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TMI Blog2003 (4) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 vide annexure 2 to the petition. As regards retail licences, the U.P. Excise (Settlement of Licenses for Retail Sale of Country Liquor) Rules, 2001, provided for grant of licence on the terms and conditions mentioned in the rules. True copy of the Retail Rules has been annexed as annexure I to the writ petition. According to the revised policy, a distillery, which wanted to sell its country liquor in any district of Uttar Pradesh, has to obtain a wholesale license known as CL-2A. The petitioner has obtained wholesale licences and has opened CL-2A depots in various districts of Uttar Pradesh. A true copy of the Wholesale Rules has been annexed as annexure 2 to the writ petition. Similarly, a retailer has to obtain a licence in Form No. CL-5C. A retailer licensee can sell the liquor at its retail outlets, only at prices fixed by the State. The supply of country spirit from the distilleries to the wholesale shop of the petitioner is covered by PD-25 pass and all the sales had to be recorded in Part III of WSI Register on day-to-day basis. The country liquor is to be supplied in bottles or pouches having security hologram approved and supplied by the Excise Commissioner only to per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etary, Government of India, with a copy to the Chairman, Central Board of Direct Taxes, New Delhi, has clarified that the State has fixed the prices at all levels (wholesale and retail) and has requested for a clarification for purpose of clause (a)(iii) of section 206C of the Income-tax Act vide annexure 5 to the writ petition. The expression sale price and retail price has been defined in section 4A of the Central Excise Act and rule 2(r) of the Standard of Weights and Measures Act (Packaged Commodities) Rules, 1977, which has been quoted in paragraph 17 of the petition. By the impugned order dated March 22, 2002, the Income-tax Officer (TDS), Muzaffarnagar, has held that the provisions of section 206C apply to the assessee and it is a defaulter for not collecting tax under that section. The petitioner had been directed to pay a sum of Rs. 8,77,89,674 as income-tax collectible and surcharge thereon vide annexure 6 to the writ petition. The said authority has also issued show cause notices to the petitioner dated April 30, 2002, and May 2, 2002, requiring him to submit details of sales of country liquor effected for the balance period not covered in the order dated March 22, 2002 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year 1988, the proviso to section 44AC(1)(a) was not there. This provision was inserted in the year 1989 with effect from April 1, 1989, and the effect of the newly inserted provision was explained by the Central Board of Direct Taxes by its circular dated May 4, 1990, annexure 9, to the writ petition. It was noted by the Central Board of Direct Taxes that contracts for sale of liquor are not given by auction or any similar mode but licences to sell the liquor are issued to contractors by the State Government. Since the purchase and sale price has been fixed there is little scope for tax evasion. Hence, the application of the presumptive profit operated very harshly in such cases. To remove this hardship, the Amending Act, 1989, has amended section 44AC to provide that the provisions for the application of the rate of presumptive profit would not apply in a case where the liquor is not obtained by the buyer by way of auction and where the sale price of such liquor to be sold by the buyer is fixed by or under any State Act. These provisions were considered by the Full Bench of the Himachal Pradesh High Court in Saini and Co. v. Union of India [2000] 246 ITR 762, and it was observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istricts in U.P. or of other states of the Union of India. In all likelihood, if such outsider does not get a licence in a subsequent year, he will shift to his own native State. In such circumstances it will not be possible to get the return of income from him by the income-tax authorities of the particular district in which he carried on the business of retail sale of country liquor, It is alleged that in case, there is no collection of tax at source, such persons may not file the income-tax returns resulting in a situation in which Government dues, which are payable by such persons may not easily be realised. In paragraph 14 of the same it is alleged that it has been observed that the retailers are selling country liquors at different prices. The maximum sale price is not the only price, which can be charged from the consumer and a lower price can be charged. As regards the challenge to the jurisdiction of the Income-tax Officer (TDS), Muzaffarnagar, the respondents have refuted the same in paragraph 15 of the counter affidavit. In paragraph 22 of the same the respondents have sought to distinguish the decision in Saini and Co. v. Union of India [2000] 246 ITR 762 (HP) [FB], si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survive since under that circular the maximum retail price is treated to be the sale price as envisaged by sub-clause (iii) of clause (a) of the Explanation to section 206C which has come into effect from March 16, 2001, i.e., the date on which the notification for fixing the maximum retail price of country liquor for the State of Uttar Pradesh was issued. In Collector of Central Excise v. Dhiren Chemical Industries [2002] 254 ITR 554 (SC) it has been held that the circulars of the Department are binding on the tax authorities. In paragraph 11 of that judgment the Supreme Court has said that even if the court has taken a different interpretation yet the interpretation of the Central Board in its circular shall be binding on the Revenue. Although that decision was under the Central Excise Act in our opinion it will also, apply to the circulars issued by the Central Board of Direct Taxes under section 119 of the Income-tax Act. Hence in view of the circular dated June 27, 2002, this writ petition is allowed. The impugned orders dated March 22, 2002, and May 7, 2002, annexures 6 and 12 to the writ petition are quashed. The respondents are restrained from realising any amount in pur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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