State of
Kerala Vs. M/S Madras Rubber Factory Ltd.
[1997] INSC 951 (19 December 1997)
S.C.
AGRAWAL, B.N. KIRPAL, D.P. WADHWA
ACT:
HEADNOTE:
THE
9TH DAY OF DECEMBER, 1997 Present:
Hon'ble
Mr. Justice S.C.Agrawal Hon'ble Mr. Justice B.N. Kirpal Hon'ble Mr. Justice
D.P. Wadhwa K.N. Bhat, Additional Solicitor General;, A.S.Nambiar, John Mathew,
Harish n. Salve, R.F.Nariman, Joseph Vellapally, Sr. Advs., G.Prakash, Dhruv Agarwal,
Ms. Suman Khaitan, Gouri Rasgotra, K.R. Nambiar, Ravinder Narain, Ashok Sagar, Amit
Bansal, Sonu Bhatnagar, Vineet Kumar, Yakesh Anand Sanjeev Anand, B.V. Desai, Shashi
Soharu, P.J. Mehta, P.N. Ramalingam, K.K.Bhaduri, M.P.Vinod, Advs. with them
for the appearing parties.
The
following Judgment of the court was delivered:
CIVIL
APPEAL NOS. 3435-36/21, 69/92, 659/93, 657/93, 4983/91, 5656-57/94, 5594-95/95,
5759/95, 5760-61/95, 5762, 5763-64, 5765, 5766, 5767, 5768-72,6226,8014,9182,OF
1995, 4869/91, 7230/93, 5296/93, 2193/93, 9183/93, 4742/91, 3442- 43/91,
10386-89/96, 2253/93, 2254/93, 2355/93, 2356/93, 11027, 11769, 11626, 11029-30,
11028, 9518 OF 1996, 4300/93, 1699-1704/88, 4593/89, and Civil appeal Nos
8874-8875 of 1997 arising our of S.L.P. (C) Nos. 9649-50 of 1997 KIRPAL, L.
Special
leave granted in SLP (Civil) Nos. 9649-50 of 1997.
The
only question which arises for consideration in this batch of cases is whether
the cess payable under the provisions of the Rubber Act, 1947 will form part of
the purchase turnover of the respondents under the kerala General Sales Tax,
1963.
M/s
M.R.F. Ltd., Ceat Tyers of India Ltd., Bata India Ltd., Goods Year India Ltd.
etc., hereinafter referred to as the dealers, are the respondents in these
cases. They purchased rubber in Kerala. This rubber was purchased either from
the producer or from the dealers. The rubber so purchased was either used in
the manufacture within the State of kerala or was sent out or the State for use
elsewhere.
Under
the provisions of Section 5 of the Kerala General Sales Tax Act, 1963
(hereinafter referred to as `the Sales Tax Act') the tax on rubber is a single
point tax. According to the said section read with the schedule thereto the tax
is leviable on the last producer of rubber within the State.
The
liability to pay tax on the purchases so made under the Sales Tax Act is not in
dispute but what has been contended by the dealers is that in computing the
turnover on which the tax is to be paid, the quantum of cess payable under the
provisions of the Rubber Act, 1947 (hereinafter referred to as the "Rubber
Act") could not be included in the purchase turnover. The contention of
the dealers before the Sales Tax Authority, was that the said cess was not a
part of the purchase price and therefore, not includible in their turnover. The
assessing authority did not agree and following the decision of the kerala High
Court in the case of Deputy Commissioner of Sales Tax (Law) Board of Revenue
Included the cess in the purchase turnover of the dealers.
This
order was confirmed in appeal by the Deputy Commissioner and thereafter by the
appellate Tribunal.
The
revision petition filed by the dealers came up for hearing before the Kerala
High Court. A Division Bench of that Court was of the opinion that there was
conflict between two decisions of that High Court and, therefore, the case was referred
to a Full Bench.
By
judgment dated 29th march, 1989 the Full Bench, by majority, allowed by
revision petition holding that the earlier decision In Bata's case (supra) was
wrongly decided and the cess payable and paid under the rubber Act and the Rules
could not form part of the dealers' purchase. In view of the importance of the
point in issue the High Court granted certificate for leave to appeal this
Court. Hence these appeals.
In
order to examine the rival contentions it is necessary to refer to the relevant
provisions of the sales Tax Act and the Rubber Act and the rules framed there under.
In
respect of MRF the assessment years in question are 1972- 73, 1976-77 and
1977-78. At that time under Schedule I Entry 71 of the Sales Tax Act rubber was
taxable at the point of last purchase in the State, by a dealer, who was liable
to pay under Section 5 of Act. The relevant provisions of the said Act and the
Rules are as follows:
"Section
2 (xxvii):
"TURNOVER"
means the aggregate amount for which goods are either bought or sold, supplied
or distributed by a dealer, either directly or through another, on his own
account or on account of other, whether for cash or for deferred payment for
other valuable consideration, provided that the proceeds of the sale by a
person of agricultural or horticultural produce, grown by himself or grown on
any land in which he has an interest whether as owner, unsufructuary mortgagee,
tenant or otherwise, shall be excluded from his turnover.
Section
2 (xxv):
"TAXABLE
TURNOVER" means the turnover on which a dealer shall be liable to pay tax
as determined after making such deductions from his total turnover and in such
manner as may be prescribed, but shall not include the turnover of purchase of
sale in the course of inter-state trade or commerce or in the course of export
of the goods out of the territory of India or in the course of import of the
goods into territory of India.
Section
5:
Levy
of "tax on sale or purchase of goods:- (1) Every dealer (other than a
casual trader or agent of a non- resident dealer) whose total turnover for a
year is not less than one lakh rupees and every casual trader or agent of a
non-resident dealer, whatever be his total turnover for the year, shall pay tax
on his taxable turnover for that year.
(i) In
the case of goods specified in the First or second Schedule, at the rates and
only at the points specified against such goods in the said schedules.
Schedule
I ENTRY 71 "Rubber" At the point of last purchase in the State by a
dealer who is liable to tax under Section 5." Rules 8 : Determination of
total turnover : (1) Save as provided in "sub-rules (2) and (3) the total
turnover of a dealer for the purpose of these Rules shall be the amount for
which the goods are sold by the dealer.
(2) In
the case of goods mentioned below the total turnover of a dealer for the
purposes of these rules shall be the amount for which the goods are bought by
the dealer :- (a) (i) grabled pepper (ii) Ungrabled pepper (b) green and dried
ginger (c) xxxxxxxxx (d) xxxxxxxxx (e) xxxxxxxxx xxxxxxxxx (n) rubber" The
controversy being with regard to the Inclusion of the cess payable under the
Rubber Act, 1947 on the purchase turnover of the dealers, it is appropriate to
refer to the relevant provision, namely, section 12 of the Rubber Act 1947 and
Rule 33 D framed under the said Act, which are as follows :
"Imposition
of rubber cess:- (1) With effect from such date as may be notified by the
Central Government in this behalf, there shall be levied and collected as a cess
for the purposes of this Act a duty of excise on all rubber produced in India
at such rate not exceeding one anna per pound of rubber so produced as the
Central Government may by the same or a like notification, from time to time :
(2)
The said duty of excise shall be payable by the owner of the case on which the
rubber is produced, and shall be paid by him to the board within one month from
the date on which he receives a notice of demand there for from the Board.
(3)
The said duty of excise may be recovered as if it were an arrear of lend
revenue.
(4)
For the purpose of enabling the Board to assess the amount of the duty of
excise payable by the owner of an estate under this section- (a) the Board
shall by notification in the Gazette of India, fix the period in respect of
which assessments shall be made and (b) Without ******** to the provisions of
Section 20, every owner of an estate shall furnish to the Board a return
stating **** amount of rubber produced on the estate in each over period not
later than fifteen days after the expiry of the period to which the return
relates:
Provided
that in respect of an estate situated only party in India. The owner shall in the said return
show separately the amounts of rubber produced within and outside India.
(5) If
any owner of an estate fails to furnish in due time the return referred to in
sub-section (4) or furnishes a return which the board has reason to believe is
incorrect or defective, the Board may assess the amount payable by that owner
in such manner as may be prescribed.
(6)
Any owner of an estate aggrieved by an assessment made under this section may
within three months of the service of the notice under sub-section (2) apply to
the District Judge for the cancelation or modification of the assessment, and
the District Judge shall, after giving the Board an opportunity of being heard,
pass such order (which shall be final) as he thinks proper.
(7)
The proceeds of the duty of excise collected by the Board and any of the fees
levied under this Act (all of which shall from part of the consolidated Fund of
India) reduced by the cost of collection as determined by the Central
Government, shall, if Parliament by appropriation made by law in this behalf so
provides, be paid to the Board for being utilised for the purposes of this
Act." Section 12 of the Rubber Act, after its amendment by Act 21 of 1960,
is extracted herein below:
"Imposition
of new rubber cess:- (1) With effect from such data as the Central Government
may, by notification in the official Gazette appoint, there shall be levied as
a cess for the purposes of this Act, a duty of excise on all rubber produced in
India at such rate, not exceeding fifty naya paice per kilogram of rubber so
produced as the Central Government may fix.
(2)
The duty of excise levied under sub-section (1) shall be collected by the Board
in accordance with rules made in this behalf either from the owner of the
estate on which the rubber is produced or from the manufacturer by whom such
rubber is used.
(3)
The owner or, as the case may be, the manufacturer shall pay to the Board the
amount of the duty within one month from the date on which the receives a
notice of demand therefor from the Board and if he fails to do so the duty may
be recovered from the owner or the manufacturer, as the case may be, as an
arrear of land revenue.
(4)
For the purpose of enabling the Board to assess the amount of the duty of
excise levied under this section (a) the ***** shall, by notification in the
Official Gazette, fix a period in respect of which assessments shall be made
and (b) without prejudice to the provisions of section 20, every owner and
every manufacturer shall furnish to the Board a return not later then fifteen
days after the expiry of the period to which the return relates, stating- (i)
in the case of an owner, the total quantity of rubber produced on the estate in
each such period:
Provided
that in respect of an estate situated only partly in India are owner shall in
the said return show separately the quantity of rubber produced within and
outside India.
(ii) in
the case of a manufacturer, the total quentity of rubber user by him in such
period out of the rubber produced in India.
(5) If
any owner of or manufacturer fails to furnish within the time prescribed the
return referred to in sub-section (4) of furnishes a return which the Board has
reason to believe is incorrect or defective, the Board may assess the amount
payable by that owner in such manner as may be prescribed.
(6)
Any owner of an estate aggrieved by an assessment made under this section may
within three months of the service of the notice under sub-section (2) apply to
the District Judge for the cancellation or modification or a assessment, and
the District Judge shall, after giving the Board an opportunity of being heard,
pass such order (which shall be final) as he thinks proper.
(7)
The proceeds of the duty of excise collected by the Board and any of the fees
levied under this Act (all of which shall form part of the Consolidated Fund of
India) reduced by the cost of collection as determined by the Central
Government, shall , if Parliament by appropriation made by law in this behalf
so provides, be paid to the Board for being utilised for the purposes of this
Act, if parliament by appropriation made by law in this behalf so
provides." Rule 33-D of the Rubber Rules, reads thus:- "(1) Every
manufacturer shall by demand notice sent through registered post or in such
other manner as the Board may direct be intimated of the amount assessed on the
quantity of rubber acquired during the periods specified in rule 33 (c). On
receipt of such notice, the manufacturer shall pay to the Board the amount
specified therein either in cash at the Board's office at kottayam or by money
order or by bank draft or cheque duly crossed and payable at kottayam to the
Board within 30 days from the date of receipt of the said notice.
(2) On
such demand being made, if a manufacturer fails to pay the amount within the
due date, the Board may take step to report the fact to the Central Government
or the State Government concerned for recovery of the outstanding amount as an
arrear of land revenue." On behalf of the appellant it was submitted by
Mr. K.N. Bhat, learned Additional Solicitor General, that under Section 12 (1)
what is levied is a cess which is duty of excise on all rubber produced in
India. Before the amendment in 1960 this duty was payable by the owner of the
estate.
After
its amendment the Rubber Board is empowered to collect the duty of excise
levied under Section 12 either from the owner of the estate of from the
manufacturer by whom the rubber is used in accordance with the rules. The
incidence of duty of excise was relatable to the production of rubber and this
position did not alter after the amendment in 1960.
The
incidence of the cess, being in the nature of duty of excise, it was submitted,
continued to be related to the production of rubber only and it was for the
sake of convenience that it was thought expedient that this cess, instead of
being collected from the innumerable producers of rubber could most
conveniently be collected from the ultimate user thereof, namely, the
manufacturer. It was submitted that the definition of turnover in Section 2
(xxvii) of the Sales Tax Act was wide enough to include the liability to pay cess
under the Rubber Act as being part of the purchase turnover.
The
learned counsel appearing on behalf of the dealers submitted that on the
correct interpretation of Section 2 (xxvii) of the Sales Tax Act, the aggregate
of the sum by the buyer to the seller "including payment made on his
behalf" would constitute a part of the turnover of the buyer for levy of
sales tax. The cess which was to be paid under the Rubber Act was not required
to be paid by the manufacturer on behalf of the seller because according to
Section 12 (2) read with Rule 33-D, though the incidence of the duty was on the
production of rubber but it was not the liability of the producer. After the
amendment of Section 12 in 1960 and with the promulgation of Rule 33-D, neither
producer nor the dealer was required to pay the cess under Section 12 at any
point of time. Inasmuch as there was no statutory liability on either the
producer or the dealer to pay the cess, therefore, the quantum of cess payable
on the goods purchased by the dealer could not be regarded as being part of the
purchase price or turnover. the liability to pay tax was only of the
manufacturer and it arose not by reason of the purchase of rubber but it arose
when the manufacturer used the same.
That
the cess which is collected is a duty of excise on all the rubber produced in India is evident from the provisions of
Section 12 (1) of the Rubber Act. The rate of cess is prescribed in Section
12(1) itself. The excise duty referred to in Section 12(1) is not determined
with reference to any price but the duty is determined by applying a fixed rate
to the weight of the rubber produced.
This
sub-section was not amended in 1960. The main change brought about relates only
to the manner of collection of duty. After the amendment of sub-section (2) of
Section 12 the duty is to be collected by the Board in accordance with the
rules made in this behalf either from the owner of the estate on which the
rubber is produced of from the manufacturer by whom such rubber is used. What
is important to note, however, is that the opening words of the sub- section
(2) refers to "the duty of excise levied under sub- section (1) [emphasis
added]. These words clearly provide that the levy of excise duty is not under
sub-section (2) but is under sub-section (1) of Section 12. It is the duty
which is statutorily levied under sub-section (1) on the rubber produced which
is to be collected, under sub-section (2), in the manner provided by the rules.
By
reason of Section 12 (1) of the Rubber Act a cess at the rate prescribed is
statutorily levied on the rubber so produced and the liability to pay the said
amount of cess gets attached to the rubber so produced. If the rules do not
provide for the excise duty to be paid by the producer then whoever purchases
the said rubber would be purchasing goods to which is attached the liability of
payment of duty. In other words, the duty element would be inherent in the
price which is paid for the purchase of the said goods. The duty of excise is
one which is directly relatable to the production or manufacture of goods but
can be collected at a latter stage is now no longer open to doubt in view of
several decisions of this Court some of which are R.C. Jall State of Mysore
[(1967) 1 SCR 548 ], Jullundur Rubber Goods Officer {91985) 59 STC 277 SC].
In an
effort to show that the Rubber Act and the Rules framed thereunder provide that
the liability to pay the cess arises only when the manufacturer uses the rubber
and that the liability was not of the producer and, therefore, cess could not
from part of the purchase turnover, reliance was placed on the decision of this
Court in Jullundur Rubber 2 S.C.R. 68], wherein after referring to Rules 33
(e), 33A, 33B and 33D (1), this Court had observed at page 79 as follows:-
"Now the above Rule seems to contemplate the filing of return both by the
owners of rubber estates and manufacturers. But under Rule 33D the demand
notice can be sent only to a manufacturer on receipt of which the must make
payment to the Board of the amounts specified therein. On his failure to make
such payment the Board can take steps for recovery of the amounts due as
arrears of land revenue by reporting to the Central Government or the State
Government as the case may be. There is no such procedure prescribed with
regard to owners of estates. It would follow that under the rules the demand
notice is to be sent only to the manufacturers and the amounts of duty are to
be realised from them alone. The substantive provisions of sub rules (4), (5)
and (6) of Section 12 also contemplate assessment being made with regard to the
returns to be furnished by owners and manufacturers. Any person aggrieved by an
assessment has been given the right of appeal to the District judge. But as
pointed out earlier, there is no provision either in the statute or in the
rules for a demand to the made and a coercive process to be employed in the
event of failure to make the payment.
That
is done by Rule 33D alone from which it would be manufacturers who are liable
to pay the amount of duty. The rules can, therefore, be said to make a definite
provision with regard to the category of persons from whom the collection of
the duty is to be made, namely, the manufacturers." From the above the
learned counsel contended that this Court had clearly held that the statutory liability
for payment of cess was on the manufacturer alone who would be paying the same
directly to the Central Government and/or the Rubber Board. It was submitted
that no part of this amount which is directly paid by the manufacturer to a
person other than the grower of rubber in fulfilment of its own statutory
liability could form part of the sale price which a manufacturer has to pay.
In our
opinion the aforesaid decision does not lead to the inference which the dealers
are seeking to derive. In Jullundur Rubber Goods manufacturers' Association
case (supra) the challenge was to the amended provisions of the Rubber Act,
1947 whereby Section 12(2) was amended giving the discretion to the Rubber
Board to frame rules for the purpose of providing whether to collect the cess
from the consumer or the manufacturer. three contentions had been raised before
the Court and they were as follows:- " The contentions which have been
raised are: (1) the duty sought to be imposed under s.12 as amended being
outside the ambit of Entry 84 of List I in the Seventh Schedule to the
Constitution is beyond the legislative competence of the Parliament; (2)
Section 12(2) suffers from the vice of excessive delegation. It confers
uncontrolled and unrestricted discretion upon the Rubber Board to levey upon
and collect duty of excise from either the owners of the rubber producing
estates or the users so called manufacturers (of rubber) without specifying the
circumstances under which it should be imposed upon the one or the other nor has
any guiding policy of principle been laid down in the Act for making a choice.
(3) In any case, the Rules which have been framed do not satisfy the provisions
of s. 12(2) of the Act and do not indicate with sufficient clarity and
precision on whom the levy is to be made and from whom the duty is to be
collected as between the owners of the estates and the manufacturers."
While dealing with the said three contentions this Court upheld the validity of
Section 12 (2) and in support of contention (1) it has been argued that once
the incidence of tax was shifted to the user by reason of Section 12 (2), the
tax would cease to be one which will fall within entry 84.
This
contention was repelled with the Court observing at page 73 as follows:
The
above statement of law in no way support the argument that the excise duty
cannot be collected from persons who are neither producers nor manufacturers.
Its incidence certainly falls directly on the production of manufacture of
goods but the method of collection will not affect the essence of the duty. In
our opinion sub-section (2) of s.12 provided for the method of collection as
the excise duty can be collected either from the producers or from the
manufacturers as defined by the Act which would include members of the appellant
association who use rubber in the manufacture of chappals." Having
categorically come to the conclusion that the Incidence of cess falls directly
on the production or manufacture of the goods while dealing with the third
contention relating to the interpretation of the rules the Court observed that
the rules did make a definite provision with regard to the category of persons
from whom the collection of duty was to be made. When this Court observed that
under the rules it is only the manufacturers who are liable to pay the amount
of duty, it was referring only to the persons or the stage at which the duty
which is levied under Section 12(1), is to be collected. In other words, the
rules state as to who was to discharge the liability of cess imposed under
Section 12 (1) by payment of the amount of duty.
It was
also contended by mr. Harish N.Salve, learned senior counsel appearing for the
dealers, that the manner in which the consideration has been made and the
components thereof do not matter and any payment made directly or indirectly by
the buyer to the seller, including any sum paid by the buyer for and on behalf
of the seller, would be includible in the turnover as long as the same is paid
as a term of the contract of sale. It is the aggregate of the sums paid by the
buyer to the seller "including payment made on his behalf", which
would constitute a part of the turnover of the buyer for levy of purchase tax.
It was further submitted that the right of the seller to recover the said
amount must flow from a contract to sell the goods.
If,
however, the seller has any statutory right to pass on any burden of any charge
or levy to the buyer, then such a sum is not a part of his turnover. In this
connection Commissioner of Sales Tax ([1981) 1 S.C.R. 707). In this question
arose whether payment of this fee could be included in the turnover of
producers for assessment of sales tax under the Act. Anand Swarup's case
(supra) was considered and distinguished by a Constitution Bench of this Court
in 59 STC 277). The decision in McDowell's case (supra) clearly supports the
submissions urged on behalf of the appellant.
In
McDowell's case excise duty on sale of liquor was payable by the appellant -
manufacturer. The appellant sold the liquor to buyers who themselves paid the
excise duty directly but the department sought to Include the amount
representing the excise duty paid by the buyer as a part of the appellant's
turnover for the purpose of levy of sales tax. Referring to the earlier
decisions of this Court, it was observed that "the Incidence of excise
duty was directly relatable to manufacturer but its collection can be deferred
to a latter stage as a measure of convenience." It was accordingly held
that the excise duty paid by the buyer would be regarded as part of the
consideration for the sale and includible in the taxable turnover. Anand Swarup's
decision was distinguished by this Court in the following words:
"Mr.
Sorabji in the course of his submission relied on a Division Bench decision of
this Court in Anand Swarup Mahesh Kumar V. Commissioner of Sales Tax (1980) 46
STC 477 (SC); 1981 1 SCR 707. This Court was considering the liability for
sales tax under the corresponding U.P. Act in respect of a dealer carrying on
business at Mandi Anandganj, Baraut in the District of Meerut. The sales tax
authorities had included in the dealer's purchase turnover "market
fee" and the commission payable to the commission agent operation within
the market area for the purpose of computing sales tax. The decision turned on
the definition of "turnover of purchase" in the U.P. Act and the
provision of the Adhiniyam and the Rules made thereunder . Market fee and
commission payable to an agent are very different from excise duty and a very
different position emerges in law in regard to them. No support is available
from that occasion for the appellants case.
We
would like to point out that the relevant consideration is not whether the law
permits the incidence of the duty to the duty to be passed on to the purchaser
but whether there is a prohibition against the passing of it. If there is no
bar, the incidence would be passed on to the purchaser in accordance with
normal commercial practice.
On
behalf of the dealers it was also contended that though Section 12 (2)
postulates that the cess can be collected either from the owner of the estate
of manufacturer, it can, in no circumstances, be collected from the dealer from
whom the manufacturers purchase raw rubber.
Therefore,
it was submitted, that the sale price to the licensed dealer is wholly
independent of the cess paid by the manufacturer on his own account to the
Central Government. In our opinion, there is an inherent fallacy in this
contention. As we have already noted, and this is apparent from the reading of
Section 12(1) and (2), the incidence of the duty arises the moment the rubber
is produced. On the rubber so produced duty at a specified rate becomes
payable. When the producer sells the said rubber to a licensed dealer it would
be legitimate to infer that in determining the amount of price payable they
incidence of the cess would be taken into account. What is purchased by the
licensed dealers is rubber to which is attached a charge of cess payable at the
prescribed rate. Even though the rubber Act and the Rules framed thereunder do
not contemplate that the licensed dealer has to pay the cess, nevertheless
because the goods are not to be used by the licensed dealer but have ultimately
to be used by the manufacturer, therefore, the transfer of the goods by the
dealer to the manufacturer would occasion the realisation of the cess by the
department from the manufacturer. The cess which will be so realised is the one
which stood imposed by the provisions of the statute itself, viz., Section 12
(1), at the time when the rubber was produced and before it was purchased by
the dealers or manufacturers.
It is
no doubt true that Section 12 (1) does not specifically state that the taxable
person is a producer or the grower of the rubber. It is, however, not possible
to accept the contention that the rules alone are to be looked at in order to
fix the liability of payment of cess. Section 12 (1) and 12(2) have to be read
together. Excise duty being a levy on the manufacture or production of goods
could ordinarily have been collected at the stage itself. This was, in fact,
the position prior to the amendment of Section 12 (2) in 1960. Section 12 (2)
after amendment makes it very clear that the levy of cess is under sub-section
(1) Section 12 and not under sub-section (2). It is only with regard to the
collection of the cess that an option is given to collect the same either from
the producer or the manufacturer. A charge under a taxing statute can only
under the Act and not under the Rules. The rules normally provide for the
procedure to be followed for the realisation of the statutory dues. It is in
this context that sub-section (2) enables the framing of the rules whereby the
duty instead of being realised from the producer is realised at a latter stage,
namely, from the manufacturer. Once the liability of payment of cess has got
attached to the rubber when manufactured and that duty is ultimately paid by
the end user, namely, the manufacturer, it would be implicit that the element
of the cess payable would be one of the factors in determining the price
payable in respect thereof.
The
aforesaid analysis is also supported by a recent decision of this Court in the
case of Mohan Breweries a Ors. [JT 1997 (8) 36]. In that case liquor was
manufactured by the appellant. According of Section 18 B of the Tamil Nadu
prohibition Act, 1937 excise duty at a specified rate was leviable on all
excisable items manufactured under any licence granted under the Act. Section
18 C provided that the excise duty under Section 18B could be paid in one or
more of the ways provided under Section 18C. Rule 22 of the TNIMFL Rules, 1981
provided that the excise duty shall be paid by the person who removes the goods
from a manufactory.
Sub-rule
(2) of Rule 22 further provided that a vend fee of rupees two per bulk litre
shall be paid by the licensee on all stocks of Indian-made Foreign Spirit
issued from the manufacturer. Rule 15 (1) of the Tamil Nadu Indian-made Foreign
Spirits (supply by wholesale) Rules, 1981 required the licensee, namely, the
wholesaler to pay the excise duty on removal of the stock by him. The
contention which was raised by the manufacturer was that in view of the
provisions of the Act and the said Rules, the liability to pay the excise duty
lay not upon the manufacturer but upon the wholesaler, who was the licensee who
was required to pay under the aforesaid Rule 15 (1) of the Tamil Nadu Indian-
made Foreign Spirits (supply by wholesale) Rules, 1981. In this connection it
was submitted that the manufacturer neither collected the excise duty from the
wholesaler nor had they statutory or contractual authority to realise the same
from it and, therefore, the manufacturers were not liable to pay sales tax on
the excise duty which was neither part of the sale price nor a consideration
for the sale Repelling this contention it was held that excise duty was levied
upon the goods manufactured, though its collection may be deferred to such
latter stage as was administratively or otherwise most convenient. After
referring to as case in [1984 (1) SCC 467], it was observed that the method of
collection did not affect the essence of duty but only related to the machinery
of collection for administrative convenience. Dealing with Rule 22 and its
effect, it was observed that "as we look at it, the primary obligations 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 its producer,
other than the manufacturer, the payment of excise duty 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 of the IMFL it
purchases from the manufacturer; it pays 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 ar bought of
sold" and "whether for case 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 Mc Dowell case, not the decisive test for determining whether or
not it would be a part of the manufacturer's turnover." In our opinion the
aforesaid decision is clearly applicable to the present case. Like the Mohan Brewerles
case the excise duty under Section 12 (1) is levied on the production or
manufacture of rubber at the rate specified thereunder. it is only by Rule 33
(1) similar to Rule 22 of TNIMFL that the cess had to be paid at a stage
subsequent to the production. Merely because for the sake of convenience the
excise duty, which would essentially be payable at the time of production of
rubber is realised at a latter point of time it cannot mean that the excise
duty, in the form of cess, was not part of the sales turnover of the producer
and correspondingly, be the purchase turnover of the purchaser of rubber.
In our
opinion, therefore, the incidence of duty is directly relatable to the
production of rubber. The character of levy is not altered merely because the
payment of duty is deferred till the purchase of the rubber by the
manufacturer, The character of levy is on the production of the rubber and the
duty paid should, therefore, be deemed to be part of the price that the producer
had paid for the goods purchased. Neither a provision for deferred payment nor
the liability case on the manufacturer of rubber goods for payment of the duty
to facilitate easy collection, can alter the duty as being one on the
production of rubber as provided by Section 12 (1) of the Rubber Act and such
duty even though paid later, will be a part of the price of goods purchased and
would, therefore, form part of the producers turnover.
For
the aforesaid reasons these appeals are allowed and the judgment under appeal
is set aside and the decision of the Sales Tax Authorities restored. There will
be on order as to costs.
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