RANGANATHA ASSOCIATES BANGALORE Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) the petitioner, M/s. Ranganatha associates, a firm of partners, is the purchaser of the exclusive privilege of retail vend of arrack in the Bangalore urban district for the year commencing from the 1st of july, 1987. In this writ petition, petitioner challenges the legality and correctness of the condition requiring him to pay sales tax on the excise duly on arrack and the bottling charges of arrack. Petitioner also assails the constitutionality of the 46th amendment. The vires of Section 5 (3-d) of the Karnataka Sales Tax Act, 1957, is also challenged.

(2.) under the Karnataka excise (lease of the rights of retail vend of liquor) rules, 1969, arrack is required to be supplied to the petitioner and, in turn, sold in retail by him, in sealed bottles. Under Rule 2 of the Karnataka excise duties rules, 1958 (referred as 'the rules' hereinafter), excise duty is payable on arrack when arrack is issued from any distillery, warehouse or place of storage. Petitioner before obtaining delivery of arrack in bottles is required to remit the price of the arrack and the excise duty to the government; and at the time of obtaining delivery of arrack in bottles pay the bottling charges to the bottler through whom bottled arrack is delivered to the petitioner. In respect of these transactions the petitioner is called upon to pay not only the sales tax on arrack, but also on the excise duty and bottling charges by the petitioner. Section 5(3-d) stipulates, inter alia, that where goods sold or purchased are contained in containers, the latter are liable to be taxed at the same rate of tax as is applicable to the contents, whether or not the containers have already been subject to tax under the act.

(3.) the first contention of Sri k. Srinivasan, learned counsel for the petitioner, is that the arrack which is the subject-matter of sale is itself manufactured by government; that, accordingly, there is no question of government as seller of the arrack being required to pay any excise duty on 'arrack' manufactured by itself; and that the requirement of payment of 'excise duty' by the petitioner as purchaser, which by reason of the fact that it is payable by the petitioner after the purchase by him of the arrack, is payable at the post- sale stage and cannot, therefore, become a part of the price of arrack so as to attract sales tax. The payment of excise duty in this case, it is contended, follows, and does not precede, the sale and therebeing no pre-existent liability on the part of the seller-government to pay excise duty, the payment of 'excise duty, in the circumstances, cannot also be deemed to be for and on behalf, or to the account, of, the seller, so that even by fiction it could not become a part of the price. Sri srinivasan placed strong reliance on the pronouncement of this court in d. Cawasji and co., Mysore v state of Mysore and others, 1969(1) mys. L.j. 461 (hereinafter referred to as cawasji's case) where this court, in the context of a similar situation, held that it was not competent for the state to collect sales tax on such excise duly.