N.K. Sodhi, J.
1. The petitioners in this bunch of 43 petitions bearing Nos. 4778, 4718, 4759, 4760, 4761, 4812, 4831, 4839, 4840, 4848, 4849, 4872, 4878, 4879, 4880, 4888, 4901, 4933, 4955, 4956, 4966, 4971, 4972, 5114, 5331, 5414, 5415, 5417, 5691, 5721, 5834, 5862, 5919, 5939, 5940, 6078, 6191, 6192, 6401, 6422, 6566, 7449 and 7540 of 1992 filed under Article 226 of the Constitution hold L-14A licences for the financial year 1992-93 obtained by them in an auction held for the purpose in accordance With the provisions of the Punjab Excise Act, 1914, as applicable to the States of Punjab and Haryana. These licences are for retail vend of country spirit including rum and gin and, on the strength of such a licence, a licensee trades in the licensed premises in alcoholic liquor for human consumption (other than Indian-made foreign liquor). A licensee who is a successful bidder is required to pay the entire amount of licence fee in twelve monthly instalments. Every licensed premises popularly known as the vend has a fixed quota of country liquor/alcohol and the licensees keep lifting for sale from time to time the country liquor from the distilleries (manufacturers). Before the country liquor can be purchased from the distilleries, a permit is necessary to be obtained from the Excise and Taxation Department for a certain quantity after depositing the excise duty thereon in the Government treasury, Then, on the production of this permit, the distilleries would, after charging the price, sell and allow release of liquor to the licensee for further sale at the vend. Thus, the petitioners have not only to pay the licence fee in monthly instalments but also the excise duty before obtaining the permit which enables them to lift a given quantity of liquor from the sellers (manufacturers) and thereafter they have also to pay the price of liquor which they purchase from the manufacturers for onward retail sale.
2. According to Section 206C of the Income-tax Act, 1961 (hereinafter called 'the Act'), as substituted by the Finance Act, 1992, with effect from April 1, 1992, every person who is a seller (like the distilleries) is required to collect tax at source at the rate of 15 per cent. on the amount payable by the buyer (like the petitioners) of goods of the nature of alcoholic liquor for human consumption other than Indian-made foreign liquor. Sub-section (1) of Section 206C of the Act, as it stands at present and the Explanation added with effect from April 1, 1992, after Sub-section (8) read as under :
'206C. (1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at thetime of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage specified in the corresponding entry in column (3) of the said Table, of such amount as income-tax :
Table
S. No.
Nature of goods
Percentage
(1)
(2)
(3)
(i)
Alcoholic liquor forhuman consumption (other thanIndian-made foreign liquor)
Fifteen per cent.
(ii)
Timber obtained under aforest lease
Fifteen per cent.
(iii)
Timber obtained by anymode other than under a forest lease
Five per cent.
(iv)
Any other forest producenot being timber
Fifteen per cent.
Provided that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that to the best of his belief any of the goods referred to in the aforesaid Table are to be utilised for the purposes of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of this sub-section shall not apply so long as the certificate is in force. . . .
Explanation.--For the purposes of this section,--
(a) 'buyer' means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in Sub-section (1) or the right to receive any such goods but does not include,--
(i) a public sector company,
(ii) a buyer in the further sale of such goods obtained in pursuance of such sale, or
(iii) a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act ;
(b) 'seller' means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society.'
It is not disputed that the petitioners who, as licensees, obtain in sale alcoholic liquor for human consumption other than Indian-made foreign liquor fall within the term 'buyer' and the distilleries from whom alcoholic liquor is purchased are 'sellers' as defined in the Explanation referred to above.
3. The case of the petitioners is that, while collecting tax from them at source, the distilleries-respondents cannot collect tax on the amount of excise duty which they deposit in the Government treasury before obtaining a permit and on the basis of which they purchase alcoholic liquor from the sellers (distilleries). In other words, their contention is that the price of alcoholic liquor does not include the amount of excise duty and they are not liable to pay tax thereon and, consequently, the seller is not entitled to collect the same at source.
4. Mr. A.S. Tewatia, learned counsel for the Union of India, on the other hand, contends that payment of excise duty is the primary and exclusive obligation of the manufacturer and even if payment is made by the buyer under a contract or by virtue of the rules framed under the Punjab Excise Act, it is nevertheless the obligation of the manufacturer and the buyer can be said to be meeting the liability of the manufacturer (seller). The argument is that, since the buyer is meeting the obligation of the manufacturer (seller), the amount of excise duty paid by the buyer would be the amount payable by him to the seller within the meaning of Section 206C of the Act and the seller is, therefore, entitled to collect tax at source on the said amount. Reliance for this proposition is placed on the judgment of their Lordships of the Supreme Court in McDowell and Co. Ltd. v. CTO : [1985]154ITR148(SC) .
5. In order to find out as to which of the rival contentions of the parties is correct, one has to look to the provisions of Section 206C of the Act reproduced above. A bare perusal of Sub-section (1) of this section makes it clear that 15 per cent. of the amount payable by the buyer to the seller (manufacturer) at the time of debiting of the amount or at the time of receipt of such amount by the seller, whichever is earlier, is to be collected by the seller as tax at source. The question is what is the amount payable by the buyer to the seller at the time of debiting of the amount by the seller or at the time of receipt of such amount by him. It cannot be disputed that the amount payable by the buyer to the seller can be debited to the account of the former or is received by the latter only at the time the alcoholic liquor is purchased by the buyer on presentation of the distillery permit obtained by the buyer from the Excise Department. Thispermit can be had by the buyer after he has paid the excise duty into the Government treasury and produces the receipted challan before the Excise Department. Since the amount of excise duty has already been paid by the buyer, may be on behalf of the seller, as it is the exclusive obligation of the latter to pay the same, this amount cannot be said to be payable at the time when liquor is purchased by the buyer on the production of the distillery permit. The amount payable at the time of sale or at the time of debiting the amount by the seller, or at the time of receipt of the amount by the seller is only the price of liquor which the buyer is purchasing and that would include the price of alcoholic liquor and the price of bottles, bottling and corking, etc. As the burden of excise duty is passed on by the manufacturer to the buyer and is ultimately borne by the consumer, it can in a way be said that the purchase price, paid by the buyer includes the excise duty as well. However, Parliament, in its wisdom, while enacting Section 206C of the Act, has not said that tax is to be collected on the 'purchase price' of liquor, but it is to be collected only on the amount that is payable at the time of purchase after the distillery permit has been obtained. In other words, tax is to be collected at source on the amount actually payable by the buyer to the seller at the time when the liquor is purchased. The use of the word 'payable' is significant and so is the point of time. In my opinion, a plain reading of Section 206C of the Act leaves no room for doubt that the quantum of the amount on which the tax is to be collected at source by the seller has to be only that amount which is to be paid to the seller as price at the time of the sale and cannot, by any stretch of reasoning, be held to include the excise duty which has already been paid to obtain the permit to enable the licensee to purchase the liquor.
6. In the case of McDowell and Co. Ltd. : [1985]154ITR148(SC) relied upon by Mr. Tewatia, their Lordships of the Supreme Court were considering a question as to whether excise duty formed part of 'turnover' as defined in Section 2(1)(s) of the Andhra Pradesh General Sales Tax Act, 1957, and whether sales tax was payable thereon or not. After examining the concept of excise duty, their Lordships found that excise duty was a part of the consideration for the sale and was includible in the turnover of the manufacturer, which was the appellant before the Supreme Court. The sales tax was, therefore, held payable on the total turnover which included excise duty as well. Their Lordships were not dealing with a provision like Section 206C of the Act which requires tax to be collected at source on the amount payable by the buyer to the seller at the time of sale. That judgment is of no help to the respondents.
7. I am, therefore, of the view that the sellers, namely, the distilleries (manufacturers) are not entitled to collect tax at source on the amount of excise duty already paid by the buyers into the Government treasury as that is not the amount payable by them to the sellers at the time of sale/purchase of liquor.
8. For the reasons recorded above, the writ petitions are allowed and the respondents are directed not to collect tax at source on the amount of excise duty paid by the petitioners into the Government treasury at the time of obtaining distillery permits. The parties are left to bear their owncosts.