TMI Blog2014 (1) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... ply by Wholesale) Rules, 1981 has nothing to do with the manufacturer - it essentially deals with the grant or privilege and licence to sell the Indian Made Foreign Spirit on a whole sale basis. As may be noted from the provisions of the Act and the Rules made, the privilege and the license granted to manufacture and the privilege and the licence to sell as a whole sale dealer is treated differently from the licence/ privilege given to the wholesale dealer, by framing two different rules namely, Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 and The Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules 1981 respectively. As far as the whole sale dealer licensee is concerned, apart from discharging the liability of the manufacturer to pay the excise duty and the vend fee, the whole sale dealer is also obliged to pay vend fee. In accordance with the provisions of sub-rule (1), there is also the levy of vend fee at the rates, which would be collected from the licensee, TASMAC on the stock of Indian Made Foreign Spirits either received from a manufactory inside the State or removed from the manufactory outside the State or removed from the bonded ware ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays that no penalty under Sub Sections (3) and (5) shall be imposed after a period of five years from the expiry of the year to which the assessment relates to and unless a dealer affected has had a reasonable opportunity of showing cause against the imposition - Vend Fee collected from the licensee-viz., TASMAC as per Rule 15(2) of the Tamil Nadu Indian made Foreign Spirits (Supply by Wholesale) Rules, 1981 cannot be included in the taxable turnover of the assessee and consequently, the assessment cannot be sustained. On the same line of reasoning, the question of levying of penalty also does not arise in these cases. - Decided in favour of assessee. - Tax Case (Revision) Nos.637, 639, 640, 641,644 of 2006, 1634, 1662, 1712, 1729, 1730, 1738 of 2008, T.C.No.637 of 2006: - - - Dated:- 19-9-2013 - Chitra Venkataraman And T. S. Sivagnanam,JJ. For the Petitioner : Mr. C. Natarajan in all petitions Senior Counsel for Mr. N. Inbarajan For the Respondent : Mr. A. L. Somayajji, Mr. Manoharan Sundaram AGP (Taxes) Mr. J. Adithya Reddy, Mr. A. R. Jaya Prathap Government Advocate (Tax) ORDER (The Order of the Court was made by Chitra Venkataraman, J.) The assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a company engaged in the manufacture of Indian Made Foreign Liquor. For the assessment year 1982-83, originally, the Assessing Officer finalised the assessment holding that the assessee had a taxable turnover of ₹ 3,41,42,842/-. While finalising the assessment, the Assessing Officer included the Excise Duty and Vend Fee on the manufactured Indian Made Foreign Liquor at the hands of the dealers. Subsequently, the assessment was sought to be revised to include the Vend Fee paid by the licensee TASMAC in terms of Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply of Wholesale) Rules, 1981. The assessee contended that unlike the Vend Fee imposed under Rule 22(3) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 Vend Fee imposed under Rule 15(2) of Tamil Nadu Indian Made Foreign Spirits (Supply of Wholesale) Rules, 1981 on the TASMAC was not exigible to tax, since the liability cleared by the whole sale dealer was independent of the sale and the Vend Fee and Excise Duty on manufacture levied under ?Rule 22 (3) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981. Thus the liability under Rule 15(2) Tamil Nadu Indian Made For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In support of this, the assessee filed a copy of the Certificate issued by the TASMAC in respect of another manufacturer viz., Tvl.Balaji Distilleries Ltd., since the Excise policy and pricing was uniform to all the manufacturers and TASMAC was the wholesale seller in the State. The First Appellate Authority accepted this. Besides Rule 22(2) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981, he pointed out that under Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply by wholesale) Rules, 1981, the Vend Fee was again specified and collected from the wholesale seller viz., TASMAC. The First Appellate Authority pointed out that the scrutiny of the records filed by the assessee revealed that this Vend Fee collected from the wholesale dealer as per Rule 22(2) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 was already included for taxation at the hands of the assessee; the decision of this Court as well as the Apex Court in the assessee's own case, did not deal with Vend Fee paid by the wholesale dealer under Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply of Wholesale) Rules, 1981. As far as the Vend Fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Tamil Nadu Indian Made Foreign Spirit (Manufacturer) Rules, 1981, as it stood at the relevant point of time, imposed the liability on Excise Duty as well as on Vend Fee to be discharged by the Wholesale vendor viz., TASMAC. Rule 22 made it clear that the liability to make the payment was shifted to the licensee viz., TASMAC and that payment would be for and on behalf of the manufacturer. However, the vend fee levied as per Rule 15 (2) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981, no sales tax could be levied on the manufacturer, it being a separate fee for the privilege granted to the TASMAC as a wholesale dealer. The basis of calculation on the Vend Fee payable by TASMAC is totally different from what is contemplated under Rule 22 of the Tamil Nadu Indian Made Foreign Spirit (Manufacturer) Rules, 1981 is concerned. He further pointed out that for inclusion under the definition of turnover , only such of those amounts, which are totally linked to the sale stands attracted and anything the purchaser has to pay post sale would be the liability of the purchaser, viz., TASMAC only. On no count, the same could be brought under the taxable tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Excise Duty. This Court had considered the inclusion of Excise Duty payable by the assessee, but collected from the TASMAC as part of the taxable turnover. The question now raised as regards the inclusion of Vend Fee paid by the TASMAC under Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981 was never the subject matter of the said case and has nothing to do with Vend Fee under Rule 22 of the Tamil Nadu Indian Made Foreign Spirit (Manufacturer) Rules, 1981. In the circumstances, the order of the Sales Tax Appellate Tribunal failed to consider the scope of Rule 15(2 ) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981, which would be of relevance to the facts and circumstances of this case. 15. As far as the penalty levied under 12(5)(iii) of the Tamil Nadu General Sales Tax Act is concerned, learned Senior Counsel submitted that once the assessment has been re-opened under Section 16 of the Tamil Nadu General Sales Tax Act, the only relevant provision to levy penalty will be Section 16(2) of the Tamil Nadu General Sales Tax Act and it can never be under section 12(5) (iii) of the Act, which is related to an orig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Consequently, it is not open to the assessee now, to raise this issue in the present tax case. In other words, the decision of this Court reported in 78 STC 461 (Mad)(cited supra), as confirmed in 107 STC 212 (SC)(cited supra) by the Apex Court would cover the issue on hand. Consequently, no grievance could be made on the inclusion of Vend Fee paid by the TASMAC as per Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981, which could be a subject matter for distinguishing these tax cases. 17. Learned Advocate General, reiterating the reliance placed on the decision of this Court reported in 78 STC 461(Mad) (cited supra), pointed out that the assessee raised a specific issue as regards the inclusion of Excise Duty in the taxable turnover of the assessee. The assessee contended therein since the payment for Excise Duty fell on the wholesaler viz., TASMAC, the same could not be part of the sale price to be assessed at the hands of the assessee. This Court rejected such contention following the decision reported in in [1985]59 STC 277 (SC) [McDowell Co., Limited vs. Commercial Tax Officer) holding that the incidence of Excise Duty falls direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981. The relevant provision of Tamil Nadu Prohibition Act, 1937 dealing with the exclusive privilege granted to the manufacturer/wholesaler right on TASMAC, Rule 22 of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 and Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981, as it stood at the relevant time, need to be noted. Sections 17-C and 17-D of the Tamil Nadu Prohibition Act, 1937 read as under: 17-C Exclusive privileges of manufacture, etc. may be granted- (1) It shall be lawful for the State Government to grant to any person or persons on such conditions and for such period as they may deem fit the exclusive or other privilege - (a) of manufacturing [****] Indian Made Foreign Spirits or; (b) of selling by retail[***] Indian-made Foreign Spirits within any local area [****] amended as per Tamil Nadu Act 14 of 1993. [(1-A) (a) Notwithstanding anything contained in this Act, the Tamil Nadu State Marketing Corporation Limited, which is a Corporation wholly owned and controlled by the State Government shall have the exclusive privilege o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in Explanation (1), in the case of bottled liquor, the quantities of liquor for purposes of sale or levy of vend fee shall be reckoned according to the following scale, namely:- Contents of bottles (1) To be reckoned as (2) (i) Bottles containing not more than150 milli-litres. One fifth of 750 millilitres. (ii) Bottles containing more than150 milli-litres but not more than 180 millilitres. One fourth of 750 millilitres. (iii) Bottles containing more than 185 milli-litres but not more than 250 millilitres. One Third of 750 millilitres. (iv) Bottles containing more than 250 milli-litres but not more than 375 millilitres. Half of of 750 millilitres. (v) Bottles containing more than 375 milli-litres but not more than 560 millilitres. Three fourth of 750 millilitres (vi) Bottles containing more than 560 milli-litres but not more than 750 millilitres. One bottle of 750 millilitres. Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981 during the relevant period reads as under: 15. Payment of Excise Duty and Vend Fee (1) The licensee shall pay the excise duty on the stock of Indian Made Fore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the whole or any part of the State. 23. Sub Section (b) to Sub Section 1-A of Section 17-C of the Act, states that TASMAC shall be granted the licence by the Commissioner for the exercise of the exclusive privilege referred to in clause (a) and such licence shall be subject to the rules made by the State Government in this behalf and to such conditions and restrictions as the Commissioner may, from time to time, specify. 24. Section 17-D of the Tamil Nadu Prohibition Act, 1937 provides for payment of a sum on consideration of the grant of exclusive or other privilege or fee on the exclusive privilege under Section 17 C and also a fee on licence granted under Section 17-C. Thus, in tune with Sections 17-C, 17-D of the Act in consideration of the grant of exclusive or other privilege, the State may, levy a sum or fee or both, apart from charging a licence fee to be granted under Section 17-C of the Act. 25. In tune with the said Rules, Rule 22(1) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 provides for levy of excise duty and vend fee payable by the licensee on the stock of Indian Made Foreign Spirit issued from the blending unit for local consump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licensee on all stocks of Indian Made Foreign Spirits supplied by the manufacturer. The licensee herein is TASMAC and as already pointed out, in terms of the decision of the Apex Court, there is no dispute from the side of the assessee as regards the inclusion of excise duty and vend fee levied as per Rule 22 of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 at the hands of the assessee as part of the sale consideration and hence as part of the turnover. 27. Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981 specifically reads that in addition to excise duty, the wholesaler has to pay the vend fee at the table given under Rule 15 Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981. Reading Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules 1981 and Rule 22 of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 The Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules 1981 of the Manufacture Rule, it is clear that both are different. In fact a reading of Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he fact that TASMAC had already given the necessary certificate as regards the Vend Fee paid as per Rule 22(2) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981. As pointed out in the preceding paragraphs Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Whole sale) Rules, 1981 has no relevance at all to the payment made by the wholesaler on the vend fee payable by the manufacturer under Rule 22 (2) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981. The wholesalers' payment has nothing to do with the assessee and the determination of its turnover does not depend on the payment by the whole sale dealer, namely, TASMAC. Consequently, we reject the plea for a remand . 31. Thus, we have no hesitation in holding that the assessment included Vend Fee paid under Rule 15(1) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981 by TASMAC, does not form part of the taxable turnover of the assessee. 32. Apart from this, it may also be noted that Sub-Rule(2) was included to the provisions of Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981, wherein there is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding the levy under Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981. As pointed out by the Apex Court, the levy is more in the nature of grant of exclusive privilege granted to TASMAC as wholesale dealer in Tamil Nadu. In the circumstances we agree with the assessee that the vend fee paid by TASMAC under Rule 15 of the Wholesale Rules cannot be included in the turnover. Consequently, we have no hesitation in setting aside the order of the Tribunal, thereby the assessment. 35. As far as the levy of penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act,1959 is concerned, admittedly the assessment in all these cases were made under Section 16 of the Tamil Nadu General Sales Tax Act, which deals with assessment of escaped turnover. Sub-Section (1) of Section 16 of the Act, speaks about the jurisdiction of the Officer to assess the turnover escaping assessment and Section 16(1)(b) refers to the turnover, which has been assessed at a rate lower than the rate at which it is assessable. Sub Section (2) of Section 16 of the Act, speaks about the levy of penalty in a case of assessment under clause (a) to Sub Section 1 of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee, the question of levy of penalty does not arise at all. Consequently, even those revisions filed as against the levy of penalty under Section 12(5)(iii) of the Act have to be necessary allowed by this Court as there is no liability at all under Section 16(1)(a) of the Act. 40. Learned Advocate General pointed out that mere quoting of wrong provision per se would not stand in the way of levy of penalty. We disagree with the line of argument advanced, for the reason that the provisions under Section 12(5)(iii) and Section 16(2) of the Tamil Nadu General Sales Tax Act are totally different. While under Section 12(5)(iii) of the Act, the penalty is levied for the case of 'incorrect and incomplete' return, under Section 16(2) of the Act, it is the case of suppressed turnover, where the task of proving wilful suppression is on the Revenue as against what is contemplated under Section 12 (5)(iii) of the Act. 41. In any event, the said issue relating to incorrect and incomplete return came up for consideration before this Court in 94 STC 157 (Mad) [State of Tamil Nadu vs. Indian Silk Traders] wherein, this Court pointed out to the phrases used in section 12 (5) (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X
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