TaxTMI 
TaxTMI 
2025 (7) TMI 923
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.... involved in bottling and supplying of Beer and Indian Made Foreign Liquor (for short 'IMFL'). The appellants hold license under the M.P. Excise Act, 1944 to manufacture and supply beer and IMFL. They supply the said goods after obtaining a No Objection Certificate [NOC] from the officer-in-charge posted at the factory. It was contended that the goods are transported to the State Government warehouse and the transportation pass is issued in the name of the concerned warehouse. According to the appellants, the sales are made by the warehouse in charge to the authorized retailers, who are also license holders for retail sale of IMFL and beer. 3. The appellants averred that under the M.P. Excise Act, FL-9 license is to manufacture IMFL products and FL-9A license is to produce franchisee products. FL-9 and FL-9A licensees can sell to FL- 10 licensees only. According to the appellants, the FL-10 licensee in M.P. is the Excise Department, which runs the State Government warehouse. The retailers hold the FL-1 license and they purchase from FL-10 licensee after issuance of NOC by the respective District Excise Officers. According to the appellants, the sale is made by the Government war....
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....charge of Foreign liquor warehouse" issued on 27.3.2002. Under the guidelines, it is mentioned that Foreign liquor warehouse be established at the Divisional Headquarters of the State. Manufacturing Units would store foreign liquor and that supply of collected liquor would be effected to the retail contractors at the rates reckoned after adding 5% amount to the rates declared by the manufacturing units. All arrangements of storage was to remain under the control of the Deputy Commissioners posted at the Divisional Headquarters; and the Divisional Deputy Commissioners would issue directions to the Officer-in-charge for issuance of No Objection Certificates to the manufacturing units after assessing the local demand. Retail sale licensee would make arrangement of loading on their own for effecting supply of foreign liquor stored in the warehouse. Collection Counter of Punjab National Bank is established in each and every store. Retail contractor would deposit the necessary amount in the account of the concerned manufacturing unit at the counter of this bank. Under Supply process, the following guidelines are mentioned:- a) Demand note of each and every shop would be submitte....
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....n in the computer branch and the Officer-in-charge so that transportation permit may be issued from the computer room. Permits would be issued through the computer only except in the cases of defects in which situation the work will be completed manually. j) Officer-in-charge would ensure that necessary particulars of the liquor/beer, date and time of leaving vehicle, amount of duty, challan number and period given to take liquor to the place of destination are recorded on the permit. k) Only after ensuring compliance of the above-said process, the Officer-in-charge would give permission to vehicle loaded with liquor/beer to move from the store. l) At the end of each and every working day, stock verification would be carried out. The complete accounts statement of wine/liquor supplied up to 25th of each and every month would be prepared. All the accounts of the amount lying deposited in the collection account of the manufacturing units would be tallied. Officer-in-charge would submit the said accounts before the concerned Deputy Commissioners and Deputy Commissioners would direct the bank as to how much amount is to be transferred by them in their account....
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....nd conditions as may be specified therein." 4A. Provision for entry tax at enhanced rate. - (ii) for sub-section (1), the following sub-section shall be substituted, namely: - (1) Notwithstanding anything to the contrary contained in this Act, the State Government may, by notification, specify the manner and appoint the competent authority to collect entry tax in respect of India made foreign liquor and Beer on such terms and conditions as may be specified therein, the entry tax payable by a dealer under this Act shall be charged on the value of such goods at a rate not exceeding thirty per centum as may be specified in such notification.. " 11. The other relevant sections from the Entry Tax Act are Section 2(1)(aa), 2(1) (b), 2(1)(l), 2(1)(m), 2(2), 2(3) and Section 14 which read as follows:- "2(1)(aa) "entry of goods into a local area" with all its grammatical variations and cognate expressions means entry of goods into that local area from any place outside thereof including a place outside the State for consumption, use or sale therein;" 2(1)(b) "Entry tax" means a tax on entry of goods into a local area for consumption, use or sa....
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....hat Act and for this purpose they may exercise all or any of the powers conferred upon them by or under that Act." 12. "Dealer" as defined under Section 2(i) of the Madhya Pradesh VAT Act, 2002 reads as under:- "2(i) - Dealer" means any person, who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash, or for deferred payment or for commission, remuneration or other valuable consideration and includes - (i) a local authority, a company, an undivided Hindu family or any society (including a cooperative society), club, firm or association which carries on such business; (ii) a society (including a co-operative society), club, firm or association which buys goods from, or sells, supplies or distributes goods to its; (iii) a commission agent, broker, a del-credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of buying, selling, supplying or distributing goods on behalf of the principal; (iv) any person who transfers the right to use any goods including leasing thereof for any purpose, (whether or not for a specified p....
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....nd includes - (i) a transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) a transfer of property in goods whether as goods or in some other form, involved in the execution of works contract; (iii) a delivery of goods on hire purchase or any system of payment by installments; (iv) a supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration; (v) a supply, by way of or as part of any service or in any other manner whatsoever, of goods being food or any other article for human consumption or any drink (whether or not intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration; (vi) a transfer of the right to use any goods including leasing thereof for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration, and such transfer, delivery or supply of any goods shall be deemed to be a sale of those goods by the person making the transfer, delivery or supply and p....
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....overnment warehouse which cause to effect the entry of the goods. That even otherwise, the manufacturers cannot be mulcted with the liability as the value of the goods would be clear only at the hands of the State Government warehouse which effects the sale to the retailer and for this reason, without notification being issued under Section 3B of the Entry Tax Act, no levy can be effected. Further, they contend that since the State Government warehouse causes to effect the entry of the goods, it is they who will ultimately pass it on to the retailers after the levy is made. They further contend that with effect from 01.04.2008 when the entry tax on IMFL and beer was withdrawn, an increase in 2% of the transportation fee was brought in and it was made to 8% from the originally fixed 6% chargeable by the warehouse on the retailers. So praying, they contend that the writ petitions ought to have been allowed, and the communication dated 13.06.2007 issued by respondent no. 2 and the communication 21.06.2007 issued by respondent no. 3 directing the manufacturers to pay entry tax ought to have been quashed. To buttress the submission, they further referred to the communication dated 02.06....
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....ed that undisputedly the State Government warehouse distributes the goods and whether as a seller or as a distributor they acquire the status of a dealer under the Act, which makes them liable for the payment of the Entry Tax. The stand of the State Government is that the warehouse neither purchases nor sells the liquor and the work undertaken is only to supervise the sale made by the manufacturer to the retailer. This contention of the State found favour with the High Court. 22. The model adopted by the State, as set out in the Paragraphs hereinabove for the transaction, clearly points to the State canalising the supply of beer and Indian made foreign liquor into the local area. The question that would then arise is: - is there an inseverable link between the manufacturers like the appellants and the ultimate retailers? While the manufacturers contend that the sale by them is made to the State warehouse and thereafter the State warehouse makes the sale to the retailers, the State contends that there is an inseverable link and it is the manufacturers who causes the sale to the retailers and the State is discharging only a supervisory role. 23. Under the modus operandi adopted....
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....the import or is in the progress or process of import or though there may appear to be two sale transactions they are so integrally interconnected that they almost resemble one transaction so that the movement of goods from a foreign country to India can be ascribed to such a composite wellintegrated transaction consisting of two transactions dovetailing into each other. (7) A sale or purchase can be treated to be in the course of import if there is a direct privity of contract between the Indian importer and the foreign exporter and the intermediary through which such import is effected merely acts as an agent or a contractor for and on behalf of the Indian importer. (8) The transaction in substance must be such that the canalising agency or the intermediary agency through which the imports are effected into India so as to reach the ultimate local users appears only as a mere name lender through whom it is the local importer-cum-local user who masquerades. 15. If the aforesaid conditions are satisfied then obviously the transaction of sale or purchase would be in the realm of sale or purchase in the course of import entitling it to earn exemption under S....
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....g transaction, we have no manner of doubt that there were two independent transactions, one between the appellant - manufacturers and the State Warehouse and the other between the State warehouse and the retailers. Hence, it will be difficult to accept the contention of the State that the role of the State is only supervisory and the warehouses didn't purchase beer and IMFL from the manufacturer. 28. This, however, does not resolve the issue in favour of the appellants. Under Section 3 of the M.P. Entry Tax Act, 1976, the incidence of taxation is on the entry in the course of business of a dealer of goods specified in Schedule II, into each local area for consumption, use or sale therein. The further requirement is that such tax was to be paid by every dealer liable to tax under the VAT Act who has effected entry of such goods. Entry Tax is defined as a tax on entry of goods into a local area for use, consumption or sale therein levied and payable in accordance with the provisions of the M.P. Entry Tax Act. Section 2(3) of the M.P. Entry Tax Act states that any reference to the expression "has effected entry of goods" shall be construed as including a reference to "has caused to....
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....the sale into the local area for consumption, use or sale therein. It is also not disputed that the appellant is a dealer as defined under the Madhya Pradesh VAT Act 2002, as it stood then. The only contention of the appellants is this that the State warehouse is also a dealer. That makes no difference since it cannot be disputed that the appellants certainly occasioned the entry of goods and the levy of entry tax on them, which could always be passed on, is perfectly justifiable in law. 32. The further contention that no notification having been issued under Section 3B of the M.P. Entry Tax Act 1976, there could be no levy of entry tax has only to be stated to be rejected. The High Court has rightly held that Section 3B is only a machinery provision and in the teeth of Section 14 of the M.P. Entry Tax Act, it is not correct to say that there cannot be any assessment or collection of Entry Tax merely because there is no notification under Section 3B. 33. Section 3B of the M.P. Entry Tax is an enabling provision. Further, the 'non-obstante' in Section 3B will not foreclose the operation of Section 14, since Section 3B will override only if there is a contrary provision. In the....