R.M. Savant, J.@mdashThe main question that arises in the above Petition is as to whether the State Excise Duty paid directly by the CL-II licence holders, the purchasers of country liquor from the Petitioners, who are the manufacturers, is to be included in the sale price to be exigible to the payment of sales tax under the Bombay Sales Tax Act, 1959.
2. The facts necessary to be cited for adjudication of the above Petition can be stated thus:
Petitioner No. 1 is a Co-operative Society registered under the provisions of the Maharashtra Co-operative Societies Act, 1960. Petitioner No. 2 is the office bearer of the Petitioner No. 1 through whom the above Petition has been filed. The Petitioners are inter alia engaged in the business of manufacture and sale of country liquor of which they have been issued licence known as CL-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 (herein after referred to as the "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% in between 01.10.1995 to 30.09.1996 and 13% from 01.10.1996 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 01.10.1995 to 14.11.1996 and 15.11.1996 to 14.01.1997. It appears that country liquor was exempted from payment of whole of the sales tax under the said Act up to 30.09.1995 by virtue of Entry No. 168 under Notification issued u/s 41 of the said Act. By Notification dated 22.9.1995 issued under exercise of power u/s 41 of the said Act, sale of country liquor was exigible to tax at the reduced rate of four percent under Group A entry No. 15. The Petitioners for the period in question i.e. from 01.10.1995 to 14.11.1996 have paid sales tax at the rate of four percent on the sale of country liquor on the basic price which is charged in the sale bills issued by the Petitioners.
3. In so far as Excise Duty is concerned, the Commissioner of State Excise Maharashtra, by circular No. CLR 1293/53060/V-B dated 25.10.1993 regulated the payment of Excise Duty by ordering that the excise duty on country liquor may be paid by persons holding CL-II licenses at the rates in force at the time of sale of country liquor subject to certain conditions. As indicated above, the Petitioners are the manufacturers of country liquor and selling country liquor to CL-II licence holders. The said excise duty is paid directly by CL-II licence holders in terms of the said circular dated 25.10.1993. It is the case of the Petitioners that the said excise duty does not find reflection in the Petitioners invoices or in their books of account. The Petitioners, therefore, pay sales tax under the said Act on the sale of country liquor on the basic price. The component of State Excise Duty is not reflected in the invoice in view of the fact that the same is paid directly by CL-II licence holder. It appears that the concerned Sales Tax Officer visited the premises of the Petitioners on 15.10.1996 and made inquiries regarding sales tax payable on the sale price inclusive of State Excise Duty on sale of country liquor. The upshot of the said visit was that the Sales Tax Officer within whose jurisdiction the Petitioners factory falls by his letter dated 12.12.1996 called upon the Petitioners to pay the sales tax on State Excise Duty. After the receipt of the said letter, the Petitioners paid under protest a sum of Rs. 10 lakhs on 20.12.1996 and a further sum of Rs. 5 lakhs on 30.12.1996 being sales tax on the State Excise Duty Component for the period from 1.10.1995 to 14.11.1996. The Sales Tax Officer thereafter vide his letter dated 17.01.1997 again called upon the Petitioners to pay the balance of sales tax on the State Excise Duty. The Petitioners again under protest have paid sales tax on the State Excise Duty in the sum of Rs. 4,01,875/ - for the period from 15.11.1996 to 14.01.1997. As mentioned herein above, thereafter by Notification dated 04.01.1997 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 15.01.1997 has been waived. It appears that the Petitioners have been issued a certificate by the Deputy Superintendent of State Excise on 11.02.1997 stating therein that the Excise Duty on country liquor is paid by the wholesale licensees of country liquor (CL-II licence holders) on the supply made to them by the Petitioners and that same has been done in view of the circular dated 25.10.1993 issued by the Commissioner of the 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, the Petitioners have challenged the constitutional validity of the said Explanation-I to Clause (29) of Section 2 of the said Act, in so far as it treats as part of the sale price the State Excise Duty paid directly by CL-II licence holders on purchases of country liquor from the Petitioners. The Petitioners have also alternatively prayed that in the event this Court upholds the constitutional validity of Explanation-I to Clause (29) of Section 2 of the said Act, then the said provision be read down so as to mean that the sale price does not include State Excise Duty and, therefore, no sales tax is payable on the State Excise Duty paid directly by the CL-II licence holders on sale of country liquor by the Petitioners.
4. On behalf of the Respondents, an affidavit in reply has been filed dealing with the claim and contentions in the Petition. In the said affidavit it is contended that the State Excise Duty payable is deemed to be a part of the sale price in terms of Explanation-I to Clause (29) of Section 2 of the said Act. The said affidavit further goes on to state that since the returns were filed by the Petitioners, the factory of the Petitioners was visited by the Sales Tax Officers in order to ascertain the correctness of the said returns filed by the Petitioner and more especially to ascertain whether the Petitioners who are the dealers under the said Act have paid sales tax on the amount of Excise Duty payable on the sale of country liquor. In the said affidavit it is further averred that the circular dated 25.10.1993 can only be said to be a sort of administrative concession and mutual arrangement extended by the Excise Department to facilitate payment of State Excise Duty, however, the liability to pay State Excise duty is principally that of the Petitioners.
5. We have heard Shri Jetly, the learned Counsel appearing for the Petitioners and Shri Sonpal, the learned Counsel appearing for the Respondents.
6. On behalf of the Petitioners, the thrust of the submissions was on the basis of circular dated 25.10.1993. It was sought to be contended by the learned Counsel for the Petitioners that in terms of the said circular dated 25.10.1993, the CL-II licence holder was obliged to pay Excise Duty on the quantity of liquor purchased from the Petitioner, and hence the said amount could not be included in the sale price of the Petitioners. The learned Counsel for the Petitioners, for the said purpose, relied upon the contents of the said circular dated 25.10.1993 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 CL-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 ultravires the Constitution of India and beyond the legislative competence of the Respondent No. 1. The learned Counsel for the Petitioners relied upon the Judgment of the Apex Court in the matter of
7. Per contra, it was submitted by the learned Counsel for the Respondents that in terms of Section 2(29) of the said Act, the State Excise Duty paid by the Petitioners is liable to be included in the sale price and the Petitioners are, therefore, obliged to pay sales tax on the State Excise Duty. The learned Counsel for the Respondents submitted that the reliance placed by the Petitioners on the said circular dated 25.10.1993 in support of their submission that since the liability of payment of State Excise Duty is that of the CL-II licence holder, the same could not be included in the sale price is misconceived. The learned Counsel for the Respondents submitted that the principal liability to pay the State Excise Duty is that of the manufacturer i.e. the Petitioners. According to him, the circular dated 25.10.1993 merely makes out a sort of administrative arrangement to facilitate the payment of Excise Duty and does not have the effect of altering the responsibility of payment of Excise Duty. The learned Counsel for the Respondents relied upon the contents of the said circular dated 25.10.1993 to contend that the said circular postulates that the Excise Duty may be paid by the CL-II licence holders. The learned Counsel for the Respondents submitted that since consideration for the sale of liquor includes State Excise Duty, the sale price would therefore have to include the total amount and not what was reflected in the bill and merely because the Petitioners have not included the State Excise Duty in the bill would not absolve them of the liability of paying sales take on the State Excise Duty. The learned Counsel for the Respondent further submitted that the issue in question whether the Excise Duty could be included in the sale price can be said to have been covered by the decision of the Apex Court in the matter of Mohan Breweries and Distilleries Ltd. v. Commercial Tax Officer, Madra and Ors. reported in (1977) 107 STC 212 (SC). In so far as Judgment in McDowell case (Supra) (1st McDowell case), on which the reliance is placed by the Petitioners, is concerned, the learned Counsel for the Respondents submitted that as a consequence of the judgment in McDowell''s case (supra), Rules 76 and 79 of the Andhra Pradesh Distillery Rules 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 turn over. 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 turn over of the Respondent and was therefore liable to be so included for determining its liability for sales tax under Andhra Pradesh General Sales Tax Act, 1957. The matter was carried to the Apex Court and, the Apex Court in judgment reported in
The learned Counsel for the Respondents submitted that in so far as the judgment of the Division Bench of this Court is concerned, the facts in the said case were relating to the payment of customs duty and, therefore, the Division Bench of this Court relying upon the 1st McDowell Case reported in
8. We have heard the learned Counsel for the parties.
9. Considering the challenge raised by the Petitioners, the crux of the issue that arised for consideration is, as to whether the State Excise Duty paid by CL-II licence holders who have been supplied liquor by the Petitioners can be included in the sale price of the Petitioners. Considering the said challenge the definition of sale price as posited in Section 2(29) can be gainfully reproduced:
Section 2(29) "sale price means the amount of valuable consideration paid or payable to a dealer for any sale made including any sum charged for anything done by the dealer in respect of goods at the time of or before delivery thereof, other than (the post of insurance for transit or for installation), when such cost is separately charged:
Explanation (I)- For the purposes of this clause, the amount of duties levied or leviable on goods under the Central Excise and Salt Act, 1944 or the Customs Act, 1962 or the Bombay Prohibition Act, 1949 shall be deemed to be part of the sale price of such goods, whether such duties are paid or payable by or on behalf of the seller or the purchaser or any other person.
Explanation (II)- Sale price shall not include sales tax (turnover tax, surcharge and resale tax) paid or payable to a dealer in respect of 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.)
10. 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 herein above, the thrust of the arguments of the learned Counsel for the Petitioners was based on the circular dated 25.10.1993 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/IT-B(TRY) dated the 4th December, 1984, it is hereby ordered that the excise duty on country liquor may be paid by the persons holding C.L.II licences at the rates in force at the time of release of Country Liquor subject to condition that:
(a) The payment should be made in the treasury or sub-Treasury in which the C.L.I licence at present credits the excise duty, and
b) The manufactory who wants to avail of this facility should give an undertaking in writing that in case the chalan produced by C.L.II license is found to be forged, bogus or defective in any case, the C.L.I licensee binds himself to pay the excise duty.
11. A reading of the said circular therefore indicates that the said circular can only be said to be a modality to facilitate the payment of Excise Duty. It cannot have the effect of shifting the responsibility of payment of Excise Duty which is primarily that of the Petitioners to the CL-II licence holders who are supplied country liquor by the Petitioners. As can be seen from the said circular, a phraseology used is that "the excise duty on country liquor may be paid by the persons holding C.L.II licences at the rates in force at the time of release of Country Liquor. That modality to facilitate the payment of Excise Duty can be seen in Clause (a) which stipulates that the payment has to be made in the treasury or sub-treasury in which CL-I licence at present credits the excise duty. However, clause II ex-facie is a pointer to the fact that it is a facility provided by the Commissioner of State Excise for payment of State Excise Duty as is in terms of Clause (b) the manufactory like Petitioners are obliged to give undertaking in writing that in case there is an problem as regards payment of Excise Duty, the CL-I licensee binds himself to pay the excise duty. Hence in our view, the said circular does not in any manner shift the obligation of payment of Excise Duty from the manufacturer to the C.L.II licence holders and that CL-II licence holders whilst paying the Excise Duty are merely fulfilling the obligation of the manufacturers like the Petitioners. Hence in our view, the circular dated 25.10.2010 does not in any manner further the case of the Petitioners in so far as their contention that the State Excise Duty having been paid by the CL-II licence holders cannot be included in the sale price.
12. In the context of the circular dated 25.10.1993, 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 CL-II licence holders, in our view, the said circular cannot bind the authority under the said Act whilst determining the sale prices as postulated in Clause 29 Section 2 of the said Act.
13. 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 (supra), the reliance placed by the learned Counsel for the Petitioners on the judgment in the 1st McDowell case (supra) and in the case of Food Corporation of India (supra) and on the judgment of the Division Bench of this Court in the case of Gujarat Export Corporation Ltd. (supra), is misplaced.
Now coming to the judgments on which reliance is placed by the learned Counsel for the Petitioners.
In the 1st McDowell case, the issue was as to whether the Excise Duty or Countervailing Duty paid directly to treasury by purchasers before removing liquor from Distillery or bonded warehouse and not included in sale bill by dealer would form part of turnover of dealer and liable to pay sales tax. The Apex Court, in the context of Clause (1)(s) of Section 2 of the Andhra Pradesh General Sales Tax Act, 1957 which postulates inclusion of "any sums charges by the dealer", held that the excise duty or the countervailing duty would not come within the sweep of the said provision and cannot be included in the sales tax.
It is required to be noted that after the said judgment in the 1st McDowell case, Rules 76 and 79 of the Andhra Pradesh General Sales Tax Act, 1957 were amended and after the amendment the liability for payment of excise duty was specifically made that of the manufacturer. The challenge of the McDowell Co. Ltd. to the said Rules on the ground that the excise duty paid directly by buyers could not be included in the sale price was turned down by the High Court of Andhra Pradesh and the said view of the High Court of Andhra Pradesh was upheld by the Apex Court in the 2nd McDowell case reported in (1985) 59 STC 277. The facts in the 2nd McDowell case therefore were closer to the facts of the present case, as in the instant case also Section 2(29) of the said Act includes the State Excise Duty in the sale price.
In so far as the judgment in the case of Food Corporation of India (supra) is concerned, the facts in the said case are clearly distinguishable from the facts in the instant case inasmuch as the question in the said case was as regards the administrative surcharge and price equalisation charge which was collected by Food Corporation of India in accordance with rates fixed by the Government merely as an agent on behalf of the Government which was not the part of price nor the part of turnover. In the said context, the Apex Court held that since the said administrative surcharge and the price equalisation charge were collected by the Food Corporation 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.
14. Now coming to the judgment of the Division Bench of this Court in Gujarat Export Corporation Limited (supra), 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 valued 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 from the facts in the instant case. In our view, therefore, the reliance placed by the learned Counsel for the Petitioners on the said three judgments (supra) are of no avail to the Petitioners.
15. Since it is the case of the Respondents that the issue in question in the above Petition is squarely covered by the judgment of the Apex Court in Mohan Breweries case (supra), it would be necessary to advert to the facts that were before the Apex Court in the said case. The Appellants before the Apex Court i.e. the Mohan Breweries and Distillery Ltd. were the manufacturers of Indian made foreign liquor on the strength of licences issued to them under the Tamil Nadu Indian-made Foreign Spirits (Manufacture (Rules, 1981. Under Rule 22 of the said Rules 1981, the excise duty on the liquor had to be paid by the person who removed the goods from a manufactory and, under Rule 15(1) of the said Rules 1981, the licensee had to pay the duty on the stock of liquor removed by him. The question before the Apex Court was as to whether the excise duty so payable by TNSMC on on the Indian-made foreign liquor manufactured by the Mohan Breweries could be included in the turnover of the Mohan Breweries for the purpose of sales tax under the Tamil Nadu General Sales Tax Act 1959. The Apex Court in the said case observed that the excise duty levied upon the goods manufactured or produced and its incidence fell on the manufacturer or producer of the goods, liability to pay the excise duty on the Indian made foreign liquor was that of the manufacturer though the collection of the excise duty might be deferred to such later stage as was administratively or otherwise most convenient. The Apex Court referred to Rule 22 of the Manufacture Rules which provided that a mode for collecting the excise duty, a mode which was obviously convenient, for it required the party removing the liquor from the factory to pay in advance the excise duty thereon. The Apex Court held that when the excise duty was collected from a party, other than the manufacturer, at the time of removing the liquor from the factory after its production, the payment of excise duty by that party made was in discharge of the obligation of the manufacturer. The Apex Court, therefore, in the context of the definition of "turnover" in Section 2(r) of the Tamil Nadu General Sales 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 turn over. Paras 7, 9, 10 and 11 are relevant and are reproduced herein under:
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 thereon. That party might be the manufacturer. That the Act provides in another section that all IMFL should be supplied in the state of Tamil Nadu by wholesale only through TASMAC does not, in our view, make any difference to this position. It cannot be a reason for holding that the primary obligation to pay excise duty is that of TASMAC or that the manufacturer is absolved of the obligation to pay excise duty.
10. We cannot agree with learned Counsel for the appellants that the second
11. As we look at it, the primary obligation to pay excise duty on the IMFL is of the manufacturer thereof. Rule 22 only provides for a convenient method for its collection. When the excise duty is collected from a party removing the IMFL from the factory of its production, other than the manufacturer, the payment of excise duty that party makes is in discharge of the obligation of the manufacturer. That party does not, as it would ordinarily do, pay the excise duty component along with the sale price to the 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
16. In our view, the facts in the said Mohan Breweries case are closer to the facts in the instant case inasmuch as by Rule 22 of the Manufacture Rules 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 25.10.1993. However, as held by the Apex Court, the mode of payment of duty would not be determinative as to whether it would form part of sale price or not. In view of what has been held by the Apex Court in Mohan Breweries case, in our view, the Petitioners cannot escape the liability to pay sales tax on the State Excise Duty for the period in question.
Though the Petitioners had challenged the constitutional validity of Explanation-I to Clause 29 of Section 2 of the said Act and had also in the alternative prayed that in the event the Court upholds the constitutional validity, then the said provision be read down so as to mean than the sale price does not include the State Excise Duty and therefore no sales tax is payable on the Sale Excise Duty paid directly to the CL-II licence holders on the sale of country liquor by the Petitioners. No submissions were advanced in support of the said challenge by the learned Counsel for the Petitioners and, therefore, it would have to be understood that the Petitioners have given up the said challenge.
In that view of the matter, we do not find any merit in the above Petition which is accordingly dismissed. Rule discharged.
