1976 (10) TMI 103 - SC - VAT and Sales Tax

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 liquors 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 the manufacturer and of the owner of the bonded warehouse respectively and as such liable to sales tax under the Act? Held that - Appeal allowed. 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.

Issues Involved:
1. Whether the excise duty deposited directly in a State treasury by purchasers of Indian-made foreign liquor forms part of the turnover of the manufacturer and is liable to sales tax under the Andhra Pradesh General Sales Tax Act, 1957.
2. Whether the countervailing duty remitted directly to a State treasury by purchasers of liquor from a bonded warehouse forms part of the turnover of the owner of the bonded warehouse and is liable to sales tax under the Act.

Detailed Analysis:

1. Excise Duty and Turnover of the Manufacturer:
The primary issue is whether the excise duty paid directly by purchasers of Indian-made foreign liquor to the State treasury before removing the liquor from a distillery forms part of the manufacturer's turnover and is thus liable to sales tax under the Andhra Pradesh General Sales Tax Act, 1957.

- Legal Framework and Facts: The appellants, who are manufacturers of Indian liquors, operate under licenses issued by the Commissioner of Excise under the Andhra Pradesh Excise Act, 1968. The Andhra Pradesh Distillery Rules, 1970, mandate that excise duty must be prepaid before liquor can be removed from the distillery. The purchasers pay the excise duty directly to the State treasury and obtain a distillery pass for the removal of liquor. The excise duty paid by the purchasers is not included in the bills of sale or the appellants' books of account.

- High Court Ruling: The High Court of Andhra Pradesh dismissed the writ petitions challenging the inclusion of excise duty in the taxable turnover, prompting the appellants to appeal to the Supreme Court.

- Supreme Court's Analysis: The Court examined the nature and character of excise duty, citing precedents such as R.C. Jall v. Union of India, which established that excise duty is a duty on the production or manufacture of goods. The Court also referred to the definition of "turnover" in section 2(1)(s) of the Act, which includes 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.

- Conclusion: The Supreme Court held that the excise duty paid directly by the purchasers to the State treasury did not form part of the manufacturer's turnover. The duty was not charged or received by the appellants but was a statutory obligation of the purchasers. Therefore, it could not be included in the taxable turnover of the appellants.

2. Countervailing Duty and Turnover of the Bonded Warehouse Owner:
The second issue concerns whether the countervailing duty paid directly by purchasers to the State treasury for liquor stored in a bonded warehouse forms part of the warehouse owner's turnover and is liable to sales tax.

- Legal Framework and Facts: The appellant in this case is a licensed wholesale dealer and owner of a bonded warehouse. The modus operandi involves the purchaser paying the countervailing duty directly to the State treasury, after which the Excise Officer grants a pass for the removal of liquor from the warehouse. The appellant only receives the price of the liquor from the buyers.

- High Court Ruling: The High Court dismissed the writ petition challenging the inclusion of countervailing duty in the taxable turnover, leading to the appeal to the Supreme Court.

- Supreme Court's Analysis: The Court cited precedents such as Kalyani Stores v. State of Orissa, which clarified that countervailing duties are meant to equalize the burden of excise duties on goods imported from outside the State. The Court also examined the definition of "turnover" and the phrase "any sums charged by the dealer," concluding that these sums must be understood in their ordinary popular sense, meaning what is demanded and collected by the dealer.

- Conclusion: The Supreme Court held that the countervailing duty paid directly by the purchasers to the State treasury did not form part of the warehouse owner's turnover. The duty was not charged or received by the appellant but was a statutory obligation of the purchasers. Therefore, it could not be included in the taxable turnover of the appellant.

Final Judgment:
The Supreme Court allowed the appeals, setting aside the impugned judgments and orders of the High Court. The Court concluded that neither the excise duty nor the countervailing duty paid directly by the purchasers constituted part of the appellants' turnovers. Consequently, these duties were not liable to sales tax under the Andhra Pradesh General Sales Tax Act, 1957. The parties were ordered to bear their own costs. Appeals allowed.

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