Kondaiah, J.
1. The questions involved in these cases being common and the facts being similar, we may conveniently dispose of the same by a common judgment stating the facts in T.R.C. Nos. 27 and 28 of 1974, which are comprehensive enough to take in all points at issue.
2. The petitioner in T.R.C. Nos. 27 and 28 of 1974 is M/s. Shah Wallace & Co. Ltd., Madras, who manufactures and produces alcohol and liquors in its factories in the State of Andhra Pradesh. The company sells the alcohol and liquors manufactured by it to its customers on the basis of permits granted by the State Government and the Excise Commissioner. The modus operandi that is adopted by the parties in the transactions of sales of such liquors or alcohol is as follows: The manufacturer enters into agreements with its customers or dealers, who purchase the goods. An indent by the buyer for the adequate quantity of liquor or alcohol will be made on the manufacturer, who, in its turn, would send to the purchaser a certificate known as proof strength certificate. Thereupon the customer-buyer applies to the excise authorities for the grant of transport permit in his own name and deposits the requisite sum of excise duty into the Government treasury and obtains a challan. Thereafter, the concerned excise authorities would issue the transport permit in the name of the buyer who sends the transport permit and the challan to the manufacturer. The manufacturer raises the invoice and despatches the goods and issues the sale bill in respect of the transaction to the customer. But, however, the amount of excise duty paid by the customer or buyer to the Government in his own name does not find a place in the sale bill.
3. For the assessment year 1970-71, a sum of Rs. 80,307.30 was claimed to have been paid by the petitioner's customers directly towards excise duty payable in respect of the excisable articles, namely, alcohol and liquor, sold by the petitioner during the year. The petitioner, therefore, claimed that as the excise duty of Rs. 80,307.30 has been paid by the purchasers themselves of their own accord in their own right and has not been included in the sale bills, it does not form part of the consideration or sale price and, therefore, the same cannot be added to the total turnover of its business for the year. The assessee also claimed deduction of Rs. 14,234.99 pertaining to the value of unserviceable gunnies sold, on the ground that it is not a dealer in gunnies. Rejecting the claim of the petitioner, the assessing authority completed the assessment for the year 1970-71 on 31st December, 1971, adding the disputed turnover of Rs. 94,542.29 consisting of Rs. 80,307.30 towards excise duty and Rs. 14,234.99, the value of gunnies sold by the assessee during the year and determined the net taxable turnover at Rs. 33,66,245.93. On appeal, the Assistant Commissioner (CT), Guntur, in his order dated 18th June, 1973, confirmed the assessment in respect of the disputed turnover and dismissed the appeal.
4. After the completion of the original assessment of the petitioner's turnover for the year 1970-71 in respect of its business at Vijayawada, the Commercial Tax Officer reopened the assessment for the year 1969-70 under Section 14(4) of the Andhra Pradesh General Sales Tax Act, 1957, and, by his order dated 16th December, 1971, determined the escaped turnover of the assessee at Rs. 25,121.51, which relates to the amount of excise duty paid by the buyers. Aggrieved by the decision of the Commercial Tax Officer, the assessee preferred an appeal to the Assistant Commissioner, Commercial Taxes, Guntur, disputing the turnover of Rs. 4,31,195.06, consisting of Rs. 25,121.51 relating to excise duty paid by the purchasers to the Government, Rs. 4,01,387.07 relating to freight charges and Rs. 4,686.48, the value of unserviceable gunnies sold during the year of assessment. The last two items concerning freight charges and value of unserviceable gunnies sold were not disputed before the assessing authority at the time of the original assessment and, further, no appeal was preferred by the assessee in respect of the addition of those two items to the total taxable turnover in the original assessment and they have been allowed to become final. The appellate authority, holding that the turnover of Rs. 25,121.51 relating to the excise duty was an escaped turnover and has been rightly reassessed and that the assessee is not entitled to reopen the other two items, which have been allowed to become final, dismissed the appeal. The further appeals, i.e., Tribunal Appeals Nos. 331 of 1973 and 5 of 1974, preferred by the assessee to the Sales Tax Appellate Tribunal against the orders of the Assistant Commissioner dismissing its appeals for the assessment years 1970-71 and 1969-70 are without success. Hence, these two tax revision cases.
5. The sum and substance of the contentions advanced by Sri P. Venkatarama Reddi, Sri S. Dasaratharama Reddi and Sri Challa Seetharamaiah, the learned Counsel for the assessee-petitioners in this batch of cases, is four-fold:
(1) Excise duty paid by a buyer directly to the excise authorities in respect of liquor or any excisable article purchased by him from a distiller or manufacturer does not constitute the sale price payable to the seller towards goods supplied and, therefore, it does not form part of the assessees' turnover.
(2) A transaction of sale of liquor is completed at the distillery at a point of time when the transport permit is sent by the seller to the buyer and the seller obtains the invoice when the goods are earmarked for the buyer and, therefore, excise duty is exigible on liquor at the point of transport or removal from the godown but not till then.
(3) At the stage of reassessment, the validity of levy of sales tax on items which were not disputed by the assessees at the earlier or original assessment, viz., freight charges and value of unserviceable gunnies sold, can be challenged as reassessment is nothing but fresh assessment of the entire turnover of the assessee-dealer.
(4) The State cannot levy sales tax on the amount of freight charges if it is not made a part of the sale price and, in any event, an opportunity must be given to the assessee to raise dispute with regard to the inclusion of freight charges in his turnover. This claim of the petitioners is resisted by Sri D.V. Sastry, the learned Government Pleader for Commercial Taxes, contending inter alia that excise duty on liquor or any excisable article is leviable on the distiller or the manufacturer at the point of its manufacture or production but it is not a duty on a buyer nor is it leviable at the point of transport or removal on sale of goods, that the assessing authority is not competent to reopen the assessment in respect of items, which have become final in the original assessment as it has jurisdiction to reassess only escaped turnover and, therefore, the inclusion of freight charges and the value of unserviceable gunnies sold, in the total turnover of the assessees at the stage of the original assessment proceedings cannot now be permitted to be challenged and that there is no merit in these petitions.
6. Upon the respective contentions raised on behalf of the parties, the following questions arise for our decision:
(1) Whether, on the facts and in the circumstances, the excise duty paid by the buyers directly to the State Government in respect of liquor purchased by them from the assessee-distillers or manufacturers forms part of the assessable turnover of the assessees ?
(2) Whether the assessing authority has jurisdiction and is competent to reopen and consider at the stage of reassessment proceedings, items of turnover which were not disputed by an assessee at the original assessment ?
(3) Whether the value of unserviceable gunnies sold and freight charges are or are not permissible deductions
7. We shall first examine question No. (1). The answer to this question turns upon the provisions of Section 21 of the Andhra Pradesh Excise Act, 1968 (hereinafter referred to as the Excise Act), and the nature and character of excise duty. The Andhra Pradesh State Legislature enacted Section 21 of the Excise Act by virtue of the powers conferred on it under entry No. 51 of List II (otherwise known as State List) of the Seventh Schedule to the Constitution, which reads thus:
Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India--
(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs and narcotics;
but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.
8. It is pertinent to notice that under entry No. 84 of List I of the Seventh Schedule to the Constitution, the Parliament is competent to make any law in respect of duties of excise on tobacco and other goods manufactured or produced in India and that power is specifically indicated to be not in existence in so far as alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics are concerned. The Andhra Pradesh State Legislature, therefore, undoubtedly possesses legislative competence to make a law to impose excise duty on alcoholic liquors for human consumption manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India. The charging section, viz., Section 21 of the Excise Act, empowers the State Government to levy excise duty on any excisable article manufactured or produced in the State. 'Excisable article' defined under Section 2(9) admittedly takes in any alcoholic liquor for human consumption. 'Liquor' is defined under Clause (21) of Section 2 thus:
'Liquor' includes--
(a) spirits of wine, denatured spirits, methylated spirits, rectified spirits, wine, beer, toddy and every liquid consisting of or containing alcohol; and
(b) any other intoxicating substance which the Government may, by notification, declare to be liquor for the purposes of this Act.
9. 'Manufacture' defined under Section 2(22) includes 'every process, whether natural or artificial, by which any fermented, spirituous or intoxicating liquor or intoxicating drug is produced, prepared or blended, and also redistillation and every process for the rectification of liquor'. From a reading of the definitions of 'excisable article', 'liquor', and 'manufacture', we have no hesitation to hold that the alcohol or liquor, which is manufactured or produced by the assessees in their distilleries and sold to their customers and dealers, is an excisable article manufactured or produced in the State of Andhra Pradesh. Similar construction has to be given to Sub-section (2) of Section 21 in so far as it relates to the levy of countervailing duty. Section 22 provides for the modes of recovery of excise duty. Sections 21 and 22 specifically disclose that the rate of excise duty payable on an excisable article is as indicated or specified in the notification made by the Government in this regard. But, however, such rate or rates of payment of excise duty must not exceed the rates mentioned in the schedule to the Excise Act. We are concerned more with the nature and character of the charge or levy of excise duty rather than the rate at which it is charged or levied. The incidence of taxation or duty cannot be equated or confused with the machinery provided for the collection thereof.
10. The crux of the problem is whether it is the distiller-manufacturer of liquor or the purchaser of liquor from the manufacturer that is liable under law to pay the excise duty. If it is the manufacturer that is statutorily liable to pay excise duty, it matters little whether it is paid by himself or anyone on his behalf and the payment of excise duty by any one other than the manufacturer must be deemed in law to be for and on behalf of the manufacturer. Hence, the excise duty may be paid either by the manufacturer or instead of him, the dealer or the purchaser who intends to take delivery of liquor. It must not be forgotten that it is always open to the manufacturer to pay the requisite duty himself and obtain the transport permit and deliver the goods after receiving the sale price inclusive of the excise duty and other amounts incurred therefor and include the same in the bill of sale. In other words, he can pay excise duty and pass on the same to the buyer as part of the sale consideration. There is no prohibition under law preventing the manufacturer from paying the excise duty, but, on the other hand, Section 21 imposes a statutory liability and obligation on the manufacturer to pay excise duty. Section 21, no doubt, does not specify the person who is liable to pay the excise duty but it certainly indicates the time and the point at which the liability to pay excise duty is created. Excise duty is chargeable or leviable on the goods manufactured or produced in the State. The intendment of the legislature as to the person who is liable to pay excise duty, though not specifically mentioned, must be gathered from the scheme of the Excise Act and the words employed in Section 21. If the words employed in Section 21 are susceptible of more than one interpretation, the one which is consistent with the taxing intent must be allowed to prevail even though the provision as such, divorced from its context, may appear to be ambiguous. On a close reading of the provisions of Section 21 with the aforesaid legal background relating to the interpretation of the statutes, we have no doubt in our minds that excise duty is chargeable at the point of production or manufacture of liquor or any other excisable article within the State. Excise duty, therefore, is charged or levied on the producer or manufacturer of excise article notwithstanding the fact that Section 21 does not specifically indicate the person who is liable to pay the same.
11. This view of ours gains support from the decision of a Division Bench of this Court in Pithapuram Taluk Tobacco, Cigars and Soda Merchants' Union v. State of Andhra Pradesh [1958] 9 S.T.C. 723 at 741, 745-746, wherein a Division Bench of this Court had to consider the impact of the absence of specification of the person from whom tax is chargeable under Sub-section (2-B) of Section 3 of the Madras General Sales Tax Act, 1939, as amended by Andhra Amendment Act 16 of 1956. The learned Judge, Jaganmohan Reddy, J. (as he then was), speaking for the court, observed thus:
'Sub-section (2-B) of Section 3 no doubt does not specify the person who is to pay the tax, i.e., whether the seller or the purchaser. All that it says is that the goods specified therein shall be liable to a tax at the rate and only at the point specified as applicable thereto, while Sub-section (2-A) clearly states that the sale of any of the goods mentioned therein shall be liable to tax at the rate specified and applicable thereto, only at the point of the first sale effected in the State by a seller.
The learned Judge proceeded to observe thus:
When it comes to Sub-section (2-B) all that is specified is the point at which the tax is to be levied, viz., at the point of purchase, and in so far as items (i) and (ii) are concerned at the point of purchase by the last dealer who buys in the State and with respect to items (iii) and (iv) at the point of first purchase in the State. No doubt there is an omission to specify that it is the purchaser who is to pay at the point of purchase, an omission which if the draftsman had been careful would not have created this problem. All the same the intention appears to us to be clear, in seeking to impose the tax on the purchaser.
12. Hence, the mere omission to specify the name of the manufacturer or distiller as the person liable to pay excise duty in Section 21 would not absolve him from his liability to pay excise duty on the goods manufactured in his factory. We may add that the same conclusion would follow even if we apply the test of nature and character of excise duty. The creation of a charge, or incidence of taxation, of excise duty turns upon the provisions of the very charging Section in the statute and no rule-making authority can, without proper legislative competence, make any law in that regard. The State Government, by virtue of the powers vested in it under Section 72 of the Excise Act, framed rules prescribing the mode and manner of collection of excise duty. We may refer to those rules at a later stage in some detail, but suffice it to state at this stage that the modes of recovery of excise duty provided in the statute and the machinery for collection thereof indicated in the rules are different and distinct from the very charge or levy of excise duty. We may conveniently advert at this stage to some leading decided cases where the nature of the excise duty has been determined.
13. The earliest one is In re Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, 1938 A.I.R. 1939 F.C. 1 at 36, wherein the learned Gwyer, C.J., holding that the nature of excise duties and the extent of the federal legislative power to impose them cannot be confused with each other, observed thus:.a brief examination of those duties shows that in practically all cases it is the producer or manufacturer from whom the duty is collected.... Subject always to the legislative competence of the taxing authority, a duty on home-produced goods will obviously be imposed at the stage which the authority find to be the most convenient and the most lucrative, wherever it may be; but that is a matter of the machinery of collection, and does not affect the essential nature of the tax. The ultimate incidence of an excise duty, as typical indirect tax, must always be on the consumer, who pays as he consumes or expends; and it continues to be an excise duty, that is, a duty on home-produced or home-manufactured goods, no matter at what stage it is collected.
14. The same view has been reiterated by the Federal Court in Province of Madras v. Boddu Paidanna and Sons A.I.R. 1942 F.C. 33 at 35. While considering the scope of an excise duty in respect of which sales tax was sought to be levied under the Madras General Sales Tax Act, 1939, the learned Chief Justice ruled:
There is in theory nothing to prevent the Central Legislature from imposing a duty of excise on a commodity as soon as it comes into existence, no matter what happens to it afterwards, whether it be sold, consumed, destroyed or given away.... It is the fact of manufacture which attracts the duty, even though it may be collected later....
15. The aforesaid view of the Federal Court has been approved by the Privy Council in Governor-General in Council v. Province of Madras A.I.R. 1945 P.C. 98 at 101. The learned Lord Simonds, speaking for the Judicial Committee, ruled:. a duty of excise is primarily a duty levied on a manufacturer or producer in respect of the commodity manufactured or produced. It is a tax on goods not on sales or the proceeds of sale of goods.... The two taxes, the one levied on a manufacturer in respect of his goods, the other on a vendor in respect of his sales, may,... in one sense overlap. But in law there is no overlapping. The taxes are separate and distinct imposts. If in fact they overlap, that may be because the taxing authority, imposing a duty of excise, finds it convenient to impose that duty at the moment when the excisable article leaves the factory or workshop for the first time on the occasion of its sale. But that method of collecting the tax is an accident of administration: it is not of the essence of the duty of excise, which is attracted by the manufacture itself.
16. The law on this subject has been settled by the Supreme Court in R.C. Jall v. Union of India A.I.R. 1962 S.C. 1281 at 1287. The learned Judge, Subba Rao, J. (as he then was), speaking for the court, after reviewing the entire case law on the subject, including the aforesaid two decisions of the Federal Court and the decision of the Privy Council, held thus:
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 a 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, its ultimate incidence will always be on the consumer. Therefore, subject always to the legislative competence of the taxing authority, the said tax can be levied at the convenient stage so long as the character of the impost, that is, it is a 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. Whether in a particular case the tax ceases to be in essence an excise duty, and the rational connection between the duty and the person on whom it is imposed ceased to exist, is to be decided on fair construction of the provisions of a particular Act.
17. The same view has been reaffirmed by the Supreme Court in In re Sea Customs Act (1878), Section 20(2) A.I.R. 1963 S.C. 1760 at 1776. The learned Sinha, C.J., observed:.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.
18. The aforesaid decisions are authorities for the proposition that excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country whereas sales tax is a tax on a sale or purchase of goods. Though both excise duty and sales tax are levied with reference to goods, they are different imposts. In the case of excise duty, the imposition is on the act of manufacture or production whereas in the case of sales tax it is on the act of sale or purchase. The two taxes may in one sense overlap but in law there is no overlapping. The imposition of each of the aforesaid two imposts is different from the machinery and methods provided in the respective statutes or the Rules made thereunder for its collection. As observed by Venkatarama Ayyar, J., in Bengal Immunity Co. Ltd. v. State of Bihar [1955] 6 S.T.C. 446 at 619 (S.C.):
A power to tax is a matter of substantive law, whereas the machinery sections providing for the execution of that power, such as assessment, and collection of tax, pertain to the domain of adjectival law, and the two are distinct and separable. It is elementary law that the power to tax does not depend on the ability to realise it.
19. See also British Columbia Electric Railway Co. Ltd. v. The King [1946] A.C. 527. The method of collection or the machinery for recovery of the tax is an accident or incident of administration but not the essence of the duty of excise or the sales tax. On the application of the aforesaid principles enunciated by the authoritative pronouncements of the Federal Court, Privy Council and the Supreme Court, we have no hesitation to hold that the excise duty is a duty charged or chargeable at the point of manufacture or production of liquor in the country. The mere fact that the person or persons who should pay the excise duty for any excisable article is, or are, not specifically mentioned in Section 21 of the Excise Act does not in any way lend support to the plea of the petitioners that no excise duty was intended to be levied by the legislature the moment an excisable article is manufactured or produced. Though Section 21 or any other provision in the Excise Act does not specifically indicate that it is the manufacturer or producer of liquor that should pay the excise duty, we cannot but in the circumstances infer that it is the manufacturer or producer and none else that is statutorily liable to pay the excise duty on the liquor manufactured at his factory irrespective of the fact when and how it has been collected by, or paid to, the State. Hence, the statutory liability to pay excise duty on the liquor manufactured by the manufacturer or the producer would not be shifted to the buyer or purchaser or any one subsequently. The concerned authorities have only shown indulgence or consideration towards the manufacturer in the payment of the excise duty chargeable at the point of manufacture or production of liquor by postponing the same to a later convenient date, that is, they can recover or collect the same at the time of the sale or delivery of the liquors by the manufacturer. Otherwise, the manufacturer who undertakes this industry would find it difficult to sustain his business. The State also would not suffer any loss as the excise duty would certainly be collected at the time of delivery of the goods. Even in case no purchaser pays excise duty, the statutory liability of the manufacturer would not be wiped out. In those circumstances, any excise duty, even if paid by the purchaser before the actual delivery of the liquor from the distillery or godowns must be construed to be one paid for and on behalf of the manufacturer who is statutorily liable to pay the same. The mere payment of the excise duty by the buyer even before actual delivery of the liquor and his conduct in applying for distillery pass as well as transport pass or permit from one place to another would not in any way alter the legal position. True, as submitted by Mr. Challa Seetharamaiah, that an applicant for distillery pass shall be responsible for the correct calculation and full payment of the excise duty on liquor removable under a pass in form D-6 and also Rules 82 to 84 of the Andhra Pradesh Distillery Rules, 1970. In fact, some of the purchasers of liquor herein have applied for and obtained distillery passes and transport permits on payment of excise duty.
20. We are unable to agree with the petitioners that excise duty is exigible at the point of transport or removal. Rules 3, 4, 5, 6, 76(a) and (b) and 79 to 84 of the Andhra Pradesh Distillery Rules, on which strong reliance has been placed, may be noticed. Section 72 of the Excise Act empowers the State Government to make rules for carrying out all or any of the purposes of the Act. Rule 3 provides for making an application for the grant of a licence to construct and work a distillery in form D-1 and addressed to the Commissioner. Such application shall be accompanied by plans of the building and other documents specified in Clauses (a) to (d) of Sub-Rule (2) of Rule 3. Rule 4 makes it abundantly clear that no licence shall be granted unless the applicant deposits a sum not less than Rs. 10,000 as a security for the fulfilment of all the conditions of his licence and satisfies the Commissioner that the proposed buildings, plant and apparatus to be used are built in accordance with the regulations. Rule 5 empowers the Commissioner to grant a licence to the applicant if he is satisfied that the applicant has fulfilled the conditions specified in Rule 4. Rule 6 requires excise duty to be paid at such rate as the Government may specify from time to time. Every licensee has to furnish to the satisfaction of the Commissioner a bank guarantee for a sum not less than Rs. 25,000 for every one lakh litres of estimated monthly production. Such bank guarantee shall be made by a licensee immediately before starting production. If the licensee executes an agreement binding himself, his heirs, legal representatives and assignees to observe the conditions of licence and hypothecating the buildings, machinery, apparatus together with the stock as security for the payment of money which may be due to the Government towards duty, no bank guarantee need be provided. Rule 76(a) prohibits the removal of any spirit or liquor manufactured or stored unless the excise duty specified in Rule 6 is paid before such removal. Rule 76(b) only provides for the manner and method of the removal of spirit. Rule 79 provides for the granting of a distillery pass for the removal of spirit fit for human consumption on payment of the requisite excise duty to (a) a person holding a licence for sale of spirit, (b) a person holding a permit signed by an officer of any other State for the export of such spirit, (c) a person holding a permit signed by an officer for export of such spirit to an Union Territory, or (d) a person holding a permit from the Excise Superintendent to transport or export rectified spirits or wine from one district or State to another. Rule 80 empowers the licensee to act as an agent in removing spirit for any licensed vendor, whereas Rule 81 provides for an application for distillery pass for removal of spirit or liquor to be made in writing to the distillery officer and accompanied by a challan in original in support of payment of excise duty therefor and the certificate or permit required under the Rules. Rule 82 provides for obtaining a challan for presentation with the cash at a treasury or sub-treasury of a district and presentation of the treasury receipt in token of his having paid the duty. The distillery officer, thereupon, shall affix it to the counterfoil of form D-6. Rule 83 makes an applicant for a distillery pass responsible for the correct calculation and full payment of excise duty due upon spirit removed. Rule 84 empowers the distillery officer to issue the spirit under a pass in form D-6 if he is satisfied that the applicant is entitled under the rules to remove spirit and that the requisite excise duty has been paid. He shall send a duplicate pass to the Excise Superintendent of the district of destination. The rules referred to above are no doubt statutory but none of them alter the legal effect of the statutory liability of the manufacturer to pay the excise duty on the liquor or spirit manufactured at his factory. But, on the other hand, Rule 6, which requires the licensee who owns and works a distillery to furnish a bank guarantee immediately before starting production on the estimated monthly production of liquor or spirit, makes it abundantly clear that it is the manufacturer that is made liable or responsible to pay the requisite excise duty. If the intendment of the law-makers were such that the liability to pay the excise duty be fastened to the purchaser or the transaction of sale or purchase of liquor, there was no necessity or need for requiring the manufacturer to furnish sufficient security for the payment of money which may be due to the Government towards duty. Such security, which may be in the form of bank guarantee or a written agreement by the licensee binding himself, his heirs, legal representatives and assignees and hypothecating the buildings, machinery, apparatus together with the stock, has been made a condition precedent for the commencement or starting of the very manufacture or production of liquor or spirit with the sole purpose of making the manufacturer liable for the excise duty payable to the Government in respect of the manufactured liquor or spirit in his factory. Rules 79 to 84 would not in any way come to the aid of the petitioners as they only provide for the machinery to collect the excise duty.
21. Rules 16, 17 and 18 of the Andhra Pradesh Foreign Liquor and Indian Liquor Rules, 1970, on which much stress has been laid by the petitioners, may conveniently be referred to at this stage. Rule 16 requires a holder of a licence in Indian liquor and foreign liquor to apply to the Excise Superintendent of the district if he desires to transport such liquor from one licensed premises to another within the same district. If he intends to transport liquor to a different district, he must apply to the Excise Superintendent of the district from which the liquor is transported. The application must be in form FL-7 and shall bear a court-fee stamp of the value of Rs. 5. Rule 17 provides for the issuance of a permit in form FL-8 for transport of liquor by the Excise Superintendent after making such enquiry as he may consider necessary and on being satisfied that the excise duty on the liquor to be transported has been paid. Rule 18 prescribes the procedure for transport of liquor. If it is within the State, Sub-rule (1) thereof comes into play. Rules 16, 17 and 18, which provide for transport permits would not in any way come to the aid of the petitioners in support of their contention that excise duty is chargeable at the point of removal or transport of liquor or spirit but not at the stage of manufacture or production.
22. We shall now advert to the contention of the petitioners that the amount of excise duty has not been included in the bills of sale issued by the manufacturers and, therefore, it does not form part of the 'turnover' defined under Section 2(s) of the Andhra Pradesh General Sales Tax Act, 1957 (hereinafter referred to as the Sales Tax Act), and, consequently, sales tax is not exigible in respect of excise duty. By virtue of item No. 26 of the First Schedule to the Sales Tax Act, all liquor other than country liquor is taxable at the point of its first sale in the State. The liquor produced or manufactured by the petitioners is Indian-made foreign liquor, which falls under item No. 26 of the First Schedule and it is the first sale of such liquor that is taxable. Sales tax, no doubt, is payable or chargeable on the total turnover of a dealer. All the petitioners herein are dealers whose total turnover is more than Rs. 15,000 for a year and sales tax is payable by them on their total turnover. In order that the petitioner-dealers can be made liable to pay sales tax on the amounts of excise duty paid by the purchasers, such amounts must be construed to be part of their total turnovers on which sales tax is leviable. In order to appreciate the contention of the petitioners, it is not only useful but necessary to examine the concept and content of the terms 'turnover' and 'total turnover' and the impact of the omission to mention the amount of excise duty in a bill of sale of liquor. 'Turnover' is defined under Section 2(s) of the Sales Tax Act as 'the total amount set out in the bill of sale (or if there is no bill of sale, the total amount charged) as the consideration for the sale or purchase of goods'. The term 'consideration' occurring in Section 2(s) is not defined in the Sales Tax Act but it is defined under Section 2(d) of the Indian Contract Act, which reads as follows:
When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.
'Total turnover' is defined under Section 2(r) thus:
'Total turnover' means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover, is liable to tax.
23. It is now pertinent to examine whether the amount of excise duty which was paid by a buyer directly to the Government and was not included in the bill of sale forms part of the consideration for the sale or purchase of liquor. If it can be held to be part of the consideration for the sale, consequently it must be held to form part of the assessee's turnover. If, however, the amount of excise duty paid by the buyer directly to the Government is not considered to be a part of the consideration for the sale of liquor, it cannot be said to form part of the assessee's turnover. Consideration is nothing but the total sale price which has been paid by the purchaser towards the transaction of sale. It is the ultimate total sum of money paid by the purchaser towards the transaction of sale--be it before, or at, or after the sale--that should enter into the computation of the 'turnover'. There may be cases where the parties agree to pay and receive the total consideration or sale price partly in cash and partly in kind. The payment may be either before, or at, or after the transaction of sale. There may or may not be a bill of sale. Stress is on the total amount charged by the seller and paid by the buyer towards the consideration for the transaction of sale. The seller may direct the buyer to pay a part of the sale consideration directly to him or to anyone as per his direction or towards his liability. The heart of the matter is what is the detriment to the buyer in so far as the transaction of sale is concerned. Admittedly, the consideration or sale price for the goods must invariably proceed from the purchaser. Therefore, what exactly has been spent by the buyer towards the transaction of sale or purchase is material for the purpose of determining the total sale price or consideration. In addition to the sale price, charity or dharmam is also being collected from the purchasers as a matter of trade usage in some transactions. So also processing and packing charges and sales tax payable by the dealer are collected. In such an event, the fact that the payment of dharmam or charity, or processing or packing charges or the sales tax payable by the dealer is not included in the bill of sale as part of the price but separately charged would not in any way conclusively establish that it does not form part of the total consideration or sale price. When judged from the standpoint of the purchaser, such payments undoubtedly constitute part of the sale consideration and, consequently, form part of the turnover of the seller. Ultimately, whatever has been spent or paid by the purchaser for the goods must be held to be the sale price otherwise known as the consideration for the purchase. In the cases on hand, the purchaser has paid excise duty directly to the Government and the value of the liquor to the assessee-manufacturer. Applying the aforesaid detriment theory to the buyer, we must hold that the total sum of money paid by the purchaser is the sum of money paid under the bill of sale to the assessee-seller plus the amount of excise duty paid by him to the Government in respect of the liquor purchased by him. If excise duty has been paid by the dealer himself instead of the buyer, he would have certainly included the same in the bill of sale as part of the price and passed it on to the purchaser and, in such an event, it would have undoubtedly formed part of the turnover of the assessee-distiller. The incidence of excise duty, an indirect tax, would ultimately be passed on to the consumer just as in the case of the sales tax the ultimate economic incidence of which is on the consumer or the last purchaser. Hence, the excise duty paid by the buyer, though not included in the bill of sale or invoice, would, without doubt, form part of the total consideration paid by him and it constitutes the turnover of the assessee-seller. The fact that the payment of excise duty was made either voluntarily or without a specific direction from the distiller-assessee does not in any way alter the legal position.
24. This view of ours gains support from certain decided cases to which we shall presently refer. A Full Bench of this Court in Government of Andhra v. East India Commercial Co. Ltd. [1957] 8 S.T.C. 114 at 119 and 125-126 (F.B.) held that the sums collected by a dealer from purchasers as dharmam or charity on the occasion of the sales effected by him must be included in his turnover. The learned Judge, Viswanatha Sastri, J., who spoke for the court, observed thus:
The consideration proceeding from the buyer is the money which he has to part with and pay to the seller. The detriment to the buyer is the whole of the sum of money he has to pay the seller for, and on the occasion of, the sale and that is the consideration for the sale which should enter into the computation of the 'turnover'. The dealer may collect and the purchaser may pay in meal or in malt. The invoice or bill of the seller might show the price of the goods and the amount of sales tax separately but the purchaser has to pay the consolidated amount of the bill as consideration for the purchase, that is to say, as the price of the goods. As observed by the Supreme Court in State of Bombay v. United Motors [1953] 4 S.T.C. 133 (S.C.)--the decision has not been upset on this point by the Bengal Immunity Co.'s case [1955] 6 S.T.C. 446 (S.C.)--the incidence of sales tax is really on the consumer and it is, in substance, a tax imposed on the goods on the occasion of sale. The ultimate economic incidence of the sales tax is on the consumer or the last purchaser and whatever he pays for the goods is paid only as price, that is to say, as consideration for the purchase. The statutory liability, however, for payment of sales tax is laid on the dealer on his total 'turnover' whether or not he realises the tax from the purchasers.
The learned Judge proceeded to observe:
The fact that the payment is voluntary does not affect the question.... The fact that the payment to charity is made as a matter of trade usage only shows that it is an incident that attaches to every contract for sale of goods, though not expressly stipulated.... The fact that the payment is not shown in the bill or invoice as part of the price but separately as an item charged to the purchaser is not a decisive factor. So are processing and packing charges and sales tax payable by the dealer and yet they are included in his turnover. Dharmam is usually a small percentage of the price proper and is charged to the buyer. The buyer has to pay the total amount of the bill, though it is split up into price plus packing charges plus sales tax plus dharmam plus sundry charges. Nor does the fact that the collection for dharmam is utilised by the dealer for charitable purposes decide the issue. The consideration for the sale is the whole of the amount paid by the purchaser and it makes no difference to him whether the consideration is paid to the dealer or to a third person on his direction. The detriment to the buyer is the same whether his payment goes into the pockets of the dealer or for the benefit of anyone else designated by the dealer. From the standpoint of the buyer, the total amount paid by him to the dealer is the price of the goods. The aggregate amount represents the consideration for the sale moving from him though it might be split up into several heads in the bill.
25. This decision has been approved by the Supreme Court in George Oakes (Private) Ltd. v. State of Madras [1961] 12 S.T.C. 476 at 486, 488 (S.C.). Therein, while rejecting the contention that sales tax charged by a dealer must be excluded while computing his turnover under the Madras General Sales Tax Act, 1939, it was ruled:
Under the definition of turnover the aggregate amount for which goods are bought or sold is taxable. This aggregate amount includes the tax as part of the price paid by the buyer.
26. See also State of Kerala v. N. Ramaswami Iyer and Sons [1966] 18 S.T.C. 1 (S.C.) and Delhi Cloth and General Mills Co. Ltd. v. Commissioner of Sales Tax [1971] 28 S.T.C. 331 (S.C.), wherein the same view has been reiterated. In George Oakes (P.) Ltd. v. State of Madras [1962] 13 S.T.C. 98 at 101 (S.C.), it was held that sales tax shall be calculated on the total amount received by the dealer including the tax at 3 paise per rupee and if there is any additional tax collected, that should also be taken into account. The learned Judge, Hidayatullah, J. (as he then was), speaking for the court, observed thus:.the word 'price' in so far as the purchaser is concerned, includes the tax also, and that in laws dealing with sales tax, turnover has, in England and America also, been held to include the tax.... Again, it was said that the price paid by the purchaser was not so much money for the article plus tax but a composite sum. Therefore, in calculating 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 over in the business.
27. We shall now advert to the decisions of the Mysore High Court in P.V. Beedies (P.) Ltd. v. State of Mysore [1963] 14 S.T.C. 139 and D. Cawasji & Co. v. State of Mysore (1969) 1 Mys. L.J. 461, and that of the Supreme Court in Joint Commercial Tax Officer v. Spencer & Co. [1975] 36 S.T.C. 188 (S.C.), on which strong reliance has been placed by the petitioners. In P.V. Beedies (P.) Ltd. v. State of Mysore [1963] 14 S.T.C. 139, a Division Bench of the Mysore High Court held that excise duty paid by a buyer who purchases tobacco from a dealer for a specified amount under a contract of sale, which did not have any stipulation about the payment of duty, is not part of the price and cannot be included in the purchase turnover of the buyer and such duty is part of the price only if it forms part of the consideration for the sale. Therein, the detriment aspect as indicated by the Full Bench of this Court in Government of Andhra v. East India Commercial Co. Ltd. [1957] 8 S.T.C. 114 (F.B.), referred to earlier, was not considered and also the nature and character of the excise duty was not examined. Even otherwise, it is distinguishable on facts. In the other decision of the Mysore High Court, i.e., D. Cawasji & Co. v. State of Mysore (1969) 1 Mys. L.J. 461, some excise contractors challenged the levy of tree tax and excise duty and the collection of sales tax on sale of arrack and special liquor by the Government to the licensees. No excise duty was levied and collected at the stage of manufacture from the distiller but, however, it was collected from the licensees at the time of their purchase of arrack from the distillers. On a consideration of the several provisions of the Mysore Excise Act, Mysore Sales Tax Act and the Rules made thereunder, it was held that the State Government is not entitled to collect from the petitioners any amount by way of sales tax on the excise duty, health cess and education cess imposed on arrack or special liquor. With great respect to the learned Judges of the Mysore High Court, we are unable to agree with the conclusion arrived at by them as the theory that the detriment to the buyer is the same whether his payment goes into the pockets of the dealer or for the benefit of anyone also designated by the dealer and from the standpoint of the buyer it is the total amount paid by him that is the price of the goods, as ruled by a Full Bench of this Court in Government of Andhra v. East India Commercial Co. Ltd. [1957] 8 S.T.C. 114 (F.B.), was not considered. That part, we are bound by the Full Bench decision of our High Court and, in any event, the two decisions of the Mysore High Court are distinguishable on facts. The question that fell for decision of the Supreme Court in Joint Commercial Tax Officer v. Spencer & Co. [1975] 36 S.T.C. 188 at 191 (S.C.) was whether sales tax required to be collected under Section 21-A of the Madras Prohibition Act, 1937, can be included in the taxable turnover under the Madras General Sales Tax Act, 1959. On a consideration of the provisions of Section 21-A of the Madras Prohibition Act, 1937, sales tax collected by a seller of foreign liquor from the purchaser was held to be a tax on the purchaser and not on the seller and this provision makes the seller a collector of tax for the Government and the amounts so collected by him being under a statutory obligation cannot be held to be a part of the turnover under the Madras General Sales Tax Act, 1959. The learned Judge, A.C. Gupta, J., speaking for the court, observed thus:
Under Section 21-A the tax payable is on the price of the liquor and that tax is to be paid by the purchaser; the seller is required to collect the tax from the purchaser which he has to pay over to the Government. Section 21-A makes a seller a collector of tax for the Government, and the amount collected by him as tax under this section cannot therefore be a part of his turnover. Under the Madras General Sales Tax Act, 1959, the dealer has no statutory duty to collect the sales tax payable by him from his customer, and when the dealer passes on to the customer the amount of tax which the former is liable to pay, the said amount does not cease to be the price for the goods although 'the price is expressed as X plus purchase tax'. But the amounts collected by the assessees concerned in these appeals under a statutory obligation cannot be a part of their taxable turnover under the Madras General Sales Tax Act, 1959.
28. Hence, this decision also is distinguishable on facts. The three decisions cited supra would not come to the aid of the petitioners.
29. The decision of our learned brother, Madhava Reddy, J., in W.P. Nos. 3698, 3707 and 3797 of 1972 dated 21st September, 1972, relied upon by the petitioners is also not on point and is distinguishable on facts. Therein, the imported liquor stored in bonded warehouses was prohibited by the Government from sales unless and until excise duty was paid. It was held that sales could not be prohibited but the liquor should not be removed until the requisite excise duty was paid. Any observations made therein by the learned Judge in regard to the present controversy are not relevant and material for the disposal of these cases and even if there are any observations contrary to the view expressed by us, they must be deemed to have been overruled.
30. To sum up: Excise duty on liquor or any excisable article is chargeable at the point of its manufacture or production. Statutory liability to pay excise duty on liquor produced or manufactured is imposed on the manufacturer or producer. The mode and manner of collection of, and the machinery provided for recovery of, excise duty under the Rules made under the Excise Act would not alter this legal position. Any excise duty paid by the purchasers before the liquor was removed from the factory or godowns or delivered to them must be construed to have been paid by them for and on behalf of the manufacturer or producer and their conduct in obtaining the requisite distillery pass and transport permits would not make them as purchasers liable to pay excise duty, as there is no provision in the statute imposing the same on the purchasers. The excise duty thus paid by a buyer though not included in the bill of sale or invoice by the manufacturer-seller would, without doubt, form part of the sale consideration otherwise known as the consideration for the purchase paid by him and it constitutes the turnover of the seller. The fact that the payment of excise duty was made either voluntarily or without a specific direction from the distiller-assessee does not alter the legal position.
31. Applying the aforesaid principles, we must hold that the excise duty paid by the purchasers directly to the State Government for obtaining the requisite transport permits and the distillery passes in the present cases in respect of liquor or alcohol purchased by them from the assessee-distillers or manufacturers form part of the taxable turnover of the assessees herein. We may add that this conclusion of ours is fortified by the decision of a Division Bench of the Patna High Court in Dayabhai Gokulbhai Patel v. State of Bihar [1959] 10 S.T.C. 483 at 492-493. Therein, it fell for consideration as to whether the excise duty paid by a customer directly to the Government but not included in cash memos issued by the dealer was or was not part of the sale price for tobacco. It was held that the legal liability to pay excise duty was upon the assessee who carried on business in tobacco under the Rules framed under the Central Excises and Salt Act, 1944, and even if the customers agree contractually to pay the excise duty, which was payable by him, such payment was manifestly a part of the valuable consideration for the purchase of the goods and the excise duty so paid constituted in law a part of the sale price for the tobacco within the meaning of Section 2(h) of the Bihar Sales Tax Act, 1947, and was rightly included in the assessee's turnover. The learned Ramaswami, C.J. (as he then was), speaking for the court, observed, after extracting several statutory rules, thus:
The effect of these statutory rules is that the liability to pay the excise duty is upon the petitioner. If the customers agree contractually to pay the excise duty which is payable by the petitioner under the Excise Rules, then the payment of the excise duty is manifestly a part of the valuable consideration for the purchase of the goods. I hold, therefore, that the payment of the excise duty constituted as a matter of law a part of the sale price for the tobacco within the meaning of Section 2(h) of the Bihar Sales Tax Act.... It is obvious that in examining the question of liability of the petitioner to sales tax we must look at the substance of the transaction and not at the mere form in which the petitioner granted receipts or in which he kept his accounts. For the reasons already given, I hold that the amount of Rs. 41,736, which was paid as excise duty by the customers was part of the valuable consideration for the sale of the tobacco and so constituted part of the sale price within the meaning of Section 2(h) of the Bihar Sales Tax Act.
32. For all the reasons stated, our answer to question No. (1) is in the affirmative and against the petitioner-assessees.
33. We shall now proceed to consider question No. (2). It is urged by the petitioner-assessee in T.R.C. Nos. 27 and 28 of 1974 that at the stage of reassessment proceedings the availability of levy of sales tax on items which were not disputed at the earlier or original assessment can be challenged. Reliance was placed by them on the decision of the Supreme Court in Commissioner of Sales Tax, Madhya Pradesh v. H.M. Esufali A.I.R. 1973 S.C. 2266, wherein it was observed that reassessment is fresh assessment and the entire turnover is reassessed afresh. The submission of the petitioner is devoid of any merit. In the present cases, the original assessment was under Section 14(1) of the Sales Tax Act. At that time, the inclusion of freight charges and the value of unserviceable gunnies sold, in the turnover of the assessee-petitioner was not disputed. Reassessment proceedings have been initiated under Section 14(4) for escaped turnover. In the circumstances, the assessing authority is not competent to reopen items other than those, which escaped turnover. The scope of reassessment proceedings under the Sales Tax Act is similar to the one under the Indian Income-tax Act. In S. Inder Singh Gill v. Commissioner of Income-tax [1963] 47 I.T.R. 284 at 297, a Division Bench of the Bombay High Court, while considering the impact of Section 34 of the Indian Income-tax Act, 1922, observed thus:
The scope of reassessment under Section 34 is a limited scope. It is an assessment only in respect of the income that has escaped assessment. The first assessment which relates to the income which had been disclosed has already become final and in the reopened assessment under Section 34, it is not open to the assessee to agitate that the income which had already been computed be recomputed.
34. To the same effect are the decisions in Commissioner of Income-tax v. A.D. Shroff [1957] 31 I.T.R. 284 and Seth Kasinath Bagla v. Commissioner of Income-tax [1930] 4 I.T.C. 472. The same view has been reiterated in Kevaldas Ranchhodas v. Commissioner of Income-tax, Bombay City I [1968] 68 I.T.R. 842, wherein it was held that the Income-tax Officer has no jurisdiction to reopen the entire assessment originally made and determine afresh the assessable profits or to correct errors and omissions made by the assessee in the matter of computation of total income as Section 34 of the Indian Income-tax Act, 1922, refers only to the income, which escaped assessment. Applying the aforesaid principles enunciated by courts with regard to the competency of the Income-tax Officer under Section 34 of the Indian Income-tax Act, 1922, which empowers him to reassess escaped income, we must hold that the sales tax authorities under the Sales Tax Act have no jurisdiction to reassess afresh items of turnover of the business of the assessee herein, which have been allowed to become final as no appeals or revisions have been filed questioning the validity of the original assessment proceedings pertaining to those items. Our answer to question No. (2), therefore, is in the negative and against the petitioner-assessee.
35. This takes us to question No. (3). The submission of the petitioner's counsel that the freight charges paid by the buyers and the value of unserviceable gunnies sold, do not form part of the petitioner's turnover, cannot be acceded to in view of our finding that the assessing authority has no jurisdiction at the stage of reassessment proceedings to consider the validity of sales tax on items which were not disputed at the earlier or original assessment. In fact, the freight charges as well as the value of unserviceable gunnies were included in the total turnover of the assessee and the inclusion of those items in the taxable turnover of the assessee was not even disputed at that stage. The decision of the Supreme Court in Hyderabad Asbestos Cement Products Ltd. v. State of Andhra Pradesh [1969] 24 S.T.C. 487 (S.C.) relied upon by the petitioner's counsel is distinguishable on facts. Therein it was held that the State cannot levy sales tax on railway freight if it is not made a part of the sale price. On the terms of the contract therein, the Supreme Court held that there was no obligation on the part of the company to pay the railway freight and the price received for sale of goods is the invoice amount less the freight charges. This decision does not advance the petitioner's plea.
36. In the result, the tax revision cases and the writ petitions are devoid of any merit and are hereby dismissed with costs. Advocate's fee Rs. 100 in each case.