FAIRDEAL TRADING CO Vs. UNION OF INDIA

JUDGEMENT

(1.) THE petitioners in this bunch of 43 petitions bearing Nos. 4778, 4718, 4759, 4760, 4761, 4812, 4831, 4839, 4840, 4848, 4849, 4872, 4878, 4879, 4880, 4888, 4901, 4933, 4955, 4956, 4966, 4971, 4972, 5114, 5331, 5414, 5415, 5417, 5691, 5721, 5834, 5862, 5919, 5939, 5940, 6078, 6191, 6192, 6401, 6422, 6566, 7449 and 7540 of 1992 filed under Article 226 of the Constitution hold L-14a licences for the financial year 1992-93 obtained by them in an auction held for the purpose in accordance With the provisions of the Punjab Excise Act, 1914, as applicable to the States of Punjab and Haryana. These licences are for retail vend of country spirit including rum and gin and, on the strength of such a licence, a licensee trades in the licensed premises in alcoholic liquor for human consumption (other than Indian-made foreign liquor ). A licensee who is a successful bidder is required to pay the entire amount of licence fee in twelve monthly instalments. Every licensed premises popularly known as the vend has a fixed quota of country liquor/alcohol and the licensees keep lifting for sale from time to time the country liquor from the distilleries (manufacturers ). Before the country liquor can be purchased from the distilleries, 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 distilleries would, after charging the price, sell and allow release of liquor to the licensee for further sale at the vend. Thus, the petitioners have not only to pay the licence fee in monthly instalments but also the excise duty before obtaining the permit which enables them to lift a given quantity of liquor from the sellers (manufacturers) and thereafter they have also to pay the price of liquor which they purchase from the manufacturers for onward retail sale.

(2.) ACCORDING to Section 206c of the Income-tax Act, 1961 (hereinafter called "the Act"), as substituted by the Finance Act, 1992, with effect from April 1, 1992, every person who is a seller (like the distilleries) is required to collect tax at source at the rate of 15 per cent. on the amount payable by the buyer (like the petitioners) of goods of the nature of alcoholic liquor for human consumption other than Indian-made foreign liquor. Sub-section (1) of Section 206c of the Act, as it stands at present and the Explanation added with effect from April 1, 1992, after Sub-section (8) read as under :

(3.) THE case of the petitioners is that, while collecting tax from them at source, the distilleries-respondents cannot collect tax on the amount of excise duty which they deposit in the Government treasury before obtaining a permit and on the basis of which they purchase alcoholic liquor from the sellers (distilleries ). In other words, their contention is that the price of alcoholic liquor does not include the amount of excise duty and they are not liable to pay tax thereon and, consequently, the seller is not entitled to collect the same at source.