NARESH KUMAR AND COMPANY Vs. UNION OF INDIA

JUDGEMENT

(1.) THE questions that arise for our consideration in this batch of twenty four writ petitions are whether the holder of L-14A licence issued under the Punjab Liquor Licence Rules, 1956 (for short "the Rules"), is a "buyer" within the meaning of Section 206C of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), and whether the Excise Department while auctioning such a license is a "seller" and as such required to collect from such a licensee 10 per cent. of the amount of licence fee as income-tax ? THE facts giving rise to these questions are identical and counsel for the parties are agreed that the decision in Civil Writ Petition No. 15583 of 1999, will govern the other cases as. well. For the sake of convenience, the facts are being taken from this case.

(2.) THE petitioners are holding L-14A licences issued to them by the Excise Department of the Union Territory, Chandigarh, for the year 1999-2000. THE mode of grant and the authority to grant and renew such licences is mentioned in Rule 1 of the rules, according to which L-14A licence is granted for retail vend of country spirit for human consumption of the premises by way of auction or negotiations. THE petitioners were granted the licences in an open auction held for the purpose in which they were the highest bidders. THE State charges on monthly basis a licence fee for the grant of this privilege of selling liquor by the wine contractors like the petitioners. This licence enables the licensee to purchase country liquor from the distilleries (manufacturers) or from the wholesalers who also hold L-13 licences for wholesale vend of country spirit. It is the common case of the parties that the petitioners before us had been purchasing country liquor from the wholesalers (L-13 licensees). Before the country liquor can be purchased, a permit is necessary to be obtained from the Excise and Taxation Department for a certain quantity after depositing the excise duty thereon in the Government treasury. THEn, on the production of this permit, the wholesalers after charging the price sell and allow the release of liquor to the L-14A licensees like the petitioners for further sale at the vend. THE wholesalers purchase the country liquor from the distilleries and sell the same to the L-14A licensees at a price fixed by the State Government under the Punjab Excise Act and the rules without any bargain or negotiations. THE L-14A licensees then sell the country liquor in retail at their vends. It is thus clear that the petitioners pay the price of country liquor to the wholesalers which includes the cost of liquor and the container. Since the Excise and Taxation Commissioner, Chandigarh, while granting L-14A licences to the petitioners did not regard them as buyers within the meaning of Section 206C of the Act nor did he regard himself as the seller of any goods, he did not collect from the petitioners 10 per cent. on the amount of licence fee deposited by them for the period April 1, 1999 to June 30, 1999, as income-tax at source. THE Deputy Commissioner of Income-tax, Circle-I(2) (TDS), Chandigarh, was, however, of the view that the petitioners while obtaining their L-14A licences in an auction had obtained the right to receive alcoholic liquor for human consumption other than Indian made foreign liquor and were therefore buyers within the meaning of Section 206C of the Act and that the Excise and Taxation Commissioner who granted those licences was the seller. Every seller in terms of Section 20GC of the Act is required to collect 10 per cent. of the amount payable at the time of the sale as income-tax at source but since the Excise and Taxation Commissioner, Chandigarh, had not collected the said amount, the Deputy Commissioner of Income-tax issued notice to him and by a detailed order dated October 15, 1999, held him liable to pay income-tax to the tune of Rs. 97,09,050 to the credit of the Central Government as provided in Sub-section (6) of Section 206C of the Act. THE Deputy Commissioner of Income-tax held that L-14A licensees like the petitioners who obtain the right to receive the specified goods mentioned in the Table in Sub-section (1) of Section 206C of the Act fall within the purview of the definition of buyer and were liable to pay 10 per cent. as income-tax on the amount of licence fee deposited by them every month. It was further held that the Excise and Taxation Commissioner was the seller. On receipt of the order from the Income-tax Department, the Deputy Excise and Taxation Commissioner, Chandigarh, issued notices to the petitioners dated October 27, 1999, requiring them to deposit 10 per cent. of the amount of licence fee deposited by them as income-tax in respect of their country liquor vends for the period April 1, 1999, to June 30, 1999. THEy were further directed to deposit 10 per cent. income-tax at source under Section 206C of the Act along with the monthly licence fee payable in future. It is against these notices that the present petition has been filed under article 226 of the Constitution.

(3.) ALCOHOLIC liquor for human consumption other than Indian made foreign liquor is one of the goods specified in the Table referred to in Section 206C of the Act and, therefore, this provision would apply to such goods.