TMI Blog2019 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... d not other species of the liquor which as rightly construed by the State functionaries will be covered by residuary entry - there is no ultra vires or an arbitrary act on the part of the State in charging tax at the rate 13% on ENA/Rectified Spirit. Input Tax Rebate (ITR) - Constitutional validity of sub-section (6-A) of Section 14 of 2002 Act - HELD THAT:- There is no force in the submissions made on behalf of the petitioner that they are not afforded opportunity to prove the bonafide of their claim - the challenge to the validity of Section 14 (6A) fails. Constitutional validity of Section 20(5) of VAT Act, 2002 - HELD THAT:- The contention that the provisions contained under sub-section (5) lacks jurisdictional foundation and therefore it is ultra vires, are taken note of and are rejected outright. If the petitioners have any grievance as regard to the procedural irregularity they are always at liberty to take recourse to forum of appeal for redressal of the grievance. Merely on assumption that the procedural irregularity may occur, a statutory provision cannot be held to ultra vires constitution - The challenge to validity of sub-section (5) of Section 20 also fails. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 read with Rule 60 of the Madhya Pradesh VAT Rules, 2006, as regulating the procedure of filing of appeal and its summary rejection. [2] Petitioners are manufacturer and sellers of spirit and alcoholic beverages in the State of Madhya Pradesh. They purchase/ import Grains Neutral Spirits/ Extra Neutral Alcohol, concentrate of Alcoholic Beverages and imported Foreign Liquor as bottled in original in the State of Madhya Pradesh. The spirit is used for manufacture of potable liquor. The spirit manufactured by the petitioner is sold within and outside State of Madhya Pradesh. The manufacture and sale is on the strength of licence issued under provisions of Madhya Pradesh Excise Act, 1915 and the Rules framed there under. The petitioners are also registered under the Madhya Pradesh Value Added Tax, 2002. [3] At the outset, it is submitted on behalf of the petitioners that as to the issue of levy of VAT on lease rental, the same is sub-judice before Hon'ble Supreme Court in petition for Special Leave to Appeal (c) No. 21700/2018 [Tripti Alcobrew Pvt. Ltd (formerly Tripti Acobrew Ltd.) Vs. State of Madhya Pradesh and others]. In view w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e II so as to ensure that there is no input tax rebate available for sale of liquor which includes spirit. The very fact that liquor has been included under Part III-A of Schedule 2 displays the clear intention of the legislature to ensure that there is no input tax rebate available against sale of spirit. It is contended that, the argument of the respondents stating that 'liquor' only means to include the final product of bottled liquor meant for human consumption is entirely misplaced as there can be no set off against sale of a final product. Thus, the respondents clearly envisaged scenario where sales of spirit made to manufacture IMFL/ country liquor should not be provided the benefit of set off. Thus, spirit falls within the meaning of the word 'liquor' as envisaged under the VAT Act read with the M.P. Excise Act. It is further contended that the respondents have tried to incorporate Entry 51 of List II in Schedule VII of the Constitution of India while interpreting the meaning of 'liquor'. Entry 51 specifically uses the words 'alcoholic liquors for human consumption' while Entries 47, 56, 6 used in the VAT Act, only refer to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Rectified Spirit at higher rate vide residuary clause. [9] Considered the rival submissions. [10] The VAT Act was enacted to levy tax on sale and purchase of goods, tax on buildings and tax on goods carried by road in the State of Madhya Pradesh previous to VAT Act, the Act which governed the field were the Madhya Pradesh General Sales Tax Act, 1958 which was then replaced by the Madhya Pradesh Vanijyik Kar Adhiniyam, 1994. And now the VAT Act, 2002. [11] The excisable articles under the Excise Act, 1915 was kept out of the purview of the Sales Tax. In other words, they were tax free goods, brought under Schedule I Entry No. 23 of 1958 Act. Entry No.18 of 1994 Act and Entry No. 47 of 2002 Act, as we are presently concerned with, of the VAT Act, Entry 47 of Schedule prior to 01/04/2013 stood thus:- 47. Goods on which duty is or may be levied under the Madhya Pradesh Excise Act, 1915 (No.2 of 1915) other than medicinal and toilet preparations specified for the time being in the schedule to the medicinal and toilet preparations (Excise Duties Act, 1955 (No.16 of 1955)). [12] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y . [16] A Taxing Statute; however, has been distinguished from those where a duty or fee is charged by the State for parting with its privilege of dealing in commodities like liquor. [17] In Organon (India) Ltd. (Now known as INFAR (India) Ltd. and another Vs. Collector of Excise and others [AIR 1994 SC 2489] , it is held:- 24. ....The distinction which the Constitution makes for legislative purposes between a 'tax' and a 'fee' and the characteristic of these two as also of 'excise duty' are well- known. A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not a payment for services rendered . A fee is a charge for special services rendered to individuals by some governmental agency and such a charge has an element in it of a quid pro quo. Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. ..... [18] A taxing statute is to be strictly construed is the well established principle of law. [19] In Commissioner of Income Tax, Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation and construction are used interchangeably, the idea is somewhat different. Dr. Patrick Devlin says: ..... A better word, I think, would be construction, because construction, although one often used it alternatively with interpretation, suggests that something more is being got out in the elucidation of the subject matter than can be got by strict interpretation of the words used. In the very full sense of the word 'construction' the judges have set themselves in this branch of the law to try to frame the law as they would like to have it ..... . [See: Samples of Law Making--Oxford University Press--p.70-71] A statute says Max Radin is neither a literary text nor a divine revelation. Its effect is, therefore, neither an expression laid on immutable emotional over-tones nor a permanent creation of infallible wisdom. It is a statement of situation or rather a group of possible events within a situation and as such it is essentially ambiguous. [See Statutory Interpretation --43 Har. L.R. 863 (868)]. The observations of Lord Russel of Killowen in Attorney General v. Carlton Bank, [1899] 2 Q.B. 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d its dispensations are based on an interaction of diverse economic, social, and policy considerations. Further, if the proviso is bad for discrimination, it would follow that the converse situation brought about by the later amendment, a discrimination as between gifts made as between the 31st of March 1972 and on 1st April, 1972 might also become bad. It is true that we are required to notice the provision as it stood at the relevant time. We, however, should not be understood to have pronounced on the question of constitutionality. That is the task of the Court in judicial-review but the rule of preference of a particular construction amongst the alternatives, in order to avoid unconstitutionality is unavailable here. Accordingly, while Civil Appeals No. 1226 and 1227 of 1975 preferred by the assessee are dismissed, CA No. 1118 of 1975 of the revenue is allowed and in reversal of the order dated 18.9.1974 of the Andhra Pradesh High Court the question referred is answered in the negative and in favour of the revenue. In the circumstances, the parties are left to bear and pay their own costs in these appeals. [22] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded as an impertinent intrusion into the sacred rights of private property and it is now increasingly regarded as a potent fiscal tool of State policy to strike the required balance- required in the context of the felt needs of the times- between citizen's claim to enjoyment of his property on the one hand and the need for an equitable distribution of the burdens of the community to sustain social services and purposes on the other. These words of Thomas M. Cooley in Law of Taxation, Vol.2 are worth mentioning: Artificial rules of construction have probably found more favour with the courts than they have ever deserved. Their application in legal controversies has often times been pushed to an extreme which has defeated the plain and manifest purpose in enacting the laws. Penal laws have sometimes had all their meaning construed away and in remedial laws, remedies have been found which the legislature never intend- ed to give. Something akin to this has befallen the revenue laws..... (Emphasis Supplied) [23] In the field of taxation it is well known that the legislature has wide discretion in selecting the person or objects it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quor containing alcohol obtained by distillation whether it is denatured or not. [27] The word liquor is a genus. It is a group marked by common characteristic; specifically: a category of biological classification ranking between the family and the species, comprising structurally or phylogenetically related species or an isolated species exhibiting unusual differentiation. The expression 'spirit' is a specie when considered in the context of liquor. [28] The spirit which is a liquor containing alcohol is obtained by distillation under Madhya Pradesh Distillery Rules, 1995, the spirit takes different form. As per Rule 2(3) it can be Denatured Spirit or Denatured Alcohol which means alcohol of any strength which has been rendered effectively unfit for human consumption by admixture of such denaturant as may be approved by the Excise Commissioner . Further, as per Rule 2(7) it could be Extra Neutral Alcohol which is silent spirit of an optimum quality which complies with the standard for neutral spirit prescribed by the Bureau of Indian Standards for the purpose. That Rule 2(21) of Rules 1995 defines Rect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a-3) Badminton hall; (a-4) Billiards/pool table; (a-5) Table tennis hall; (a-6) Squash Court; (a-7) Cards room; (a-8) Lawn tennis Court. The licensee may possess Foreign Liquor at the licensed premises and sell it thereat to members of the club or their bonafide guests when accompanied by the member of the club. [32] Evidently, these licencees do not sell ENA/Rectified spirit under the licences held by them, which are commodity different than 'liquor' sold under said licences. And as the liquor defined under Section 2(13) of the Act of 1915 is taken out from exempted category under Entry 47 in Schedule I of VAT Act 2002 with effect from 01.04.2013, all its species, by necessary corollary, comes out of exempted category. [33] Furthermore, under Entry 56 in part II of Schedule II and Entry 6 in part III A of Schedule II of the VAT Act 2002, the liquor which is sold by the holder of licence FL2, FL3, FL3A, FL4 and FL4A is only subjected to 5 % tax and not other species of the liquor which as rightly construed by the State functionaries will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been lawfully adjusted against output tax liability and correctly reflected in the return filed for the respective tax period and High Court of Delhi instead of declaring the clause ultra vires, read it down to the extent that the expression 'dealer or class of dealers' should be interpreted as not including purchasing dealer who has bonafide entered into purchase transaction with validly registered dealers who have issued the invoices. It is urged that in Madhya Pradesh enactment there is no ambiguity with the proviso added to sub-section (6-A) of Section 14 vide MP Act 16 of 2013 (with effect from 01.04.2013). It is contended that the reasonable opportunity is available to the dealer with the expression 'unless it is found otherwise'. On instruction, it is submitted by learned Additional Advocate General that the department gives exhaustive opportunity to the dealer and there has never been any complaint that to establish their entitlement to input tax rebate they were not given the opportunity of hearing. [38] In view whereof, we do not perceive any force in the submissions made on behalf of the petitioner that they are not afforded op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises or any other place and day and directing him,- (i) to appear in person or by an agent entitled to appear in accordance with the provisions of Section 23; or (ii) to produce evidence or have it produced in support of the returns; or (iii) to produce or cause to be produced accounts, registers, cash memoranda or other documents relating to his business. (b) The Commissioner, after hearing the registered dealer or his agent and examining the evidence produced in compliance with the requirements of sub-clause (ii) or sub-clause (iii) of clause (a) and such further evidence as he may require, shall assess or re-assess him to tax. (5) If a registered dealer referred to in clause (a) of subsection (4),- (a) has not furnished returns and statement in respect of any period by the prescribed date; or (b) has knowingly furnished incomplete or incorrect returns for any period; or (c) having furnished such returns has failed to comply with any of the terms of a notice issued under clause (a) of sub-section (4); or (d) (i) has not maintained any accounts, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f admitted tax as also certain portion of balance amount of assessee tax, has been made in most of Laws relating to Tax on sale of goods by various other States. Similar provision existed under State of Tamil Nadu General Sales Tax, 1959 where the provision of pre deposit of tax before filing of appeal is available. The said provision was challenged before Madras High Court in Devi Spinning Ltd. V/s. Appellate Commissioner Salem, 2009 15 STJ 197, the Madras High Court examined the issue in the light of all the decisions delivered by the Apex court and came to the conclusion that when the appeal was preferred by the petitioner company itself, the same could be entertained after compliance of the statutory provisions. The Madras High Court dismissed the writ petition, following the decision of the Apex court in the case of Vijay Prakash D. Mehta and Jawahar D. Mheta V/s. Collector of Custom reported as 1988 (4) SCC 402 and has held as under :- That the right to appeal neither existing right nor ingredient of natural justice, the principle of which must be followed in all judicial and quasi judicial adjudications. The right to appeal is a statutory right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d interest demanded or penalty levied would cause undue hardship to such person and in that case the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interest of Revenue. In those circumstances, the decision of Indu Nissan Oxo Chemical Industries Ltd (supa) was passed by the Apex court. But in the present case, there is no such provision and, therefore, when there is no provision relaxing the condition of depositing the tax before filing the appeal, if the appellate Court would have directed not to deposit the required tax before filing the appeal. If the appellate court would have directed not to deposit the required tax, such order would have been without jurisdiction. Even this court while exercising writ jurisdiction is not empowered to pass such type of order when the statute does not permit not to deposit the requisite tax. Hence, we do not have any scintilla of doubt in our mind that in the absence of depositing the required tax, the Appellate Authority (respondent No.2) rightly did not admit the appeal of the assessee /writ petitioner. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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