UNITED DISTILLERS LTD Vs. COMMISSIONER OF COMMERCIAL TAXES

JUDGEMENT

(1.) WE are called upon to answer the reference in terms of Section 48 of the Bihar Finance Act 1981 (hereinafter referred to as 'the Act'). By order dated 5.2.2001, passed in the present case, we had called for reference on three questions stated in the order and reproduced in paragraph -3 hereinbelow.

(2.) THE petitioner is a manufacturer and dealer of India -made Foreign Liquor (IMFL), and has its manufacturing unit at Mirganj in the district of Gopalganj. After taking lease of the unit from S.K.G. Sugar Mills, the petitioner filed returns for the years 1981 -1982, which did not include the amount of excise duty paid or payable by the petitioner in the capacity of the manufacturer, or its purchaser, or any further onward purchaser. By order dated 22.8.2008, the learned assessing authority discarded the books of accounts as unreliable which, inter alia, did not disclose the amount of excise duty on its products and proceeded for best judgment assessment. The gross turn -over was enhanced, was accordingly determined, and sales tax was levied thereupon. Aggrieved by the order, the petitioner appealed which were numbered as Appeal Case No. ST. GG -17/88 -89 and CST 1/88 -89. Both dealt with the period 1981 -82. The former deals with the assessment under the Act, and the latter under the Central Sales Tax Act 1956. Both the appeals were disposed of by a common judgment dated 12.8.94, passed by the learned Joint Commissioner of Commercial Taxes (Appeals), Tirhut Division, Muzaffarpur, whereby the order of the learned assessing authority was upheld leading to the two revision applications. Revision Case No. MZ 694/94 has arisen with respect to the Bihar Act, and Revision Case No. MZ 695/94 (CST 1/88 -89) is with respect to the Central Act. Both the cases were disposed of by a common order dated 9.9.97, passed by the Commercial Tax Tribunal, Bihar, Patna, whereby the revision applications were dismissed. The Tribunal has held that the books of accounts maintained by the petitioner did not disclose the amount of excise duty paid or payable on the products of the petitioner. The authorities below had further reasons to discard the books of accounts leading to best judgment assessment and payment of taxes. The learned Tribunal has further held that the amount of excise duty leviable on the products of the petitioner is liable to be included in the sale price and consequently in the petitioner's gross turn -over also, and is, therefore, exigiable to sales tax.

(3.) MR . K.N. Jain appears for the petitioner, and has taken us through the scheme of the Act, as well as the Bihar Excise Act, and submits that the judgment of the Supreme Court in McDowell and Co. Ltd. v. Commercial Tax Officer AIR 1986 SC 640 : 1986 Tax L.R. 2174 : 59 STC 277 (hereinafter referred to as the second McDowell) was rendered in the background of a different factual matrix and, therefore, the propositions enunciated therein are inapplicable to the facts and circumstances of the present case. He submits that, in the peculiar facts and circumstances of this case, the decision of the Supreme Court in McDowell and Co. v. Commercial Tax Officer : [1977]1SCR914 (hereinafter referred to as the first McDowell) is applicable to the facts and circumstances of the present case. He next submits that the learned Tribunal has failed to notice the basic factual position in the present case that the parties had entered into an agreement for sale of goods wherein neither the petitioner nor the purchaser was required to pay the excise duty. The goods were lifted from the warehouse on the basis of bonds and may have been paid by anybody beyond the petitioner's purchaser. In other words, in his submission, neither the petitioner received excise duty, nor its purchaser deposited the same in the treasury for and on behalf of the petitioner. He relies on the judgment of the Supreme Court in George Oakes (Pvt.) Ltd. v. State of Madras : [1962]2SCR570 . He further submitted that, if the petitioner were made liable to pay sales tax on the component of excise duty, then the authorities under the Act would be rewriting its commercial agreement inter -parties completely eroding the freedom of the parties to enter into agreements. There is no law controlling prices of goods in question, the parties were free to negotiate and determine the price of goods sold. Such price was fixed by the agreement inter -parties which alone forms the sale price and the consequent gross turn -over. He lastly submits that the transactions in question related to a period when the first McDowell was ruling the field the petitioner was not required to maintain the books of accounts reflecting the duties of excise paid or payable, and discarding the same on this ground and one more ground is bad in law. In his submission, therefore, there was no basis to proceed with best judgment assessment. He also submits that there should be no confusion between the Act and the Excise Act. The taxing events under both the enactments are fundamentally different. Learned Counsel for the petitioner wrapped up his submission by stating that the questions may be answered in favour of the petitioner.