TMI Blog1997 (3) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... are applicable to the Union Territory, Chandigarh, CITCO purchases liquor from the distilleries/bottling plants and sells it to L-14 licensees. The petitioner is under an obligation to purchase liquor from CITCO in terms of clause 25 of the auction conditions notified by the Chandigarh Administration for grant of licence during the year 1994-95. The price of the liquor purchased by CITCO is fixed by the State Government and the price of the liquor sold by CITCO is fixed by the Excise Department of the Chandigarh Administration. In the year 1994, CITCO started deducting tax at source from the petitioner on the basis of the instructions issued by the Income-tax Department. The petitioner has moved this court by contending that no tax is payable by it under section 206C of the Act read with clarification given by the Central Board of Direct Taxes, vide Circular No. 660, dated September 15, 1993. In the reply filed by it, respondent No. I has admitted the facts narrated in the writ petition. However, it has justified the deduction of tax at source on the strength of section 206C of the Act by contending that CITCO falls within the ambit of the term " seller " under section 206C. Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent sale " and that CITCO falls within the ambit of the term " seller " used in section 206C of the Act. In its reply, respondent No. 2 has pleaded that an L-13 licence has been given to CITCO on a fixed licence fee of Rs. 15,000. In its reply, respondent No. 3 (CITCO) has pleaded that as an L-13 licensee, it is the first purchaser of country liquor from the distilleries and as per the provisions of the Act it is exempted from payment of income-tax at source. It has also been pleaded by respondent No. 3 that it cannot deduct income-tax at source upon the second sale made to L-14 licensees but it is compelled to do so due to coercive methods adopted by the Income-tax Department. Thus, respondent No. 3 has supported the case set up by the petitioner. Civil Writ Petitions Nos. 9280, 9281, 9282, 9283, 9284 and 9285 of 1996 : The petitioners in the above-noted six petitions hold L-14 and L-2 licences valid for the period from June 1, 1996, to March 31, 1997. They have been purchasing liquor from CITCO which holds an L-13 licence. In its turn, CITCO has been purchasing liquor from the distilleries/bottling plants/manufacturers. The case set up by the petitioners is that C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were to pay tax much more than the expected returns which could not be considered to be the object of legislation as it originally stood. L-13 licensees appeared to be a class which, in view of the existing system of the transaction of sale of country liquor, could not be considered to be a class evading payment of tax and thus falling under the category of others for whom sections 44AC and 206C were brought into the statute book. Hence, persons holding L-13 licences were not liable to pay tax at the stage of purchase of the country liquor, in view of the proviso to clause (a) of sub-section (1) of section 44AC." The Division Bench further held : "...since the Government of India had taken a decision exempting the Uttar Pradesh contractors from payment of tax on the excise duty, discrimination in the matter could not be made in the case of petitioners holding L-14 licences. In a democratic set-up, the rule of law prevails and the Constitution of India provides equal rights to all the citizens of the country. Once the Government have extended a positive relief in a particular State, the same cannot be denied in other States similarly situated. The Government of India shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase [1991] 187 ITR 208 and [1993] 203 ITR 201 has acquired finality. In order to determine whether section 206C is available to the respondents for deducting tax at source from the petitioners, it will be useful to take notice of the relevant statutory provisions. Section 206C(1) as amended by the Finance Act, 1992 reads as under : " 206C. (1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax : TABLE --------------------------------------------------------------------------------------------------------------------------------------------------- Sl. No. Nature of goods percentage --------------------------------------------------------------------------------------------------------------------------------------------------- (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dorsed on the licence . . ." Clause 25 of the auction conditions and the relevant extract of Circular No. 660, dated September 15, 1993, issued by the Central Board of Direct Taxes are also quoted below for reference purposes : " 25. Retail vendors in Union Territory, Chandigarh, will obtain their requirement of country liquor 50 degree and rum, gin and whisky of 60 degree from wholesale vend of CITCO only. The L-13 licensee shall be granted permit by the Assistant Excise and Taxation Commissioner holding charge of the District to transport country liquor of 50 degree/rum, gin and whisky of 60 degree. CITCO will function as stockist for retail vendors, who will charge from the latter, fixed price of country liquor/rum, gin and whisky of 60 degree as given above plus still-head duty paid by him and 0.50 paise per proof litre as handling charges. The L-13 licensee will be allowed breakage allowance up to 1/2 per cent. of the quota lifted from the distilleries/bottling plants. (ii) The stock of country liquor left unsold at the end of the financial year 1994-95 shall be surrendered to the Assistant Excise and Taxation Commissioner of the District and shall be disposed of accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and were selling the same to L-14 licensees at the price fixed by the Administration. We, therefore, do not find any ground to accept the plea raised by respondent No. 1 that the L-13 licensee does not purchase liquor. Rule 38(15)(g) of the Rules of 1956 imposes a restriction on the sale of country spirit by L-13 licensees at rates other than those fixed by the Excise Commissioner. In terms of the conditions of auction, L-14 licensees are bound to purchase liquor from L-13 licensees. In these cases, the petitioners do not have freedom to obtain their supply from any other source other than the wholesale vend of CITCO. Thus, the sale of liquor by CITCO to L-14 licensees like the petitioners has to be treated as a subsequent sale. Vide circular dated September 15, 1993, the Central Board of Direct Taxes has clarified that section 206C(1) of the Act in relation to the buyer will not apply to public sector undertakings/companies and to any other buyer who obtains goods at a subsequent sale of such goods and the provisions of section 206C will apply only at the time of first sale. Admittedly, CITCO is a public sector undertaking and, therefore, the provisions of section 206C are no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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