TMI Blog1989 (4) TMI 308X X X X Extracts X X X X X X X X Extracts X X X X ..... 5850 of 1988. All the petitioners are manufacturers of Indian-made foreign liquor (for short "IMFL") on the basis of licences issued to them under the Tamil Nadu Indian-made Foreign Spirits (Manufacture) Rules, 1981. The petitioners are required to effect sales of their IMFL products only to Government-appointed wholesalers. The manufacture, supply and sale of the IMFL products are governed by the Tamil Nadu Prohibition Act, 1937 (for short "the Act'), the Tamil Nadu Indian-made Foreign Spirits (Supply by Wholesale) Rules, 1981 (for short "the Wholesale Rules') and the Tamil Nadu Indian-made Foreign Spirit (Manufacture) Rules, 1981 (for short "the Manufacture Rules"). Section 17-C was introduced to the Act by the Tamil Nadu Amendment Act (33 of 1983) by which Tamil Nadu State Marketing Corporation (hereinafter referred to as "TASMAC") was appointed as the exclusive wholesale purchaser of the product for the entire State of Tamil Nadu. In other words, the entire sales of the petitioners are only to TASMAC. Section 18-B of the Act provides for levy of excise duty on excisable articles. Section 18-C talks of how duty may be imposed. Before proceeding further, it will be advantageous t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under this Act; (c) permitted to be transported under this Act (d) manufactured under any licence granted under this Act; (e) manufactured at any distillery, blending unit or brewery licensed or established under this Act; (f) issued from a distillery, blending unit, brewery or warehouse licensed or established under this Act; or (g) sold in any part of this State. (2) Nothing in this section shall authorise the levy of any duty which as between excisable articles manufactured or produced in the State and similar excisable articles not so manufactured or produced, discriminates in favour of the former or which in the case of excisable articles manufactured or produced outside the State discriminates between excisable articles manufactured or produced in one locality and similar excisable articles, manufactured or produced in another locality. (3) Section 18-A shall, in so far as it relates to matters specified in this section, cease to be in force with effect on and from 1st May, 1981. 18-C. The excise duty or the countervailing duty under section 18-B may be levied in one or more of the following ways: (a) by duty of excise to be charged in the case of spirits o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for its requirement of the product and thereupon the element of excise duty is assessed and duty is recovered from the said wholesaler and on such assessment, the wholesaler remits the same into the treasury. On the production of the duty-paid challan, the petitioners effect delivery of the product. It is, therefore, clear the petitioners neither collect the excise duty from the wholesaler nor have any statutory or contractual authority to realise the same from the wholesaler. If that be the position, according to the learned counsel, the petitioners could not be required to pay sales tax on excise duty which is neither part of the sale price nor consideration for the sale of the IMFL products. Therefore, the attempt on the part of the Revenue to include excise duty in the turnover of the petitioners and consequently to recover sales tax on excise duty is without jurisdiction. The amendment introduced to rule 22 of the Manufacture Rules and rule 15 of the Wholesale Rules by G.O. Ms. 711 (P E), dated 4th October, 1982, according to the petitioners, is deliberate to avoid sales tax on excise duty. The Revenue misunderstood the ratio of the judgment of the Supreme Court in McDowel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The learned Advocate-General took us through the judgment of the Supreme Court in the Second McDowell's case [1985] 59 STC 277 and submitted that it provides a full and complete answer to the arguments advanced by the learned counsel for the petitioners. 6.. We have carefully gone through the judgment of the Supreme Court in the Second McDowell's case [1985] 59 STC 277. We feel that it will be useful to extract liberally from the judgment of the Supreme Court in the Second McDowell's case [1985] 59 STC 277 (by underlining* wherever necessary to lay emphasis) as we find therein that the Supreme Court has given a clear picture about the character and incidence of excise duty. Once this is clear, most of the arguments advanced by the learned counsel for the petitioners will not survive. Regarding the character and incidence of the excise duty, the Supreme Court in the Second McDowell's case [1985] 59 STC 277, has held as follows: "The Federal Court in Province of Madras v. Boddu Paidanna Sons [1942] 1 STC 104 (FC); [1942] FCR 90 held: 'There is in theory nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either producers nor manufacturers. Its incidence certainly falls directly on the production or manufacture of goods but the method of collection will not affect the essence of the duty.' In A.B. Abdul Kadir v. State of Kerala [1976] 2 SCR 690, this Court restated the position thus: 'Excise duty, it is now well-settled, is a tax on articles produced or manufactured in the taxing country. Generally speaking, the tax is on the manufacturer or the producer, yet laws are to be found which impose a duty of excise at stages subsequent to the manufacture or production.' Thus, the incidence of excise duty is directly relatable to manufacture but its collection can be deferred to a later stage as a measure of convenience or expediency. On an examination of the provisions of the Excise Act, the Rules framed thereunder and the pronouncements referred to above, we are of the view that the conclusion of this Court at page 921 of the Reports [at page 158 of [1977] 39 STC 151 (SC)] that intending purchasers of the Indian liquors who seek to obtain distillery passes are also legally responsible for payment of excise duty, is too broadly stated. The 'duty' was primarily a burden which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermining the turnover. Where a bill of sale is issued (and obviously the bill has to state the total amount charged as consideration), the total amount set out therein is to be taken into account. In every transaction of sale, there is bound to be a seller at one end and a buyer at the other and transfer of title in the goods takes place for a consideration. In Hindustan Sugar Mills v. State of Rajasthan [1979] 43 STC 13 (SC); [1979] 1 SCR 276, this Court observed: 'The test is, what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up, whether it includes excise duty or sales tax or freight. The only relevant question to ask is as to what is the amount payable by the purchaser to the dealer as consideration for the sale........ The Court proceeded to say: 'Take for example, excise duty payable by a dealer who is a manufacturer. When he sells goods manufactured by him, he always passes on the excise duty to the purchaser. Ordinarily it is not shown as a separate item in the bill, but it is included in the price charged by him. The sale price in such a case could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t seller has included tax or not....... So far as the purchaser is concerned, he pays for the goods what the seller demands, namely, the price even though it may include tax. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover.' Admittedly, the bills issued by the appellant did not include the excise duty. As already found, payment of excise duty is a legal liability of the manufacturer; its payment is a condition precedent to the removal of the liquor from the distillery and payment by the purchaser is on account of the manufacturer. According to normal commercial practice, excise duty should have been reflected in the bill either as merged in price or being shown separately. As a fact, in the hands of the buyer the cost of liquor is what is charged by the appellant under its bill together with excise duty which the buyer has directly paid on seller's account. The consideration for the sale is thus the total amount and not what is reflected in the bill. We are, therefore, clearly of the opinion that excise duty though pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving been paid by the wholesaler and consequently did not go into the common till of the petitioners and, therefore, cannot form part of the turnover of the petitioners, has to be rejected in view of the following view expressed by the Supreme Court: "....We are of the view that the conclusion reached in the appellant's case in [1977] 1 SCR 914 [McDowell Co. Ltd. v. Commercial Tax Officer [1977] 39 STC 151 (SC)] on the second aspect of the matter, namely, when the excise duty does not go into the common till of the assessee and it does not become a part of the circulating capital, it does not constitute turnover, is not the decisive test for determining whether such duty would constitute turnover." 8.. The only other contention remains to be considered is, whether the demand of sales tax on excise duty turnover is barred by the principles of equitable estoppel. While considering this contention, it is necessary to remind ourselves that there is no equity about a tax, there is no presumption as to tax and there is nothing to be read in, and nothing is to be implied. There is no estoppel against a statute. 9.. In support of the submission that the demand is barred by the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the letter dated 14th May, 1986, written by the Chairman and Managing Director, TASMAC, to the effect that no sales tax can be levied on the excise duty turnover, he is not the authority to give such a statement and it is not binding on the Government. Therefore, we have no hesitation to hold that the petitioners cannot invoke the principle of equitable or promissory estoppel to the facts of these cases. The Supreme Court decision cited by the learned counsel for the petitioners will have no application to the facts of these cases. 10.. So far as the Writ Petition No. 15850 of 1988 is concerned, no separate arguments were addressed. The principles laid down above will equally apply to the facts in Writ Petition No. 15850 of 1988. The only difference is, the sales tax was levied at the purchase point and, therefore, the tax was levied under section 7-A of the Tamil Nadu General Sales Tax Act. 11.. For the foregoing reasons, we hold that the petitioners are liable to pay sales tax on the excise duty turnover though factually the excise duty was paid by the purchasers at the time of purchase from the petitioners. 12.. In the result, the writ petitions as well as the tax case a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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