TMI Blog1992 (9) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... fferent dates for the period ending March 31, 1993. Copies of some of such licences have been annexed by some of the petitioners to the respective writ applications. The State Government as a condition for grant of the said privilege has made it mandatory for the petitioners to lift a prescribed minimum quantity of liquor from the specified warehouses in every month. Sale of the country spirit is effected in sachets (polythene packs) by the wholesale licensee acquiring such privilege for the area concerned from the specified ware-houses, Messrs. S. K. G. Sugar Ltd., Patna, Messrs. Shri Shiv Shankar Chemical Industries ( Bihar) Ltd., Bhagalpur, and Messrs. Kanpur Sugar Works Limited, Saran, and all these companies incorporated under the Companies Act, 1956, have acquired the privilege of supply in wholesale of country spirit from the respective warehouses to the petitioners. According to the statutory rules and directions, before taking the supply of the country spirit, the petitioners have to pay the cost price ( i.e., purchase price ), thereof by way of bank draft drawn in favour of the wholesaler and they have also to deposit the excise duty payable thereon in the Government trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es a certificate in the prescribed form that to the best of his belief any of the goods referred to in the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of this sub-section shall not apply so long as the certificate is in force.; (b) after sub-section (8), the following Explanation shall be inserted, namely : 'Explanation.-For the purposes of this section, (a) "buyer" means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any such goods but does not include, (i) a public sector company, (ii) a buyer in the further sale of such goods obtained in pursuance of such sale, or (iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act. (b) " seller " means the Central Government, a State Government or any local authority or Corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the grantee of such a privilege has to obtain a licence in that behalf from the competent authority. Chapter V of the Excise Act deals with the levy of duty of excise. Section 29 provides that instead of or in addition to any duty leviable under this Act, the State Government may accept payment of sum in consideration of a grant of exclusive privilege under section 22. The rules framed by the Board under section 90 makes specific provisions for licensing and regulation of distilleries as also for establishment and regulation of warehouse for wholesale supply to retail vendors. Rules 44 to 62 have more relevance for the present set of cases as they provide for regulation of supplies by the wholesalers to the retailers. Licence for retail vending in country spirit is granted in Form No. 26 and for wholesale in Form No. 27. From a reading of the provisions of the Excise Act and the Rules, it transpires that the retail vendors like the petitioners have to purchase country spirit by taking supplies thereof from specified warehouses. The supplies in the warehouse are made by either the manufacturer or the wholesale dealer within whose area of supply such warehouse lies. The wareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey have to sell the country spirit to the licensed vendors at the warehouses specified in the licence at the fixed prices on production of passes in the prescribed form by them. The storage, reduction, etc., of the spirit have to be made under the immediate supervision of a Government Officer incharge of the warehouse. In view of condition No. 15 of the licence read with the directions issued by the State Government as contained in memo No. 698, dated March 12, 1992, the wholesalers are to collect the cost price of the liquor from the licensed vendors in the form of bank draft directly. The conditions incorporated in Form No. 26 meant for granting licence to the retail vendors, provide that they have to purchase the country spirit from the specified warehouses. Pursuant to the conditions of the licence and the sale notification, the retail vendors have to deposit the cost price through a bank draft drawn in favour of the wholesaler. From the discussions aforesaid, it is clear that a retail vendor can acquire country spirit meant for human consumption on the fulfilment of two conditions, relevant for the purpose, namely, (1) they have to pay the price of the goods in the form o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in respect of leviability of sales tax under the Andhra Pradesh General Sales Tax Act, 1957. Subsequent to the said decision of the Supreme Court, rules 76 and 79 of the Andhra Pradesh Distilleries Rules were amended with effect from August 4, 1981, and the manufacturers were made liable to pay the excise duty on removal of liquor. Pursuant to this amendment, the sales tax authorities levied tax by treating the excise duty as part of the sale consideration. The plea of the company was that notwithstanding the said amendment since the purchasers are directly depositing the excise duty with the Government, therefore, the same cannot be treated to be a part of the appellant's turnover. It was in this context that in the subsequent case of McDowell, it was held by the Supreme Court that since in view of the amended rules the liability for payment of the excise duty was that of the manufacturer, therefore, though the excise duty was paid by the purchasers to meet the liability of the appellant, it was very much the part of the consideration for sale and is includible in the turnover of the company. So far as the provisions of the Excise Act in this State are concerned, as noticed abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in Circular No. 585, dated November 27, 1990, the said definition was incorporated so as to make incumbent the collection of income-tax at source also by reference to the excise duty. The said concept of the " purchase price " has not been retained by the Legislature in the substituted provisions. Therefore, in my opinion, the Bench decision, referred to above, has no bearing on the question involved in the present cases. In the above view of the matter, since the sellers are entitled to receive only the cost price from the retail vendors, therefore, neither it is incumbent nor permissible on their part to collect any amount by way of income-tax with reference to the excise duty payable by the buyers to the Government as a measure of tax or consideration for parting with the exclusive privilege. They will be statutorily liable to collect an amount as income-tax with reference to the cost price only. It is also important to ascertain as to whether by employing any interpretational tool, the State Government can also be held to be a seller for the purposes of the provisions of the Income-tax Act in question so as to make it incumbent upon the State Government also to collect 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the State of Bihar is a " seller " within the meaning of section 44AC of the said Act. In that decision, it was further held that in terms of the rules as also circular letters issued from time to time, an extended meaning of the definition of " seller " has to be given. From a perusal of paragraph 28 of the said judgment, it would be evident that it was not disputed therein that the retail dealers purchase country liquor by paying the cost price as well as excise duty by challan to the State Government. In that case, the learned Additional Advocate-General No. 1 who appeared for the State of Bihar accepted the position that the cost price of country liquor was realised by the State along with the excise duty by way of challans which are kept in a separate account. The State, thereafter, debits the cost price in the account of the distiller. In that situation, it was observed that for the purpose of section 206C of the said Act, tax has to be deducted not only on the basis of the cost price but for that purpose the amount of excise duty has also to be taken into consideration. In these cases, however, the petitioners have, inter alia, contended that they are liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comprised therein. --------------------------------------------------------------------------------------------------------------------------------------------------- Sl. No. Nature of goods Percentage --------------------------------------------------------------------------------------------------------------------------------------------------- (1) (2) (3) --------------------------------------------------------------------------------------------------------------------------------------------------- (1) Alcoholic liquor for human consumption Fifteen (other than Indian-made foreign liquor) . . . . per cent.... --------------------------------------------------------------------------------------------------------------------------------------------------- Provided that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that to the best of his belief any of the goods referred to in the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of this sub-section shall not apply so long as the certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s carried on by the assessee. Explanation. -For the purposes of this section, 'seller' means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company, or firm or co-operative society." Section 206C of the said Act, as has been substituted by the Finance Act, 1992, reads thus : " Section 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 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:..... Provided that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that to the best of his belief any of the goods referred to in the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver, by a circular letter bearing No. 698 dated March 12, 1992, the Deputy Commissioner of Excise informed all the Assistant Commissioners of Excise and Superintendents of Excise of all the districts that it has now been decided that from the security point of view, the price of the licensed country liquor shall be paid to the contractors by way of bank draft by the licencee directly who would grant receipts therefrom and which shall be produced by the retail licensees before the authorities of the warehouse so that the country liquor may be released on the basis thereof. It has further been clarified that so far as the realisation of income-tax from the retail vendors is concerned, the same shall be deposited by them by way of bank draft and one photocopy thereof shall be retained by the warehouse officers and another photocopy shall be retained by the contractor. Thus, after March 12, 1992, the contractors who are either the manufacturer or the wholesaler have been receiving the amount of cost price of the country liquor directly. Even the amount of income-tax has to be deposited by a separate bank draft. Thus in terms of the present arrangement, the State does not realise th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued a notice as to why the excise duty paid directly by the buyers shall not be included in the appellant's turnover for a part of the year 1982-83. A writ petition was filed before the High Court for quashing the notice issued by the authorities of the Sales Tax Department and the said writ petition was dismissed. On special leave having been granted by the Supreme Court against the aforementioned judgment of the High Court, the correctness of the decision in the earlier case of the said company was doubted. Before the Supreme Court, the vires of the amended rules was not questioned. The Supreme Court, therefore, considered the definition of " turnover " as contained in section 2(s) of the Sales Tax Act, i.e., to mean " the total amount set out in the bill of sale ( or if there is no bill of sale, the total amount charged ) as the consideration for the sale or purchase of goods (whether such consideration be cash, deferred payment or any other thing of value) including any sums charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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