Summarize the following court judgment. Civil Appeal No. 570 of 1983. From the Judgment and Order dated 6.12.1982 of the High Court of Andhra Pradesh in Writ Petition No. 7985/82. Soli J. Sorabjee	 Harish N. Salve	 Ravinder Narain and Mrs. A.K. Verma for the Appellant. S.T. Desai	 B. Parthasarthi and T.V.S.N. Chari for the Respondents. The following Judgments were delivered CHINNAPPA REDDY	 J. While I entirely agree with my brother Rangnath Misra	 J. in the judgment proposed to be delivered by him	 I wish to add a few paragraphs	 particularly to supplement what he has said on the fashionable ' topic of tax avoidance. My excuse for inflicting this extra opinion is that the ingenious attempts to rationalise and legitimise tax avoidance have always fascinated and amused me and made me wonder how ready the minds are to adapt themselves and discover excuses to dip into the treasury. The shortest definition of tax avoidance that I have come across is "the art of dodging tax without breaking the law. " Much legal sophistry and judicial exposition have gone into the attempt to differentiate the concepts of tax evasion and tax avoidance and to discover the invisible line supposed to exist which distinguishes one from the other. Tax avoidance	 it seems	 is legal: tax evasion is illegal. Though initially the law was	 and I suppose the law still is	 "there is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in	 nothing is to be implied"	 during 798 the period between the two world wars	 the theory came to be propounded and developed that it was perfectly open for persons to evade (avoid) income tax if they could do so legally. For some time it looked as if tax avoidance was even viewed with affection. Lord Sumner in Inland Revenue Commissioners vs Fishers Executors(l) said: ` "My Lords the highest authorities have always recognised that the subject is entitled so to arrange his affairs as not to attract taxes imposed by the Crown so far as he can do so within the law	 and that he may legitimately claim the advantage of any expressed term or of any emotions that he can find in his favour in taxing Acts. In so doing he neither comes under liability nor incurs blame. " Lord Tomlin echoing what Lord Sumner had said observed in Inland Revenue Commissioners vs Duke of West Minister(2) follows type filing the prevalent attitude towards tax avoidance at that time: "Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than if otherwise would be. If he succeeds in ordering them so as to secure this result	 then	 however	 unappreciative the Commissioners of Inland Revenue or his fellow tax payers may be of his ingenuity. he cannot be compelled to pay on increased tax. " Then came World War II and in its wake huge profiteering and racketeering	 something which persists till today	 but on a much larger scale. The attitude of the Courts towards avoidance of tax perceptibly changed and hardened and in Lord Howard De Waldan vs Inland Revenue Commissioners(a) Greene	 M.R.	 dealing with the construction of an anti avoidance section said: "For years a battle of manoeuvre has been waged between the legislature and those who are minded to throw the (1) ; (2) 	 (3) [1942] I	KB 389. 799 burden of taxation off their own shoulders on to those Of their fellow subjects. In that battle the legislature has been worsted by the skill	 determination and resourcefulness of its opponents of whom the present appellant has not been the least successful. It would not shock us in the least to find that the legislature has determined to put an and to the struggle by imposing the severest penalities. It scarcely lies in the mouth of the tax payer who plays with fire to complain of burnt fingers. " Expressing the same sentiment and dissertating on the moral aspects of tax avoidance Lord Simon in Latilla vs Inland Revenue Commissioners(1) said	 "My Lords	 of recent years much ingenuity has been expended in certain quarters in attempting to devise met hods of disposition of income by which those who were prepared to adopt them might enjoy the benefits of residents in this country while receiving the equivalent of such income without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that	 however	 elaborate and artificial such methods may be	 those who adopt them are 'entitled ' to do 60. There is	 of course	 no doubt that they are within their legal rights but that is no reason why their efforts	 or those of the professional gentlemen who assist them in the matter	 should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship. On the contrary	 one result of such methods	 if they succeed	 is of course to increase pro tanto the load of tax on the shoulders of the great body of good citizens who do not desire or do not know how	 to adopt these manoeuvres. " In several cases	 Griffith vs JP Harrizan Ltd.(2)	 Morgan vs Inland Revenue Commissioners '(3) Public Trustee vs Inland Revenue Commissioners(4)	 Lord Denning repeatedly referred to tax avoidance schemes (1) (2) (3) [1963] Chancery 438. (4) [1965] Chancery 286. 800 and described them as magic performance by lawyer turned magicians. Lord Harman	 almost in the same words as Lord Denning described a tax avoidance scheme as one 'which smells a little of the lamp" and said ' it is a splendid scheme it is almost too good to be true. In law quite too good to be true. It won 't do." (Campbell vs Inland Revenue Commissioners(1)	 Stamp J. In re Western 's Settlements observed ". There must be some limit to the devices which this Court ought to countenance in order to defeat the fiscal intentions of the legislature. In my judgment these proposals overstep that limit. I am not pursuaded with this application represents more than a cheap exercise in tax avoidance which r ought not to sanction as distinct from a legitimate avoidance of liability to taxation. In Greenberg vs Inland Revenue Commissioners(2)	 Lord Reid dealing with a scheme for tax avoidance by forward dividend stripping observed	 " . We seem to have travelled a long way from the general and salutary rule that the subject is not be taxed except by plain words. But I must recognise that plain words are seldom adequate to anticipate and forestall the multiplicity of ingenious schemes which are constantly being devised to evade taxation. Parliament is very properly determined to prevent this kind of tax evasion and	 if the courts find it impossible to give very wide meanings to general phrases	 the only alternative may be for Parliament to do as some other countries have done and introduce legislation of a more sweeping character which will put the ordinary well intentioned person at much greater risk than is created by a wide interpretation of such provisions as those which we are now considering." (1) [1967] Chancery	 651. (2) 1971(3) All ER. 135. 801 "I am inclined to think that the real explanation of these verbal difficulties may be that	 in legislation of such extreme complexity as we have here	 it is not humanly possible for a draftsman to preserve that consistency in the use of language which we generally look for. Indeed	 l sometimes suspect that our normal meticulous methods of statutory construction tend to lead us astray by concentrating too much 1 on verbal niceties and paying too little attention to the provisions read as a whole. " The march of the law against tax avoidance schemes continued and came a significant departure from the West minister and the Fisher Executor. principle. In W.I. Ramsay vs Inland Revenue Commissioners(1)	 the House of Lords had to consider a scheme of tax avoidance which consisted of a series or a combination of transactions each of which was individually genuine but the result of all of which was an avoidance of tax. Lord Wilberforce	 with great force	 observed	 "Given that a document or transaction is genuine	 the court cannot go behind it to some supposed underlying substance. This is the well known principle of Inland Revenue Commissioners vs Duke of Westminister. This is a cardinal principle but it must not be overstated or overextended. While obliging the court to accept documents or transactions	 found to be genuine	 as such	 it does not compel the court to look at a document or a transaction in blinkers	 isolated from any context to which it properly belongs. If it can be seen that a document or transaction was intended to have effect as part of a nexus or series of transactions	 or as an ingredient of a wider transaction intended as a whole	 there is nothing in the doctrine to prevent it being so regarded: to do so is not to prefer form to sub stance	 or substance to form. It is the task of the court to ascertain the legal nature of any transaction to which it is sought to attach a tax or a tax consequence and if that emerges from a series or combination of transactions	 in tended to operate as such	 it is that series or combination which may be regarded. For this there is authority in the (1) 11982] AB 300. 802 law relating to income tax and capital gains tax: See Chinn vs Hochstrasser and Inland Revenue Com missioners vs Plummer "For the commissioners considering a particular case it is wrong and an unnecessary self limitation	 to regard themselves as precluded by their own finding that documents or transactions are not "shams"	 from considering what	 as evidenced by the documents themselves or by the manifested intentions of the parties	 the relevant transaction is. They are not	 under the Westminister doctrine or any other authority	 bound to consider individually each separate step in a composite transaction intended to be carried through as a whole. " Later again he observed	 ". .For the taxpayers it was said that to accept the revenue 's wide contention involved a rejection of accepted and established canons and that	 if so general an attack upon schemes for tax avoidance as the revenue suggest is to be validated	 that is a matter for Parliament. The function of the courts is to apply strictly and correctly the legislation which Parliament has enacted: if the taxpayer escapes the charge	 it is for Parliament	 if it disapproves of the result	 to close the gap. General principles against tax avoidance are	 it was claimed	 for Parliament to lay down. We were referred	 at our request	 in this connection to the various enactments by which Parliament has from time to time tried to counter tax avoidance by some general prescription. The most extensive of these is Income and Corporation Taxes Act 1970	 sections 460 et seq. We were referred also to well known sections in Australia and New Zealand (Australia	 Income Tax Assesment Act 1936 51	 section 260	 New Zealand	 Income Tax Act 1976	 section 99	 replacing earlier legislation). Further it was pointed out that the capital gains tax legislation (starting with the Finance Act 1965) does not contain any provision corresponding to section 460. The intention should be 803 deduced therefore	 it was said	 to leave capital gains tax to be dealt with by "hole and plug" methods: that such schemes as the present could be so dealt with has been con firmed by later legislation as to "value shifting": Capital Gains Tax Act 1979	 section 25 et seq. These arguments merit serious consideration. In substance they appealed to Barwick C.J. in the recent case of Federal Commissioner of Taxation vs Westraders Pty. Ltd. ; 	 354 355	 " "I have a full respect for the principles which have been stated but I do not consider that they should exclude the approach for which the Crown contends. That does not introduce a new principle: it would be to apply to new and sophisticated legal devices the undoubted power and duty of the courts to determine their nature in law and to relate them to existing legislation. While the techniques of tax avoidance progress and are technically improved	 the courts are not obliged to stand still. Such immobility must result either in loss of tax	 to the prejudice of other taxpayers or to Parliamentary congestion or (most likely) to both. To force the courts to adopt	 in relation to closely integrated situations	 a step by step	 dissecting	 approach which the par ties themselves may have negated	 would be a denial rather than an affirmation of the true judicial process. In each case the facts must be established	 and a legal analysis made: legislation cannot be required or even be desirable to enable the courts to arrive at a conclusion which corresponds with the parties ' own intentions." "The capital gains tax was created to operate in the real world	 not that of make belief. The significance of Ramsay as a turning point in the interpretation of tax laws in England and the departure from the strings of Westminister were explained in Inland Revenue Commissioners vs Burmah Oil Company Ltd.	(1) where Lord Diplock said	 "It would be disingenuous to suggest	 and dangerous (1) [1982] S.T.C. 30 804 on the part of those who advise on elaborate tax avoidance schemes to assume	 that Ramsay 's case did not mark a significant change in the approach adopted by this House in its judicial role to a pre ordained series of transactions (whether or not they include the achievement of a legitimate commercial end) into which there are inserted steps that have no commercial purpose apart from the avoidance of a liability to tax which in the absence of those particular steps would have been payable. The difference is in approach. It does not necessitate the overruling of any earlier decisions of this House; hut it does involve recognising that Lord Hamlin 's oft quoted dictum in IRC vs Duke of Westminister(1) "Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less then it otherwise would be"	 tell us little or nothing as to what methods of ordering one 's affairs will be recognised by the courts as effective to lesson the tax what would attach to them if business transactions were conducted in a straight forward way. " Lord Scarman said	 "First	 it is of the utmost importance that the business community (and others	 including their advisers) should appreciate	 as my noble and learned friend Lord Diplock has emphasised	 that Ramsay 's case marks "a significant change in the approach adopted by this House in its judicial role" towards tax avoidance schemes. Secondly	 it is now crucial when considering any such scheme to take the analysis far enough to determine where the profit	 gain or loss is really to be found	 The winds of change continued to blow and in Furniss vs Dawson(2) Ramsay was reiterated. Lord Brightman observed, The fact that the court accepted that each step in a transaction was a genuine step producing its intended legal (1) All ER. Rep. 259 (at) 267. (2) [1984] 1 Ali E.R. 530	 805 results did not confine the court to considering each step in h. isolation for the purpose of assessing the fiscal results. " He further said	 "My Lords	 in my opinion the rationale of the new approach is this. In a preplanned tax saving scheme	 no distinction is to be drawn for fiscal purposes	 because none exists in reality	 between (i) a series of steps which are followed through by virtue of an arrangement which falls short of a binding contract	 and (ii) a like series of steps which and followed through because the participants are contractually bound to take each step seriatim. In a contractual case the fiscal consequences will naturally fall to be assessed in the light of the contractually agreed results. " In the same case Lord Fraser explained the principle of Ramsay as follows: ". _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . _ __ The true principle of decision in Ramsay was that the fiscal consequences of a preordained series of transactions	 intended to operate as such	 are generally to be asertained by considering the result of the series as a whin	 and not by dissecting the scheme and considering each individual transaction separately. " Lord Scarman in his characteristic style observed	 "The law will develop from case to case. Lord Wilberforcc in W.T. Ramsay Ltd. vs IRC ; at 872; 	 at 324 referred to 'the emerging principle ' of the law. What has been established with certainty by the House in Ramsay 's case is that the determination of what does	 and what does not	 constitute unacceptable tax evasion is a subject suited to development by judicial process. The best chart that we have for the way forward appears to me	 with great respect to all engaged on the map making process	 to be the words of Lord Diplock in IRC vs Burmah Oil Co. Ltd. [1982] STC 30 at 32 which my noble and learned friend Lord Brightman quotes in his speech. These words 806 have space in the law for the principle enunciated by Lord Tomlin in IRC vs Duke of Westminister [1936] AC I at 19	 at 267 that every man is entitled if he can to order his affairs so as to diminish the burden of tax. The limits within which this principle is to operate remain to be probed and determined judicially. Difficult though the task may be for judges	 it is one which is beyond the power of the blunt instrument of legislation. Whatever a statute may provide	 it has to be interpreted and applied by the courts; and ultimately it will prove to be this area of judge made law that our elusive journey 's end will be a found. " Lord Roskill put it even more forcefully: "The error	 if I may venture to use that word	 into which the courts below have fallen is that they have looked back to 1936 and not forward from 1982. They do not appear to have appreciated the true significance of the passages in the speeches in Ramsay 's case ; at 872 873	 881; 	 at 325	 337 of Lord Wilberforce and Lord Fraser	 and	 even more important	 of the warnings in the Burmah Oil Case [1982] STC 30 at 32	 39 given by Lord Diplock and Lord Scarman in the passages to which my noble and learned friend Lord Brightman refers and which I will not repeat. It is perhaps worth recalling the warning given	 albeit in another content by Lord Atkin	 who himself dissented in the Duke af Westminister 's case	 in United Australia Ltd. vs Barclays Bank Ltd.(1) ' When these ghosts of the past stand in the path of justice	 clanking their mediaeval chains	 the proper course for the judge is to pass through them undeterred. ' 1936	 a bare half century ago	 cannot be described as part of the Middle Ages but the ghost of the Duke of Westminister and of his transaction	 be it noted a single and not a composite transaction	 with his gardener and with other members of his staff has haunted the ad ministration of this branch of the law for too long. I confess that I had hoped that ghost might have found quietude with the decisions in Ramsay and in Burmah. Unhappily it (1) @ 37=[1941] A.C. I @ 29. 807 has not. Perhaps the decision of this House in these appeals 	 will now suffice as exorcism." Thus the ghost of Westminister (in the words of Lord Roskill) has been exercised in England. Should it be allowed to rear its head in India? I have referred to the English cases at some length	 only to show that in the very country of its birth	 the principle of Westminister has been given a decent burial and in that very country where the phrase 'tax avoidance ' originated the judicial attitude towards tax avoidance has changed and the smile	 cynical or even affectionate though it might have been at one time	 has now frozen into a deep C frown. The courts are now concerning themselves not merely with the genuineness of a transaction	 but with the intended effect of it for fiscal purposes. No one can now get away with a tax avoidance project with the mere statement that there is nothing illegal about it. Some years ago	 a diverting attempt was made by a Correspondent to the London 'Times ' to defend tax avoidance. He said	 "The taxpayer is morally bound to obey the law	 but is not bound beyond the law	 for apart from the law taxation would be blackmail or racketeering. There is not behind taxing laws	 as there is behind laws against crime	 an in dependent moral obligation. When therefore the tax payer has obeyed the law	 he had done all that morality requires" He had further said	 "It is said that by avoiding a tax he throws a load on to some other taxpayer. But this is not quite accurate	 for the deficiency might be met by reducing expenditure. is it not a good thing that there should be this last lawful remedy against oppressive taxation by a majority	 that human ingenuity can always find a way by which the minority can escape from tyrannical imposts. " The correspondent was answered by another 's correspondent who described the former 's defence of tax avoidance as 'an amusing 808 attempt to raise the art of tax avoidance to the moral level of political martyrdom and to make Hampdens of our modern tax dodgers '. Nor	 may we say	 are our tax dodgers Gandhiji is on the Dandi March to protest against the Salt Tax. In Commissioner of Income tax	 Gujarat vs A. Raman & Co.	(1) JC Shah	 JJ. speaking for himself and Sikri and Ramaswami	 JJ repeating almost verbatim the observations in Westminister and Fishers Executors observed: "Avoidance of tax liability by 80 arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality	 but on the Legislative injunction in taking statutes may not	 except on period of penalty	 be violated	 but it may lawfully be cumvented. " The same Judge	 speaking for himself	 Ramaswami and Grover JJ in Commissioner of income tax	 Gujarat vs Kharwar(2) expressely followed Westminister and observed: "The taxing authority is entitled and is indeed bound to determine the true legal relation resulting from a transaction. If the parties have chosen to conceal by a device the legal relation	 it Is open to the taking authorities to unravel the device and to determine the true character of relationship. But the legal effect of a transaction cannot be displaced by probing into the "substance of the transaction". We think that time has come for us to depart from the Westminister principle as emphatically as the British Courts have done and to dissociate ourselves from the observations of Shah	 J. and similar observations made elsewhere. The evil consequences of tax avoidance are manifold. First there is substantial loss of much needed public revenue	 particularly in a welfare state like ours. Next there (1) [1968]1 S.C.R 10. (2) 809 is the serious disturbance caused to the economy of the country by the piling up of mountains of blackmoney	 directly causing inflation. Then there is "the large hidden loss" to the community (as pointed out by Master Sheatcraft in by some of the best brains in the country being involved in the perpetual war waged between the tax avoider and his expert team of advisers	 lawyers and accountants on one side and the tax gatherer and his perhaps not so skilful	 advisers on the other side. Then again there is the 'sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it '. Last but not the least is the ethics (to be precise	 the lack of it) of transferring the burden of tax liability to the shoulders of the guideless good citizens from those of the 'artful dodgers '. It may	 indeed	 be difficult for lesser mortals to attain the state of mind of Mr. Justice Holmes	 who said	 "Taxes are what we pay for civilized society. I like to pay taxes. With them I buy civilization. " But	 surely	 it is high time for tho judiciary in India too to part its ways from the principle of Westminister and the alluring logic of tax avoidance. We now live In a welfare state whose financial needs	 if backed by the law	 have to be respected and met. We must recognise that there is behind taxation laws as much moral sanction as behind any other welfare legislation and it is a pretence to say that avoidance of taxation is not unethical and that It stands on no less moral plane than honest payment of taxation. In our view	 the proper way to construe a taking statute	 while considering a device to avoid tax	 is not to ask whether the provisions should be construed literally	 or liberally	 nor whether the transaction is not unreal and not prohibited by the statute	 but whether the transaction is a device to avoid tax	 and whether the transaction is such that the judicial process may accord its approval to it. A hint of this approach is to be found in the judgment of Desai	 J. in Wood Polymer Ltd. vs Bengal Hotels Limited(1) where the learned judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax. It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging ' techniques of interpretation as was done in Ramsay	 Burma Oil and Dawson	 to expose the devices (1) 810 for what they really are and to refuse to give judicial benediction. We agree with Ranganath Misra	 J. that the appeal should be dismissed. RANGANATH MISRA	 J. The appellant company	 a licensed manufacturer of Indian liquor at Hyderabad	 is in appeal by special leave questioning the dismissal of its writ petition by the High Court. Manufacture	 sale wholesale and retail as also storage and transport of liquor are regulated by the Andhra Pradesh Excise Act	 1968 ( 'Excise Act ' for short) and the Andhra Pradesh Distillery Rules the Andhra Pradesh Indian Liquor (Storage in Bond) Rules and the Andhra Pradesh Foreign Liquor Rules	 and Indian liquor Rules all made under the Excise Act. 'Excise duty ' as defined in section 2(10) of the Excise Act is leviable on the manufacture of liquor and the manufacturer cannot remove the same from the distillery unless the duty imposed under the Excise Act has been paid. Buyers of Indian liquor from the appellant 's distillery as alleged by it	 obtain distillery passes for release of liquor after making payment of excise duty and present the same at the distillery whereupon the bill of sale or invoice is prepared by the distillery showing the price of liquor but excluding the excise duty. The appellant 's books of account also did not contain any reference to excise duty paid by the purchaser. The appellant paid Sales Tax payable by it under the Andhra Pradesh General Sales Tax Act	 1957	 ( 'Sales Tax Act ' for short)	 on the basis of its turnover which excluded excise duty. The Company was assessed to sales tax on the basis of its returns but later the Commercial Tax Officer was of the view that the Company had failed to include the excise duty paid on the liquor sold by it to wholesalers. The taking authority accordingly called upon the Company to show cause why assessments made may not be reopened. The appellant moved the High Court for quashing of such notice and having failed	 carried the matter in appeal to this Court. A Division Bench of this Court in Mc Dowell & Company Ltd. etc. vs Commercial Tax Officer	 Vll Circle	 Hyderabad	 etc.	 (1) (1) ; 811 examined the provision of the Excise Act and the Rules made there under as also the provisions of the Sales Tax Act. This Court took the view: "We hold that intending purchasers of the Indian liquor 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 department. This Court then proceeded to determine whether excise duty paid directly to the Excise authorities or deposited directly in the State Exchequer in respect of Indian liquor by the buyers before removing the same from the distillery could be said to form part of the taxable turnover of the appellant distillery. Precedents w ere referred to and the Court came to the conclusion that excise duty did not go into the common till of the appellant and did not become a part of the circulating capital. Therefore	 the Sales Tax authorities were not competent to include in the turnover of the appellant the excise duty which was not charged by it but was paid directly to the excise authorities by the buyers of the liquor. The appellant	 therefore	 succeeded before this Court and the notices issued by the Sales Tax authorities were quashed. The judgment of this Court was delivered on October 25	 1976. Rules 76 and 79 of the Distillery Rules were amended with effect from August 4	 1981. Rule 76(a) now provides: "No spirit or liquor manufactured or stored shall be removed unless the excise duty specified in rule 6 has been paid by a holder of D 2 licence before such removal." It is not disputed that appellant is the holder of a D 2 licence under the law. Amended rule 79 (1) provides: "76 (1). On payment of the excise duty by the holder of D 2 licence a distillery pass for the removal of spirit fit for human consumption may be granted in favour of any of the following persons only	 namely: (a) a person holding a licence in the Andhra Pradesh or in other States for sale of spirit by wholesale or retail and when the spirit is to be transported or exported beyond the limits of the district in which the distillery is situ 812 ated to a person holding a permit signed by the Excise Superintendent of the district of destination or an officer of that district authorised in this behalf. (b) A person holding a permit signed by the Officer of any other State referred to in clause (a) above for the export of such spirit from the Andhra Pradesh into that State. (c) A person holding a permit signed by an Officer duly authorised in that behalf for export of such spirit to an Union Territory (d) A person holding a permit from the Excise Superintendent of any district in Andhra Pradesh or from officer referred to in clause (a) above of any other State to transport or export rectified spirits or wine	 to such district or State. " On the basis of the amended provisions	 the respondent Officer issued a notice to the appellant proposing to include a sum of Rs.4	49	09	552.40 representing the excise duty paid directly by buyers of appellant 's liquor in the appellant 's turnover for a part of the year 1982 83. Thereupon	 the appellant again moved the High Court for quashing of the notice. Reliance was placed on the earlier decision of this Court. The High Court very appropriately felt bound by the decision of this Court and considered the effect of the amended Rules and held that the primary liability to pay excise duty was indisputably of the holder of the D 2 licence. It further found that the turnover related to liquor	 excise duty which was payable by the appellant but had by amicable arrangement been paid by the buyer was actually a part of the turnover of the appellant and was	 therefore	 liable to be so included for determining liability for sales tax. On these findings the High Court dismissed the writ petition. When leave was granted by a Division Bench of this Court to appeal against the Judgment of the High Court	 the correctness of the decision in appellant 's case reported in ; 	 was doubted and the matter was referred to a larger Bench. That is how the appeal came to be heard by us. 813 Mr. Sorabji	 appearing in support of the appeal at the very commencement of his submissions stated that there was no constitutional question involved in the appeal. He also fairly stated that the vires of the Excise Act and the Rules was not under challenge. Nor was the amendment of Rules in 1981 in dispute. The Federal Court In The Province of Madras vs Messrs. Boddu Paidanna & Sons	(1) held: "There is in theory nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence	 no matter what happens to it afterwards. whether it be sold	 consumed	 destroyed	 or given away. A taking authority will not ordinarily Impose such a duty	 because it is much more convenient administratively to collect the duty tax in the case of most of the Indian Excise Acts) when the commodity leaves the factory for the first time	 and also because the duty is intended to be an indirect duty which the manufacture or producer is to pass on to the ultimate consumer	 which he could not do if the commodity had	 for example	 been destroyed in the factory itself. It is the fact of manufacture which attracts the duty	 even though it may be collected later; . " This view has been followed by this Court and the position has been put beyond doubt by a series of decisions. In R.C. Jall vs Union of India	(2) it has been observed: "The Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country. Subject always to the legislative competence of the taking authority	 the said tax can be levied at a convenient stage so long as the character of the impost is not lost. The method of collection does not affect the essence of the duty but only relates to the machinery of collection for administrative convenience. " (1) (2) [1962] Suppl. 3 S.C.R. 436. 814 In Re. Sea Customs Act	 (1) this Court said: "With great respect	 we accept the principles laid down by the said three decisions ; and 1945 F.G.R. 179) in the matter of levy of an excise duty and the machinery for collection thereof." In M/S. Guruswamy & Co. etc. vs State of Mysore & ors (2) Sikri	 J. (as he then was)	 spoke for the majority and stated the ratio thus: "These cases establish that in order to be an excise duty (a) the levy must be upon 'goods ' and (b) the taxable event must be the manufacture or production of goods. Further the levy need not be imposed at the stage of production or manufacture but may be imposed later. " In Jullundur Rubber Goods Manufacturers ' Association vs Union of India & Anr.	 (3) Grover	 J. after extracting a part of the Judgment in Jall 's case (supra) spoke for the Court thus: "The above statement of law in no way supports the argument that excise duty cannot be collected from per sons who are neither producers nor manufacturers. Its incidence certainly falls directly on the production or manufacture of goods but the method of collection will not affect the essence of the duty." In A.B. Abdul Kadir & Ors. vs State of Kerala	 (4) this Court restated the position thus: "Excise duty	 it is now well settled	 is a tax on articles produced or manufactured in the taxing country	 Generally speaking	 the tax is on the manufacturer on the producer	 yet laws are to be found which impose a duty of excise at stages subsequent to the manufacture or production." (2) (1964] 3 S.C.R. 787. (3) (4) ; (1) 815 Thus	 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 or expediency. On an examination of the provisions of the Excise Act	 the Rules framed thereunder and the pronouncements referred to above	) we are of the view that the conclusion of this Court at page 921 of the Reports that intending purchasers of the Indian liquors who seek to obtain distillery passes are also legally responsible for payment of the excise duty is too broadly stated. The "duty" was primarily a burden which the manufacturer had to bear and even if purchasers paid the same under the Distillery Rules	 the provisions were merely enabling and did not give rise to any legal responsibility or obligation for meeting the burden. We do not propose	 however	 to examine this aspect any further for the change in Rule 76 of the Distillery Rules has clearly affirmed the position that liability for payment of excise duty is of the manufacturer. Provisions of rules 80	 81	 82	 83 and 84 do not militate against the conclusion that the payment of excise duty is a liability exclusively of the manufacturer. In these rules detailed provisions have been made regarding obtaining of distillery pass	 correct calculation and full payment of excise duty	 the manner of depositing such duty and ultimately issue of the spirit under the pass from the distillery. These rules	 therefore	 do not detract from the position that payment 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. It was the stand of the appellant before the High Court that it makes a condition precedent for the buyer of its finished goods that he (the buyer) pays the excise duty to the excise authorise directly and only on production of the receipted challan	 liquor is issued from the distillery by way of sale under the supervision of the excise authorities. In view of such an arrangement	 the excise duty paid by the buyer does not become a part of the turnover of the appellant. 'Turnover ' is defined in section 2(s) of the Sales Tax Act to mean "the total amount set out in the bill of sale or if there is no bill of sale	 the total amount charged) as the consideration for the sale 816 or purchase of goods (whether such consideration be cash	 deferred payment of any other thing or value) including any sums charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer	 whatever be the description	 name or object thereof. " The definition clearly indicates that the total amount charged as the consideration for the sale is to be taken into account for determining the turnover. Where a bill of sale is Issued (and obviously the bill has to state the total amount charged as consideration)	 the total amount set out therein is to be taken into account. In every transaction of sale	 there is bound to be a seller at one end and a buyer at the other and transfer or title in the goods takes place for a consideration. In Hindustan Sugar Mills vs Rajasthan State	 (1) this Court observed: "The test is	 what is the consideration passing from the purchaser to the dealer for the sale of the goods. It is immaterial to enquire as to how the amount of consideration is made up	 whether it includes excise duty or sales tax or freight. The only relevant question to ask is as to what is the amount payable by the purchaser to the dealer as consideration for the sale. " The Court proceeded to say: "take for example	 excise duty payable by a dealer who is a manufacturer. When he sells goods manufactured by him	 he always passes on the excise duty to the purchaser. Ordinarily it is not shown as a separate item in the bill	 but it is included in the price charged by him. The sale Price in such a case could be the entire price inclusive of excise duty because that would be the consideration payable by the purchaser for the sale of the goods. True	 the excise duty component of the price would not be an addition to the coffers of the dealer. as it would go to reimburse him (1) [1979] I S.C.R. 276. 817 in respect of the excise duty already paid by him on the manufacture of the goods. But even so	 it would be part of the sale price because it forms a component of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser. There is no other manner of liability	 statutory or other wise	 under which the purchaser would be liable to pay the amount of excise duty to the dealer. And on this reasoning	 it would make no difference whether the amount of excise duty is included in the price charged by the dealer or is shown as a separate item in the bill. " We would like to add	 that the position is not different when under a prior agreement	 the legal liability of the manufacturer dealer for payment of excise duty is satisfied by the purchaser by direct payment to excise authorities or to the state exchequer. In Paprica Ltd. & Anr. vs Board of Trade	 (1) Lawrence	 J. stated: "Whenever a sale attracts purchase tax	 that tax presumably affects the price which the seller who is liable to pay the tax demands but it does not cease to be the price which the buyer has to pay even if the price is expressed as 'X ' plus purchase tax." This Court in Messrs. George Oakes (P) Ltd. vs The State of Madras	 (2) quoted this extract with approval and also referred to the following passage in the Judgment of Goddard	 L.J. in Low vs Norman Wright (Builders) Ltd (3): "Where an article is taxed	 whether by purchase tax	 customs duty	 or excise duty the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax	 but on a sale there is only one consideration though made up	 of cost plus profit plus tax. So if a seller offers goods (1) (2) ; (3) 818 for sale	 it is for him to quote a price which includes the tax if he desires to pass it on to the buyer. If the buyer agrees to the price	 it is not for him to consider how it is made up or whether that seller has included tax or not So far as the purchaser is concerned	 he pays for the goods what the seller demands	 namely	 the price even though it may include tax. That is the whole consideration for the sale and there is no reason why the whole amount paid to the seller by the purchaser should not be treated as the consideration for the sale and included in the turnover. " Admittedly	 the bills issued by the appellant did not include the excise duty. As already found	 payment of excise duty is a legal liability of the manufacturer; its payment ii a condition precedent to the removal of the liquor from the distillery and payment by the purchaser is on account of the manufacturer. According to normal commercial practice	 excise duty should have been reflected in the bill either as merged in price or being shown separately. As a fact	 in the hands of the buyer the cost of liquor is what is charged by the appellant under its bill together with excise duty which the buyer has directly paid on seller 's account. The consideration for the sale is thus the total amount and not what is reflected in the bill. We are	 therefore	 clearly of the opinion that excise duty though paid by the purchaser to meet the liability of the appellant	 is a part of the consideration for the sale and is includible in the turnover of the appellant. The purchaser has paid the tax because the law asks him to pay it on behalf of the manufacturer. Mr. Sorabji in the course of his submission relied on a Division Bench decision of this Court in Anand Swarup Mahesh Kumar vs The commissioner of Sales Tax. (1) This Court was considering the liability for Sales Tax under the corresponding U.P. Act in respect of a dealer carrying on business at Mandi Anandganj	 Baraut in the District of Merrut. The Sales Tax authorities had included in the dealer 's purchase turnover 'market fee ' and the commission payable to the commission agent operating within the market area for the purpose of computing sales tax. The decision (1) ; 819 turned on the definition of 'turnover of purchase ' in the U.P. Act and the provision of the Adhiniyam and the Rules made thereunder. Market fee and commission payable to an agent are very different from excise duty and a very different position emerges in law in regard to them. No support is available from that decision for the appellant 's case. We would like to point out that the relevant consideration is not whether the law permits the incidence of the duty to be passed on to the purchaser but whether there is a prohibition against the passing of it. If there is no bar	 the incidence would be passed on to the purchaser in accordance with normal commercial practice. Mr. Sorabji built up an argument in support of the appellant 's stand by referring to the amendment to the First Schedule to the Sales Tax Act. The relevant part of the Schedule provides thus : Item No Description of Point of levy. Rate of tax goods 26. All liquors	 other At the point than country liquor of the first sale 2 (but including in the State. Vodka) (1026) (a) not covered by 3 (50 paise) item (b) below in the rupee	 (b) Where the 3 (25 paise) consideration for in the rupee. the sale or purchase of liquor includes the duties of excise payable under the Andhra Pradesh Excise Act	 1968. Apparently this amendment was brought about after the Judgment of this Court in the appellant 's appeal in 1976 and the position has been further altered by amendment in 1984. Sale of liquor has now been made exigible to tax at every point other than the point of last 820 sale in the State. The argument advanced before this Court is that the appellant had already paid tax on the basis of 50p. in the rupee on the footing that the consideration for sale of its liquor did not include duty of excise payable under the Excise Act and the appellant cannot	 therefore	 be made liable for sales tax on a different footing. This contention too has no force. Such a stand had not been taken in the writ petition before the High Court and there has been no factual examination of the position as to whether the classification indicated is not intended to cover a totally different situation. For resolving the dispute as to whether excise duty is a part of the turnover	 reference to the Schedule ii indeed wholly irrelevant. Mr. Sorabji relied heavily on the observations of Hidayatullah	 J. (as he then was) speaking for the Court in the case of George Oakes (Private) Ltd. & Ors. vs The State of Madras	 (1) where it was said: "It was pointed out by this Court (in 12 STC 476) that the word 'price ' in so far as the purchaser is concerned includes the tax also	 and that 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 dealer who realises the tax does not hand it over forth with to Government but keeps it with him	 and turns it over in his business before the 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 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. " According to Mr. Sorabji the excise duty had never come into the hands of the appellant and the Company had no occasion or opportunity to turn it over in its hands	 and	 therefore	 the same could never be considered as a part of its turnover. The obser (1) 13 S.T.C. 98. 821 vations made by this Court were in a very different setting and what was being considered was whether the additional tax levied under the Madras Act formed a part of the turnover. If we accept the observations of Hidayatullah	 J. as laying down the test for general application	 it would be very prejudical to the Revenue as between the seller and the buyer	 by special arrangement	 a part of what ordinarily would constitute consideration proper could even be kept out and the turnover could be reduced and tax liability avoided. We are of the view that the conclusion reached in the appellant 's case in ; on the second aspect of the matter	 namely	 when the excise duty does not go into the common till of the assesses and it does not become a part of the circulating capital	 it does not constitute turnover	 is not the decisive test for determining whether such duty would constitute turnover. A further contention was advanced by Mr. Sorabji as his last submission that it is open to every one to so arrange his affairs as to reduce the brunt of taxation to the minimum and such a process does not constitute tax evasion; nor does it carry any ignominy. In support of this submission he relied on the observations of Shah	 J. speaking for this Court in Commissioner of Income tax vs Raman and Co.	(1) where it was said: "The law does not oblige a trader to make the maximum profit that he. can out of his trading transactions. Income which accrues to a trader is taxable in his hands: income which he could have	 but has not earned	 is not made taxable as income accrues to him . Avoidance of tax liability by so arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality	 but on the operation of the Income tax Act. Legislative injunction in taxing statutes may not except on peril of penalty	 by violated	 but may lawfully be circumvented. " Support was also sought from the observations of the same learned Judge (as he then was) in the case of Commissioner of Income (1) 822 tax Gujarat II vs B.M. Kharwar.(1) After quoting a passage from the judgment of the Privy Council in the case of Bank of Chettinad Ltd. vs Commissioner of Income tax (2) this Court stated: "The taxing authority is entitled and is indeed bound to determine the true legal relation resulting from a trans action. If the parties have chosen to conceal by a device the legal relation	 it open to the taxing authorities to unravel the device and to determine the true character of the relationship But the legal effect of a transaction cannot be displaced by probing into the substance of the transaction. In Jiyajeerao Cotton Mills Ltd. vs Commissioner of Income tax and Excise Profits Tax Bombay (3) this Court observed: "Every person is entitled so to arrange his affairs as to avoid taxation but the arrangement must be real and genuine and not a sham or make believe	. " The Gujarat High Court in the case of Commissioner of Income tax vs Sakarlal Balabhai (4) said: "Tax avoidance postulates that the assessee is in receipt of amount which is really and in truth his income liable to tax but on which he avoids payment of tax by some artifice or device. Such artifice or device may apparently show the income as accruing to another person	 at the same time making it available for use and enjoyment to the assessee as in a case falling within section 44D or mask the true character of the income by disguising it as a capital receipt as in a case falling within section 44E or assume diverse other forms . But there must be some artifice or device enabling the assessee to avoid payment of tax on what is really and in truth his income. If the assessee parts with his income producing asset	 so that the right to (1) (2) (3) (4) 823 receive income arising from the asset which theretofore belonged to the assessee is transferred to and vested in some other person	 there is no avoidance of tax liability: no part of the income from the asset goes into the hands of the assessee in the shape of income or under any guise. ' This decision has been affirmed by this Court in Commissioner of Income tax vs Sakarlal Balabhai.(1) We may also recall the observations of Viscount Simon in Latilla vs I. R. (2) "Of recent years much ingenuity has been expended in certain quarters in attempting to device methods of deposition of income by which those who were prepared to adopt them might enjoy the benefits of residence in this country while receiving the equivalent of such incomes	 without sharing in the appropriate burden of British taxation. Judicial dicta may be cited which point out that	 however elaborate and artificial such methods may be	 those who adopt them are "entitled" to do so. There is	 of course	 no doubt that they are within their legal rights	 but that is no reason why their efforts	 or those of the professional gentlemen who assist them in the matter	 should be regarded as a commendable exercise of ingenuity or as a discharge of the duties of good citizenship. On the contrary one result of such methods	 if they succeed	 is of course to increase pro tento the load of tax on the shoulders of the great body of good citizens who do not desire	 or do not know how	 to adopt these manoeuvres. Another consequence is that the Legislature has made amendments to our Income Tax Code which aim at nullifying the affectiveness of such schemes." Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by (2) (3) 824 resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. On this aspect one of us	 Chinnappa Reddy	 J. has proposed separate and detailed opinion with which we agree. In our view	 therefore	 there is no merit in the appeal and the same is liable to be dismissed with costs. Hearing fee is assessed at Rs. 5	000. We would like to add that now that a clear picture of the situation has emerged the State of Andhra Pradesh should relationalise the law on the subject	 if necessary	 by making other a appropriate amendments. While granting leave and allowing stay of proceedings	 this Court had directed that bank guarantee be furnished for the tax to the satisfaction of the assessing authority and in the event of the respondent succeeding in the appeal	 the appellant do pay interest at 12% per annum. The respondent may now proceed to collect the dues of the State in accordance with law. S.R. Appeal dismissed.

"Excise duty" as defined in section 2(10) of the A.P. Excise Act	 1968 is leviable on the manufacture of liquor and the manufacturer cannot remove the same from the distillery unless the duty imposed under the Excise Act has been paid. Buyers of Indian liquor from the appellant 's distillery obtain distillery passes for release of liquor after making payment of excise duty and present the same at the distillery there upon the bill of sale or invoice is prepared by the distillery showing the price of liquor but excluding excise duty. The appellant 's books of account also did not contain any reference to excise duty paid by the purchaser. The appellant	 there ore	 paid sales tax under the Andhra Pradesh General Sales Tax Act	 1957 on the basis of turnover which excluded excise duty. This position was not accepted by the Sale Tax Authorities and the matter was contested right upto the Supreme Court. The Supreme Court in Mc Dowell & Company Ltd. etc. vs Commercial Tax Officer VIIth Circle	 Hyderabad	 etc. reported in ; held that the Sales Tax Authorities were not competent to include in the "turnover" of the appellant	 the excise duty which was not charged by it	 but was paid directly to the Excise 792 Authorities the buyers of the liquor	 inasmuch as the excise duty did not go into the common till of the appellant and did not become a part of the circulating capital. After the judgment of the Supreme Court Rules 76 and 79(1) of the A.P. Distillery Rules were suitably amended with effect from August 4	 1981. Amended Rule 76(a) provides that "No spirit of liquor" manufactured or stored shall be removed unless the Excise duty specified in rule 6 has been paid by a holder of D 2 licence before such removal and the amended rule 79(1) provides that on payment of the excise duty by the holder of D 2 licence a distillery pass for the removal of spirit fit for human compensation may be granted in favour of any of the named persons therein. The appellant	 being a D 2 licence holder was served with a notice	 on the basis of the amended provisions	 by the respondent proposing to include a sum of Rs. 4	49	09	532.40 representing the excise duty paid directly by buyers of appellants ' liquor in the appellants	 turnover for a part of the year 1982 83	 Thereupon	 the appellant again moved the High Court for quashing the said notice. The High Court considered the effect of the amended Rules and held that the primary liability to pay excise duty was indisputably of the holder of the D 2 licence. The High Court dismissed the writ petition on the findings (a) that the turnover related to liquor; and (b) that the excise duty which was payable by the appellant but had by amicable arrangement been paid by the buyer was actually a part of the turnover of the appellant and was	 therefore	 liable to be so included for determining liability for sales tax. When leave was granted by a Division Bench of the Supreme Court to appeal against the judgment of the High Court	 the correctness of the decision in appellants ' case reported in ; 	 was doubted and the matter was referred to a larger Bench. Dismissing the appeal	 the Court	 ^ HELD: (Per Chinnappa Reddy	 J. (concurring) 1.1 Much legal sophistry and Judicial exposition both in England and India have gone into the attempt to differentiate the concepts of tax evasion and tax avoidance and to discover the invisible line supposed to exist which distinguishes one from the other. Tax avoidance	 it seems	 is legal; tax evasion is illegal. Though initially the law was	 and law still is	 there is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in	 nothings to be implied"	 during the period between the two world wars the theory came to be propounded and developed that it was perfectly open for persons to evade (avoid) income tax if they could do so legally. In the wake of World War II huge profiteering and racketeering became the order of the day	 something which persists till today but on a much larger scale. Therefore	 the attitude of the entire English Courts towards avoidance of tax perceptibly changed and hardened	 The march of the law against Tax avoidance schemes des 793 cribed as magic performance by lawyer turned magician continued and then came a significant departure from the West mininister and the Fisher Executors principle in 1982 and finally "the ghost of West minister" has been exercised in England. Thus	 in the very country of its birth	 the principle of West minister has been given a decent burial and in that very country where the phrase "tax avoidance" originated the judicial attitude towards tax avoidance has changed and the smile	 cynical or even affectionate though it might have been at one time	 has now frozen into a deep frown. The courts are concerning themselves not merely with the genuineness of a transaction	 but with the intended effect of it for fiscal purposes. No man now can get away with a tax avoidance project with the mere statement that there is nothing illegal about it. [797 G H	 C	 807 A D] Inland Revenue Commissioners vs Fishers Executors	 ; ; Inland Revenue Commissioners vs Duke of West minister	 [19361 AC 1; Lord Howard De Waldan vs Inland Revenue Commissioners	 ; Latilla vs Inland Revenue Commissioners	 Griffiths vs J.P. Harrizan Ltd. ; Morgan vs Inland Revenue Commissioners	 [1963] Chancery 438; Public Trustee vs Inland Revenue Commissioners	 [1965] Chancery 286; Campbell vs Inland Revenue Commissioners	 [1967] Chancery 651; Greenberg vs Inland Revenue Commissioners	 [1971] 3 All E.R. 136; W.T. Ramsay vs Inland Revenue Commissioners	 11982] AC 300: Inland Revenue Commissioners vs Burmah Oil Company Ltd	 1982 STC 30: Furniss vs Dawson	 ; ; Commissioner of Income tax	 Gujarat vs A. Raman & Co.	 [1968]1 SCR 10; Commissioner of Income tax. Gujarat vs Kharwar	 referred to. 2. The evil consequence of tax avoidance are manifold: (i) there is substantial loss of much needed public revenue particularly in a welfare State like ours; (ii) there is the serious disturbance caused to the economy of the country by the piling up of mountains of blackmoney directly causing inflation; (iii) there is "the large hidden loss" to the community by some of the best brains in the country being involved in the perpetual war waged between the tax avoider and his expert team of advisers	 lawyers and accountants on the side and the tax gathered and his perhaps not so skillful	 advisers on the other side; (iv) there is the "sense of injustice and inequality which tax avoidance arouses in the breasts of those who are unwilling or unable to profit by it"; and (v) last but not least is the ethics (to be precise	 the lack of it) of transferring the burden of tax liability to the shoulders of the guideless	 good citizens from those of the "artful doggers". [808 H	 809 A C] 3. The proper way to construe a taxing statute	 while considering a device to avoid tax	 is not to ask whether the provisions should be construed literally or liberally	 nor whether the transaction is not unreal and not prohibited by the statute	 but whether the transaction is a device to avoid tax	 and whether the transaction is such that the judicial process may accord its approval to it. [809 E F] Wood Polymer Ltd. vs Bengal Hotels Limited	 referred to. 794 4. It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging ' techniques of inter pretation	 to expose the devices for what they really are and to refuse to give Judicial benediction. [809 G H 810 A] W.T. Ramsay vs Inland Revenue Commissioners	 ; ; Inland Revenue Commissioners vs Burmah Oil Company Ltd. 1982 STC 30; Furniss vs Dawson	 [1984] I All E.R. 530 quoted with approval. HELD: (Per Ranganath Misra	 J.) 1. Tax planning may be legitimate provided lt is within the framework of law	 Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. [823 H	 824 A] Commissioner of Income tax vs A. Raman & Co. (1968) 67 ITR II SC J Commissioner of Income tax	 Gujarat II vs B.M. Kharwar	 SC; Bank of Chettinad Ltd. vs Commissioner of Income tax	 ; Jiyajeerao Cotton Mills Ltd. vs Commission of Income Tax and Excess Profits Tax	 Bombay	 Commissioner of Income Tax vs Sakarlal Balabhai referred to. Latilla vs I.R. quoted with approval. 2.1 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 or expediency. [815 A B] The Province of Madras vs M/s. Boddu Paidanna & Sons R.C. Jall vs Union of India	 [1962] Suppl. 3 SCR 436; Re. Sea Custom Act	 [1964) 3 SCR 787; M/s Guruswamy & Co. etc. vs State of Mysore & Ors. 	 ; Jullundur Rubber Goods Manufacturers ' Association vs Union of India & Anr. ; ; A.B. Abdul Kadir & Anr. vs State of Kerala	 referred to. 2.2 On an examination of the provisions of the A.P. Excise Act	 the Rules were framed thereunder and the pronouncements of the Supreme Court	 it is clear	 that the conclusion of the Court in Mc Dowells & Company Ltd. etc. vs Commercial Tax Officer	 Vllth Circle	 Hyderabad etc.; 	 at page 921 of [1973] 1 SCR	 that intending purchasers of the Indian liquors who seek to obtain distillery passes are also legally responsible for payment of the excise duty is too broadly stated. The "duty wag primarily a burden which the 795 manufacturer had to bear and even if the purchasers paid the same under the Distillery Rules	 the provisions were merely enabling and did not give rise to any legal responsibility or obligation for meeting the burden. [815 B D] The change in Rule 76 of the AP Distillery Rules has clearly affirmed the position that liability for payment of excise duty is of the manufacturer and the provisions of rules 80 to 84 do not militate against it. These rules do 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. [815 D F] 2.3 The definition of "turnover"	 in section 2(s) of the A.P. General Sales Tax Act	 which is to the effect. namely 'the total amount set out in the bill of sale (or if there is no bill of sale	 the total amount charged) as the consideration for the sale or purchase of goods (whether such consideration be cash	 deferred payment or any other thing or value) Including any sums charged by the dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer	 whatever be the description	 name or object thereof" clearly indicates that the total amount charged as the consideration for the sale is to be taken into account for determining the turnover. Where a bin of sale is issued (and obviously the bill has to state the total amount charged as consideration)	 the total amount set out therein is to be taken into account. In every transaction of sale	 there is bound to be a seller at one end and a buyer at the other and transfer of title in the goods takes place for a consideration. [815 H	816 A C] 2.4 Excise duty though paid by the purchaser to meet the liability of the appellant	 is a part of the consideration for the sale and is includible in the turnover of the appellant. The purchaser has paid the tax because the law asks him to pay it on behalf of the manufacturer. Here	 admittedly	 the bills issued by the appellant did not include the excise duty; Payment of excise duty is a legal liability of the manufacture	 its payment is a condition precedent to the removal of the liquor from the distillery and payment by the purchaser is on account of the manufacturer. According to normal commercial practice	 excise duty should have been reflected in the bill either as merged in price or being shown separately. As a fact	 in the hands of the buyer the cost of liquor is what is charged by the appellant under its bill together with excise duty which the buyer has directly paid on seller 's account. The consideration for the sale is thus the total amount not what is reflected in the bill. [818 C F] 2.5 True	 the excise duty component of the price would not be an addition to the coffers of the dealer	 as it would go to reimburse him in respect of the excise duty already paid by him on the manufacture of the goods. But even so	 it would be part of the sale price because it forms a component of the consideration for the sale of the goods that the amount representing excise duty would be payable by the purchaser	 There is no other manner of liability	 statutory or 796 otherwise	 under which the purchaser would be liable to pay the amount of excise duty to the dealer. And on this reasoning	 it would make no difference whether the amount of excise duty is included in the price changed by the dealer or is shown as a separate item in the bill	 The position is not different when under a prior agreement	 the legal liability of the manufacturer dealer for payment of excise duty is satisfied by the purchaser by direct payment to the excise authorities or to the State exchequer. [816 G H	 817 A D] 2.6 The conclusion reached in the appellants ' case in ; on the second aspect of the matter namely	 when the excise duty does not go into the common till of the assessee and it does not become a part of the circulating capital	 it does not constitute turnover	 is not the decisive test for deter mining whether such duty would constitute "turnover". The relevant consideration is not whether the law permits the incidence of the duty to be passed on to the purchaser but whether there is a prohibition against passing of it. If there is no bar	 the incidence would be passed on to the purchaser in accordance with normal commercial practice. [819 A C 821 B C] The Province of Madras vs M/s. Boddu Paidanna & Sons	 ; RC Jall vs Union of India	 [1962] Suppl. 3 SCR 436; Re. Sea Customs Act; 	 ; M/s	 Guruswamy & Co. etc. vs State of Mysore & Ors	 ; jullundur Rubber Goods Manufacturers ' Association vs Union of India & Anr. ; ; A.B. Abbul Kadir & Ors. vs State of Kerala	 referred to. Hindustan Sugar Mills vs Rajasthan State	 [1979] I SCR 276 applied. Paprika Ltd. & Anr. vs Board of Trade	 []944] All. E.R. 372; Love v	 Norman Wright (Builders) Ltd. [1944] I All E.R. 618 quoted with approval. M/s George Oakes(P) Ltd. vs The State of Madras	 ; 	 Anand Swarup Mahesh Kumar vs The Commissioner of Sales Tax	 ; discussed and distinguished. 3.A stand which has not been taken in the writ petition before the High Court cannot be allowed to be taken in the Supreme Court. Here the contention based on item 26 of the amended First Schedule to the Sales Tax Act that the appellant had already paid tax on the basis of 50 p. in the rupee on the fooling that the consideration for its liquor did not include duty of excise pay able under the Excise Act and the appellant cannot	 therefore	 be made liable for sales tax on a different footing cannot be sustained. Such a stand had not been taken in the writ petition before the High Court and there has been no 797 factual examination of the position as to whether the classification indicated is not intended to cover a totally different situation. Further for resolving the dispute as to whether excise duty is a part of the turnover	 reference to the Schedule is indeed wholly irrelevant. [820 A D] George Oakes (P) Ltd. & Ors. vs The State Madras	 13 STC 98	 distinguished.