Case: Messrs Mc. Dowell And Company Limited   Vs. Commercial Tax Officer

matter. He has invited our attention to the second part of the definition of the word turnover as set out above and has strenuously urged that as in addition to the price of the liquor set out in the bills of sale as consideration for the sales, other sums charged by the dealer at the time of or before the delivery of the goods also form part of turnover, and according to the well established canon of construction, a taxing statute has to be interpreted reasonably so that there is no evasion of the tax, the phrase any sums charged by the dealer occurring in the aforesaid definition of the word turnover must be construed as meaning any item of expense including the excise duty or the countervailing duty to which buyers were put by the manufacturers of the liquors or the owner of the bonded warehouse. We find ourselves unable to accept the construction sought to be put by him as it is opposed to the plain meaning of the said phrase. It will be advantageous here to refer to the decisions of this Court in A. V. Fernandez vs. The State of Kerala where Bhagwati, J. speaking for the Bench after quoting the observations made by Lord Russell of Killowen in Inland Revenue Commissioners vs. Duke of Westminster which were approved by the Privy Council in the Bank of Chettinad vs. Income-Tax Commissioner observed :"It is no doubt true that in construing fiscal statutes and determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statutes, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. We must of necessity, therefore, have regard to the actual provisions of the Act and the rules made thereunder before we can come to the conclusion that the appellant was liable to assessment as contended by the Sales Tax Authorities. 13. Bearing in mind the principle set out in A. V. Fernandezs case the phrase any sums charged by the dealer has to be understood in its ordinary popular sense. So construing the phrase it means "what is demanded, collected or received by the dealer". In the instant cases, the excise duty or the countervailing duty has, as already stated, not been charged or received by the dealers but has been charged by the excise authorities and deposited directly by the buyers of the liquor in the State exchequer. It is, therefore, difficult to hold that excise duty or countervailing duty was charged by the appellants. 14. The reason for inclusion of tax or a duty in the turnover was explained in two decisions of this Court bearing the same cause title viz. Messrs George Oakes (Private) Ltd. vs. The State of Madras & Ors. In the first of these cases, it was observed :-"Under the definition of turnover the aggregate amount for which goods are brought or sold is taxable. This aggregate amount includes the tax as part of the price paid by the buyer. The amount goes into the common till of the dealer till he pays the tax. It is money which he keeps using for his business till he pays it over to Government. Indeed, he may turn it over again and again till he finally hands it to Government."In the other decision, Hidayatullah, J. (as he then was) said : "In laws dealing with sales tax, turnover has, in England and America also, been held to include the tax. The reason for such inclusion is stated to be that the dealer who realises the tax does not hand it over forthwith to Government but keeps it with him, and turns it over in his business before he parts with it. Thus, the tax becomes, for the time being, a part of the circulating capital of the tradesman, and is turned over in his business. Again, it was said that the price paid by the purchaser was not so much money for the article plus tax but a composite sum. Therefore, in calculating the total turnover, there is nothing wrong in treating the tax as part of the turnover, because "turnover" means the amount of money which is turned over in the business." 15. In the instant cases, the excise and countervailing duties did not go into the common tills of the appellants and did not become a part of their circulating capital. We are, therefore, of the view that the Sales Tax authorities were not competent to include in the turnovers of the appellants the excise duty and the countervailing duty which was not charged by them but was charged by and paid directly to the excise authorities by the buyers of the liquors as stated above. 16. The Full Bench decision of the High Court of Andhra Pradesh in The Government of Andhra (now Andhra Pradesh) vs. East India Commercial Co. Ltd. relied upon by the Revenue is clearly distinguishable. In that case, it was the actual collection of certain sums as dharmam or charity by the dealer from the purchasers on the occasion of the sales that made the learned Judges to hold that they constitute part of the turnover. In Messrs George Oakes (Private) Ltd.s case also, the tax in question was collected by the registered dealer. 17. We have, therefore, no hesitation in holding that the excise duty and the countervailing duty paid directly by the buyers of the Indian liquors as stated above did not constitute a part of the turnovers of the appellants. 18.

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

Explanation:
1[ds]9. Having seen that a provision can be inserted in the excise law for collection of the excise duty at a stage subsequent to the manufacture or production of the excisable article, we shall now proceed to examine the main contentions raised by counsel for the appellants. We have first to see as to how far the contention of counsel for the appellants that apart from a manufacturer of Indian liquors and an owner of a bonded warehouse who in our opinion cannot but be regarded as primarily responsible for payment of excise duty and countervailing duty respectively in view of Sections 21, 28 and 65 of the Andhra Pradesh Excise Act, 1968, and rules 3, 4, 5, 6, 67 and 76 of the Andhra Pradesh Distillery Rules, 1970, and condition No. 9 of the Distillery Licence granted under Rule 5 of these Rules : rules 5 and 10 of the Andhra Pradesh Indian Liquor (Storage in bond) Rules, 1969, conditions Nos. 7 and 10 of licence granted in form B.W. 1 under rule 5 (2), the phraseology of the application for receipt of liquor into the bonded warehouse prescribed by Rule 9(2) and the terms of the counterpart agreement required to be executed by a licence of an Indian liquor bonded warehouse under Rules 3 (2) and 5 (2) of these Rules the buyers of the said liquors are also liable under the law for payment of the aforesaid duties can be sustained. For a proper determination of this question, it is necessary to recall the provisions of the Andhra Pradesh Distillery Rules, 1970 which have been set out in the earlier part of this judgment. The said rules particularly rules 79, 81, 82, 83 and 84 lend a good deal of support, in our opinion, to the contention of counsel for the appellants and make every intending buyer of the Indian liquor liable for payment of the excise duty before obtaining the distillery pass and lifting the quantity mentioned therein from the distillery. Accordingly agreeing with counsel for the appellants we hold that intending purchasers of the Indian liquors who seek to obtain distillery passes are also legally responsible for payment of the excise duty which is collected from them by the authorities of the Excise Department10. The position in regard to the countervailing duty is not, however, clear though rule 10 (1) of the Andhra Pradesh Indian Liquor (Storage in bond) Rules 1969 and rules 5 (2) and 17 of the Andhra Pradesh Foreign and Indian Liquor Rules, 1970 enable the intending buyers of Indian liquors to remove the same from a bonded warehouse on payment of the said duty, to the excise authorities11. This is not, however, sufficient to dispose of the matter.The real and pivotal question that requires to be determined is whether the excise duty or the countervailing duty, as the case may be, paid directly to the excise authorities of the State or deposited directly in the State exchequer in respect of the Indian liquor by the buyers thereof before removing it from any of the aforesaid distilleries or the warehouse can be said to form part of the taxable turnover of the appellants, as according to Section 5 of the Act which is the charging section, sales tax is required to be paid by the appellants on their turnover of the year.It will be useful at this stage to advert to the definitions of the words turnover and sale as given in clauses (a) and (n) of sub-section (1) of Section 2 of the Act12. In the instant case, it is not disputed that excise duty or countervailing duty paid directly to the excise authorities by the purchasers of Indian liquors before removal thereof from the distilleries or the bonded warehouse on the strength of the distillery and warehouse passes was not included in the bills of sale as the consideration for the sales, but that alone, according to the Attorney General, is not determinative of the matter. He has invited our attention to the second part of the definition of the word turnover as set out above and has strenuously urged that as in addition to the price of the liquor set out in the bills of sale as consideration for the sales, other sums charged by the dealer at the time of or before the delivery of the goods also form part of turnover, and according to the well established canon of construction, a taxing statute has to be interpreted reasonably so that there is no evasion of the tax, the phrase any sums charged by the dealer occurring in the aforesaid definition of the word turnover must be construed as meaning any item of expense including the excise duty or the countervailing duty to which buyers were put by the manufacturers of the liquors or the owner of the bonded warehouse. We find ourselves unable to accept the construction sought to be put by him as it is opposed to the plain meaning of the said phrase. It will be advantageous here to refer to the decisions of this Court in A. V. Fernandez vs. The State of Kerala where Bhagwati, J. speaking for the Bench after quoting the observations made by Lord Russell of Killowen in Inland Revenue Commissioners vs. Duke of Westminster which were approved by the Privy Council in the Bank of Chettinad vs. Income-Tax Commissioner observed :"It is no doubt true that in construing fiscal statutes and determining the liability of a subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue satisfies the Court that the case falls strictly within the provisions of the law, the subject can be taxed. If, on the other hand, the case is not covered within the four corners of the provisions of the taxing statutes, no tax can be imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. We must of necessity, therefore, have regard to the actual provisions of the Act and the rules made thereunder before we can come to the conclusion that the appellant was liable to assessment as contended by the Sales Tax Authorities13. Bearing in mind the principle set out in A. V. Fernandezs case the phrase any sums charged by the dealer has to be understood in its ordinary popular sense. So construing the phrase it means "what is demanded, collected or received by the dealer". In the instant cases, the excise duty or the countervailing duty has, as already stated, not been charged or received by the dealers but has been charged by the excise authorities and deposited directly by the buyers of the liquor in the State exchequer. It is, therefore, difficult to hold that excise duty or countervailing duty was charged by the appellants15. In the instant cases, the excise and countervailing duties did not go into the common tills of the appellants and did not become a part of their circulating capital. We are, therefore, of the view that the Sales Tax authorities were not competent to include in the turnovers of the appellants the excise duty and the countervailing duty which was not charged by them but was charged by and paid directly to the excise authorities by the buyers of the liquors as stated above16. The Full Bench decision of the High Court of Andhra Pradesh in The Government of Andhra (now Andhra Pradesh) vs. East India Commercial Co. Ltd. relied upon by the Revenue is clearly distinguishable. In that case, it was the actual collection of certain sums as dharmam or charity by the dealer from the purchasers on the occasion of the sales that made the learned Judges to hold that they constitute part of the turnover. In Messrs George Oakes (Private) Ltd.s case also, the tax in question was collected by the registered dealer17. We have, therefore, no hesitation in holding that the excise duty and the countervailing duty paid directly by the buyers of the Indian liquors as stated above did not constitute a part of the turnovers of the appellants.