TaxTMI 
TaxTMI 
1997 (9) TMI 500
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....or the purpose of levy of tax under the Tamil Nadu General Sales Tax Act. 2.. The appellants manufacture Indian-made Foreign Liquor (IMFL) on the strength of licences issued to them under the provisions of the Tamil Nadu Indian- made Foreign Spirits (Manufacture) Rules, 1981. The manufacture, supply and sale of the IMFL is governed by the Tamil Nadu Prohibition Act, 1937 (now referred to as "the Act"), the Tamil Nadu Indian-made Foreign Spirits (Supply by Wholesale) Rules, 1981, and the Tamil Nadu Indian-made Foreign Spirits (Manufacture) Rules, 1981 (now referred to as the "Wholesale Rules" and the "Manufacture Rules" respectively). 3.. By reason of section 17-C of the Act (introduced by an amendment in 1983), the Tamil Nadu State Marketing Corporation, a corporation wholly owned and controlled by the Government of State of Tamil Nadu, had at the relevant time the exclusive privilege of supplying by wholesale IMFL for the whole of that State. Section 18-A provides for excise duty on liquor. Sub-section (1) thereof reads thus: "(1) An excise duty or countervailing duty of such amount as the State Government may, by notification in the Fort St. George Gazette, specify from ....
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....ee.-(1) The licensee shall pay the excise duty on the stock of Indian-made foreign spirits removed by him from a manufactory in the State as required under sub-rule (1) of rule 22 of the Tamil Nadu Indian-made Foreign Spirits (Manufacture) Rules, 1981, or the countervailing duty on the stock of Indian-made foreign spirits imported from a manufactory outside the State or the excise duty or countervailing duty as the case may be, on the stock of Indian-made foreign spirits removed by him from a bonded warehouse licensed under the Tamil Nadu Indian-made Foreign Spirits (Storage- in-Bond) Rules, 1981." These amendments were given retrospective effect from 23rd May, 1981. 4.. It was contended on behalf of the appellants in their writ petitions before the High Court that the liability to pay excise duty upon the basis of the aforesaid provisions lay not upon them but upon the Tamil Nadu State Marketing Corporation (TASMAC). TASMAC had to submit an application for its requirement of IMFL and thereupon the excise duty thereon was assessed. TASMAC paid the amount thereof directly. The appellants neither collected the excise duty from the wholesaler nor had they the statu....
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....anufacturer could not, by reason of rule 22, seek to recover the excise duty from the party so removing the IMFL. The element of the excise duty did not enter into the turnover of the manufacturer and, accordingly, no sales tax was payable on the element of excise duty. Learned counsel cited the judgment of this Court in Union of India v. Bombay Tyre International Ltd. (1984) 1 SCC 467, and emphasised the reference to the judgments of the Federal Court in In re: Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 [1938] 1 STC 1 and Province of Madras v. Boddu Paidanna & Sons [1942] 1 STC 104. In learned counsel's submission, the observations therein supported the argument that the imposition of excise duty was upon the party who removed the IMFL from the factory. Learned counsel submitted that the ratio of the judgment in McDowell & Company Limited v. Commercial Tax Officer [1985] 59 STC 277; [1985] 3 SCR 791, (the second McDowell case), upon which the High Court had relied, was restricted to the Andhra Pradesh Rules therein mentioned and was inapposite to the provisions which are before us. Learned counsel sought to draw assistance from Explanation ....
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....m 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 our 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. 10.. We cannot agree with learned counsel for the appellants that the second McDowell case [1985] 59 STC 277 (SC) was based only upon the provisions of the Andhra 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 concept 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 or expediency". The Andhra 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 und....