, and that in laws dealing with sales tax, turnover has, in England and America also, been held to include the tax ...... Again, it was said that the price paid by the purchaser was not so much money for the article plus tax but a composite sum. Therefore, in calculating the total turnover, there is nothing wrong in treating the tax as part of the turnover, because 'turnover' means the amount of money which is turned over in the business." We shall now advert to the decisions of the Mysore High Court in P. V. Beedies (P.) Ltd. v. State of Mysore[1963114 S.T.C. 139. and D. Cawasji Co. v. State of Mysore[1969] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of our High Court and, in any event, the two decisions of the Mysore High Court are distinguishable on facts. The question that fell for decision of the Supreme Court in Joint Commercial Tax Officer v. Spencer Co.[1975] 36 S.T.C. 188 at 191 (S.C.). was whether sales tax required to be collected under section 21-A of the Madras Prohibition Act, 1937, can be included in the taxable turnover under the Madras General Sales Tax Act, 1959. On a consideration of the provisions of section 21-A of the Madras Prohibition Act, 1937, sales tax collected by a seller of foreign liquor from the purchaser was held to be a tax on the purchaser and not on the seller and this provision makes the seller a collector of tax for the Government and the amounts so collected by him being under a statutory obligation cannot be held to be a part of the turnover under the Madras General Sales Tax Act, 1959. The learned Judge, A.C. Gupta, J., speaking for the court, observed thus: "Under section 21-A the tax payable is on the price of the liquor and that tax is to be paid by the purchaser; the seller is required to collect the tax from the purchaser which he has to pay over to the Government. Section 21-A m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same on the purchasers. The excise duty thus paid by a buyer though not included in the bill of sale or invoice by the manufacturer-seller would, without doubt, form part of the sale consideration otherwise known as the consideration for the purchase paid by him and it constitutes the turnover of the seller. The fact that the payment of excise duty was made either voluntarily or without a specific direction from the distiller-assessee does not alter the legal position. Applying the aforesaid principles, we must hold that the excise duty paid by the purchasers directly to the State Government for obtaining the requisite transport permits and the distillery passes in the present cases in respect of liquor or alcohol purchased by them from the assessee-distillers or manufacturers form part of the taxable turnover of the assessees herein. We may add that this conclusion of ours is fortified by the decision of a Division Bench of the Patna High Court in Dayabhai Gokulbhai Patel v. State of Bihar[1959] 10 S.T.C. 483 at 492-493. Therein, it fell for consideration as to whether the excise duty paid by a customer directly to the Government but not included in cash memos issued by the dea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.); A.I.R. 1973 S.C. 2266., wherein it was observed that reassessment is fresh assessment and the entire turnover is reassessed afresh. The submission of the petitioner is devoid of any merit. In the present cases, the original assessment was under section 14(1) of the Sales Tax Act. At that time, the inclusion of freight charges and the value of unserviceable gunnies sold, in the turnover of the assessee-petitioner was not disputed. Reassessment proceedings have been initiated under section 14(4) for escaped turnover. In the circumstances, the assessing authority is not competent to reopen items other than those, which escaped turnover. The scope of reassessment proceedings under the Sales Tax Act is similar to the one under the Indian Income-tax Act. In S. Inder Singh Gill v. Commissioner of Income-tax[1963] 47 I.T.R. 284 at 297., a Division Bench of the Bombay High Court, while considering the impact of section 34 of the Indian Income-tax Act, 1922, observed thus: "The scope of reassessment under section 34 is a limited scope. It is an assessment only in respect of the income that has escaped assessment. The first assessment which relates to the income which had been disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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