Mc Dowell & Company Ltd. Vs.
Commercial Tax Officer, Vii Circle, Hyderabad  INSC 259 (25 October 1976)
SINGH, JASWANT SINGH, JASWANT KHANNA, HANS
CITATION: 1977 AIR 1459 1977 SCR (1) 914 1977
SCC (1) 441
CITATOR INFO :
E&D 1985 SC1211 (41) O 1986 SC 649
(21,23,30,40) D 1987 SC 611 (10) RF 1991 SC 735 (20)
Andhra Pradesh General Sales Tax Act,
1957--Excise and countervailing duty paid by the buyers directly into the
Treasury--Neither the invoice nor books of the assessee (manufacturer) show the
excise duty--Excise duty--If fails under "any sums charged by the
dealer" occurring in the definition of "turnover".
Section 2(1)(s) of the Andhra Pradesh General
Sales Tax Act, defines 'turnover" to mean the total amount set out in the bill
of Sale as the consideration for the sale or purchase of goods 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.
The appellants in the first two sets of
appeals are manufacturers of Indian liquors. A buyer of Indian liquor from the
distilleries pays, in the first instance, the excise duty in the Treasury and
obtains a distillery pass for the release of liquor. On presentation of the
distillery pass an invoice is prepared by the manufacturers showing the price
of liquor. Neither invoice. nor the account books of the manufacturers show the
excise duty paid by the purchasers.
Under the system in vogue in the second set
of appeals, the appellant who is the owner of a bonded warehouse prepares a
bill for the liquor required by the purchaser who pays the countervailing duty
in the Treasury in his own name and obtains a pass from the excise authorities
for the removal of the liquor from the warehouse.
In both the, cases the Sales Tax Authorities
included the excise duty in the taxable turnover of the appellants.
The High, Court dismissed the writ petition
of the appellants impugning the orders of the Sales Tax Officers.
Allowing the appeal,
HELD: (1) Excise duty and countervailing duty
paid directly by the buyers for the Indian liquors did not constitute a part of
the turnovers or, the appellants.
[924 C] (2) The phrase 'any sums charged by
the dealer' occurring in the definition of 'turnover' has to be understood in
its ordinary popular sense. So construed, it means what is demanded and
collected or received by the dealer. [923 B] In the instant case the excise
duty or the countervailing duty has not been charged or received by the dealer
but has been charged by the excise authorities and deposited directly by the
buyers of the liquor in the State exchequer.
It cannot be said that the excise duty or the
countervailing duty was charged by the appellants.
In M/s. George Oakes (Private) Ltd. v. The
State of Madras & Ors., this Court held in relation to the definition of
turn-over that the aggregate amount includes the tax as part of the price paid
by the buyer; the amount goes into the common till of the dealer till 'he pays
the tax; it is the money which he keeps using for his business till he pays the
tax; it is the money which he keeps using for his business till he pays it over
to Government; it becomes a part of the circulating capital of the tradesman
and is turned over in his business. Secondly the price paid by the purchaser
was not so much money for the cause turnover means the amount of money which is
turned over in the business. [923 E-G] 915 In the instant case the excise and
the countervailing duties did not go into the common tills of the appellants
and did not become a part of their circulating capital. The Sales tax
authorities were not competent to include in the turnovers of the appellants
the excise duty and the countervailing duty which was not charged by them but
was charged by and. paid directly to the excise authorities by the buyers of
the liquors. [924 A] A. V. Fernandez v. The State of Kerala  S.C.R. 837
R.C. Jail v. Union of India  Supp. 3
S.C.R. 436, Sea
Customs ACT  3 S.C.R. 787, A B. Abdul
Kadir & Ors. v. State of Kerala  3 S.C.R. 219, Kalyani Stores v. The
State of Orissa & Ors.  1 S.C.R. 865 & M/s Mohan Megkin Brewaries
Ltd. v. Excise & TaxatiOn Commisisoner, Chandigarh & Ors.  3
S.C.C. 421 referred to.
Messrs George Oakes (Private) Ltd. v. The
State of Madras & Ors. (122 S.T.C. 476) and (13 S.T.C. 98) referred to and
The Government of Andhra (now Andhra Pradesh)
v. East India Commercial Co. Ltd. (8 S.T.C. 114) distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 248-251 of 1976.
(Appeals by Special Leave from the Judgment
and Order dated 28-11-1975 of the Andhra Pradesh High Court in Writ Petitions
CIVIL APPEALS Nos. 934-936 of 1976.
(Appeals by Special Leave from the Judgment
and Order dated 28-11-1975 of the Andhra Pradesh High Court in Writ Petitions
Nos. 3931, 3944 and 4029/75).
CIVIL APPEALS No. 693 of 1976.
(Appeal by Special Leave from the Judgment
and Order dated 28-11-1975 of the Andhra Pradesh High Court in Writ Petition
Soli Sorabji and K.J. John for the Appellant
A. Subba Rao for the Appellant (CAs.
Babul Reddy and K.J. John for the Appellant
Niren De, Attorney General for India, P.P.
Rao, D.V. Sastry and T.V.S.N. Chari for the Respondents (in CAs. 248251/76 and
T.V.S.N. Chari for the Respondent (In CA No.
The Judgment of the Court was delivered by
JASWANT SINGH, J.--This batch of appeals by special leave which are directed against
three separate judgments of the High Court of Andhra Pradesh at Hyderabad
dismissing three sets of writ petitions Nos. 1195 to 1198 of 1975,3931, 3944
and 4929 of 1975 and 6790 of 1974 filed by the. appellants to challenge certain
orders of the sales tax authorities made in respect of re-determination of
their' turnover for certain years under the Andhra Pradesh General Sales Tax
Act, 916 1957 (hereinafter referred to as 'the Act') shah be disposed of by
this judgment, as they raise a common question as to whether the excise duty
deposited directly in a State treasury or a sub-treasury by the purchasers of
the Indian-made foreign liquor called 'Indian liquor' before removing the said
liquor from a distillery and the countervailing duty remitted directly to a
State Treasury or a sub-treasury by the purchasers of the aforesaid specie of
liquor before removing it from a bonded warehouse can properly be said to form
part of the turnover of .he manufacturer and of the owner of the bonded
warehouse respectively and as such liable to sales tax under the Act.
The circumstances which have given rise to
these appeals lie in a short compass and may be briefly stated: The appellants
in the first two sets of Appeals Nos. 248 to 251 of 1976 and 934 to 936 of 1976
carry on the business of manufacture of 'Indian liquors' in their distilleries
established in Andhra Pradesh under licences issued to them by the Commissioner
of Excise under the Andhra Pradesh Excise Act, 1968 (Act 17 of 1968) and the
rules made there under and sell their finished products to the wholesale
dealers who in turn sell them to retail dealers. Under Rule 76 of the Andhra
Pradesh Distillery Rules, 1970 removal of any liquor manufactured or stored
without prepayment of the excise duty specified in rule 6 is forbidden. Rule 77
of the Rules prohibits issue of any liquor until its quantity and strength have
been duly verified by the distillery officer.
Rule 579 of the Rules authorises the
distillery officer on payment of excise duty to grant a distillery pass for
removal of the liquor fit for human consumption to the persons specified in the
said rule including a person holding a licence for sale of liquor by wholesale
or retail. Under Rule 81 of the Rules, every application for a distillery pass
for removal of liquor has to be addressed in writing to the distillery officer
and has to be accompanied by a challan in original for payment of excise duty
therefor and a general or special permit for the purpose of removal of the
liquor. Rule 82 of the Rules enjoins the distillery officer upon tender of cash
payment of excise duty by the applicant to fill up the challan for presentation
with the cash at a treasury or sub-treasury of the district in which the
distillery is situate, and the applicant for distillery pass to present the
treasury receipt in token of his having made payment of the duty where after
the distillery officer has to affix the said receipt to the counterfoil of form
6. Rule 83 of the Rules casts responsibility
upon an applicant for a distillery pass to, make a correct calculation and full
payment of the excise duty upon the liquor desired to be removed. Rule 84 of
the Rules requires, the distillery officer to issue the liquor under a pass in
form D-6 sending a duplicate' thereof to the Excise Superintendent of the
district of destination on being satisfied that the applicant is entitled under
the Rules to remove the liquor and has made payment of the requisite excise
Accordingly every buyer of the Indian liquor
from either of the 'appellants' distilleries during the years in question
obtained the distillery pass for release of the liquor after making payment of
the excise duty and presented the same at the concerned distillery whereupon
bill of sale or invoice was prepared by the distillery showing the price of the
liquor. The said bill did not include 917 the excise duty paid by the buyer.
The appellants' books of accounts also did not contain any reference regarding
the excise duty paid by the purchasers in the manner stated above. The
appellants paid the sales tax in full as per final assessments made by the
sales tax authorities under the Act. it appears that after the completion of
the assessments of the sales tax under the Act for the years in question, the Commercial
Tax Officer felt that there had been a failure to include the excise duty paid
on the aforesaid liquors vended by the appellants in their taxable turnover.
Accordingly, acting under the provisions of section 14(1) of the Act, the
Commercial Tax Officer issued notices in February, 1975 to the appellants in
the aforesaid first two sets of appeals to show cause why the assessments be
not reopened. Aggrieved by the said action of the Commercial Tax Officer, the
appellants filed writ petitions Nos. 1195 to 1198 of 1975 and 3931, 3944 and
4929 of 1975 in the High Court of Andhra Pradesh challenging the said notices
which, as already stated, were dismissed by the High Court.
The appellant in Appeal No. 693 of 1976 is a
firm which is a licensed wholesale dealer in liquors and owner of a bonded
warehouse under the Andhra Pradesh Indian Liquor (Storage in bond) Rules, 1969
where it stores or deposits Indian Liquors such as whisky, brandy. gin etc.
imported by it from various States outside the State of Andhra Pradesh without
prepayment of countervailing duty or other fee and issues the same according to
the rules to its customers. The modus operandi of the appellant is that it
makes a bill for the value of the liquor required by an intending purchaser, who
thereafter pays the requisite countervailing duty in his own name and the
Excise Officer in-charge of the bonded warehouse grants him a pass entitling
him to remove the liquor from the warehouse. According to the appellant, it
gets only the price of the liquor from its buyers. For the assessment year
1971-72, the Commercial Tax Officer, Hyderabad III by its order dated August
16, 1972 included the amount representing the countervailing duty paid by the
purchasers in respect of the Indian liquors in bond which was not included in
the bills of sale issued by the appellant. On appeal, the Assistant
Commissioner by its order dated March 26, 1973 deleted from the turnover of the
appellant the item pertaining to the excise duty paid directly by the purchasers
holding that the excise duty so paid by the purchasers did not, in the
circumstances, form part of the turnover of the appellant. Sometime thereafter,
the Sales Tax Appellate Tribunal by its order dated August 5, 1974 passed in
T.A. Nos. 331 of 1973 and 5 of 1974 upheld the assessment made under similar
circumstances by the Commercial Tax Officer, Vijayawada, on the turnover of M/s
Shaw Wallace & Co. Thereupon the Deputy Commissioner, Commercial Taxes,
Hyderabad by virtue of the power vested in him under section 20 of the Act
issued the impugned notice dated October 9, 1974. to the appellant calling upon
it to show cause why the order passed by the Assistant Commissioner, Commercial
Taxes on March 26, 1973 should not be set aside and the original assessment
order of the Commercial Tax Officer dated August 16, 1972 restored. The
appellant was also required to file objections and adduce evidence in support
thereof within 7 days from the date of receipt of the impugned notice, 918
Aggrieved by the notice, the appellant filed a petition being petition No. 6790
of 1974 before the High Court of Andhra Pradesh. seeking issue of an
appropriate writ, order or direction declaring that the appellant was not
liable to pay sales tax on excise duty paid by the purchasers in their own
names and restraining the Deputy Commissioner, Commercial Taxes, Hyderabad,
respondent in the appeal from taking further proceedings in pursuance Of the
The said petition having been dismissed, the
appellant has, as already stated, come up in appeal to this Court.
At the hearing of these appeals, Mr. Sorabji
and the other counsel appearing on behalf of the appellants have assailed the
aforesaid Judgments and orders of the High Court by urging in the first
instance that the view taken by the High Court about the nature and character
of excise duty and countervailing duty is not correct. They have also after
trying in vain to argue for considerable length of time that on the true
construction of the Andhra Pradesh Excise Act, 1968, the Andhra Pradesh
Distillery Rules, 1970, the Andhra Pradesh Foreign and Indian Liquor Rules,
1970 and the Andhra Pradesh Indian Liquor (Storage in bond) Rules, 1969, a
manufacturer of Indian liquors and an owner of a bonded warehouse are not
primarily responsible for payment of the excise duty or countervailing duty, as
the case may be, contended that a manufacturer and owner of the bonded warehouse
are not solely responsible for payment of the said duties and a purchaser of
the liquor who obtains a distillery pass or a ware house pass and transport
permit is also legally responsible for payment there for and if he does pay the
duty, it is something which he does in discharge his own statutory liability
and not something which he does for or on behalf or for the benefit of the
manufacturer or the owner of the bonded warehouse. They have alternatively
contended that on a true construction of the expression 'turnover' as defined
in section 2(1) (s) of the Act, the determinative factor is the total amount
set out in the bill of sale as consideration for the sale of the liquor and
since the excise duty or the countervailing duty was directly paid by the
purchasers to the excise authorities and did not at all form part of
the-consideration for the sale of the said liquor as set out in the bills of
sale, it was not permissible for the sales tax authorities to assess the
turnover by roping therein something which was not set out in the bills of sale
as consideration for the sales. They have lastly contended that in any event as
the excise duty or the countervailing duty was at no time charged by the
appellants for anything done in respect of the liquors sold but was charged by
the excise authorities before removal of the liquors under the Andhra Pradesh Excise
Act, 1968 and the rules made there under, it could not constitute a part of the
turnover and taxed under the Act.
Although some controversy was sought to be
raised by counsel for the appellants regarding the nature and character of the
excise duty and countervailing duty but as rightly pointed out by the learned
Attorney General, the matter has been put beyond doubt by the decisions of this
Court. In R.C. Jail v. Union of India(I) after a review of the authorities
bearing on the matter, it was held by this Court as follows :-(1)  supp.
3 S.C.R. 436.
918 'The excise duty is primarily a duty on
the production or manufacture of goods produced or manufactured within the
country. Subject always to the legislative competence of the taxing authority,
the said tax can be levied at a convenient stage so long as the character of
the impost is not lost. The method of collection does not affect the essence of
the duty but only relates to the machinery of collection for administrative
convenience." Again In re Sea Customs Act(1) it was observed:
"The question with respect to excise
duties was considered by this Court in the case of Amalgamated Coal fields Ltd.
v. Union of India (A.I.R. 1962 S.C. 1281). After considering the previous
decisions of the Federal Court In re. The Central Provinces and Berar Sales of
Motor and Lubricant Taxation Act (1939 F.C.R. 18); The Province of Madras v.
M/s Boddu Paidanna (1942 F.C.R. 90) and of the Judicial Committee of the Privy
Council in Governor General in Council v. Province of Madras (1945 F.C.R. 179),
this Court observed as follows at p. 1287:
"With great respect, we accept the
principles laid down by the said three decisions in the matter of levy of an
excise duty and the machinery for collection thereof.
Excise duty is primarily a duty on the production
or manufacture of goods produced or manufactured within the. Country. It is an
indirect .duty which the manufacturer or producer passes on to the ultimate
consumer, that is, ultimate incidence will always be on the customer.
Therefore, subject always to the legislative competence of the taxing
authority, the said tax can be levied at a convenient stage so long as the
character of the impost, that is, it is a duty on the manufacture or
production, is not lost. The method of collection does not affect the essence
of the duty, but only relates to the machinery of collection for administrative
convenience." This will show that the taxable event in the case of duties
of excise is the manufacture of goods and the duty is not directly on the goods
but on the manufacture thereof. We may in this connection contrast sales tax
which is also imposed with reference to goods sold, where the taxable event, is
the act of sale. Therefore, though both excise duty and sales-tax are levied
with reference to goods, the two are very different imposes;
in one case the imposition is on the act of
manufacture or production while in the other it is on the act of sale. In
neither case therefore can it be said that the excise duty or sales tax is a
tax directly on the goods for in that event they will really become the same
tax. It would thus appear 'that duties of excise partake of the nature of
indirect taxes as known to standard works on economics and are to be
distinguished from direct taxes like taxes on property and income." (1)
 3 S.C.R. 787.
919 It is, therefore, clear that excise duty
is a duty on the production or manufacture of goods produced or manufactured
within the country though as observed by one of us (Khanna, J.) in A.B. Abdul
Kadir & Ors. v. State of Kerala(1) laws are to be found which impose a duty
of excise at stages subsequent to the manufacture or production.
The position with regard to the nature and
character of countervailing duty has equally been made clear in a number of
decisions of this Court. In Kalyani Stores v. The State of Orissa & Ors.(2)
which was followed in M/s Mohan Meakin Breweries Ltd. v. Excise & Taxation
Commissioner, Chandigarh & Ors. (2), Shah, J. (as he then was) observed:
"This brings us to the consideration of
the meaning of the expression "countervailing duties" as used in
Entry 51, List 1I of the Seventh Schedule to the Constitution. The expression
"countervailing duties" has not been defined in the Constitution or
the Bihar & Orissa Act 2 of 1915. We have, therefore, to depend upon its
etymological sense and the context in which it has been used in Entry 51.
In its etymological sense, it means to counter-balance;
to avail against with equal force or virtue; to compensate for something or
serve as an equivalent of or substitute for:
see Black's Law Dictionary, 4th Edn. 421.
This would suggest that a countervailing duty
is imposed for the purpose of counterbalancing or to avail against something
with equal force or to compensate for something as an equivalent. Entry 51 in
List II of the Seventh Schedule to the Constitution gives power to the State
Legislature to impose duties of excise on alcoholic liquors for human consumption
where the goods are manufactured or produced in the State. If also gives power
to levy countervailing duties at the same or lower rates on similar goods
manufactured or produced elsewhere in India. The fact that countervailing
duties may be imposed at the same or lower rates suggests that they are meant to
counterbalance the duties of excise imposed on goods manufactured in the State.
They may be imposed at the same rate as
excise duties or at "a lower rate, presumably to equalise the burden after
taking into account the cost of transport from the place of manufacture to the
taxing State. It seems, therefore, that countervailing duties are meant to
equalise the burden on alcoholic liquors imported from outside the State and
the burden placed by excise duties on alcoholic liquors manufactured or
produced in the State. If no alcoholic liquors similar to those imported into
the State are produced or manufactured, the right to impose counterbalancing
duties of excise levied on the goods manufactured in the State will not arise.
It may, therefore, be accepted that countervailing duties can only be levied if
similar goods are actually produced or manufactured in the State on which
excise duties are being levied." (1)  3 s.c.c. 219.
(2)  1 S.C.R. 865.
(3)  3 S.C.C. 421.
921 Having seen that a provision can be
inserted in the excise law for collection of the excise duty at a stage
subsequent to the manufacture or production of the excisable article, we shall
now proceed to examine the main contentions raised by counsel for the
appellants. We have first to see as to how far the contention of counsel for
the appellants that apart from a manufacturer of Indian liquors and an owner of
a bonded warehouse (who in our opinion cannot but be regarded as primarily
responsible for payment of excise duty and countervailing duty respectively in
view of sections 21, 28 & 65 of the Andhra Pradesh Excise Act, 1968, and
rules 3, 4, 5, 6, 67 & 76 of the Andhra Pradesh Distillery Rules, 1970, and
condition No. 9 of the Distillery Licence granted under rule 5 of these Rules;
rules 5 & 10 of the Andhra Pradesh Indian Liquor (Storage. in bond) Rules,
1969, conditions Nos. 7 & 10 of the licence granted in form B.W. 1 under
rule 5(2). the phraseology of the application for receipt of liquor into the
bounded warehouse prescribed by rule 9(2) and the terms of the counterpart
agreement required to be executed by a licensee of an Indian liquor bonded
warehouse under rules 3(2) and 5(2) of these Rules) the buyers of the said
liquors are also liable under the law for payment of the aforesaid duties can
be sustained. For a proper determination of this question, it is necessary to
recall the provisions of the Andhra Pradesh Distillery Rules, 1970 which have
been set out in the earlier part of this judgment. The said rules particularly
rules 79, 81, 82, 83 and 84 lend a good deal of support, in our opinion, to the
contention of counsel for the appellants and make every intending buyer of the
Indian liquor liable for payment of the excise duty before obtaining the distillery
pass and lifting the quantity mentioned therein from 1he distillery.
Accordingly agreeing with counsel for the
appellants we hold that intending purchasers of the Indian liquors who seek to
obtain distillery passes are also legally responsible for payment of the excise
duty which is collected from them by the authorities of the Excise Department.
The position in regard to the countervailing
duty is not however dear though rule 10(1) of the Andhra Pradesh Indian Liquor
(Storage in bond) Rules, 1969 and rules 5(2) and 17 of the Andhra Pradesh
Foreign and Indian Liquor Rules, 1970 enable the intending buyers of Indian
liquors to remove the same from a bonded warehouse on payment of the said duty,
to the excise authorities.
. This is not, however, sufficient to dispose
of the matter. The real and pivotal question that requires to be determined is
whether the excise duty or the countervailing duty, as the case may be. paid
directly to the excise authorities of the State or deposited directly in the
State exchequer in respect of the Indian liquor by the buyers thereof before
removing it from any of the aforesaid distilleries or the warehouse can be said
to form part of the taxable turnover of the appellants as according to section
5 of the Act which is the charging section sales tax is required to be paid by
the appellants on their turnover of the year. It will be useful at this stage
to advert to the definitions of the words 'turnover' and 'sale' as given in
clauses (s) and (n) of sub-section (1) of section 2 of the Act. Shorn of
unnecessary details, these definitions run as under:
922 "turnover" means 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 or 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 object thereof
......... . ...................
"sale" with all its grammatical
variations and cognate expressions means every transfer of the property in
goods by one person to another in the course of trade or business, for cash, or
for deferred payment, or for any other valuable consideration.....
In the instant case, it is not disputed that
excise duty or countervailing duty paid directly to the excise authorities by
the purchasers of Indian liquors before removal thereof from the distilleries
or the bonded warehouse on the strength of the distillery and warehouse passes
was not included in the bills of sale as the consideration for the sales, but
1hat alone, according to the Attorney General, is not determinative of the
matter. He has invited our attention to the second part of the definition of
the word 'turnover' as set out above and has strenuously urged that as in
addition to the price of the liquor set out in the bills of sale as
consideration for the sales, other sums charged by the dealer at the time of or
before the delivery of the goods also form part of turnover, and according to
the well established canon of construction, a taxing statute has to be
interpreted reasonably so that there is no evasion of the tax, the phrase 'any
sums charged by the dealer' occurring in the aforesaid definition of the word
'turnover' must be 'construed as meaning any item of expense including the
excise duty or the countervailing duty to which the buyers were put by the
manufacturers of the liquors or the owner of the bonded warehouse. We find ourselves
unable to accept the construction sought to be put by him as it is opposed to
the plain meaning of the said phrase. It will be advantageous here to refer to
the decisions of this Court in. A.V. Fernandez v. The State of Kerala(1) where
speaking for the Bench after quoting the
observations made by Lord Russell of Killowen in Inland Revenue Commissioners
v. Duke of Westminster(2) which were approved by the Privy Council in the Bank
of Chettinad v.
Income Tax Commissioner(3) observed:
"It is no doubt true that in construing
fiscal statutes and determining the liability of a subject to tax one must have
regard to the strict letter of the law and not merely to the spirit of the
statute or the substance of the law. If the Revenue satisfies the Court that
the case fails strictly within the provisions of the law, the subject can be
If, on the other hand, the case is not
covered within the four corners of the provisions of the taxing statute, no tax
can be (1)  S.C.R. 837. (2) [19361 A.C.I, 24.
(3) A.I.R. 1940 P.C. 183.
923 imposed by inference or by analogy or by
trying to probe into the intentions of the legislature and by considering what
was the substance of the matter. We must of necessity, therefore, have regard
to the actual provisions of the Act and the rules made there under before we
can come to the conclusion that the appellant was liable to assessment as
contended by the Sales Tax Authorities." Bearing in mind the principle set
out in A.V. Fernandez's case (supra) the phrase 'any sums charged by the
dealer' has to .be understood in its ordinary popular sense. So construing the
phrase, it means "what is demanded and collected or received by the
dealer." In the instant cases, the excise duty or the countervailing duty
has, as already stated, not been charged or received by the dealer but has been
charged by the excise authorities and deposited directly by the buyers of the liquor
in the State exchequer.
It is, therefore, difficult to hold that
excise duty or' countervailing duty was charged by the appellants.
The reason for inclusion of tax or a duty in
the turnover was explained in two decisions of this Court bearing the same
cause title viz. Messrs George Oakes (Private) Ltd.
v. The State of Madras & Ors. (12 S.T.C.
476) and (13 S.T.C. 98). In the first of these cases, it was observed :-"Under
the definition of turnover the aggregate amount for which goods are bought or
sold is taxable. This aggregate amount includes the tax as part of the price
paid by the buyer. The amount goes into the common till of the dealer till he
pays the tax.
It is money which he keeps using for his
business till he pays it over to Government.
Indeed, he may turn it over again and again
till he finally hands it to Government." In the other decision,
Hidayatullah, J. (as he then was) said:
"In laws dealing with sales tax, turnover
has, in England and America also, been held to include the tax. The reason for
such inclusion is stated to be that the dealer who realises the tax does not
hand it over forthwith to Government but keeps it with him, and turns it over
in his business before he parts with it. Thus, the tax becomes for the time
being, a part of the circulating capital of the tradesman, and is turned over
in his business. Again, it was said that the price paid by the purchaser was
not so much money for the article plus tax but a composite sum.
Therefore, in calculating the total turnover,
there is nothing wrong in treating the tax as part of the turnover, because
"turnover" means the amount of money which is turned .over in the
business." In the instant cases, the excise and countervailing duties did
not go into the common tills of the appellants and did not become a part of
their circulating capital. We are, therefore, of the view that the 9
--1338SCI/76 924 Sales Tax authorities were not competent to include in the
turnovers of the appellants the excise duty and the countervailing duty which
was not charged by them but was closed by and paid directly to the excise
authorities by the buyers of the liquors as stated above.
The Full Bench decision of the High Court of
Andhra Pradesh in The Government of Andhra (Now Andhra Pradesh) v. East India
Commercial Co. Ltd.(1) relied upon by the Revenue is clearly distinguishable.
In that case, it was the actual collection of certain sums as dharamam or
charity by the dealer from the purchasers on the occasion of the sales that
made the learned Judges to hold that they constitute part of the turnover. In
Messrs George Oakes (Private) Ltd.'s case (supra) also, the tax in question was
collected by the registered dealer.
We have, therefore, no hesitation in holding
that the excise duty and the countervailing duty paid directly by the buyers of
the Indian liquors as stated above did not constitute a part of the turnovers
of the appellants.
For the foregoing reasons, we allow the
appeals and set aside the impugned judgments and orders. In the circumstances
of the case, we leave the parties to pay and bear their own costs of these
P.B.R. Appeals allowed.
(1) 8 S.T.C. 114.