Case: Mohan Breweries and Distilleries Limited Etc Vs. Commercial Tax Officer, Madras and Others

levied upon goods manufactured or produced Entry 84 of List I and Entry 51 of List II of the Seventh Schedule to the Constitution). Its incidence falls, therefore, on the manufacturer or producer of the goods. The collection of excise duty may be deferred to such later stage as is, administratively or otherwise, most convenient. 6. In the case of Central Provinces and Berar Sales of Motor Spirit an Lubricants Taxation Act, it was noted that excise duty was a duty ordinarily levied on the manufacturer or producer in respect of the manufacture or producer in respect of the manufacture or production of the Commodity tax. A distinction was made between the nature of the tax and the point at which it was collected. It was subject to the legislative competence of the taxing authority to impose the duty at the stage which was most convenient and the most lucrative, wherever it might be, but "that is a matter of the machinery of collection, and does not affect the essential nature of the tax". This was reiterated by the Federal Court in Boddu Paidannas case. In the Bombay Tyres case, this Court referred to the aformentioned two authorities of the Federal Court and several authorities of this Court to hold that excise duty was levied on manufacture but it could be levied at any convenient stage so long as the character of the impost, that is, that it was a duty on the manufacture or production, was not lost. The method of collection did not affect the essence of the duty but only related to the machinery of collection of administrative convenience. This Court said, "while the levy in our country has the status of a constitutional concept, the point of collection is located where the statute declare it to be." 7. The liability to pay excise duty on the IMFL is, therefore, that of the manufacturer thereof. Rule 22 only provides a mode for collecting the excise duty, a mode which is obviously convenient for it requires the party removing the IMFL from the factory of its production to pay in advance the excise duty thereon. That party might be the manufacturer. That the Act provides in another section that all IMFL should be supplied in the state of Tamil Nadu by wholesale only through TASMAC does not, in out view, make any difference to this position. It cannot be a reason for holding that the primary obligation to pay excise duty is that of TASMAC or that the manufacturer is absolved of the obligation to pay excise duty.8. We cannot agree with learned counsel for the appellants that the second Mc Dowell case was based only upon the provisions of the Andra Pradesh rules that were under consideration. It is amply clear from the citation of the authorities of this court in that judgment that it elaborated upon the concepts of excise duty and concluded that "the incidence of excise duty is directly relatable to manufacture but its collection can be deferred to a later stage as a measure of convenience of expediency". The Andra Pradesh rules, it was held "did not detract from the position that payment of excise duty is the primary and exclusive obligation of the manufacturer and if payment be made under a contract or arrangement by any other person it would amount to meeting of the obligation of the manufacturer and nothing more". Note was taken of the argument that excise duty had never come into the hands of the appellant and that the appellant and that the appellant had no opportunity to turn it over his hands and, therefore, the same could not be considered to be a part of its turnover. It was held that the argument that: "when the excise duty does not go into the common till of the assesses and it does not become a part of the circulation capital, it does not constitute turnover, is not the decisive test for determining whether such duty would constitute turnover." 9. As we look at it, the primary obligation to pay excise duty on the IMFL is of the manufacturer thereof. Rule 22 only provides for a convenient method for its collection. When the excise duty is collected from a party removing the IMFL from the factory from the factory of its production, other than the manufacturer, the payment of excise duty that party makes is in discharge of the obligation of the manufacturer. That party does not, as it would ordinarily do, pay the excise duty component along with the sale price of the IMFL it purchases to the manufacturer; it pays the sale price to the manufacturer and it pays the excise duty into the Treasury for and on behalf of the manufacturer. In effect, therefore, the element of excise duty does enter into the turnover of the manufacturer just as much as it would ordinarily do. The definition of "turnover" in section 2(r) of the sales Tax Act, referring as it does to "the aggregate amount for which goods are bought or sold" and "whether for cash or..... other valuable consideration" is wide enough to cover such excise duty. That the excise duty does not physically enter the manufacturers till is, as held in the second Mc. Dowell case, not the decisive test for determining whether or not it would be a part of the manufactures turnover. The argument based on Explanation (1-A) of Section 2(r) of the Sales Tax Act cannot be entertained because the amount of excise duty was not charged by the appellants by way of tax separately without including the same in the price of the IMFL sold. 10. Insofar as the argument of equatable estoppel is concerned, the short answer, in our view, is that, admittedly, no representation had been made by any sales Tax authority, and, given the construction that we have placed upon it, Rule 22 itself cannot be said to be a representation that could have misled the appellants.11.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]As we look at it, the primary obligation to pay excise duty on the IMFL is of the manufacturer thereof. Rule 22 only provides for a convenient method for its collection. When the excise duty is collected from a party removing the IMFL from the factory from the factory of its production, other than the manufacturer, the payment of excise duty that party makes is in discharge of the obligation of the manufacturer. That party does not, as it would ordinarily do, pay the excise duty component along with the sale price of the IMFL it purchases to the manufacturer; it pays the sale price to the manufacturer and it pays the excise duty into the Treasury for and on behalf of the manufacturer. In effect, therefore, the element of excise duty does enter into the turnover of the manufacturer just as much as it would ordinarily do. The definition of "turnover" in section 2(r) of the sales Tax Act, referring as it does to "the aggregate amount for which goods are bought or sold" and "whether for cash or..... other valuable consideration" is wide enough to cover such excise duty. That the excise duty does not physically enter the manufacturers till is, as held in the second Mc. Dowell case, not the decisive test for determining whether or not it would be a part of the manufacturesargument based on Explanationof Section 2(r) of the Sales Tax Act cannot be entertained because the amount of excise duty was not charged by the appellants by way of tax separately without including the same in the price of the IMFLas the argument of equatable estoppel is concerned, the short answer, in our view, is that, admittedly, no representation had been made by any sales Tax authority, and, given the construction that we have placed upon it, Rule 22 itself cannot be said to be a representation that could have misled the appellants.8. We cannot agree with learned counsel for the appellants that the second Mc Dowell case was based only upon the provisions of the Andra Pradesh rules that were under consideration. It is amply clear from the citation of the authorities of this court in that judgment that it elaborated upon the concepts of excise duty and concluded that "the incidence of excise duty is directly relatable to manufacture but its collection can be deferred to a later stage as a measure of convenience of expediency". The Andra Pradesh rules, it was held "did not detract from the position that payment of excise duty is the primary and exclusive obligation of the manufacturer and if payment be made under a contract or arrangement by any other person it would amount to meeting of the obligation of the manufacturer and nothing more". Note was taken of the argument that excise duty had never come into the hands of the appellant and that the appellant and that the appellant had no opportunity to turn it over his hands and, therefore, the same could not be considered to be a part of its turnover.