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TMI Blog1992 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... emains the property of the wholesale dealers and thus the State or its officers are not owners thereof and cannot be " sellers " within the aforementioned provisions of the Act. Respondent No. 2, however, issued a letter dated July 27, 1990, addressed to the Excise Commissioner, Bihar (petitioner No. 2), stating therein that the Excise Department is the seller and thus, it is bound by the terms of section 206C of the Act. The petitioner, however, in its reply dated October 25, 1990, as contained in annexure 2 to the writ application denied its liability on the basis of an opinion of the learned Additional Advocate-General No. 1. Another letter dated December 13, 1990, was addressed by respondent No. 1 to petitioner No. 2, wherein it was reiterated that the Excise Department is the " seller ", inter alia, on the ground that in terms of the provisions of Act, the other States including the State of U. P. are collecting tax in terms of section 206C of the Act. The petitioners again sought the opinion of the learned Additional Advocate-General No. 1 and in reply to respondent No. 1's aforementioned letter, the Deputy Commissioner of Excise by his letter dated March 14, 1991 ( annexur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also respondents Nos. 3 to 9 in their impugned orders and demands as contained in annexure 5 series. Mr. Rastogi, learned senior standing counsel of the Income-tax Department, on the other hand, submitted that as the State is collecting the cost price of the liquor, it is bound to collect the tax also from the retail dealers. According to learned counsel, from a perusal of the impugned orders as contained in annexure 5 series, it would appear that in the past tax had also been collected by the respondents, but as there have been short-payments, proceedings had been initiated as against petitioners Nos. 4 to 11 under the provisions of the said Act. It was further submitted that as the cost price is being deposited in the account of the Excise Department by the retail dealers along with the excise duty by challans, there cannot be any doubt that the State of Bihar is a " seller " within the meaning of section 206C of the Act. Learned counsel in this connection has drawn our attention to the Explanation appended to section 44AC of the Act. It was further submitted that in view of sub-section (1) of section 46 of the Bihar Excise Act, there is no bar to the Government's dealing in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Taxation Commissioner [1990] 185 ITR 375. Section 44AC and section 206C of the Act read as follows: "Section 44AC. Special provisions for computing profits and gains front the business of trading in certain goods. - (1) Notwithstanding any thing to the contrary contained in sections 28 to 43C, in the case of an assessee, being a person other than a public sector company ( hereafter in this section referred to as " the buyer obtaining in any sale by way of auction, tender or any other mode, conducted by any other person or his agent ( hereafter in this section referred to as " the seller " ) (a) any goods in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor), a sum equal to forty per cent. of the amount paid or payable by the buyer as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head 'Profits and gains of business or profession' : Provided that nothing contained in this clause shall apply to 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporation or authority established by or under a Central, State or Provincial Act, or any company, or firm, or to co-operative society. " " Section 206C, Profits and gains from the business of trading in alcoholic liquor, forest produce, scrap, etc. - (1) Every person, being a seller referred to in section 44AC, shall, at the time of debiting of the amount payable by the buyer referred to in that section to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft, or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax on income comprised therein. TABLE -------------------------------------------------------------------------------------------------------------------------------------------------- Sl. No. Nature of goods Percentage -------------------------------------------------------------------------------------------------------------------------------------------------- (1) (2) (3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, and deliver or cause to be delivered to the prescribed income-tax authority such returns in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed. (6) Any person responsible for collecting the tax who fails to collect the tax in accordance with the provisions of this section, shall, not withstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3). (7) Without prejudice to the provisions of sub-section (6), if the seller does not collect the tax or after collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rate of two per cent. per month or part thereof on the amount of such tax from the date on which such tax was collectable to the date on which the tax was actually paid. (8) Where the tax has not been paid as aforesaid after it is collected, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (7) shall be a charge upon all the assets of the seller. As indicated hereinbefore, the question which arises for consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch warehouses are to remain in. charge of an Excise Officer. The licensee is further required thereunder to provide for suitable quarters for the Excise Officers and guards in charge of the warehouse close to the warehouse buildings or in lieu thereof to pay to each of them monthly, in advance, such house allowance as may be fixed by the Excise Commissioner. Under rule 45 supply to the warehouse is made under a bond and at the sole risk and responsibility of the wholesale dealer. It is the duty of the person licensed to supply to such warehouse to keep the minimum stock of spirit as the Excise Commissioner from time to time direct. Under rule 46, no spirit is to be issued from a warehouse, except under a pass. Under rule 48, as soon as a consignment is received at the warehouse, the Officer- in-Charge thereof is required to open the vessel and measure and test the spirit in each vessel and if any excessive deficiency is found after measuring the spirit by the bung-rod, the actual deficiency is to be ascertained. The result is then noted in the prescribed register as also on the pass covering the consignment. One copy of the pass is immediately returned to the officer who issued th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On receipt of such receipt/challan showing payment of the amount due, the warehouse incharge has to prepare a transit pass in the prescribed form. Under rule 60 it is the duty of the Officer-in-Charge to see that the spirit in excess is not issued therefrom. Under rule 62 it is the wholesale dealer who is responsible for any excessive wastage found to occur from any negligence on his part in supplying unsound casks, tanks or vats or on the part of any person conducting the operation on his behalf. It is not in dispute that the retail vendors purchase country liquor by paying the cost price as also the State excise duty by challan to the excise departments. It is now well-settled that no person has any inherent right to manufacture or sell any intoxicant. The right to vend excisable articles is exclusively owned by the State and a " fee " is realised as the price of the privilege. It is also well-settled that the State is competent to regulate the trade in intoxicants in a manner different from other trades or businesses. Reference in this connection may be made to Cooverjee B. Bharucha v. Excise Commissioner, Ajmer, AIR 1954 SC 220, Sadiq Ali v. Election Commission of India, AIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uyer. The Finance Minister, in his Budget Speech for 1988-89, describe this as 'an anti-evasion measure'. This Bill provided that the profits and gains of purchasers Of specified goods shall be deemed to be 60 per cent. of the purchase price. It also provided for collecting 20 per cent. of the purchase price at source. This provision was sought to be made applicable not only to purchasers of alcoholic liquor for human consumption (other than Indian-made foreign liquor ) and forest produce, but also to purchasers of scrap and waste as well. Parliament, however, confined the operation of the said provisions only to alcoholic liquor, timber and forest produce ( referred to in this judgment as 'specified goods' ). It also altered the percentage of profits and gains, as well as the percentage of deduction, as mentioned hereinbefore. After the Finance Act, 1988, was passed, a Press Note was issued by the Press Information Bureau explaining sections 44AC and 206C. According to the Press Note, section 44AC is a special provision for computing profits and gains in the cases of persons engaged in the trading in specified goods. It applies only to persons 'engaged in the trading in goods', ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de or his agent is the seller. " Seller ", inter alia, means the State Government. It, however, expressly excludes " person " or a " Hindu undivided family ". If a literal meaning is assigned to the words " any goods " as Mr. Jain persuaded us to do, it may be held that in terms of the provisions of the Excise Act and Rules framed by the Board, the State never becomes the owner of " the goods ", in our opinion, such a restricted meaning would lead to an illogical conclusion and defeat the purpose for which the statute has to be brought in the said Act. If the contention of Mr. Jain is correct, the State will have no liability to collect the tax at all. Mr. Jain has accepted that the cost price of the country liquor is realised by the State along with the duty by way of challan and kept in a separate account ; and the State debits the cost price in the account of the distiller. For the purpose of section 206C of the Act, tax has to be deducted not only on the basis of cost price but for that purpose the amount of excise duty has also to be taken into consideration. From the scheme of the provisions of the Excise Act and the Rules as noticed hereinbefore, it is clear that the " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stiller/whole-seller cannot do so evidently for the simple reason that it does not realise the cost price of the country liquor. It is now well known that for the purpose of construction of a statute the same has to be read as a whole. It is also well-known that in order to construe the provisions of a statute it would be just and proper as observed by the Supreme Court in Goodyear India Ltd. v. State of Haryana [1991] 188 ITR 402, to see what was the position before the amendment and find out what was the mischief sought to be remedied and then discover the true rationale for such remedy. The Supreme Court in Goodyear's case [1991] 188 ITR 402 quoted with approval the following observations of Lord Reid in Blach-Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg AG [1975] 1 All ER 810, 814 (HL) : "It has always been said to be important to consider the 'mischief' which the Act was apparently intended to remedy. The word 'mischief' is traditional. I would expand it in this way. In addition to reading the Act, you look at the facts presumed to be known to Parliament when the Bill which became the Act in question was before it, and you consider whether there is disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Eyston v. Studd. Put into homely metaphor it is this: A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out ? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases. " Yet recently, the Supreme Court in Pandey Orson v. Ram Chander Sahu, AIR 1992 SC 195 ; [1992] 1 PLJR 89 (SC) approved the observations of the House of Lords in D. (a minor) v. Berkshire County Council [1987]1 All ER 20, that a broad and liberal construction should be given to give full effect to the legislative purpose. In Pandey Orson's case, AIR 1992 SC 195, the Supreme Court while construing the word " transfer ", used in section 71(A) of the Chhotanagpur Tenancy Act held (at page 196): "In section 71A in the absence of a definition of transfer and considering the situation in which exercise of jurisdiction is contemplated, it would not be proper to confine the meaning of transfer to transfer under the Transfer of Property Act or a situation where transfer has a statutory definition. What exactly is contempl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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