Case Note & Summary
The petitioners, Rajarambapu Patil Sahakari Sakhar Karkhana Limited (a cooperative society) and its office bearer, are manufacturers of country liquor holding a CLI licence under the Maharashtra Country Liquor Rules, 1973 framed under the Bombay Prohibition Act, 1949. They are also registered under the Bombay Sales Tax Act, 1959 (the said Act) and the Central Sales Tax Act, 1956. The country liquor manufactured by them is subject to State Excise Duty under the Bombay Prohibition Act and sales tax under the said Act. The dispute pertains to the period from 01.10.1995 to 14.11.1996 and 15.11.1996 to 14.01.1997. Up to 30.09.1995, country liquor was exempt from sales tax under Entry No.168 of a notification under Section 41 of the said Act. By a notification dated 22.9.1995, the sale of country liquor became taxable at a reduced rate of 4% under Group A entry No.15. The petitioners paid sales tax at 4% on the basic price charged in their sale bills. However, the Sales Tax Officer sought to include the State Excise Duty paid directly by the purchasers (CLII licence holders) in the sale price for computing sales tax. The petitioners challenged this inclusion, arguing that the excise duty is not part of the consideration for the sale and is paid directly by the purchaser to the State. The court examined the definition of 'sale price' under Section 2(28) of the said Act and the scheme of the Bombay Prohibition Act. It held that the State Excise Duty is a statutory liability of the purchaser and is not part of the sale price. The duty is paid directly by the purchaser to the State and does not flow through the seller. Therefore, it cannot be included in the taxable turnover of the petitioners. The court allowed the petition, quashed the impugned notices, and directed the respondents to refund the excess tax paid by the petitioners on the excise duty component within three months.
Headnote
A) Sales Tax - Sale Price - Inclusion of Excise Duty - Section 2(28) Bombay Sales Tax Act, 1959 - State Excise Duty paid directly by the purchaser to the State under the Bombay Prohibition Act, 1949 is not part of the consideration for the sale and hence not includible in the sale price for sales tax - The court held that the duty is a statutory liability of the purchaser and does not flow from the seller to the State as part of the sale transaction (Paras 1, 6-8). B) Sales Tax - Exemption Notification - Section 41 Bombay Sales Tax Act, 1959 - Notification dated 22.9.1995 reducing tax rate to 4% on country liquor - The notification applies only to the sale price as defined, and excise duty paid directly by purchaser cannot be added to the sale price for computing tax - Held that the petitioners are entitled to refund of excess tax paid on the excise duty component (Paras 2, 9-10).
Issue of Consideration
Whether State Excise Duty paid directly by CLII licence holders (purchasers of country liquor) to the State is to be included in the sale price for the purpose of sales tax under the Bombay Sales Tax Act, 1959.
Final Decision
The court allowed the writ petition, quashed the impugned notices/orders, and directed the respondents to refund the excess sales tax paid by the petitioners on the excise duty component within three months.
Law Points
- State Excise Duty paid directly by purchaser not includible in sale price for sales tax
- Section 2(28) definition of sale price
- Section 41 exemption notification
- Bombay Sales Tax Act 1959
- Bombay Prohibition Act 1949
