TMI Blog2010 (9) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... ners. No submissions were advanced in support of the said challenge by the learned counsel for the petitioners and, therefore, it would have to be understood that the petitioners have given up the said challenge. Appeal dismissed. - Writ Petition No. 1832 of 1997 - - - Dated:- 3-9-2010 - DAGA V.C. AND SAVANT R.M., JJ. The judgment of the court was delivered by R.M. SAVANT J. The main question that arises in the above petition is as to whether the State excise duty paid directly by the C.L. II licence holders, the purchasers of country liquor from the petitioners, who are the manufacturers, is to be included in the sale price to be exigible to the payment of sales tax under the Bombay Sales Tax Act, 1959. The facts necessary to be cited for adjudication of the above petition can be stated thus: Petitioner No. 1 is a co-operative society registered under the provisions of the Maharashtra Co-operative Societies Act, 1960. Petitioner No. 2 is the office bearer of petitioner No. 1 through whom the above petition has been filed. The petitioners are, inter alia, engaged in the business of manufacture and sale of country liquor of which they have been issued licence know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoices or in their books of account. The petitioners, therefore, pay sales tax under the said Act on the sale of country liquor on the basic price. The component of State excise duty is not reflected in the invoice in view of the fact that the same is paid directly by C.L. II licence holder. It appears that the concerned Sales Tax Officer visited the premises of the petitioners on October 15, 1996 and made inquiries regarding sales tax payable on the sale price inclusive of State excise duty on sale of country liquor. The upshot of the said visit was that the Sales Tax Officer, within whose jurisdiction the petitioners-factory falls, by his letter dated December 12, 1996 called upon the petitioners to pay the sales tax on State excise duty. After the receipt of the said letter, the petitioners paid under protest a sum of Rs. 10 lakhs on December 20, 1996 and a further sum of Rs. 5 lakhs on December 30, 1996 being sales tax on the State excise duty component for the period from October 1, 1995 to November 14, 1996. The Sales Tax Officer thereafter vide his letter dated January 17, 1997 again called upon the petitioners to pay the balance of sales tax on the State excise duty. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Officers in order to ascertain the correctness of the said returns filed by the petitioner, and more especially to ascertain whether the petitioners, who are the dealers under the said Act, have paid sales tax on the amount of excise duty payable on the sale of country liquor. In the said affidavit it is further averred that the circular dated October 25, 1993 can only be said to be a sort of administrative concession and mutual arrangement extended by the Excise Department to facilitate payment of State excise duty, however, the liability to pay State excise duty is principally that of the petitioners. We have heard Shri Jetly, the learned counsel appearing for the petitioners and Shri Sonpal, the learned counsel appearing for the respondents. On behalf of the petitioners, the thrust of the submissions was on the basis of circular dated October 25, 1993. It was sought to be contended by the learned counsel for the petitioners that in terms of the said circular dated October 25, 1993, the C.L. II licence holder was obliged to pay excise duty on the quantity of liquor purchased from the petitioner, and hence the said amount could not be included in the sale price of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect of altering the responsibility of payment of excise duty. The learned counsel for the respondents relied upon the contents of the said circular dated October 25, 1993 to contend that the said circular postulates that the excise duty may be paid by the C.L. II licence holders. The learned counsel for the respondents submitted that since consideration for the sale of liquor includes State excise duty, the sale price would therefore have to include the total amount and not what was reflected in the bill and merely because the petitioners have not included the State excise duty in the bill would not absolve them of the liability of paying sales tax on the State excise duty. The learned counsel for the respondent further submitted that the issue in question whether the excise duty could be included in the sale price can be said to have been covered by the decision of the apex court in the matter of Mohan Breweries Distilleries Ltd. v. Commercial Tax Officer, Madras reported in [1997] 107 STC 212. In so far as the judgment in McDowell case [1977] 39 STC 151 (SC) (1st McDowell case), on which the reliance is placed by the petitioners, is concerned, the learned counsel for the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the parties. Considering the challenge raised by the petitioners, the crux of the issue that arised for consideration is, as to whether the State excise duty paid by C.L. II licence holders who have been supplied liquor by the petitioners can be included in the sale price of the petitioners. Considering the said challenge the definition of sale price as posited in section 2(29) can be gainfully reproduced: 2. (29) 'sale price' means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the dealer in respect of goods at the time of or before delivery thereof, other than the cost of insurance for transit or of installation, when such cost is separately charged; Explanation I. For the purposes of this clause, the amount of duties levied or leviable on goods under the Central Excise and Salt Act, 1944 or the Customs Act, 1962 or the Bombay Prohibition Act, 1949 shall be deemed to be part of the sale price of such goods, whether such duties are paid or payable by or on behalf of the seller or the purchaser or any other person; Explanation II. Sale price shall not include sales tax (tur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry liquor. That modality to facilitate the payment of excise duty can be seen in clause (a) which stipulates that the payment has to be made in the treasury or sub-treasury in which C.L. I licensee at present credits the excise duty. However, clause II ex facie is a pointer to the fact that it is a facility provided by the Commissioner of State Excise for payment of State excise duty as is in terms of clause (b) the manufactory like petitioners are obliged to give undertaking in writing that in case there is any problem as regards payment of excise duty, the C.L. I licensee binds himself to pay the excise duty. Hence in our view, the said circular does not in any manner shift the obligation of payment of excise duty from the manufacturer to the C.L. II licence holders and that C.L. II licence holders whilst paying the excise duty are merely fulfilling the obligation of the manufacturers like the petitioners. Hence in our view, the circular dated October 25, 2010 does not in any manner further the case of the petitioners in so far as their contention that the State excise duty having been paid by the C.L. II licence holders cannot be included in the sale price. In the context of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e challenge of the McDowell Co. Ltd. to the said Rules on the ground that the excise duty paid directly by buyers could not be included in the sale price was turned down by the High Court of Andhra Pradesh and the said view of the High Court of Andhra Pradesh was upheld by the apex court in the second McDowell case reported in [1985] 59 STC 277. The facts in the second McDowell case [1985] 59 STC 277 (SC) therefore were closer to the facts of the present case, as in the instant case also section 2(29) of the said Act includes the State excise duty in the sale price. In so far as the judgment in the case of Food Corporation of India [1988] 68 STC 1 (SC) is concerned, the facts in the said case are clearly distinguishable from the facts in the instant case inasmuch as the question in the said case was as regards the administrative surcharge and price equalisation charge which was collected by the Food Corporation of India in accordance with rates fixed by the Government merely as an agent on behalf of the Government which was not the part of price nor the part of turnover. In the said context, the apex court held that since the said administrative surcharge and the price equalisat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e included in the turnover of the Mohan Breweries for the purpose of sales tax under the Tamil Nadu General Sales Tax Act, 1959. The apex court in the said case observed that the excise duty levied upon the goods manufactured or produced and its incidence fell on the manufacturer or producer of the goods, liability to pay the excise duty on the Indian-made foreign liquor was that of the manufacturer though the collection of the excise duty might be deferred to such later stage as was administratively or otherwise most convenient. The apex court referred to rule 22 of the Tamil Nadu Indian-made Foreign Spirits (Manufacture) Rules, 1981 which provided that a mode for collecting the excise duty, a mode which was obviously convenient, for it required the party removing the liquor from the factory to pay in advance the excise duty thereon. The apex court held that when the excise duty was collected from a party, other than the manufacturer, at the time of removing the liquor from the factory after its production, the payment of excise duty by that party made was in discharge of the obligation of the manufacturer. The apex court, therefore, in the context of the definition of turnover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or arrangement by any other person it would amount to meeting of the obligation of the manufacturer and nothing more'. Note was taken of the argument that excise duty had never come into the hands of the appellant and that the appellant had no opportunity to turn it over his hands and, therefore, the same could not be considered to be part of its turnover. It was held that the argument that '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'. 11. As we look at it, the primary obligation to pay excise duty on the IMFL is of the manufacturer thereof. Rule 22 only provides for a convenient method for its collection. When the excise duty is collected from a party removing the IMFL from the factory of its production, other than the manufacturer, the payment of excise duty that party makes is in discharge of the obligation of the manufacturer. That party does not, as it would ordinarily do, pay the excise duty component along with the sale price of the IMFL it purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X
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