T.A. Taylor and Company (Madras) Private Ltd. Vs. the Government of Madras - Court Judgment

Ramanujam, J.

1. The petitioners in all these cases are the same. The assessment years involved are 1959-60 to 1964-65. The petitioners have imported foreign liquor and have sold the same to the various licensees and permit-holders. On their sales of foreign liquor they have collected sales tax under Section 21-A of the Madras Prohibition Act, 1937, and paid over the same to the State Government. They also paid gallonage fee under Section 18-A of the said Act. They were assessed to sales tax on their sales of foreign liquor in respect of the various assessment years above referred to. Resisting those assessments the petitioners contended that the foreign liquor having been subjected to sales tax under Section 21-A of the Madras Prohibition Act as also a gallonage fee under Section 18-A of that Act, the same cannot again be brought to charge under the Madras General Sales Tax Act, in view of Section 8 read with item 3 of Schedule III of the Madras General Sales Tax Act, 1959. It was also contended that in any event the sales tax collected and paid over to the State under Section 21-A and the gallonage fee paid under Section 18-A of the Prohibition Act cannot be treated as part of the turnover of the assessees.

2. These contentions of the assessees were overruled by the assessing authority and he proceeded to finalise the assessments holding that the petitioners are liable to pay tax under the Madras General Sales Tax Act notwithstanding the fact that the goods have been subjected to sales tax under Section 21-A of the Madras Prohibition Act and a gallonage fee under Section 18-A of the said Act, and that the exemption provided under Section 8 read with item 3 of Schedule III of the Madras General Sales Tax Act will not apply. The assessing authority also did not accept the contention of the assessees that the sales tax collected under Section 21-A and the gallonage fee under Section 18 A will not form part of the turnover for the purpose of the levy of tax under the Madras General Sales Tax Act.

3. Aggrieved against the orders of the assessment, the assessees went before the appellate authority but without success. Thereafter, the assessees moved the Tribunal by way of appeals. The Tribunal also rejected all the contentions of the assessees and upheld the orders of assessment.

4. Before us, it is contended by the learned counsel for the petitioners that the decision of the Tribunal at least on one point is inconsistent with the decision of this court in Spencer and Co., Madras v. Joint Commercial Tax Officer, Division No. III, Madras [1969] 24 S.T.C. 161, which had been reudered a few days prior to the decision of the Tribunal. After perusing the said decision in Spencer and Co., Madras v. Joint Commercial Tax Officer, Division No. III, Madras [1969] 24 S.T.C. 161, we are convinced that at least one point has to be decided in favour of the petitioners.

5. The first contention of the petitioners is that in view of Section 8 read with item 3 of Schedule III of the Madras General Sales Tax Act, foreign liquor which has been subjected to various duties such as sale's tax and gallonage fee should be taken to have been exempted from tax under the provisions of that Act. A similar contention was advanced before this court on two earlier occasions in Phipson & Co. (Private) Limited v. Government of Madras [1964] 15 S.T.C. 740 and Spencer and Co., Madras v. Joint Commercial Tax Officer, Division No. III, Madras [1969] 24 S.T.C. 161. In both these decisions it has been categorically held that notwithstanding the fact that the assessees have paid sales tax under Section 21-A and gallonage fee under Section 18-A of the Madras Prohibition Act, the sales of foreign liquor are liable to be taxed under the Madras General Sales Tax Act. With respect we entirely agree with the reasoning in the above decisions. We have to therefore hold that the assessees were rightly assessed to tax under the Madras General Sales Tax Act.

6. The next contention advanced by the learned counsel for the petitioners is that the sales tax and the gallonage fee paid by them should not be taken to be part of their turnover for the purpose of levy under the Madras General Sales Tax Act. In Spencer and Co., Madras v. Joint Commercial Tax Officer, Division No. III, Madras [1969] 24 S.T.C. 161, this point has been specifically considered and the Bench has held that the gallonage fee paid by the petitioners will get into the cost price of the goods sold by them and therefore it will automatically come under the definition of turnover. As regards the sales tax collected under Section 21-A of the Madras Prohibition Act, the Bench however held that the said Section 21-A clearly creates a dichotomy between the sale price of the goods and the tax collected, and that, in view of the special feature contained in the said section, the tax collected thereunder cannot be treated as part of the turnover liable to be taxed under the Madras General Sales Tax Act. The learned counsel for the petitioners very strongly relies on the said decision in support of his contention that the sales tax collected under Section 21-A cannot form part of the turnover for the purpose of the General Sales Tax Act. But, the learned counsel for the revenue submits that the decision in Spencer and Co., Madras v. Joint Commercial Tax Officer, Division No. III, Madras [1969] 24 S.T.C. 161, so far as it deals with this point requires reconsideration. But we are not convinced that the principle laid down in the said decision on this point is in any way erroneous. Following the above decision we hold that the sales tax collected and paid over to the State by the petitioners under Section 21-A of the Madras Prohibition Act has to be excluded from the taxable turnover while the gallonage fee had rightly been included. In other respects the orders of the Tribunal are upheld. The tax case is therefore partly allowed to the extent indicated above. There will be no order as to costs.