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TMI Blog2010 (9) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... as C.L.I licence under the Maharashtra Country Liquor Rules, 1973 framed under the Bombay Prohibition Act, 1949. The petitioners are registered under the provisions of the Bombay Sales Tax Act, 1959 (hereinafter referred to as, "the said Act") as also the Central Sales Tax Act, 1956. The country liquor manufactured by the petitioners for sale is exigible to State excise duty under the Bombay Prohibition Act, 1949 as also to the sales tax under the said Act. In so far as the sales tax is concerned, the country liquor is listed at entry No. 20 of Schedule C, Part II of the said Act and the rate of tax thereon was 10 per cent in between October 1, 1995 to September 30, 1996 and 13 per cent from October 1, 1996 to the date of filing of the above petition, i.e., March, 1997. The period for which there is a dispute and which is, therefore, the subject-matter of the above petition is the period from October 1, 1995 to November 14, 1996 and November 15, 1996 to January 14, 1997. It appears that country liquor was exempted from payment of whole of the sales tax under the said Act up to September 30, 1995 by virtue of entry No. 168 under notification issued under section 41 of the said Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners again under protest have paid sales tax on the State excise duty in the sum of Rs. 4,01,875 for the period from November 15, 1996 to January 14, 1997. As mentioned hereinabove, thereafter by notification dated November 4, 1997 issued in exercise of powers conferred by sub-section (1) of section 41 of the said Act the whole of tax on the sale of country liquor with effect from January 15, 1997 has been waived. It appears that the petitioners have been issued a certificate by the Deputy Superintendent of State Excise on February 11, 1997 stating therein that the excise duty on country liquor is paid by the wholesale licensees of country liquor (C.L. II licence holders) on the supply made to them by the petitioners and that same has been done in view of the circular dated October 25, 1993 issued by the Commissioner of State Excise Duty, Maharashtra. The petitioners have, by their above petition, challenged communications, exhibits E, G and H, whereby they have been called upon to pay sales tax on the excise duty. Since the respondents have relied upon Explanation I to clause (29) of section 2 of the said Act, to base their claim for payment of sales tax on State excise duty, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioners. The learned counsel for the petitioners, for the said purpose, relied upon the contents of the said circular dated October 25, 1993 to buttress the said submission. The learned counsel further submitted that since the component of the State excise duty is not reflected in the invoices of the petitioners or in their books of accounts, the same cannot be included in the sale price as the State excise duty is paid directly by the C.L. II licence holder to the Department. The learned counsel would contend that in so far as Explanation I to clause (29) of section 2 of the said Act seeks to increase the sale price by adding the component of State excise duty, the same is ultra vires the Constitution of India and beyond the legislative competence of respondent No. 1. The learned counsel for the petitioners relied upon the judgment of the apex court in the matter of McDowell Company Ltd. v. Commercial Tax Officer, VII Circle, Hyderabad reported in [1977] 39 STC 151 (hereinafter referred to as, "the 1st McDowell case"), as also the judgment of the apex court in the matter of Food Corporation of India v. State of Kerala reported in [1988] 68 STC 1 and also the judgment of the Divisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts submitted that as a consequence of the judgment in McDowell's case [1977] 39 STC 151 (SC), rules 76 and 79 of the Andhra Pradesh Distillery Rules, 1970 were amended and after the amendment the liability for the payment of excise duty was that of the manufacturer. The McDowell Co Ltd. challenged the said amendment on the ground that the excise duty did not constitute part of the turnover. The writ petition filed by the McDowell Co. Ltd. was decided against it by the Division Bench of the High Court of Andhra Pradesh by holding that the excise duty being payable by the manufacturer but by an amicable agreement being paid by the buyer was actually a part of the turnover of the respondent and was therefore liable to be so included for determining its liability for sales tax under the Andhra Pradesh General Sales Tax Act, 1957. The matter was carried to the apex court and, the apex court in the judgment of McDowell & Company Limited v. Commercial Tax Officer reported in [1985] 59 STC 277 (hereinafter referred to as, "the 2nd McDowell case") upholding the view of the High Court of the Andhra Pradesh. Therefore, according to the learned counsel for the respondents, the reliance pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harge and resale tax) paid or payable to a dealer in respect of any such sale; Explanation III.-For the purpose of this clause, sale price shall include the amount received by the seller by way of deposit (whether refundable or not), which has been received whether by way of a separate agreement or not, in connection with or incidental or ancillary to, the said sale or the distribution of the said goods." The said definition therefore postulates by virtue of Explanation I that sale price would include the customs or State excise duty paid on the liquor. Hence there can be no dispute, considering the said definition, that the State excise duty is to be the part of the sale price. Now coming to the challenge of the petitioners to the inclusion of the State excise duty in the sale price. As mentioned hereinabove, the thrust of the arguments of the learned counsel for the petitioners was based on the circular dated October 25, 1993 issued by the Commissioner of State Excise, Maharashtra. It would, therefore, be apposite to reproduce the contents of the said circular, which are as under: "In partial modification of this office circular No. BIC. 1081/ITB(TRY) dated the 4th December, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93, an issue also arises as to whether the circular issued by the Commissioner of State Excise, assuming to be issued under the statute under which he exercised his powers, can bind the authority exercising the power under the said Act, viz., the Bombay Sales Tax Act. The learned counsel for the petitioners fairly conceded that the efficacy of the said circular qua the authority exercising the powers under the said Act is questionable. Apart from the fact that the said circular does not in any manner shift the responsibility of payment of State excise duty on the C.L. II licence holders, in our view, the said circular cannot bind the authority under the said Act whilst determining the "sale price" as postulated in clause (29) section 2 of the said Act. In so far as judgment relied upon by the learned counsel for the petitioners are concerned, in our view, in the light of authoritative pronouncement of the apex court in the case of Mohan Breweries [1997] 107 STC 212, the reliance placed by the learned counsel for the petitioners on the judgment in the first McDowell case [1977] 39 STC 151 (SC) and in the case of Food Corporation of India [1988] 68 STC 1 (SC) and on the judgment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration of India under the agreement and since the Food Corporation of India functioned merely as a collecting agent, the said two items were never part of the price of the articles or commodities and they, therefore, could not be included in the turnover of the Food Corporation of India. The reliance placed by the learned counsel for the petitioners on the said judgments in our view is misplaced in view of the definition of "sale price" as contained in section 2(29) of the said Act. Now coming to the judgment of the Division Bench of this court in Gujarat Export Corporation Limited [1990] 77 STC 110, in the said case the buyer was liable for payment of customs duty and all other charges for clearing goods from customs in terms of the contract. Gujarat Export Corporation Limited merely charged value of goods plus compensation and, since the buyer cleared goods as owner after he handing over document for payment of consideration, the customs duty paid by buyer was therefore held by the Division Bench of this court not includible in sale price as contemplated under the said Act. In our view, the facts in the case before the Division Bench of this court are clearly distinguishable f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Tax Act, 1959 which referred to the "aggregate amount for which goods are bought or sold" and ("whether for cash or . . . other valuable consideration"), held that the said definition was wide enough to cover such excise duty and that merely because the excise duty did not enter the manufacturer's till was not the decisive test for determining whether or not it would be part of the manufacturer's turnover. Paras 7, 9, 10 and 11 are relevant and are reproduced hereinunder (pages 217 and 218 in 107 STC): "7. Excise duty is levied upon goods manufactured or produced (entry 84 of List I and entry 51 of List II of the Seventh Schedule to the Constitution). Its incidence falls, therefore, on the manufacturer or producer of the goods. The collection of excise duty may be deferred to such later stage as is, administratively or otherwise, most convenient. . . . 9.. The liability to pay excise duty on the IMFL is, therefore, that of the manufacturer thereof. Rule 22 only provides a mode for collecting the excise duty, a mode which is obviously convenient for it requires the party removing the IMFL from the factory of its production to pay in advance the excise duty there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturer and it pays the excise duty into the treasury for and on behalf of the manufacturer. In effect, therefore, the element of excise duty does enter into the turnover of the manufacturer just as much as it would ordinarily do. The definition of 'turnover' in section 2(r) of the Sales Tax Act, referring as it does to 'the aggregate amount for which goods are bought or sold' and 'whether for cash or . . . other valuable consideration' is wide enough to cover such excise duty. That the excise duty does not physically enter the manufacturer's till is, as held in the second McDowell case [1985] 59 STC 277 (SC), not the decisive test for determining whether or not it would be a part of the manufacturer's turnover." In our view, the facts in the said Mohan Breweries case [1997] 107 STC 212 are closer to the facts in the instant case inasmuch as by rule 22 of the Tamil Nadu Indian-made Foreign Spirits (Manufacture) Rules, 1981. In the said case what was provided was a mode of payment of excise duty which is a similar situation on account of the circular dated October 25, 1993. However, as held by the apex court, the mode of payment of duty would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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