MC DOWELL & COMPANY LTD. ETC. versus COMMERCIAL TAX OFFICER, VII CIRCLE, HYDERABAD ETC.

MC DOWELL & COMPANY LTD. ETC. v.

COMMERCIAL TAX OFFICER, VII CIRCLE, HYDERABAD ETC. October 25. 1976

(H. R. KHANNA AND JASWANT SINGH, JJ.]

countervai/i•w • ,;0~. 0~. ~.

A1ulhra Pradesh General Sales Tax Act, 1957-Excise mu! countervai/i•w • duty paid by the buyers directly illlo the Treasury-Neither the invoice ,;0~. 0~. ~. books of the assessee (111a11ufact11rer) show the exci,e duty-Excise dwy..:._/f (.alls 111ul~r "any sums charged by the dealer" occurring in the dt,inition of turnover .

Section 2 ( 1 )( s) of the Andhra Pradesh General Sales Tax Act defines ··.turnover" to mean the total amount set out in, the bill of sale ~s the' considera-tion for t~e sale or. purchase of goods including any sums charged by tile dealer for anythmg done m respect of goods sold at the time of or before the delivery of the goods.

. The appellants in the first two sets of appeals are manufacturers of Indian liquors. buyer of Indian liquor from the distilleries pays, in the first instance, the excise duty m the Treasury and obtains distillery pass for the release of liquor. On presentation of the distillery pass an invoice is prepared by the manufacturers showing the price of liquor. Neither invoice nor the account \Jooks of the manufacturers show the excise duty paid by the purchasers.

Under the system in vogue in the second set of appeals, the appellant who is the owner of bonded warehouse prepares bill for the liquor required by the · purchaser who pays the countervailing duty in the Treasury in his own name and obtains pass from the excise authorities for the removal of the liquor from the warehouse.

lll both the, cases the Sales Tax Authorities included the excise duty in the taxable turnover' of the appellants. The High Court dismissed tiJ0 writ petiti:m of the appellants impugning the orders of the Sales Tax Officers.

Allowing the appeal,

HELD : (I) Excise duty and countervailing duty paid directly by the buyers for the Indian liquors did not constitute part of the turnovers of the appellants.

[924 CJ

(2) The phrase 'any sums charged by the dealer' occurring in the definition of 'turnover' has to be understood in its ordinary' popular sense. So construed, it means what is demanded and collected or received by the dealer. (923 BJ

In the instant case the excise duty or the countervailing duty has not been charged or received by the dealer but has been charged by the excise :mthorites and deposited directly by the buyers of the liquor in the State exchequer. Tt cannot be said that the excise duty or the countervailing duty was charged by the appellants. In M /s. George Oakes (Private) Ltd. v. The State of Madras & Ors., this Court held in relation to the defintion of• tum-over that the aggregate am<;>unt includes the tax as part of the price paid by the bu:,:er;. the amount goe.s mto the common till of the dealer till he pays the tax; 1t 1s the money which he keeps using for his business till he pays the tax; it i~ the m~:mey which he keeps ·using for his business till he pays it over to \)overnmenl; 1t be~om~s pa!t of the circulating capital of the tradesman and 1s turned over m lus busmess. Secondly the price paid by· the purchaser was ~ot s.o much mon!'y for .th.e cause turnover means the: amount of money which JS turned over m the, busi-ness. [923 E-GJ

MC DOWELL & co. v. COMM. TAX OFFICER (Jaswant Singh, J.) 915

In the instant case the excise and the countervailing duties did not go into the common tills of the appellants and did not become part.of their circulat-ing capital. The. Sales tax authorities were not competent co include jn . the turnovers of the appellants the excise .duty and the countervailing duty which was not charged by them but was charged by and paid directly to the excise authorities by the buyers of the liquors: [924 A] .

A. V. Fernandez v. The State of Kera/a [1957] S.C.R. 837 followed.

R. C. Jail v. Union of India [l 962] Supp. 3 S.C.R. 436, Seit Custums Act [1964] 3 S.C.R. 787, A. B. Abdul Kadir & Ors. v. State of Kera/a [1976] 3 S.C.R. 219, K!rlyani Stores v. The State of OrfasCJ & Ors. [1966] 1 ~.~.R. 865 & Mis. Mohan Meakin Brewaries Ltd. v. Excise & Taxation Comm1s1sonff, Cha11d1garh & Ors. [1976] 3 S.C.C. 421 referred to.

Mess1~ George Oakes (Private) Ltd. v. The Stcite of Madras & Ors. (12 S.T.C. 476) and (13 S.T.C. 98) referred to and distinguished.

The Government of Andhra (now Andhra Prade"h) v. East India Commer-cial Co. Ltd. (8 S.T.C. 114) distinguished.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 248-251 of 1976.

(Appeals by Special Leave from the Judgm~nt a~d Or.d~r dated 28-11-1975 of the Andhra Pradesh High Court m Wnt Pet1t10ns Nos. 1195-1198/75).

CIVIL APPEALS Nos. 934-936 of 1976.

(Appeals by Special Leave from the Judgment and Order dated 28-11-1975 of the Andhra Pradesh High Court in Writ Petitions Nos. 3931, 3944 and 4029/75).

ClVIL APPEALS No. 693 of 1976.

(Appeal by Special Leave from the Judgment and Order dated 28-11-1975 of the Andhra Pradesh High Court in Writ .Petition No. 16790/74).

Soli Sornbji and K. J. John for the Appellant (CAs 248-251/76).

A. Subba Rao for the Appellant (CAs. 934-936/76).

Babu! Reddy and K. J. John for the Appellant (CA. 693/76).

Niren De, Attorney General for India, P. P. Rao, D. V. Sastry and T. V. S. N. Ohari for the Respondents (in CAs. 248-251/76 and CAs. 934-936/76).

T. V. S. N. Chari for the Respondent (Jn CA No. 693/76)..

The Judgment of the Court was delivered by

JASWANT SINGH, J.-This batch of appeals by special leave which are directed against three separate judgments of the High Court of Andhra Pradesh at Hyderabad' dismissing three sets of writ petitions Nos. 1195 to 1198 of 1975, 3931, 3944 and 4929 of 1975 and 6790 of 197 4 filed by the appellants to challenge certain orders of the sales tax authorities made in respect of re-determination of their turnover for certain years under the Andhra Pradesh General Sales Tax Act,

1957 (hereinafter referred to. as 'the Act') shall be disposed of by this judgment, as they raise common question as to w~ther the excise duty lleposited directly in State treasury or sub-treasury by the purchasers of the Indian-made foreign liquor called 'Indian liquor' before removing the said liquor from distillery and the countryvailing duty remitted directly to State Treasury or sub-treasury by the purchasers of the aforesaid specie of liquor before removing it from bonded warehouse can properly be said to form part of the turnover of he manufacturer and of the owner of the bonded warehouse res-pectively and as such liable to sales tax under the Act. •The circumstances which ii.ave given rise to these appealStlie in short compass and may be briefly stated : The appellants in the first two sets of Appeals Nos. 248 to251of1976 and 934 .. to 936 of 1976 carry on the business of manufacture of 'Indian liquors' in their distil-leries established in Andhra Pradesh under licences issued to them by the Commissioner of Excise under the Andhra Pradesh Excise Act, 1968 (Act 17 of 1968) and the rules made thereunder and sell their finished products to the wholesale dealers who in turn sell them to retail dealers. Under Rule 76 of the Andhra Pradesh Distillery Rules, 1970 removal of any liquor manufactured or stored without pre-payment of the excise duty specified in rule 6 is forbidden. Rule 77 of the Rules prohibits issue of any liquor until its quantity and strength have been duly v~rified by the distillery officer. Rule 79 of the Rules authorises the distillery officer on payment of excise duty to grant distillery pass for removal of the liquor fit for human consumption to the persons specified in the said rule including person holding licence for sale of liquor by wholesale or ·retail. Under Rule 81 of the· Rules, every application for distillery pass for removal of liquor has to be addressed in writing to the distillery officer and has to be accompanied by challan in- original for paymr;;nt of excise duty there-for and general or special permit for the purpose of removal of the liquor. Rule 82 of the Rules enjoins the distillery officer upon tender of ca>h payment of excise duty by !the applicant to fill up the challan for presentation with the cash at treasury' or sub-treasury of the district in which the distillery is situate, and the applicant for distil-lery pass to present the treasury receipt in token of his having made payment of the duty whereafter the distillery officer has to affix the said receipt to the counterfoil of form D-6. Rule 83 of the Rules casts responsibility upon an applicant for distille"ry pass to make correct calculation and full payment of the excise duty upon the liquor desired to be removed. Rule 84 of the Rules requires, the distillery officer to issue the liquor under pass in form D-6 sending duplicate thereof to the Excise Superintendent of the district of destination on being satisfied that the applicant is entitled under the Rules to remove the liquor and has made payment of the requisite excise duty. Accordingly every buyer of the Indian liquor from either of the appellants' distilleries during the years in question obtained the distillery pass for release ·of the liquor after making payment of the excise duty and presented the same at the concerned distillery whereupon bill of sale or in-V.oice was prepared by the dis-tillery showing the price of the liquor. The said bill did not include

the excise duty paid by the buyer. The appellants' books of acc?unts also did not contain any reference regarding the excise duty p~1d by the purchasers in the manner stated above. The appellants paid the sales tax in full as per final assessments made by the sal~s tax autho-rities under the Act. It appears that after the completion of the a·ssessments of the sales tax under the Act for the years in questio~ the Commercial Tax Officer felt that there had been failure to include the excise duty paid on the aforesaid liquors vended by the appellants in their taxable turnover. Accordingly, acting under the pro.-isions of section 14(1) of the Act, the Commercial Tax Officer issued notices in February, 1975 to the )appellants in the aforesaid first two sets of appeals to show cause why the assessments be not reope~ed. Aggrieved by the said action of ithe Commercial Tax Officer, the appellants filed writ petitions Nos. 1195 to 1198 of 1975 and 3931, 3944 and 4929 of 1975 in the High Court of Andhra Pradesh challenging the said notices which, as already stated, were dismis-sed by the High . Court.The appellant in Appeal No. 693 of 1976 is firm which is licen-sed wholesale dealer in liquors and owner of bonded warehouse under the Andhra Pradesh Indian Liquor (Storage in bond) Rules, 1969 where it stores or deposits lhdian Liquors such as whisky, brandy. gin ·etc. imported by it from various States outside the State of Andhra Pradesh without pre-payment of countervailing duty or other fee and issues the same according to the rules to its customern. The modus operandi of' the appellant is that it makes bill for the value of the liquor required by an intending purchaser, who thereafter pays the requisite countervailing duty in his own name and the Excise Officer incharge of the bonded warehouse grants him pas:s entitling him to remove the liquor from the warehouse. According to the appellant, it gets only the price of the liquor from its buyers. For the assessment year 1971-72, the Commercial Tax Officer, Hyderabad UI by its order dated August 16, 1972 included the amount represent-ing the countervailing duty paid by the purchasers in respect of the Indian liquors in bond which was not included in the bil11S of sale issued by the appellant. On appeal, the Assistant Commissioner by its order dated March 26, 1973 deleted from the turnover of the appellant the item pertaining to the excise duty paid directly by the purchasers holding that the excise duty so paid by the purchasers did not, in the circumstances, form part of the turnover of the appellant. Some-time thereafter, the Sales Tax Appellate Tribuna.J by its order dated August 5, 1974 passed in T.A. Nos. 331 of 1973 and 5 of 1974 upheld the assessment made under similar circumstances by the Com.: mercial Tax Officer, Vijayawada, on the turnover of M/s Shaw Wallace & Co. Thereupon the Deputy Commissioner, Commercial Taxes, Hyderabad by virtue of the power vested in him under section 20 of the Act issued the impugned notice dated October 9, 1974 to the appellant calling upon it to show cause why the order passed by the Assistant Commissioner, Commercial Taxes on March 26, 1973 should not be set aside and the original assessment order of the Commercial Tax Officer dated August 16, 1972 restored. The appellant was also required to file objections and adduce evidence in support there-of within 7 days from the date of receipt of the impugned notice,

Aggrieved by the notice, the appellant filed petition being petition No. 6790 of 1974 before the High Court of Andhra Pradesh, seeking issue of an appropriate writ, order or direction declaring that the appellant was not liable to pay sales tax on exci:se duty paid by the purchasers in their own names and restraining the Deputy Commi-ssioner, Commercial Taxes, Hyderabad, respondent in the appeal from taking further proceedings in pursuance of the said notice. 'rhe said petition having been dismissed, the appellant has, as already stated, come up in appeal to this Court.At the hearing of these appeals, Mr. Sorabji and the other colijlsel appearing on behalf of the appellants have assailed the aforesaid Judg-ments and orders of the High Court by urging in the first instance that the view taken by the High Court about the nature and chara«er of excise duty and countervailing duty is not correct. They have also after trying in vain to argue for considerable length of time that on the true construction of the Andhra Pradesh Excise Act,. 1968, the Andhra Pradesh Distillery Rules, 1970, the Andhra Pradesh Foreign and Indian Liquor Rules, 1970 and the Andhra Pradesh Indian Liquor (Storage in bond) Rules, 1969, manufacturer of Indian liquors and an owner of bonded warehouse are not primarily responsible for payment of the excise duty or countervailing duty, as the case may be, contended that manufacturer and owner of the bonded warehoUJse are not solely responsible for payment of the said duties and pmcha-ser of the liquor who obtains distillery pass or ,a werehouse pass and transport permit is also legally responsible for payment therefor and if he does pay the duty, it is something which he does in discharge of his own statutory liability and not something which he does for or on behalf or for the benefit of the manufacturer or the owner of the bonded warehouse. They have alternatively contended that on true construction of the expression 'turnover' a's defined in section 2(1) (s) of the Act, the determinative factor is the total amcunt set out in the bill of sale as consideration for the s.ale of the liqllor and since the excise duty or the countervailing duty was dir~ctly paid by the purchasers to the excise authorities and did not at all form part of the consideration for the sale of the said liquor as se:: out in the bills of sale, it was not permissible for the sales tax authorities to assess the turnover by roping therein something which was not set out in the bills of sale as consideration for the sales. They have lastly contended that in any event as the excise duty or the countervailing duty was at no time charged by the appellants for anything done in respect of the liquors sold but was charged by the "excise authorities before removal of the liquors under the Andhra Pradesh Excise Act, 1968 and the rules made thereunder, it could not constitute part of the turnover and taxed under the Act.

Although some controve11sy was sought to be raised by counsel for the appellants regarding the nature and character of the excise duty and countervailing duty but as rightly pointed out by the learned Attorney General, the matter has been put beyond doubt by the decisions of this Court. In R. C. Jail v. Union of Tndia([1 ]\ after •.1 review of the authorities bearing on the matter, it was held by this Court as follows :-

(I) [l 962] Supp. 3 S.C.R. 436.

MC DOWELL & co. v. COMM. TAX OFFICER (Jaswant Singh, J.) 919

"The excise duty is primarily duty on the production or manufacture of· goods produced or manufactured within the country. Subject always to the legislative competence of the taxing authority, the said tax can be levied at conven-ient stage so long as the character of the impost is not lost. The method of collection does not affect the essence of the duty but only relates to the machinery of collection for administrative convenience."

Again In re Sea Customs Act(I) it was observed:

"The. question with respect to excise duties was considered by this Court in the case of Amalgamated Coalfields Ltd. v. • Union of India (A.LR. 1962 S.C. 1281). After consider-ing 1he previous decisions of the Federal Court In re. The <;emral Provinces and Berar Sales of Motor and Lubricant Taxaiion Ac;t (1939 F.C.R. 18); The' Province of Madras v. Mis Boddu Paidanna (1942 F.C.R. 90) and of the Judicial Committee of the Privy Council in Governor General in Council v. Province of Madras (1945 F.C.R. 179), this Court observed as follows at p. 1287 :"With great respect, we accept the principles laid down by the said three decisions in the matter of levy of an excise duty and the machinery for collection thereof. Excise duty is primarily duty on the production or manufacture of goods produced or manufactured within the country. It is an indirect duty which the manufacturer or producer passes on to the ultimate consumer, that is, ultimate incidence will always be on the cu1stomer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at convenient stage so long as the charac-ter of the impost, that is, ~t is duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience." Thi1s 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 1Sale. Therefore, though both excise duty and sales-tax are levied with reference to goods, the two are very diofferent imposts; in one case the imposition is on the act of manufacture or production while in tlie other it is on the act of sale. In neither case therefore can it be said that the excise duty or sales tax is tax directly on the goo<!s 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 (Jn property and income."

----(!) [1964] 3 S.C.R. 787.

It is, therefore, clear that excise duty is duty on the production or manufacture of goods produced or manufactured within the country though as observed by one of us (Khanna, J.) in A. B. Abdul Kadir & Ors. v. State of Kerala(l) laws are to be found which impose duty of excise at stages subsequent to the manufacture or production.

The position with r\!gard_ to the nature and character of counter-vailing duty has equally been made clear in number of decisions of this Court. In Kalyani Stores v. The State of Orissa & Ors.([2 ]) which was followed in. M/s Mohan Meakin Breweries Ltd. v. Excise & Taxation Commissioner, Chandigarh & Ors.("), Shah, J. (as he then was) observed :

"This brings us to the consideration of the meaning of • the expression "countervailing duties" as used in E,ntry 51, List II of the Seventh Schedule to the Constitution. The expression "countervailing duties" has not been defined it! the Constitution or the Bihar & Orissa Act 2 of 1915. We have, therefore, to depend upon its etymological sense and the context in which it has been u1Sed in Entry 51. In its etymological sense, it means to counter-balance; to avail against with equal force or virtue; to compensate for some-thing or serve as an equivalent of or \Substitute for : see Black's Law Dictionary, 4th Edn. 421. This would suggest that countervailing duty is imposed for the purpose of counterbalancing or to avail against something with equal force .or to compensate for something as an equivalent. Entry 51 in List II of the Seventh Schedule to the Consti-tution gives power to the State Legislature to impo:se duties of excise on alcoholic liquors for human consumption where the goods are manufactured or produced in the State. If also gives power to levy countervailing duties at the same or lower rates on similar goods manufactured or produced elselwhere in India. The fact that countervailing duties may be imposed at the same or lower rates suggests that the: are meant to counterbalance the duties of excise imposed on goods manufactured in the State. They may be imposed at the same rate as e!xcise duties or at "a lower rate, pre-sumably to equalise the burden after taking into account the cost of transport from the place of manufacture to the taxing State. It iseems, therefore, that countervailing duties are meant to equalise the burden on alcoholic liquors im-ported from outside the State and the burden placed by excise duties on alcoholic Jiquous manufactured or produced in the State. If no alcoholic liquors similar t~ those im-ported into the State are produced or manufactured, the right to impose counterbalancing duties of excise levied on the goods manufactured in the State will not arise. It may. therefore, be accepted that countervailing duties can only be levied if similar goods are actually produced or manufactur~d in the State on which excise duties are being levied."

(!) (1976] 3 s.c.c. 219.

(2) [1966] 1 S.C.R. 865. (3) [19761 3 s.c.c. 421.

Having seen that provision can be inserted in the excise law for collection of the excise duty at stage subsequent to the manufacture -0r production of the excisable article, we shall now proceed to examine the main contentions raised by counsel for the appellants. We have first to see as to how far the contention of counsel for the appel-lants that apart from manufacturer of Indian liquors and an owner of bonded wareholliSe (who in our opinion cannot but be regarded as primarily responsible for payment of excise duty and countervailing duty respectively in view of sections 21, 28 & 65 of the Andhra Pradesh Excise Act, 1968, and rules 3, 4, 5, 6, 67 & 76 of the Andhra Pradesh Distillery Rules, 1970, and condition No. 9 of the Distillery Licence granted under rule 5 of these Rules; rules 5 & 10 of the Andhra Pradesh Indian·Liquor (Storage in bond) Rules, 1969, conditions Nos. 7 & 1 c1 of the licence granted in form B.W. 1 under rule 5 (2), the phraseology of the application for receipt of liquor into the bonded warehouse prescribed by rule 9(2) and the terms of the counterpart agreement required to be executed by licensee of an Indian liquor bonded warehouse under rules 3 (2) and 5 (2) of these Rules) tr.e buyers of the said liquors are also liable under the law for payment of the aforesaid duties can be sustained. For proper determination -0f this question, it is necessary to recall the provisions of the Andhra Pradesh Distillery Rules, 1970 which have been set out in the earlier part of this judgment. The said rules particularly rules 79, 81, 82, 83 and 84 lend good deal of support, in our opinion, to the contention of counsel for the appellants and make every intending buyer of the Indian liquor liable for payment of the excise duty before obtaining the distillery pass and lifting the quantity mentioned therein from the distillery. Accordingly agreeing with counsel for the appellants we hold that intending purchasers of the Indian liquors who seek to obtain distillery passes are also legally responsible for payment of the excise duty which is collected from them by the authorities of the Excise Department. ·

The position in regard to the countervailing duty is not, howe1cr, dear though rule 10(1) of the Andhra Pradesh Indian Liquor (Storage in bond) Rules, 1969 and rules 5 (2) and 17 of the Andhra Pradesh Foreign and Indian Liquor Rules, l 970 enable the intending buveni of Indian liquors to remove the same from bonded warehouse · on payment of the said duty, to the excise authorities.

This is. not, howe".er, sufficient to dispose of the matter. The real and pivotal question that requires to be determined is whether t~e excise duty or _the count~~vailing duty, as the case may be, paid d!fectly to the exc1s~ authonties of the State or deposited directh· in the State excheg_uer .in respect of the Indian liquor by the buyers there-of before removmg it from any of the aforesaid distilleries or the ware-house can. be, said to form part of the taxable turnover of the appellants, as accord!ng to . sect10n 5 of. the Act which is the charging section, sales tax 1s requrred to be paid by the appellants on their turnover of the year. It will be useful at this stage to advert to the definitions of the words 'turnover' and 'sale' as given in clauses (s) and (n) of sub-section (1) of section 2 of the Act. Shorn of unnecessary details, these definitions run as under :

"turnover" means the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charg-ed) as the consideration for the sale or purchase of goods (whether such consideration be cash, deferred payment er any other thing or value) including any sums charged by t:Je dealer for anything done in respect of goods sold at the time of or before the delivery of the goods and any other sums charged by the dealer, whatever be the description, name or object thereof. . . . . . . . . . . . . . . . . . . . . . ...... . "sale" with all its grammatical variations and cognate ex-pressions means every transfer of the property in goods by one person to another in the course of trade or business, ior cash, or for deferred payment, or for any other valuable i:onsideration. . . . . . . .. .. . . . . . . . . . . . . . . . . . . . ... ...

"sale" with all its grammatical variations and cognate ex-pressions means every transfer of the property in goods by one person to another in the course of trade or business, ior cash, or for deferred payment, or for any other valuable i:onsideration. . . . . . . .. .. . . . . . . . . . . . . . . . . . . . ... ...

Jn !he instant case, it is not disputed .that excise duty or countervail-ing duty paid directly to the excise authorities by the purchasers of Indian liquors before removal thereof from the distilleries or the bond-·ed warehouse on the strength of the distillery and warehouse passes was not included in the bills of sale as the consideration for the sales, but !hat a:one, according to the Attorney General, is not determinative of the matter. He has invited our attention to the second part of the definition of the word 'turnover' as set out above and has stren-uously urged that as in addition to the price of the liquor set out in the bills of sale as consideration for the sales, other sums charged by the dealer at the time of or before the delivery of the goods also form part of turnover, and according to the well established canon of cornstruc:ion, taxing statute has to be interpreted reasonably so that there is no evasion of the tax, the phrase 'any sums charged by the dealer' occurring in the aforesaid definition of the word 'turnover' must be construed as meaning any item of expense including the excise duty or the countervailing duty to which the buyers were put by the manufacturers of the liquors or the owner of the bonded warehouse. We find ourselves unable to accept the construction sought to be put by him as it is opposed to the plain meaning of the said phrase. It will be 3dvantageous here to refer to the decisions of this Court in A. V. Fernandez v. The State of Kerala(l) where Bhagwati, J. speaking for the Bench after quoting the observations made by Lord Russell of Killowen in Inland Revenue Commissioners v. Duke of Westmins-ter(2) which were approved by the Privy Council in the Bank of Chet-tinad v. Income Tax Commissioner(3) observed :

·'It is no doubt true that in construing fiscal statutes and determining the liability of subject to tax one must have regard to the strict letter of the law and not merely to the spirit of the statute or the substance of the law. If the Revenue safa;fies the Court that the case falls strictly within the provisions of the Jaw, the subject can be taxed. If, on the other hand, the case is not covered within the four cor-ners of the provisions of the taxing statute, no tax can be

(1) [1957] S.C.R. 837. (2) [1936] A.C.l, 24.

(3) A.LR. 1940 P.C. 183.

::\1C DOWELL & co. v. COMM. TAX OFFICER (Jaswant Singh, J.) 923

imposed by inference or by analogy or by trying to probe into the intentions of the legislature and by considering what was the substance of the matter. We must of necessity, there-

fore, have regard to the actual provisions of' the Act and the rules made thereunder before we can come to the conclusion that the appellant was liable to assessment as contended by the Sales Tax Authorities."

Bearing in mind the principle set out in A. V. Fernandez's case (supra) the phrase 'any sums charged by the dealer' has to be unders4Jod in its ordinary popular sense. So construing the phrase, it means "what is demanded and collected or received by the dealer." In the instant cases, the exci1se duty or the countervailing duty has, as alreadf stated, not been charged or received by the dealer but has been charged by the excise authorities and deposited directly by the buyers of the liquor in the State exchequer. It is, therefore, difficult tO hold that excise duty or countervailing duty was charged by the appellants. The reason for inclusion of tax or duty in the turnover was ex-plained in two decisions of this Court bearing the same cause title viz. Messrs George Oakes (Private) Ltd. v. The State of Madras & Ors. (12 S.T.C. 476) and (13 S.T.C. 98). fn the first of these cases, it was observed :-

"Under the definition of turnover the aggregate amount for which goods are bought or sold is taxable. This aggre-gate amount includes the tax :JJS purt of the price paid by the buyer. The amount goes into the common till of the dealer till he pays the tax. lt is money which he keeps · usin~ for his business till he pays it over to Government. Indeed, he may turn it over again and again till he finally hands it to-Government."

In the other decision, Hidayatullah, L (as he then was) said :

"In laws dealing with sales tax, turnover has, in England and America also, been held to include the tax. The rea-son for such inclusion is stated to be that the dealer who realises the tax does not hand it over forthwith to Govern-ment but keeps it with him, and turns it over in his business before he parts wit:h it. Thus, the tax becomes, for the time being, p<1rt of the circulating capital of the tradesman, and is turned over in his business. Again, it was said that the price paid by the purchaser was not so much money for the article plus tax but composite sum. Therefore, in cakulating the total turnover, there is nothing wrong in treating the tax as part of the turnover, because "turnover" means the amount of money which is turned <Jver in the business."

In the instant case;, the excise and countervailing duties did not go into the common tills of the appellants and did not become part of their circulating capital. We are, therefore, of the view that the 9-t338SCJ/76 .

Sales Tax authorities were not competent to include in the turnovers of the appellants the excise duty and the countervailing duty which was not charged by them but was closed by and paid directly to the excise authorities by the buyers of the liquors as stated above.

The Full Bench decision of the High Court of Andhra Pradesh in The Government of Andhra (Now Andhra Pradesh) v. East India Commercial Co. Ltd.(') relied upon by the Revenue is clearly distin-guishable. In that case, it was the actual collection of certain sums as dharamarn or charity by the dealer from the purchasers on the occasion of the sales that made the learned Judges to hold that they constitute part of the turnover. In Messrs George Oakes (Private) Ltd.'J case (supra) also, the tax in question was collected by the registered dealer.

We have, therefore, no hesitation in holding that the e~ise duty and the countervailing duty paid directly by the buyers of the Indian liquors as stated above did not constitute part of the turnovers of the appellants.

For the foregoing reasons, we allow the appeals and set aside the impugned judgments and orders. In the circwnstances of the case, we leave the parties to pay and bear their own costs of t!hese appeals.

P. B. R.

Appeals allowed.