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TMI Blog1997 (8) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... les and thereafter those are brought to the excise warehouse owned and controlled by the State Government. The import of spirit (liquor) is settled by the tender system. After the country spirit is brought to the warehouse owned and controlled by the State Government, it is bottled in the specified manner in the warehouse under the supervision of the State Government for supply to the retailers, i.e., the country spirit shops. The bottling contract is also settled by tender system. Under the Act and the Rules, the settlement of the country liquor spirit shops is made by tender system in conformity with the statutory rules made under the Act for a period specified by the competent authority. The lessee of the concerned country spirit (liquor) shop can operate the trade on the strength of licence under the Act on payment of vend fee fixed by the Government for the specified period and subject to restrictions and conditions imposed in the licences. Under the Rules, the holder of licence, permit or pass shall be bound by the conditions specified therein and shall observe all directions, prohibitions and orders of the excise authorities and the directions contained in the excise laws fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 44AC shall at the time of debiting of the amount payable by the buyer or at the time of receipt of such amount from the said buyer in cash or issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of the goods of the nature specified, a sum equal to the percentage, as mentioned against each, of such amount as income-tax on the income comprised therein. By the Central Board of Direct Taxes Circular No. 620, dated December 6, 1991, the following clarifications are issued : "It may be clarified that 'seller' for the aforesaid purpose means the Central Government or a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society. It is also clarified that the provisions of section 44AC, and, consequently, those of section 206C will apply only to an assessee being a person (as defined in the Act) other than a public sector company, referred to as "buyer" of any goods, in the preceding paragraph, at the point of first sale, and not in the case of second or subsequent sale of such goods. It is further clarified that in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y collection under sub-section (1) shall be without prejudice to any other mode of recovery. (3) Any person collecting any amount under sub-section (1) shall pay within seven days the amount so collected to the credit of the Central Government or as the Board directs. (4) Any amount collected in accordance with the provisions of this section and paid under sub-section (3) shall be deemed as payment of tax on behalf of the person from whom the amount has been collected and credit shall be given to him for the amount so collected on the production of the certificate furnished under sub-section (5) in the assessment made under this Act for the assessment year for which such income is assessable. (5) Every person collecting tax in accordance with the provisions of this section shall within ten days from the date of debit or receipt of the amount furnish to the buyer to whose account such amount is debited or from whom such payment is received, a certificate to the effect that tax has been collected, and specifying the sum so collected, the rate at which the tax has been collected and such other particulars as may be prescribed. (5A) Every person collecting tax in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyer of any goods of the nature specified in column (2) of the Table a sum equal to the percentage specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax. Lastly inserted is an Explanation which was mentioned earlier. Parliament by inserting an Explanation explained the term "buyer" as a person who obtained in any sale, by way of auction, or tender or any other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any such goods but does not include (i) a public sector company (ii) a buyer in the further sale of such goods obtained in pursuance of such sale, or (iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act, vide the Central Board of Direct Taxes Circular No. 634 (see [1992] 197 ITR (St) 170), dated August 20, 1992, which, amongst others, delineated as follows : "3.1 Sub-section (1) of the amended section 206C enjoins that every person, being a seller shall, at the time of debiting of the amount payable by the buyer, to the account of the buyer or at the time of receipt of suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of such goods. . ." The scope of the provision is explained in the Finance Bill, 1992. As a sequel to the amendment as cited above, the Assistant Commissioner of Income-tax TDS, by his memo dated August 18, 1994 (annexure-A), brought to the notice about the insertion of section 44AC in the Income-tax Act, 1961, and also subsequent deletion of the same by the Finance Act, 1992, and that similar provisions have been made in the new section 206C of the Income-tax Act, 1961, with effect from April 1, 1992. By the said letter, the Assistant Commissioner of Income-tax, TDS, Panbazar, Guwahati, communicated to the Government that every person being a seller of the specified goods is required to collect income-tax at source from the "buyer" at the specified rates mentioned in the said communication. The Assistant Commissioner of Income-tax by his letter dated August 18, 1994, vide No. C-I/Act/TDS/94-95 sent the following communication to the Commissioner of Excise : "It is reported by the Income-tax Officer, Sibsagar, Assam, that income-tax has not been deducted as per provision of section 206C by the concerned authorities in Sibsagar District, etc., because of non-receipt of dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... country liquor shop does not come within the purview of section 206C of the Act. Mr. Baruah, in support of his contention, has drawn by attention to the two decisions, namely, of two different High Courts on the same matter. The High Court in Gian Chand Ashok Kumar [1991] 187 ITR 188 (HP), observed as follows : "Thus, L-13 licensees take the liquor from the distillery for retail sale to L-14 vends and in case they fail to supply the same, L-14 licensee can make the purchase from other sources. As per condition No. 51, supply of country liquor to the retail sale licensees has to be as per the rates given in annexure 'I' throughout the excise year 1989-90. Perusal of this document demonstrates that the price of various sizes of bottles of country liquor has to be notified districtwise and their charge mentioned. According to clause 53, the price of country liquor mentioned in annexure 'I' in respect of L-13 ends is inclusive of all charges, including cost of transportation, establishment, godown, packing material and the existing export fee imposed by the Uttar Pradesh, Punjab and Haryana Governments, etc. No other charges other than mentioned in conditions Nos. 47 and 51 have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validity of the provisions of sections 44AC and 206 was assailed before the Supreme Court in a batch of petitions in Union of India v. A. Sanyasi Rao [1996] 219 ITR 330; [1996] 3 SCC 465. The vires of any of the provisions of the Act is not under challenge in this case, what is challenged is the legality and validity of the actions of the respondents in collecting tax at source under the provisions of section 206C. Section 206C is meant for recovery of tax at source from the class of persons specified in section 206C itself. Parliament explained and defined the terms "buyer" and "seller" in clear and unequivocal terms. All buyers of specified articles do not come within the purview of the provisions. The Legislature in its wisdom explained the provision and exempted the public sector company from the term "buyer" and those engaged in further sale of such goods obtained in pursuance of such sale; or a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act. The legislative provisions in this regard are clear. The fiscal measure in imposing liability of tax must be construed st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e price as well as the sale price of the liquor is fixed by the Government. The licence for a country spirit shop in Assam is issued on fixed vend fees which is prescribed by the Government. Further, in case the licensee of the country spirit shop fails to sell the total quantity of liquor bought by him under the licence, the same has to be surrendered to the Government on the expiry of the licence. On an overall consideration of the provisions of the Excise Act and Rules framed thereunder along with the provisions of the Income-tax Act more particularly section 206C of the Act, keeping in mind the background of the introduction of the provision for collection at source from the business of trading in alcoholic liquor, it thus appears that the rigours of the provision contained in section 206C are not applicable to the lessees of country spirit liquor shops in Assam. In this view of the matter the lessees of the country liquor shops cannot therefore be saddled with the liability imposed in section 206C of the Act and the said provision will not be applicable to the buyers covered by the Explanation. The impugned direction contained in the communication No. C-1/CTS/ACIY/GHY/94-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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