MCDOWELL AND COMPANYMPANY LIMITED KAPITAN CHEMICALS CENTRAL WINES HYDERABAD Vs. COMMERCIAL TAX OFFICER VII CIRCLE HYDERABAD:GOVERNMENT OF ANDHRA PRADESH:THE DEPUTY COMMISSIONER COMMERCIAL TAXES

JUDGEMENT

(1.) This batch of appeals by special leave which are directed against three separate judgments of the High Court of Andhra Pradesh at Hyderabad dismissing three sets of writ petitions Nos. 1195 to 1198 of 1975, 3931, 3944 and 4929 of 1975 and 6790 of 1974 filed by the appellants to challenge certain orders of the sales tax authorities made in respect of re-determination of their turnover for certain years under the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as the Act) shall be disposed of by this judgment, as they raise a common question as to 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.

(2.) The circumstances which have given rise to these appeals lie in a short compass and may be briefly stated:The appellants in the first two sets of Appeals Nos. 248 to 251 of 1976 and 934 to 936 of 1976 carry on the business of manufacture of Indian liquors in their distilleries established in Andhra Pradesh under licenses issued to them by the Commissioner of Excise under the Andhra Pradesh Excise Act, 1968 (Act 17 of 1968) and the rules made thereunder and sell their finished products to the wholesale dealers who in turn sell them to retail dealers. Under Rule 76 of the Andhra Pradesh Distillery Rules. 1970, removal of any liquor manufactured or stored without pre-payment of the excise duty specified in Rule 6 is forbidden. Rule 77 of the Rules Prohibits issue of any liquor until its quantity and strength have been duly verified by the distillery officer. Rule 79 of the Rules authorises the distillery officer on payment of excise duty to grant a distillery pass for removal of the liquor fit for human consumption to the persons specified in the said rule including a person holding a licence for sale of liquor by wholesale or retail. Under Rule 81 of the Rules, every application for a distillery pass for removal of liquor has to be addressed in writing to the distillery officer and has to be accompanied by a challan in original for payment of excise duty therefore and a general or special permit for the purpose of removal of the liquor Rule 82 of the Rules enjoins the distillery officer upon tender of cash payment of excise duty by the applicant to fill up the challan for presentation with the cash at a treasury or sub-treasury of the district in which the distillery is situate, and the applicant for distillery pass to present the treasury receipt in token of his having made payment of the duty whereafter the distillery officer has to affix the said receipt to the counterfoil of form D-6. Rule 83 of the Rules casts responsibility upon an applicant for a distillery pass to make a correct calculation and full payment of the excise duty upon the liquor desired to be removed. Rule 84 of the Rules requires the distillery officer to issue the liquor under a pass in form D-6 sending a duplicate thereof to the Excise Superintendent of the district of destination on being satisfied that the applicant is entitled under the Rules to remove the liquor and has made payment of the requisite excise duty. Accordingly every buyer of the Indian liquor from either of the appellants distilleries during the years in question obtained the distillery pass for release of the liquor after making payment of the excise duty and presented the same at the concerned distillery whereupon a bill of sale or invoice was prepared by the distillery showing the price of the liquor. The said bill did not include the excise duty paid by the buyer. The appellants books of accounts also did not contain any reference regarding the excise duty paid by the purchasers in the manner stated above. The appellants paid the sales tax in full as per final assessments made by the sales tax authorities under the Act. It appears that after the completion of the assessments of the sales tax under the Act for the years in question, the Commercial Tax Officer felt that there had been a failure to include the excise duty paid on the aforesaid liquors vended by the appellants in their taxable turnover. Accordingly, acting under the provisions of Section 14 (1) of the Act, the Commercial Tax Officer issued notices in February, 1975 to the appellants in the aforesaid first two sets of appeals to show cause why the assessments be not reopened. Aggrieved by the said action of the Commercial Tax Officer, the appellants filed writ petitions Nos. 1195 to 1198 of 1975 and 3931, 3944 and 4929 of 1975 in the High Court of Andhra pradesh challenging the said notices which, as already stated, were dismissed by the High Court.

(3.) The appellant in Appeal No, 693 of 1976 is a firm which is a licensed wholesale dealer in liquors and owner of a bonded warehouse under the Andhra Pradesh Indian Liquor (Storage in Bond) Rules, 1969 where it stores or deposits Indian liquors such as whisky, brandy, gin etc. imported by it from various States outside the State of Andhra Pradesh without pre-payment of countervailing duty or other fee and issues the same according to the rules to its customers. The modus operandi of the appellant is that it makes a bill for the value of the liquor required by an intending purchaser, who thereafter pays the requisite countervailing duty in his own name and the Excise Officer incharge of the bonded warehouse grants him a pass entitling him to remove the liquor from the warehouse. According to the appellant, it gets only the price of the liquor from its buyers. For the assessment year 1971-72, the Commercial Tax Officer, Hyderabad III by his order dated August 16, 1972 included the amount representing the countervailing duty paid by the purchasers in respect of the Indian liquors in bond which was not included in the bills of sale issued by the appellant. On appeal the Assistant Commissioner by its order dated March 26, 1973 deleted from the turnover of the appellant the item pertaining to the excise duty paid directly by the purchasers holding that the excise duty so paid by the purchasers did not in the circumstances, form part of the turnover of the appellant. Sometime thereafter, the Sales Tax Appellate Tribunal by its order dated August 5, 1974 passed in T. A. Nos. 331 of 1973 and 5 of 1974 upheld the assessment made under similar circumstances by the Commercial Tax Officer, Vijayawada, on the turnover of M/s. Shaw Wallace and Co. Thereupon the Deputy Commissioner, Commercial Taxes. Hyderabad by virtue of the power vested in him under S. 20 of the Act issued the impugned notice dated October 9, 1974 to the appellant calling upon it to show cause why the order passed by the Assistant Commissioner, Commercial Taxes, on March 26, 1973 should not be set aside and the original assessment order of the Commercial Tax Officer dated August 16, 1972 restored. The appellant was also required to file objections and adduce evidence in support thereof within 7 days from the date of receipt of the impugned notice. Aggrieved by the notice, the appellant filed a petition, being petition No. 6790 of 1974, before the High Court of Andhra Pradesh, seeking issue of an appropriate writ, order or direction declaring that the appellant was not liable to pay sales tax on excise duty paid by the purchasers in their own names and restraining the Deputy Commissioner, Commercial Taxes, Hyderabad, respondent in the appeal, from taking further proceeding in pursuance of the said notice. The said petition having been dismissed the appellant has, as already stated, come up in appeal to this Court.