Real sale consideration includes excise duty paid on behalf of the seller; colourable tax-avoidance devices can be disregarded.

Excise duty paid by a purchaser on behalf of a manufacturer may form part of the real sale consideration and be included in turnover under sales tax law, even if remitted directly to the excise authorities and not shown separately in the bill. The governing principle is that turnover covers the total consideration for the sale, and fiscal arrangements are assessed by their real substance rather than their form. Legitimate tax planning remains permissible within the law, but artificial or pre-planned devices designed to avoid tax may be disregarded as colourable devices and will not defeat the levy.

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Issues: (i) Whether excise duty paid directly by the purchaser on behalf of the manufacturer formed part of the sale consideration and was includible in the assessee's turnover under the sales tax law; (ii) Whether the arrangement adopted to exclude excise duty from turnover was a legitimate tax planning device or an impermissible colourable device to avoid tax.

Issue (i): Whether excise duty paid directly by the purchaser on behalf of the manufacturer formed part of the sale consideration and was includible in the assessee's turnover under the sales tax law.

Analysis: Excise duty was the primary liability of the manufacturer under the excise law, and payment by the purchaser pursuant to the distillery arrangements was only a discharge of that liability on behalf of the assessee. The definition of turnover embraced the total amount charged as consideration for the sale, and the real consideration for the liquor sold included the excise duty component even if it was remitted directly to the excise authorities and not shown separately in the bill. The earlier understanding that the duty did not enter the assessee's common till was not treated as decisive.

Conclusion: The excise duty paid by the purchaser on the assessee's behalf was part of the consideration for sale and was includible in the assessee's turnover.

Issue (ii): Whether the arrangement adopted to exclude excise duty from turnover was a legitimate tax planning device or an impermissible colourable device to avoid tax.

Analysis: Legitimate tax planning within the framework of law was accepted, but devices intended to avoid tax by artificial arrangements could not claim judicial approval. The Court rejected the narrow Westminster approach and held that transactions must be viewed in their fiscal reality, especially where the arrangement is pre-planned and intended to operate as a whole for tax avoidance. Colourable devices and subterfuges were not to be treated as part of lawful tax planning.

Conclusion: The arrangement was an impermissible tax-avoidance device and could not defeat the levy.

Final Conclusion: The appeal failed, the reassessment notice was upheld, and the assessee remained liable to include the excise duty component in its taxable turnover.

Ratio Decidendi: Tax planning is permissible only within the framework of law, but a pre-planned artificial arrangement devised to avoid tax may be disregarded, and amounts paid on an assessee's behalf as part of the real consideration for a sale are includible in turnover.

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