STANDARD REFINERY CO Vs. SALES TAX COMMISSIONER

JUDGEMENT

(1.) This is a reference under Section 11 of the U. P. Sales Tax Act at the instance of M/s. Standard Refinery Co. (hereinaftercalled the assessee) in which the following questions of law have been referred for decision by this Court.

(2.) From the statement of the case it appears that the assessee carries on the business of the manufacture among other things of rectified and methylated spirit at Unnao. For the assessment year 1949-50 the assessee was assessed by Sri B. N. Srivastava, Sales Tax Officer, on the turnover returned by the assessee. It may be mentioned that a figure of Rs. 34,000 and odd was shown by the assessee as having been paid to the Government as excise duty and vend fee under the U. P. Excise Act. This figure of Rs. 34,000 and odd was not included by the assessee in its turnover. Subsequently Sri J. S. Mathur, Sales Tax Officer, issued a notice under Section 21 of the Act to the assessee calling upon it to show cause why the figure of Rs. 34,000 be not included in its turnover and be assessed as that part of the turnover escaped assessment. The assessee did not appear before the Sales Tax Officer despite repeated notices and contented itself by merely replying that it was not liable to be assessed under Section 21 of the Act as there was no escaped assessment in its case. The Sales Tax Officer took the proceedings ex parte and made an assessment. The assessee thereupon appealed and raised two main pleas, namely, that no case of escaped assessment under Section 21 was made out under the circumstances of the case and that the amount of Rs. 34,000 which was paid by the assessee as excise duty and vend fee to the Government in fact was paid on behalf of the customers, which such customers were under a duty to pay, and it could not legally form part of the turnover of the assessee as that amount was not realised as a part of the sale proceeds. The learned Judge (Appeals) rejected the plea of the assessee in respect of the validity of the assessment under Section 21 of the Act but accepted the plea that the amount paid by the assessee as excise duty and vend fee could not legally be included in the turnover of the assessee. Against the order of the Judge (Appeals), the Commissioner of Sales Tax filed a revision. The learned Judge (Revisions) allowed the revision and set aside the decision of the learned Judge (Appeals). On behalf of the assessee the decision of the learned Judge (Appeals) was sought to be supported on the ground that the assessment could not legally have been made under Section 21 of the Act. The learned Judge (Revisions) considered this plea raised by the assessee and rejected the same, Thereupon the assessee applied under Section 11 of the Act for referring a case for the decision of the High Court on certain questions of law arising in the case. This application was allowed and the questions mentioned above have been referred to this Court.

(3.) Sri A. K. Kirty, the learned counsel appearing for the assessee, has, at the very outset, stated that question No. (1) is not happily worded. What was meant was that the amount paid by the assessee on behalf of the purchasers as excise duty and vend fee could not legally form a part of the turnover of the assessee for purposes of payment of sales tax. We think that the question framed does clearly bring out the intention of the assessee as stated by its counsel and it is in that light that we proceed to answer the question. It is not disputed that on the facts found, the amount which the assessee paid as excise duty and vend fee was realised by it from the customers to whom the requisite quantity of methylated spirit and rectified spirit was sold from the bonded warehouse. What was contended on behalf of the assessee was that inasmuch as under the rules under the U. P. Excise Act the customers who came to take delivery of the spirit bought had to pay the excise duty and the vend fee before the goods sold could be cleared from the warehouse; what the assessee did was nothing more than first paying the necessary excise duty and vend fee on the customers' behalf and then realising the same separately from the customers in order to afford convenience to them. It has not been denied that the proportionate amount of the excise duty and the vend fee was realised by the assessee at the time when the sale took place. Sri Kirty sought assistance from the decision of the Supreme Court in the case of George Oakes (Private) Ltd. v. State of Madras (A.I.R. 1962 S.C. 1037). He also referred to another case of George Oakes (Private) Ltd. v. State of Madras (A.I.R. 1962 S.C. 1352), decided by the Supreme Court. On the reasoning which their Lordships of the Supreme Court adopted in the two cases cited, Sri Kirty urged that since the amount which was realised by the assessee from its customers as excise duty and vend fee was paid to the Government by it and was not allowed to be mixed up with its assets, that amount so realised from the customers at the time of the sale of the spirit could not legally form a part of the sale proceeds. We think that neither the dicta of the Supreme Court in the cases cited nor the reasoning supports this contention of the learned counsel, rather they militate against the conclusions which the learned counsel asked us to arrive at on the facts of the present case. It would be seen that their Lordships of the Supreme Court in the above cited cases held in connection with the definition of "turnover" under the Madras General Sales Tax (Definition of Turnover and Validation of Assessments) Act, that: When the seller passes on the tax and the buyer agrees to pay sales tax in addition to the price, the tax is really part of the entire, consideration and the distinction between the two amounts-tax and price-loses all significance from the point of view of legislative competence.