TaxTMI 
TaxTMI 
2005 (5) TMI 308
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court, namely-Whether the incidence of excise duty, having regard to the provision of the Kerala Abkari Act and the relevant Rules, falls upon the manufacturer/distiller such as the respondents herein and therefore includable in their turnover for the purpose of levy of turnover tax, or whether the incidence of excise duty falls on the Kerala State Beverages (Manufacturing and Marketing) Corporation Limited, a Government company which alone is liable to pay the excise duty on Indian-made foreign liquor, and consequently the said component is not includable in the turnover of the respondents/distillers. 3.. These appeals came up for hearing before a 3-Judge Bench of this Court. After hearing the parties for sometime, by order dated October 17, 2001, it was observed that, the point involved was an important one and it would be appropriate if the cases are heard by a larger Bench. The referring Bench observed thus: "The question which arises for consideration in these cases is, whether the excise duty levied under the provisions of the Kerala Abkari Act on Indian-made foreign liquor which is manufactured forms part of the turnover of the manufacturer for the purpose of levy of turno....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... rule 22 of the Tamil Nadu Rules provides for realisation of the excise duty from the Corporation that was only a convenient method of collection, the primary obligation to pay excise duty being only of the manufacturer. Mr. Iyer, therefore, contended that following the said decision the appeals should be allowed. Mr. F.S. Nariman, learned Senior Counsel for the respondents, has drawn our attention to three Constitution Bench decisions of this Court. In the case of A.B. Abdul Kadir v. State of Kerala [1962] Supp 2 SCR 741, where at page 751 it was observed as follows: 'It may also be accepted that generally speaking the tax is on the manufacturer or the producer, though it cannot be denied that laws are to be found which impose a duty of excise at stages subsequent to the manufacture or production.' (emphasis added) In R.C. Jall Parsi v. Union of India [1962] Supp 3 SCR 436, at page 451, it was contended that the excise duty cannot be legally levied on the consignee who had nothing to do with the manufacture or production of coal. This argument was repelled and at page 451, it was observed as follows: 'Excise duty is primarily a duty on the production or manufacture of go....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fore the honourable Chief Justice for appropriate orders." That is how these appeals have been placed by the honourable Chief Justice before this Bench for disposal. 4.. The first batch of appeals arise out of writ petitions filed in the years 1998-1999 which were disposed of by a common judgment and order of a division Bench of the High Court dated November 27, 1999 See Kerala Distilleries and Allied Products Limited v. Assistant Commissioner (Assessment) (I), Commercial Tax [2000] 117 STC 553 (Ker). in O.P. Nos. 23008, 23903 of 1998-L, 818, 2255, 2264, 12893, 3283, 7437 and 19686 of 1999 whereby the High Court allowed See Kerala Distilleries and Allied Products Limited v. Assistant Commissioner (Assessment) (I), Commercial Tax [2000] 117 STC 553 (Ker). the writ petitions filed by the respondents/distillers holding, inter alia, that under the Scheme of the Kerala Abkari Act and the Rules, the incidence of excise duty on the manufacture of Indian-made foreign liquor was required by law to be borne by the Kerala Beverages Corporation to whom the liquor was sold at a price which did not include the element of excise duty. Consequently the State of Kerala and its officers were not e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cidence of excise duty fell squarely on the respondents/distillers and as such was includable in their total turnover for purpose of computation of turnover tax under the Kerala General Sales Tax Act. However, the division Bench held itself bound by the earlier decision rendered by the High Court and, therefore, following the earlier decision held that by adding an Explanation to section 5(2C) by the Kerala General Sales Tax Act the constitutional lacuna pointed out in the earlier judgment had not been removed by appropriate amendment to the Kerala Abkari Act. By merely adding the Explanation to section 5(2C) of the Kerala General Sales Tax Act, the excise duty element paid by the Corporation could not be added to the turnover of the respondents/distillers since it had been held in the earlier judgment that excise duty was leviable only on the purchaser, namely, the Kerala State Beverages Corporation. 7.. In this view of the matter the High Court allowed the writ petitions and declared that the Explanation appended to section 5(2C) of the Kerala General Sales Tax Act was unconstitutional and invalid both in its prospective operation from April 1, 2001 and in its retrospective eff....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e duty did not form part of the turnover of the respondents/distillers and was therefore not includable in the total turnover of the respondents/distillers for the purpose of computation of turnover tax payable by them under the Kerala General Sales Tax Act. 11.. The Kerala Abkari Act was formerly known as Cochin Abkari Act enacted in the year 1902. It applied to the territories comprised within the State of Cochin but with effect from July 11, 1967, by Act 10 of 1967, the provisions of the Act were extended to the whole of the State of Kerala. Chapter IV of the Act deals with manufacture, possession and sale of liquor. The relevant part of section 12 reads as follows: "12(1). Manufacture of liquor or intoxicating drug prohibited except under the provisions of this Act.-No liquor or intoxicating drug shall be manufactured, ............... except under the authority and subject to the terms and conditions of a licence granted by the Commissioner in that behalf, or under the provisions of section 21; ..............." 12.. Section 14 deals with establishment and control of distilleries, breweries, warehouses, etc., and provides as follows: "14. Establishment and control of dist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed.-(1) Such duty of excise may be levied: (a) in the case of spirits or beer, either on the quantity produced in or passed out of a distillery, brewery or warehouse licensed or established under section 12 or section 14 as the case may be or in accordance with such scale of equivalents, calculated on the quantity of materials used or by the degree of attenuation of the wash or wort or on the value of the liquor as the case may be as the Government may prescribe; ............... " Section 18A of the Act provides as follows: "18A. Grant of exclusive or other privilege of manufacture, etc., on payment of rentals.-(1) It shall be lawful for the Government to grant to any person or persons, on such conditions and for such period as may deem fit, the exclusive or other privilege- (i) of manufacturing or supplying by wholesale; or (ii) of selling by retail; or (iii) of manufacturing or supplying by wholesale and selling by retail, any liquor or intoxicating drugs within any local area on his or their payment to the Government of any amount as rental in consideration of the grant of such privilege. The amount of rental may be settled by auction, negotiation or by any other method as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er bond.-When spirits are removed from the distillery or warehouse without payment of duty, the distiller or warehouse keepers shall execute bond for the payment of duty on them at the prescribed rate in case of his failure to account for them to the satisfaction of the Commissioner. In the case of spirits exported, bond shall be executed with one or more sureties." The relevant part of rule 52 provides as follows: "52. To whom issues for local consumption may be made.-(1) Indian-made foreign spirit may be issued for consumption within the State only to the FL9 licensees in the State. ..............." 16.. Foreign Liquor Rules, 1953 have also been framed under sections 10, 24 and 29 of the Cochin Abkari Act. Rule 13, sub-rule (9) which deals with issue of licences in form FL9 reads as follows: "(9) Licence for possession and supply of foreign liquor in wholesale by the bonded warehouse licensees to foreign liquor-I licensees. Foreign liquor-3 hotel restaurant licensees. Foreign liquor-4 club licensees. Foreign liquor-4A club licensees. Foreign liquor-11 beer wine parlour licensees and Foreign liquor-12 beer retail sale outlet licensees in the State: Licences in form FL9 shall ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Bond) Rules, 1961 which have been framed under sections 14(d) and 29(2) of the Cochin Abkari Act. Under the Rules "bonded warehouse" means a warehouse where foreign liquor is stored in bond. Sub-section (vi) of section 2 explains the words "to store foreign liquor in bond" as under: "With all its grammatical variations means to store, deposit or keep foreign liquor in a bonded warehouse without payment of the excise duty payable thereon." Rule 3 provides as follows: "3(a) Any person desiring to store in bond foreign liquor shall make an application for a licence in that behalf to the Commissioner of Excise through the concerned officer-in-charge of the Excise Division. The application shall contain the following particulars namely: (1) name and address of the applicant in the case of a firm or company, the names and addresses of the partners or directors should be furnished; (2) name and address of the place where foreign liquor is to be stored or bond together with the description and the correct plan of the building or rooms to be used as a warehouse in triplicate; (3) the maximum quantity of each kind of foreign liquor required to be stored in bond at any one time; (4) t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch read as follows: "11. (1) Foreign liquor stored in the bonded warehouse shall be removed only to the premises licensed under the FL 9 licence referred to in sub-rule (C) of rule 3, held by the bonded warehouse licensee, and such removal shall be only under cover of a pass granted in that behalf and on payment of the excise duty due. Foreign liquor intended for export to foreign countries on the strength of the export authorisation from the Government of India shall also be brought and stored in the bonded warehouse and the removal therefrom shall be only under cover of a pass granted in that behalf. The pass shall be granted on the execution a bond to pay excise duty at full rate payable on the quantity not exported as evidenced from the certificate from the 'customs authority' of the port of export: Provided that nothing contained in sub-rule (1) shall be applicable to the licensee in form BW1(A). (2) If the licensee wants to issue or remove any quantity of foreign liquor from the bonded warehouse, he shall make an application to the officer-in-charge of the Excise Division through the officer-in-charge in that behalf." "14. A licence in form BW1 shall be granted to the Ke....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ises. 23.. We may now briefly refer to the facts of the cases before us. The representative facts are taken from the writ petition filed by M/s. Kerala Distilleries and Allied Products Ltd., now renamed as Maharashtra Distilleries Limited as per the Scheme of Amalgamation sanctioned by the High Court of Kerala. The aforesaid petitioner is engaged in the manufacture and sale of IMFL. It is registered as dealer both under the Kerala General Sales Tax Act, 1963 and the Central Sales Tax Act, 1956. Pursuant to the policy of the Government creating a monopoly in favour of the Kerala State Beverages (Manufacturing and Marketing) Corporation Limited, the petitioner has been submitting tenders as required for sale and supply of IMFL. The prices quoted of the various brands of IMFL do not include the sales tax or the excise duty since it was only the Kerala State Beverages Corporation which was liable to pay the tax. Excise duty was not paid by the petitioner (respondent herein) since the IMFL was required to be delivered to the Kerala State Beverages Corporation and no excise duty was payable by the petitioner (respondent herein). The offer made as per the requirement of the tender docu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d, inter alia, that the excise duty paid by the Kerala State Beverages Corporation formed part of the sale turnover of the manufacturer, since it is the obligation of the manufacturer to pay excise duty, though it may be discharged by others. Relying upon the decision of this Court in Mohan Breweries & Distilleries Ltd. v. Commercial Tax Officer, Madras See [1997] 107 STC 212. (1997) 7 SCC 542 it was contended that excise duty element formed part of the total turnover which was chargeable to turnover tax under section 5(2C) of the Kerala General Sales Tax Act, 1963. 26.. The Kerala State Beverages Corporation which was respondent No. 4 in the writ petition accepted the fact that the excise duty on IMFL purchased by it from the petitioner (respondent herein) was paid by it and the same is included in its price which it realised as a wholesale dealer from its purchasers, and the turnover of the Corporation is computed on that basis and the turnover tax paid accordingly. 27.. The turnover tax was introduced with effect from July 1, 1987 by amendment of the Kerala General Sales Tax Act, 1963. The turnover tax was then payable only by those dealers who were not liable to pay sales tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
....April, 1991 till 31st day of July, 1991 and thereafter at the rate of four per cent on the turnover; (b) by any dealer in Foreign liquor (Indian-made) or Foreign liquor (Foreign made) as specified in entries against serial numbers 53 and 54 of the First Schedule at the rate of five per cent on the turnover at all points; . . .. . .. . ..." 30. The entry against serial No. 53, which is relevant is to the following effect: "53. Foreign liquor (Indian-made) At the point of sale by the Kerala State Beverages (Manufacturing and Marketing) Corporation Limited and at the point of first sale in the State by a dealer who is liable to tax under section 5 (except where the sale is to the Kerala State Beverages (Manufacturing and Marketing) Corporation Ltd." 31. In the first batch of writ petitions which were disposed of by a division Bench by its judgment and order of November 27, 1999 See [2000] 117 STC 553 (Ker). it was held that entry 51 of List II of the Seventh Schedule to the Constitution of India is only the source of power for the Legislature concerned empowering it to enact a law for the levy of excise duty on consumable alcohol manufactured within the State. Excise duty....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... pay excise duty which never formed part of their turnover. The finding of the High Court has been summarised in paragraph 41 of the judgment, which is as follows: "(i) That a duty of excise is leviable under section 17 either at the point of manufacture or at the point of issue from a manufacturer or warehouse. The choice is that of the Government. (ii) That the duty may be imposed either on the quantity produced or passed out from a distillery, brewery or warehouse. (iii) For ad valorem the value is such at which the fourth respondent purchases from the suppliers. (iv) The petitioner does not have any licence except for compounding, blending and bottling in form No. 1, in form No. 2 and form No. 4. (v) The fourth respondent is the exclusive marketing organisation in the State of Kerala and all sales have to take place to the said organisation. (vi) The fourth respondent alone holds licence in FL9 and alone competent to have a bonded warehouse granted under BW1. They have executed requisite bond in form A and entered into an agreement with the Government for payment of duty of excise. (vii) Duty is imposed and collected when the fourth respondent removes goods from its bond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unt of the manufacturer himself. The learned Judges referred to the decision of this Court in Mohan Breweries & Distilleries Ltd. See [1997] 107 STC 212 (SC); (1997) 7 SCC 542. which according to the learned Judges squarely governed the case. After noticing several judgments of this Court the learned Judges were not inclined to agree with the view of the earlier Bench on this aspect of the matter, but finding themselves bound by the earlier decision, they proceeded to dispose of the writ petitions on the basis that the manufacturers/distillers were not liable to pay turnover tax under the Abkari Act. It held that the earlier judgment could not be said to have been rendered per incuriam because the judgment was rendered after considering the binding judgments of the Supreme Court. The High Court also noticed the fact that appeals were pending before this Court against the judgment in the first batch of writ petitions. 38.. Having held itself bound by the judgment of the High Court in the first batch of writ petitions, it held that the Explanation to section 5(2C) of the Act did not advance the case of the State because once it is held that the provisions of the Abkari Act read wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ke the respondents. With effect from April 1, 1984 the KSBC came into existence and a monopoly was created in its favour for whole sale marketing in foreign liquor. The manufacturers/ distillers were obliged to sell their products to the aforesaid Corporation which distributed the same to the retailers all over the State. In view of the powers conferred by section 17 of the Abkari Act notifications levying the excise duty were issued from time to time which cast the liability to pay excise duty on the distillers/manufacturers under the Abkari Act. He has drawn our attention, in particular, to two Notifications being S.R.O. No. 60/61 dated March 18, 1961 and S.R.O. No. 330/96 which came into force on April 1, 1996. The first of these notifications shorn of unnecessary details is to the effect that in exercise of the powers conferred by section 17 of the Abkari Act, the Government of Kerala directed that the duty under the said section shall be levied on the following kind of liquors manufactured in the area where the said Act is in force or manufactured elsewhere in India and imported into the said area by land or under bond by sea, at the rates mentioned against each kind of liquo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the excise duty. He, therefore, submitted that the liability to pay excise duty was clearly on the manufacturers/distillers. The amendment made to the Rules only enabled the KSBC to procure IMFL from the manufacturers without payment of excise duty and stock the same in its bonded warehouses. The liability to pay excise duty which was cast on the manufacturer was never shifted. That liability arose at the point of manufacture and there was no amendment to the relevant statutory provision whereby the liability to pay excise duty was shifted from the manufacturers to the KSBC. As a matter of convenience the amended rules provided for payment of excise duty, which was the primary liability of the manufacturers, by the KSBC and therefore it was the liability of the manufacturer which was discharged by the KSBC. Reliance was placed on a decision of this Court in Mohan Breweries & Distilleries Ltd. See [1997] 107 STC 212 (SC); (1997) 7 SCC 542. and McDowell & Co. Ltd. v. Commercial Tax Officer See [1985] 59 STC 277 (SC). (1985) 3 SCC 230 and State of Kerala v. Madras Rubber Factory Ltd. See [1998] 108 STC 583 (SC). (1998) 1 SCC 616 and Deputy Commissioner of Sales Tax (Law), Board of Rev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at duty is imposed on the manufacturer of IMFL. That the excise duty liability is of distiller is also evident from the fact that the duty payable is on the value sale price of the liquor sold by the distillery to the KSBC and not on the basis of the sale price of the KSBC to retailers. He, therefore, submitted that the amendment of the Rules, particularly the (Storage in Bond) Rules, did not shift the liability of the manufacturer under the notification issued under section 17 of the Abkari Act. It only enabled the IMFL to be removed from the distillers warehouse to the premises of the FL9 licensees namely, the KSBC under the cover of a pass granted in that behalf and on payment of excise duty. The excise duty liability has never been obliterated or dispensed with by statutory provision. The liability continued and only the collection was postponed in cases where the liquor was removed from the bonded warehouses of the distillers to the bonded warehouses of the KSBC without payment of excise duty. 42.. He further submitted that in view of the Government's order dated January 5, 1999 the Foreign Liquor Rules were amended and, thereafter the KSBC was obliged to pay the excise duty ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... it also envisaged the levy of duty on liquor exported or transported under clauses (b) and (c) or even issued from the distillery as contemplated by clause (f) or sold in any part of the State as contemplated by clause (g). Levy under these clauses cannot be characterised as levy of excise duty because they are not related to the manufacture of goods. Section 18 prescribes how duty can be imposed and in essence the basis of duty under the Abkari Act is either on the quantity produced in, or passed out of, a distillery, brewery or warehouse. The section, therefore, gives a discretion to the State to impose such duty either on a distillery or brewery or warehouse. Excise duty in essence is a duty on manufacture but section 18(A) of the Act also contemplates grant of exclusive or other privilege of manufacturing or supplying by wholesale on payment of rentals. Section 18(A) is an enabling provision and apparently the levy under section 18(A) which was inserted in 1964 must fall under entry 8 of List II. The State is enabled to part with its privilege of manufacturing or supplying liquor in wholesale or of selling in retail. Since the levy is relatable to entry 8 of List II it cannot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding has been recorded by the High Court on this aspect of the matter. 46.. Alternatively, and assuming without conceding, that the duty imposed is excise duty, Mr. Nariman submitted that the observations in Mohan Breweries See [1997] 107 STC 212 (SC); (1997) 7 SCC 542. that the incidence of excise duty falls on the manufacturer or producer of the goods is not a rule of universal application, as it must depend upon the words the statute employs. He relied upon decisions of this Court in support of his submission that the incidence of excise duty may fall on a person other than the manufacturer, if the statute so provides. In the present case, he submitted that up to the time the Abkari Act was amended in 2003, it gave an option to the Government to levy excise duty on liquor either on the manufacturer who was licensed under section 14 or on the issue of the liquor from the warehouse of the licensed warehouse keeper. According to him, the licensed warehouse keeper referred to in section 14(f) means the KSBC. According to him the KSBC being the sole and exclusive warehouse keeper under the Government order of February 1, 1984 read with rule 11 of the (Storage in Bond) Rules, it was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....turer, then it must follow that the turnover tax on that duty must also be treated as having been paid on behalf of the manufacturer. Therefore, there could be no additional liability on the manufacturer to pay turnover tax since the same had already been paid by the Corporation. 49.. Mr. Ashok Desai, Senior Advocate appearing on behalf of some of the respondents, supplemented the arguments advanced by Shri Nariman and submitted that having regard to the scheme of the Abkari Act and the Rules, the exigibility to the duty of excise was on KSBC which has the sole marketing and monopolistic rights as from April 1, 1984. In fact that is how the authorities also understood the law till the judgment in Mohan Breweries case See [1997] 107 STC 212 (SC); (1997) 7 SCC 542.. According to him under the legal frame work the duty of excise can be paid only by the Corporation and not by the distillers. He also referred to the various provisions of the Act and the relevant Rules in support of his arguments. He also submitted that on a strict construction of the taxing statute there can be no levy of turnover tax at all on the manufacturers. Reading sections 5(1) and 5(2C) of the Kerala General Sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f U.P.See [1991] 80 STC 270. (1990) 1 SCC 109 this Court has taken judicial notice of the fact that in many statutes excise duty and price of privilege were regarded as one and the same. This Court in paragraph 87 See at page 315 of 80 STC. of the Report observed: "87. On an analysis of the various Abkari Acts and Excise Acts, it appears that various Provinces/States reserve to themselves in their respective States the right to transfer exclusive or other privileges only in respect of manufacture and sale of alcohol and not in respect of possession and use. Not all but some of the States have provided such reservation in their favour. The price charged as a consideration for the grant of exclusive and other privileges was generally regarded as an excise duty. In other words, excise duty and price for privileges were regarded as one and the same thing. The so-called privilege was reserved by the State mostly in respect of country liquor and not foreign liquor which included denatured spirit." 52. Learned counsel for the parties have referred to several decisions of this Court on the question as to what is the nature of a duty of excise. It may be useful to refer to some of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Council v. Province of Madras See [1945] 1 STC 135 (PC). AIR 1945 PC 98 the Privy Council noticed the earlier decisions of the Federal Court and rejected the contention before it that the power to impose a duty of excise, which is given to the Federal Legislature alone by entry No. 45 of the Federal List, entitles that Legislature and no other to impose a tax on first sales of goods manufactured or produced in India. Their Lordships observed: "To their Lordships this contention does not appear well-founded. The term 'duty of excise' is a somewhat flexible one: it may, no doubt, cover a tax on first and perhaps on other sales: it may in a proper context have an even wider meaning. An exhaustive discussion of this subject, from which their Lordships have obtained valuable assistance, is to be found in the judgment of the Federal Court in See [1938] 1 STC 1 (FC) (Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938, In re).[1939 FCR] 18. Consistently with this decision their Lordships are of opinion that a duty of excise is primarily a duty levied upon a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax up....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the law was stated in the following words: "This will show that the taxable event in the case of duties of excise is the manufacture of goods and the duty is not directly on the goods but on the manufacture thereof. We may in this connection contrast sales tax which is also imposed with reference to goods sold, where the taxable event is the act of sale. Therefore, though both excise duty and sales tax are levied with reference to goods, the two are very different imposts; in one case the imposition is on the act of manufacture or production while in the other it is on the act of sale. In neither case therefore can it be said that the excise duty or sales tax is a tax directly on the goods for in that event they will really become the same tax. It would thus appear that duties of excise partake of the nature of indirect taxes as known to standard works on economics and are to be distinguished from direct taxes like taxes on property and income." 59.. The principle was stated in somewhat similar terms in Obviously the case relates to Shinde Brothers v. Deputy Commissioner AIR 1967 SC 1512. Guruswamy and Co. v. State of Mysore [1967] 1 SCR 548 which is as follows: "These cases es....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e taxing event envisaged under the aforesaid clauses do not relate to manufacture. Learned counsel for the respondents, in particular, emphasised clause (f) of section 17 because it is their contention that in the instant case the levy of duty is under clause (f) of section 17 since the State intended to recover duty from KSBC on the issue of liquor from its warehouses in course of its monopoly wholesale trade. It was further emphasised that section 18A which related to grant of exclusive or other privilege of manufacturing or supply by wholesale, etc., enabled the State to grant such privilege on the basis of annual rental by way of consideration for the grant of such privilege and the rental could be collected to the exclusion of or in addition to the duty or tax leviable under sections 17 and 18. 64.. So viewed there can be no doubt that the levy of duty under section 17 need not necessarily be a duty of excise stricto sensu. In each case the court has to consider whether, having regard to the nature of levy, it is a duty of excise or other impost. 65.. We have earlier noticed that under rule 11 of the Foreign Liquor (Storage in Bond) Rules, 1961, foreign liquor stored ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...." 68.. It was argued that the notifications suggest that such duties are levied either on goods manufactured in the area or imported into the area. It was also submitted that an essential characteristic of duty of excise is a uniformity of incidence. It cannot vary from notification to notification. 69.. From a perusal of Notification No. SRO 60/61 issued on 18th March, 1961 it appears that different rates of duties have been prescribed for different kinds of liquor. So far as Indian-made foreign spirits, except that consumed by defence services personnel, the rate of duty prescribed was Rs. 12 per proof litre. For the Indian-made foreign spirits for defence services that rate was Rs. 3 per proof litre. This was subsequently substituted by notification dated 23rd April, 1964 whereunder for the Indian-made foreign spirits when exported by distillers to Goa and not re-imported into the State, the rate of duty was 45 np. per proof litre subject to the enumerated conditions being satisfied. In other cases it was Rs. 14 per proof litre. However, in the case of Indian-made foreign spirits for defence services personnel supplied through Canteen Stores Department, etc., the duty is Rs. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Corporation and sales tax paid by the Corporation. It is thus admitted by the Corporation that under rule 11 of the (Storage in Bond) Rules the duty was payable when the goods moved out from its bonded warehouse to FL9 premises. This also supports the submission of the respondents that the duty was levied at the stage of movement of the goods from the bonded warehouse of the Corporation to the FL9 premises and, therefore, the levy of duty in terms of rule 11 must necessarily be traced to section 17(f) which levied duty on liquor "issued from a distillery, brewery, winery or other manufactory or warehouse licensed or established under section 12 or section 14". Even the parties understood that it was for the KSBC to pay the duty in terms of licence. Notifications have been issued under section 17 and not specifically under any of the sub-clauses thereof. It would, therefore, not be correct to contend that the duty was levied on manufacture only. 72.. In this connection we may usefully refer to the decision of this Court in State of Punjab v. Devans Modern Breweries Ltd. See [2004] 2 RC 122; 2003 JT (10) SC 485. In that case the State of Kerala was also a party. The State had....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rala State Beverages Corporation has licence only for wholesale and retail of liquor which will not authorise them to import liquor and that the only licence issued to import liquor into the State is the permit issued on payment of the import fee and, therefore, it is seen that the levy of import fee is authorised by sections 6 and 24 of the Abkari Act, 1077. It is not excise duty or countervailing duty referable to entry 51 of List II. It is a collection falling under entry 8 of List II. It is the price paid to the State for parting with its exclusive privilege of dealing in liquor which includes every fact of it including its import. In my view, the State has the right to prohibit every form of activity in relation to intoxicants including its import." 73.. It, therefore, held that the levy was permissible and authorised under sections 6, 7, 17 and 18 of the Abkari Act. This decision supports the view that the levy of so called excise duty under the Abkari Act may be referable to entry 8 of List II and not entry 51 thereof. 74.. In the passing we may observe that the majority decision has also referred to the judgment of the Kerala High Court in the first batch of appeal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hin one month from the date on which he received a notice of payment therefor from the Board. In view of the clear language of the charging section which saddled the owner of the estate on which the rubber is produced with the liability to pay the said duty of excise, this Court held that the liability to pay the said amount of cess got attached to the rubber so produced and, therefore, if the rules did not provide for the excise duty to be paid by the producer then whoever purchased the said rubber would be purchasing goods to which the liability of payment of duty was attached. We do not find such a provision in the Kerala Abkari Act. 77.. From the above discussions the following conclusions emerge: (1) Section 17 of the Kerala Abkari Act deals with imposition of duty not necessarily connected with manufacture of liquor and, therefore, the duty levied must in each case be examined before coming to a conclusion as to whether it is in reality a duty of excise. (2) The use of the words "duty of excise " in section 17 of the Act is not conclusive and it is for the courts to examine in each case as to whether it is in fact a "duty of excise". (3) In order that a duty may be charact....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by its very nature the privilege price must be paid by the beneficiary and is not capable of being transferred to the manufacturers/distillers from whom the IMFL is purchased for wholesale trade. 80. We are of the view that if the privilege price is a part of the consideration payable by the Corporation to the manufacturers for supply of IMFL to the Corporation it will certainly be a component of the sale price of the liquor sold by the manufacturers to the Beverages Corporation. If it is not so, then the respondents are right in contending that having regard to its very nature, privilege price is a price which the beneficiary, in whose favour the State parts with its privilege, must pay. In this case since the State has parted with its exclusive privilege of wholesale trade in IMFL and that right has been conferred exclusively on the Beverages Corporation, it is the Beverages Corporation which must pay the privilege price in addition to the annual rental payable by it. 81.. In view of our above finding, it is not necessary to consider the alternative submission of Mr. Nariman that even if the levy is found to be a duty of excise, its incidence did not fall on the manufacturer o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... section 5(1) and section 5(2C) of the Kerala General Sales Tax Act, there was no liability on the manufacturer of liquor to pay turnover tax on the sale of IMFL. We find no merit in this submission. 84.. The levy of tax under the Kerala General Sales Tax Act, 1963 is by virtue of section 5. Section 5(1) deals with levy of sales tax, whilst section 5(2C)(i) deals with turnover tax. The relevant portion of this section reads as follows: "5. Levy of tax on sale or purchase of goods.-(1) Every dealer (other than a causal trader or agent of a non-resident dealer) whose total turnover for a year is not less than two lakh rupees and every casual trader or agent of a non-resident dealer, whatever be his total turnover for the year, shall pay tax on his taxable turnover for that year,- (i) in the case of goods specified in the First or Second Schedule, at the rates and only at the points specified against such goods in the said Schedules." "5(2C)(i) Notwithstanding anything contained in this Act or the Rules made thereunder every dealer shall pay turnover tax on the turnover of goods as specified hereunder, namely: (a)............... (b) by any dealer in Foreign Liquor (Indian-made) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 5(1)(i) it becomes clear that thereunder the sales tax is payable on the "goods", "at the points" and "at the rates" specified in the Schedules. Whilst considering point and rate at which levy is to be made under section 5(1)(i) the levy and rate will be as per the First Schedule but under section 5(2C)(i)(b) the levy is at all points and at 5 per cent of the turnover. It is only if one has to see at what point and at what rate the levy is to be made that one will take columns (3) and (4) of the First Schedule into consideration. As against this under section 5(2C)(i) the turnover tax is on "Foreign liquor" specified in entries 53 and 54, i.e., in column (2) of entries 53 and 54. The turnover tax is at the fixed rate of 5 per cent on the turnover at all points. Thus, in section 5(2C)(i) there is no reference to columns (3) and (4) of the First Schedule. This is clear from the fact that under section 5(2C), which is the charging section, turnover tax is payable by "all dealers". The term "dealer" is defined in section 2(viii) and admittedly covers the respondents. If the interpretation sought to be placed by the respondents is accepted then there would be a conflict between section....