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TMI Blog2011 (3) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... over to the distilleries - The distilleries after manufacture of liquor are required to supply the contracted quantity of liquor to the bonded warehouse which is owned by the State Government - The State Government remains in full control of the liquor placed in the bonded warehouse - The State Government sells the liquor by issuing the allotment to the licensees who pay the cost price of the liquor and the licence fee - Element of 'sale' as conceptually understood is not involved while charging licence fees – Hence, The Tribunal has rightly held that the basic licence fee is not purchase price for the purposes of section 206C of the Act - Decided against revenue. - 31, 32, 25, 29, 35, 36, 37, 38, 39 of 2003, 67, 69 of 2002 - - - Dated:- 31-3-2011 - Ferdino Inacio Rebello,Prakash Krishna,JJ. Petitioner Counsel :- Shambhu Chopra,A.N. Mahajan,Ashok Kumar,Bharatji Agarwal,D. Awasthi,G.Krishna,R.K. Upadhaya 1. All these eleven appeals preferred under Section 260A of the Income Tax Act by the Commissioner of Income Tax arise out of a common order of the Tribunal dated 1st of April, 2002 passed by the income Tax Appellate Tribunal, Delhi Bench 'F', New Delhi in eleven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 206C (7) thereon. 5. The Income Tax Officer (TDS), Muzaffarnagar, the Assessing Authority passed a composite order dated 20.2.1997 for the financial years 1991-1992 to 1995-1996 under section 206C (1)/206C (7) of the Act creating a demand of Rs.1,84,19,216/-. The relevant portion of the order is reproduced below: "Keeping in view of the above facts and circumstances of the case I hold that the District Excise Officer as an assessee in default to deduct tax collection at source on the purchase price on account of basic licence fee (called Nirgam Mulya/Excise duty/Issue price etc.) for the financial year 1991-91, 92-93, 94-95 and 95-96. The short collection of tax at source on account of basic licence fee/Nirgam Mulya/Excise duty/Issue price with interest u/s206C(7) accordingly is worked out at Rs.1,84,19,216/- as per annexure III as under:- 1. Short collection of tax at source on the basic Rs. 81,37,630/- licence fee/nirgam Mulya/Excise duty/Issue price 2. Interest u/s 206C(7) Rs. 1,02,88,586/- TOTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urer cannot remove even a single drop of liquor out of the distillery without the permission of government. Moreover, once the country liquor reaches to the Bonded Ware House, the manufacturer does not have any right or control over the said quantity of liquor. Thus it is the State Government which remains in full ownership and control of the liquor placed in the Bonded Ware House. As per section 24B of U.P. Excise Act the State Government has exclusive right and privilege to manufacture and sale of liquor. The right of manufacture is granted to the distillers by the state government for a consideration but at no point of time the right to sell the said liquor is granted to the distillers as the terms of license of manufacturer reveals. Subsequently the government grants rights for sale of liquor to the retailers (liquor contractors) for a consideration i.e. license fees. This shows that at no point of time the right to sale the liquor remains with the distiller and rather the State Government with itself always keeps this right of sale. Thus it is clear that the work of supplying whole sale liquor to the retailers is with the state government which performs this function through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 14. Section 44B of U.P. Excise Act is titled as "Removal of Doubts". It provides that the State has exclusive right or privilege to manufacture and sell liquor and licence fee mentioned in Section 41(c) of the Excise Act is in substance rental consideration for grant of such right or privilege. 15. Bid Money: This has been defined in Rule 3(f) of U.P. Excise License (Tender cum Auction rules, 1991) which means the consideration of the grant of license under sec. 24 and 24A of the Act for the exclusive privilege of selling by retail any country liquor or foreign liquor. This comprise of License fee and Basic License fee. 16. License fee: has been defined in rule 3(m) to mean that part of bid money which is payable on acceptance of the bid other that the part of bid money described as basic license fee. 17. Basic license fee is defined in rule 3(g) to mean that part of the bid money which is payable by the auction purchaser calculated on the entire minimum guaranteed quantity at the rate notified Excise Commissioner from time to time. 18. From the above definitions it would be seen that the License fee is the auction money which is offered by a buyer in an aucti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called as license fees. Holding of license is a condition precedent before a person can vend liquor. The aim and object of the enactment of section 206C would show that the aforesaid section was enacted to collect the tax at source on the heads such as liquor contractors, scrap dealers, deals in foreign products etc. as defined therein. The Apex Court in Union of India and others Vs. A. Sanyasi Rao and others, (1996) 219 ITR 330 while considering the constitutional validity of sections 44AC and 206C has ruled out that section 206C is a machinery provision and the regular assessment as provided in the case of other assessees under the various sections shall also be made. In other words, section 206C is not a charging section. In the case of Union of India and others Vs. Om Prakash SS Co. and another (supra), a case under the State Excise Act, it has been held that "buyer" would mean whether a person by virtue of payment, gets a right to receive specified goods and not where he has merely allowed/permitted to carry on the business in that trade. The relevant extract is quoted below: "Buyer would mean whether a person by virtue of payment, gets a right to receive specified good ..... X X X X Extracts X X X X X X X X Extracts X X X X
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