IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.11276 of 1995 M/s SCI India Ltd., a Company incorporated under the provisions of Companies Act, formally known as M/s Shiv Shanker Chemical Industries (Bihar) Ltd., having its registered office at D.N. Singh Road, Bhagalpur, through its Finance Manager Virendra Kumar Agrawal ………..Petitioner Versus 1. State of Bihar through the Secretary, Department of Finance, Old Secretariat, Patna. 2. The Secretary-cum-Commissioner of Excise, New Secretariat, Patna 3. The Special Secretary-cum-Commissioner of Commercial Taxes, Bihar, Patna 4. The Assistant Commissioner of Commercial Taxes, Muzaffarpur Circle, Katchuary Court Compound, P.O. & P.S.Town, District Bhagalpur. ………..Respondents ----------- For the petitioner : Mr. Gautam Kejriwal, Advocate Mr.Akash Chaturvedi, Advocate For the State : Mr. Piyush Lal, AC to AAG 1. 12 21.1.2011 In the instant writ petition, the petitioner seeks quashing the demand notice dated 14.1.1993 issued by the Assistant Commissioner, Commercial Taxes, Bhagalpur. Before we take up the issue in question, it is necessary to notice the facts in some detail. The petitioner is a manufacturing unit of rectified spirit. It supplied rectified spirit to the bonded Warehouse maintained by the State Government; through the Excise Department. The charge of Commercial Taxes Department is that the appellant had not paid its sales tax liability for some periods both prior and subsequent to 1.4.1989. The stand of the 2 petitioner is that it could not pay the sales tax due, as the same was not paid to it by the purchaser, the department of Excise, Govt. of Bihar. The sales tax department began to pressurize the petitioner to make payment of the sales tax liability. This forced petitioner to stop further supply of the rectified spirit. The Excise department, Government of Bihar too persuaded the petitioner unit to continue the supply of rectified spirit. A copy of telegram from Excise department in this respect is annexed as Annexure-1 to the writ application. On account of mounting pressure and assurance of the Excise Department that it would sort out the sales tax matter with the commercial tax department, the petitioner began to make supply of the rectified spirit. On 14.3.1988, the Commissioner of Excise vide his letter no.1048 wrote to the Commissioner of Commercial Taxes drawing his attention to the earlier discussions wherein it was emphasized that manufacturer of country liquor was not liable to pay sales tax as it was making sale to government warehouse through the Excise Department. A copy of 3 the letter dated 14.3.1988 is annexed as Annexure-2 to the writ petition. While the disputes between the two departments namely the Department of Excise and the Department of Sales Tax was pending before the Government, the Commissioner of Commercial Taxes, Bihar vide his memo no.492 dated 22.1.1990 directed all the sales tax authorities to recover sales tax from the manufacturer of country liquor spirit w.e.f.1.4.1989, and for the period prior to 1.4.1989 the matter was to be decided between the authorities of sales tax. A copy of memo no.492 dated 22.1.1990 is annexed as Annexure-3 to the writ petition. Pursuant to the letter of the Commissioner of Commercial Taxes dated 22.1.1990, the sales tax department begun to pressurize the petitioner for payment of sales tax. The petitioner time and again represented both before the Excise Department and the Commercial Taxes Department. A copy of the representation dated 17.12.1992 made to the Excise Commissioner is annexed as Annexure-4 to the writ petition. The Excise Department even wrote to the Government for allocation of finance to meet the requirement of sales tax payment. The petitioner 4 complains that notwithstanding the aforesaid aspects, the Assistant Commissioner, Commercial Taxes vide demand notice dated 14.1.1993 called upon it to pay the sales tax liability of Rs.9,24,852.72 paise, besides penalty of Rs.1,76,399 for the delayed payment. Mr. Piyush Lal, learned AC to learned AAG 1 has made elaborate submissions in support of stand of the State Government which we find to be unreasonable. He states that it is the liability of the dealer who makes a sale to pay the sales tax amount and it is immaterial whether the seller collects the same from the purchaser or not. He contends that the petitioner has been rightly called upon to pay the sales tax liability and it is his responsibility to collect the same from purchaser. The sales department is not concerned, if the seller does not choose to collect the sales tax from the purchaser. In support of his submissions, learned counsel has relied upon a decision in the case of State of Jammu & Kashmir & Ors Vs Vidyawanti Devi Jain, reported in 56 STC 214. Heard counsel for the petitioner and the State. It is not in dispute that the petitioner used to 5 supply rectified spirit through the Excise Commissioner to the bonded warehouse maintained by the State Government. It is also not in dispute that the petitioner did not receive the sales tax amount from the Excise Department. It appears that the Commissioner of Commercial Taxes was also one of the members in the high leveled meeting dated 2.12.1989 in which the liability regarding payment of sales tax was referred to the State Government for its final decision. The point at which sales tax liability was payable was yet to be resolved. The letter of the Excise Commissioner would also show that it was the liability of the Excise department to pay the sales tax amount on the sale of rectified spirit made by the petitioner unit to the bonded warehouses maintained by the State Government. It appears that up till now the State Government has not taken any decision as to the point at which the sales tax would be levied. Further more, the State Government has not yet decided whether the manufacturing unit would collect the sales tax from the Excise Department or the Excise Department would pay the sales tax amount to the Commercial Taxes Department. 6 In the case of Bihar Distilleries Association & Ors Vs State of Bihar & Ors, reported in 2010(4) PLJR 796, a similar issue came for consideration, wherein this court observed that the manufacturing unit should not suffer on account of stand off between the departments of the governments when admittedly the payment of sales tax was to be made by one of the departments. The approach of the State Government appears to us to be that the right hand does not know what the left hand is doing to the detriment of manufacturer. The decision of the learned Division Bench in the aforesaid case fully covers the case of the petitioner. The decision relied upon by the learned State counsel reported in 56 STC 214 would not be applicable in the facts of the instant case as in the aforesaid case, the supply was made to a private party and not to the department of the State Government. Thus we are of the considered opinion that for dispute between the two departments, the petitioner cannot suffer. In view of the admitted fact that the Excise Commissioner admits the liability to pay sales tax due, we do not consider it expedient to remit the 7 KHAN matter to the State Government. As such, we quash the impugned demand notice dated 14.1.1993 contained in Annexure-8 issued by the Assistant Commissioner, Commercial Taxes, Bhagalpur. It would be open for the Commercial Tax Department to recover the same from the Excise department. It is evident that the petitioner has under gone litigation for 15 years on account of non-resolution of the dispute due to stand off between the two departments which has not only caused harassment to the petitioner but also burdened this court with unnecessary litigation. We accordingly award cost of Rs.20,000/- on the Excise Department which would be payable to the petitioner within a period of three months from today. The Secretary, Excise Department, Government of Bihar would ensure payment of cost to the petitioner. (S.K.Katriar,J) (S.P.Singh,J) 8