TaxTMI 
TaxTMI 
TaxTMI 
2014 (1) TMI 99
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....985-86, raises the common question of law as to whether the Vend Fee paid by the licencee-TAMIL NADU STATE MARKETING CORPORATION LIMITED (in short 'TASMAC') was to be included in the taxable turnover of the assessee. 3. Whereas T.C.No.1634 of 2008 relating to assessment year 1983-84; T.C.No.1712 of 2008 relating to assessment year 1984-85 and T.C.No.1729 of 2008 relating to assessment year 1985-86 raises the question regarding levy of penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act,1959 in respect of revision of assessment. 4(a). The question of law framed on the Vend Fee inclusion is as follows: Whether the Vend Fee imposed and collected by the Government under Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981 from the Tamil Nadu State Marketing Corporation Limited is an exaction on the said purchaser-wholesale Corporation so that the said Vend Fee, which was neither contracted or collected by the petitioner-manufacturers, is outside the sale price of the petitioners? (b) The question of law raised in T.C.No.1634 of 2006 relating to levy of penalty under Section 12(5)(iii) of the Tamil Nadu General Sales Ta....
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....is Court in 107 STC 212 (SC) [Mohan Breweries and Distilleries Limited vs. CTO, Madras], the question of inclusion of the Vend Fee paid by the purchaser at the hands of assessee would not arise. Thus the Vend Fee incurred by TASMAC imposed under the Tamil Nadu Indian Made Foreign Spirits (Supply of Wholesale) Rules, 1981 would have no relevance to include the same in the taxable turnover of the assessee, as the said payment was totally unrelated to the sale by the manufacturer. Consequently, the re-assessment was bad. The Assessing Officer held that on the earlier round of litigation, for the assessment year 1982-83, which went upto the Supreme Court on the inclusion of Excise Duty and Vend fee, it was held that the same would form part of the taxable turnover. Hence, the Assessing Officer, rejected the said contention and ultimately confirmed the assessment under Section 16 of the Tamil Nadu General Sales Tax Act. 7. Aggrieved by this inclusion of the vend fee levied on the whole sale dealer in the assessment, the assessee went on appeal before the Appellate Assistant Commissioner. The First Appellate Authority pointed out that insofar as the Excise Duty Payment was concerned, th....
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....bunal contending that when Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply by wholesale) Rules, 1981 clearly stated that the Vend Fee payable by the wholesale dealer viz, TASMAC, on its sale, the same would not form part of the turnover of the assessee. Thus there was no need for a remand. 9. By a common order dated 09.09.2002, the Sales Tax Appellate Tribunal considered the appeals filed by the assessee relating to the assessment years 1982-83 to 1986-87 and ultimately came to the conclusion holding that the Vend Fee paid by the wholesaler was liable to be included at the hands of the assessee's taxable turnover. In so holding, it referred to the decision of the Apex court reported in 107 STC 212 cited supra and thus the assessee's appeals were dismissed. 10. It may be of relevance to note here in that while passing the revision of assessment, the Assessing Authority also levied penalty invoking Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959. Having regard to the assessment upheld by the Sales Tax Appellate Tribunal, the penalty also stood attracted in respect of the assessment years 1983-84, 1984-85, 1985- 86. As far as the assessment ....
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....privilege to supply by wholesale Indian Made Foreign Spirits for the whole of State of Tamil Nadu and no person is entitled to any such privilege. Considering such privilege granted, the levy contemplated under Section 17-D of the Tamil Nadu Prohibition Act, 1937 is by way of licence fee and any amount paid has to be considered as one in the way of privilege fee and even if we give it a name as Vend Fee or Excise Duty, the same could only be read as a privilege fee, it having no correlation to an Excise levied in the normal legal sense. Thus for doing wholesale business, the privilege fee fixed is different from the Excise duty or Vend Fee payable by TASMAC on behalf of the manufacturer. The levy collected under Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981 would be only on account of the privilege granted to TASMAC as an exclusive wholesale dealer and it could never form part of the price or the consideration that the TASMAC had to pay for purchasing of the manufactured product from the stock of the assessee. In this connection, learned Senior Counsel placed reliance on the decision of the Apex court reported in 141 STC 358 [SC][ State of ....
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....t reported in 94 STC 157(Mad) [State of Tamil Nadu vs. Indian Silk Traders], wherein, this Court had pointed out the clear distinction between "incomplete and incorrect" return as appearing under Section 12(5)(iii) of the Act which does not imply any deliberate, suppression or wilfulness, and penalty under Section 16 (2) of the Act where wilfulness on the suppression of turnover would be of relevance. In the absence of any definite finding on the contumacious conduct of the assessee in deliberately suppressing the turnover, the penalty levied under Section 12(5)(iii) of the Tamil Nadu General Sales Tax Act, 1959 has no legal basis. Hence, it is liable to be set aside. 16. Countering the claim of the assessee, learned Advocate General appearing for the Revenue placed heavy reliance on the order of assessment as well as the orders passed by the Sales Tax Appellate Tribunal and submitted that even going by the provisions of the Act as well as the Rules made with reference to Supply by Wholesale as well as by manufacturing, the levy of Vend Fee under Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981, has to be treated as a levy payable by the a....
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....he Revenue and perused the records. 19. It is no doubt true that the affidavit filed before this Court as produced by the learned Advocate General shows that the assessee had canvassed Excise Duty as well as Vend Fee included in the assessment of the assessee. The fact remains that this Court's decision rested only on the Excise Duty ultimately paid by TASMAC- the wholesale dealer, and on an Appeal before the Apex Court in the decision reported in 107 STC 212(SC) (cited supra), the decision of this Court reported in 78 STC 461 (cited supra) was confirmed holding that the mere fact of deferring the collection of Excise Duty to be collected at the hands of the purchaser viz., TASMAC would not make any difference for the purpose of inclusion of Excise Duty in the taxable turnover of the assessee. The Apex Court pointed out that Rule 22 of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules,1981, provided a mode of collecting Excise Duty, a mode, which was obviously convenient for the party, who collected the Indian Made Foreign Liquor from the factory, to pay in advance the Excise Duty thereon. 20. The Tamil Nadu Prohibition Laws provided that all liquor manufactured ....
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....ce shall be subject to the rules made by the State Government in this behalf and to such conditions and restrictions as the Commissioner may, from time to time, specify. (c) The Tamil Nadu State Marketing Corporation Limited shall, as soon as may be, after the grant of the licence under clause (b) for the exercise of the exclusive privilege referred to in clause (a), open its branches in the State in such places and subject to such conditions as the Commissioner may specify: Provided that the said Corporation shall open not less than one branch in each district]. (1-B) [....] Substituted by Tamil Nadu Act 23 of 1981. (2) No grantee of any privilege under this section shall exercise the same until he has received a licence in that behalf from the prescribed authority]. *17-D. Payment of a sum in consideration of the grant of any exclusive or other privilege or fee on licences for manufacture or sale The State Government may, by rules, levy a sum or fee or both in consideration of the grant of any exclusive or other privilege under Section 17-C and also a fee on licences granted under Section 17-C. * Inserted by (Tamil Nadu) Act 51 of 1981]. Rule 22 of the Tamil Nadu Indian Ma....
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....e duty or countervailing duty, as the case may be paid in accordance with the provisions of Sub Rule (1) above, a vend fee at the rates specified below shall also be collected from the licensee on the stock of Indian-made Foreign Spirits either received from a manufactory inside the State or removed from a manufactory outside the State or removed from a bonded ware-house licensed under the Tamil Nadu Indian-made Foreign Spirits (Storage-in-Bond) Rules, 1981:- (a) Liquor for consumption as ordinary alcoholic beverage:- (i) .......... (ii)........... (iii).......... (b) Brandy and medicated wines for medicinal purposes:- (i) ........ (ii)........ (iii) ........ Explanation (1) The quantities of liquor and medicated wine shown in the accounts maintained under these Rules shall be expressed in terms of litres and millilitres. Explanation (2) Notwithstanding anything contained in explanation (1), in the case of bottled liquor, the quantities of liquor for purposes of sale or levy of vend fee shall be reckoned according to the following scale, namely:- ...................................... ......................................" 22. Under Section 17-C of the Tamil Nadu Proh....
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....ideration to form part of the turnover. The writ petition filed before this Court was dismissed and the assessee went on appeal before the Apex Court. In the decision reported in 107 STC 212 (cited supra) the Apex Court held that the liability to pay excise duty on the Indian Made Foreign Spirit was on the manufacturer-petitioner and Rule 22 merely provided the mode for collecting the excise duty, a mode which was convenient for the State, for it required the party removing the Indian Made Foreign Spirit from the factory to pay it in advance. Thus the Apex Court held that the excise duty though paid by the wholesaler was part of the sale consideration and was liable to be included in the turnover. 26. As far as the vend fee payable under the The Tamil Nadu Indian Made Foreign Spirit (Supply by Wholesale) Rules, 1981 is concerned, it has nothing to do with the manufacturer. A reading of the provisions of this Rule shows that it essentially deals with the grant or privilege and licence to sell the Indian Made Foreign Spirit on a whole sale basis. As may be noted from the provisions of the Act and the Rules made, the privilege and the license granted to manufacture and the privilege ....
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....by Whole sale) Rules, 1981 as well as Rule 22 of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 clearly show that there is a clear distinction as regards the levy made as per the table given thereunder. Both the Rules show that they stand no comparison at all. As already seen, Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Whole sale) Rules, 1981 makes no reference at all to Rule 22(3) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981. In Contrast, Sub Rule (1) of Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Whole sale) Rules, 1981 makes specific reference as regards excise duty in addition to the vend fee. 29. Thus on a plain reading of Rule 15(2) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Whole sale) Rules, 1981, we have no hesitation in accepting the case of the assessee that the vend fee paid by the licencee-TASMAC as per rule 15(1) of the Tamil Nadu Indian Made Foreign Spirits (Supply by Whole sale) Rules, 1981 has no relevance to what is paid under Rule 22(2) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981, which is for the discharge of the liability on ....
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....re) Rules, 1981 makes no such distinction giving one rate for ordinary alcoholic beverage and one for medicinal purposes. The additional vend fee under Sub Rule (2) of Rule 15 of the Tamil Nadu Indian Made Foreign Spirits (Supply by Wholesale) Rules, 1981 relates to the levy on the sale of alcoholic liquor and the same is quantified based on the actual sale by the licensee. Thus the distinction being very clear even for a normal reading, we hold that the revision of assessment by the Revenue cannot be sustained on any legal provision. Consequently, we have no hesitation in allowing the tax case revisions filed by the assessee, thereby setting aside the order of the Sales Tax Appellate Tribunal confirming the order of assessment. 33. It may also be of relevance to note that in the case reported in 141 STC 358 (SC) [State of Kerala vs. Maharashtra Distilleries Limited], the Apex Court pointed out that the duty levied under Section 17 of the Abkari Act was not the duty connected with the manufacture of liquor. The State of Kerala by the amendment of the Act and the Rules created a monopoly in favour of Kerala State Beverages Corporation in the whole sale trade of Indian Made Foreign ....
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.... Tax Act relates to a regular assessment. Section 12(5) of the Act is a provision relating to penalty under three categories. For the purpose of this case, Section 12(5)(iii) is the provision invoked by the Officer, which relates to the submission of incorrect and incomplete return. Thus, while making an assessment, if the Officer is satisfied that the accounts maintained by the assessee are correct and the returns submitted by the assessee is found to be incorrect or incomplete, the Assessing Officer may either by a separate order or in the order of assessment, levy penalty at a sum not less than 50% of the sum and not more than 150% of the difference in the tax payable on the turnover disclosed in the return and thus determined by the Officer. The proviso to said Section says that no penalty under Sub Sections (3) and (5) shall be imposed after a period of five years from the expiry of the year to which the assessment relates to and unless a dealer affected has had a reasonable opportunity of showing cause against the imposition. 38. Learned Senior counsel appearing for the assessee, submitted that for the assessment thus made under Section 16 (1) (a) of the Act, if the Revenue ....