Punjab-Haryana High Court
Bharat Singh Kamlesh Kumar Vijay Singh ... vs State Of Haryana And Ors. on 7 March, 2002
Equivalent citations: [2002]127STC201(P&H)
Author: N.K. Sud
Bench: N.K. Sud
JUDGMENT Jawahar Lal Gupta, J.
1.The petitioners are engaged in the sale of liquor in the State of Haryana. They have licences for the wholesale and retail sale of Indian-made foreign liquor as well as for retail sale of country liquor. The vends were allotted to the petitioners in an open auction. It is alleged that at the time of auction, it was announced that "there would be no sales tax on the Indian-made foreign liquor".
2. In pursuance to the grant of licences, the petitioners had started the sale of liquor from April 1, 2001. On June 26, 2001, the State of Haryana issued a notification amending the provisions of the Haryana General Sales Tax Act, 1973. By this notification, Schedule "B" which embodies the list of items exempted from the levy of sales tax was amended. Entry 24A relating to the sale of Indian-made foreign liquor was omitted. A corresponding entry was made in Schedule "C". A copy of this notification is at annexure P3 with the writ petition.
3. The wine contractors in the State of Haryana represented. Petitioner Nos. 1, 2, 3 and 5 also filed petitions to challenge the imposition of sales tax. The petitioners allege that during the pendency of the writ petitions, the State Government decided to reconsider the matter. Thus, they filed applications to withdraw the writ petitions. The prayer was allowed. The notification amending the Act was issued on October 15, 2001. A copy of this notification is at annexure P4 with the writ petition. However, the petitioners were told to pay tax for the period from June 26, 2001 to October 15, 2001.
4. The provisions of the Act having been amended on June 26, 2001, notices were issued to the wine contractors for deposit of tax. A notice dated July 19, 2001 was issued to petitioner No. 1 informing it of its "liability to pay tax... on the opening stock of June 26, 2001 of 1,01,556 bottles of IMFS and 1,04,844 bottles of beer....". It was further pointed out that it had "received 1,12,548 bottles of IMFS and 1,26,000 bottles of beer....from June 26, 2001 to June 30, 2001 without payment of sales tax at the stage of L-1B and L-1-B/1". On this basis, it was alleged that "the total stock of IMFS and beer....to be taxed comes to 2,14,104 bottles of IMFS and 2,30,844 bottles of beer". This stock was valued at Rs. 2,71,81,500. Tax at 25 per cent was demanded "in case of stock sold at Rs. 500 and more per quart and 20 per cent in case of stock sold below that rate". Directions for deposit of tax on the above-noted "stock by July 31, 2001" were thus, given.
5. The petitioners allege that the demand of tax on stocks is totally without authority of law. In fact, the collection of tax for the period from June 26, 2001 to October 15, 2001 is against the terms of the contract and thus untenable.
6. The petitioners have also raised issues regarding the enhancement and lowering of prices, the orders of cancellation of licences and the composition fee imposed by the authority. However, learned counsel for the petitioners has very clearly stated before us that he is not pressing the case in that behalf. Thus, we are not noticing the other facts as alleged in the petition. The challenge has been confined to the issue of levy of tax on goods which were in stock with the petitioners on the midnight of June 25, 2001.
7. A written statement has been filed on behalf of the respondents by the Deputy Excise and Taxation Commissioner (Headquarter), Haryana. It is maintained that the terms of auction have not been violated. The levy of tax is in strict conformity with the provisions of the Act. The notice issued to the petitioners for deposit of tax is legal and valid. The sale of IMFS and foreign liquor has been exempted from the levy of tax only when the price is less than Rs. 500 per quart. The action being in conformity with law, no ground for interference is made out.
The petitioners have filed a replication.
8. Initially, during the course of hearing, various documents were produced however, in view of the short argument which has been finally raised in the case and the challenge on other grounds having been given up by the counsel for the petitioners during the course of hearing, it is not necessary to make any reference to the documents produced by the counsel for the parties.
9. Mr. Mohan Jain, counsel for the petitioners, has only contended that in view of the notification dated June 26, 2001, the petitioners are not liable to pay any sales tax on the goods which were in stock with them on June 25, 2001.
10. On the other hand Mr. Surya Kant, Advocate-General, Haryana, submits that the sale of liquor had become a taxable event on June 26, 2001. Thus, every sale made by an excise licensee on and from June 26, 2001 is exigible to the levy of sales tax.
11. The short question that arises for consideration is--Are the petitioners liable to pay tax on the sale of goods which were in stock with them on June 25, 2001 ?
12. A brief reference to the relevant provisions is necessary. Section 6 provides for the incidence of tax. It, inter alia, says that the dealer shall be "liable to pay tax under this Act on the sale or purchase of goods by him in the State...". The first proviso to the section stipulates that this provision "shall not apply to a dealer who deals exclusively in goods specified in Schedule 'B'..." In Schedule "B", entry 24A is relevant. It provides as under :
"(See sections 6 and 15) Sl. No. Description of goods Conditions and exceptions 24A.
Sale of foreign liquor (Indian-made foreign liquor or foreign liquor) on which State excise duty has been paid at the rate fixed for the year or on which sales tax has been paid at the time of purchase thereof inside State, (and postal stationery.)"
Except when sold by an L4/ L5 licensee.
13. Thus, sale of Indian-made foreign liquor was exempted from payment of sales tax. It is not disputed that this entry remained in force till the midnight of June 25, 2001. On June 26, 2001, the notification amending the Haryana General Sales Tax Act, 1973, viz., the Haryana Act No. 11 of 2001 was issued. Provisions of sections 13B, 15 and 64 were amended. However, reference to these provisions is not necessary. Sections 5 and 6 of the amending Act are relevant. These may be noticed in extenso. The two provisions read as under :
"5. In Schedule B of the principal Act :
(i) Serial number 24A and entry there against shall be omitted; and
(ii) against serial number 50, for the existing entry, the following entry shall be substituted, namely All goods except Indian-made foreign liquor and foreign liquor sold to the serving military personnel and ex-servicemen by the Canteen Stores Department direct or through the authorised canteen contractors or through unit run canteens.
6. In Schedule C of the principal Act, under columns 2 and 3, against serial number 2, for the existing entries, the following entries shall be substituted, namely :--2 3
Indian-made foreign liquor and foreign liquor --
(i) when sold by L-1B or L-1B1 licensees, granted licence under the Punjab Excise Act, 1914 (1 of 1914), as applicable to the State of Haryana.
At the stage of sale by L-1B or L-1B1 licensees in the State ;
(ii) when sold to L-9 licensees, granted licence under the Punjab Excise Act, 1914 (1 of 1914), as applicable to the State of Haryana, if not subjected to tax under entry (i) above.
At the stage of sale to L-9 licensee in the State.
(iii) when sold in circumstances not covered under entries (i) and (ii) above.
At the stage of sale made for the first time in the State of Haryana by an excise licensee.
Note.--If an L-4/L-5 or L-12C licensee under the Punjab Excise Act, 1914 (1 of 1914) purchase liquor on which sales tax has already been paid in the State, then such licensee shall not be liable to pay tax on the sale of such liquor by him."
14. A taxing statute has to be strictly construed. The words-have to be given their plain meaning. Under the Act, the tax is leviable on the first sale in the State of Haryana. Not on the first sale made after the promulgation of the Amending Act. A perusal of Section 5 of the amending Act shows that entry at Sr. No. 24A was completely omitted. Thus, the exemption from payment of sales tax as contemplated under the first proviso to Section 6 ceased to be available. Still further, in Section 6, the stage at which the sale of Indian-made foreign liquor, etc., would be exigible to the levy of sales, tax was laid down.
15. It is the admitted position that the State of Haryana has framed the Haryana Liquor Licence Rules, 1970. The licenses are classified under these rules. Licence L.1-B is granted to a person who can sell liquor in wholesale. L.1-B.1 is granted to a person who is entitled to "import and sell beer, wines, ciders and liquor from the distilleries and breweries of other States as well as of Haryana". L-9 is a licence for the running of a retail vend of foreign liquor in a military canteen including unit run military canteens or those run regimently on club lines, etc. The rules also contemplate licenses for "wholesale and retail vend of foreign liquor to the trade only and wholesale and retail vend of foreign liquor to the public only". These are classified as L-1 and L-2 licences respectively.
16. The petitioners have L-1 and L-2 licences. They have also got L-14 and L-14-A licences which relate to country liquor. Since there is no sales tax on the sale and purchase of country liquor, we are not concerned with their position as L-14 and L-14-A licences. The short question as already noticed is--Is an L-1 or L-2 licensee liable to pay sales tax on the stocks which existed with it on the midnight of June 25, 2001 ?
17. On a perusal of the above noted entry introduced by notification dated June 26, 2001, it is clear that the cases of the petitioners shall not be covered by the entries at Sl. Nos. (i) and (ii). This is for the reason that the petitioners do not have any licence for wholesale sale to an L-1 licensee. Nor they are concerned with sales to military canteens. It is admitted by the counsel for both sides that their case has to be considered under the entry at Sl. No. (iii), viz., "when sold in circumstances not covered under entries (i) and (ii) above". The stage for the levy of tax is sale made for the "first time in the State of Haryana by an excise licensee". It is admitted by the counsel for both sides that under the excise law, a manufacturer of alcohol can sell it only to a wholesaler, viz., a person who holds an L-1 licence.
It is also the admitted position that the wholesaler cannot sell goods in retail. He can sell only to a person who has an L-2 licence.
18. It is in the background of this factual position that the contending claims as made by the counsel for the parties have to be examined.
19. The taxable event is the sale of goods. Admittedly, the goods lying in stock with the petitioners on the mid-night of June 25, 2001 had been purchased by them on or before that date. Normally, these sales would have been exigible to the levy of tax. However, since the sale of liquor was exempted from the levy of sales tax on account of entry 24A in Schedule "B", the tax was not leviable. Clearly, when an L-1 licensee purchases the liquor from the manufacturer or sells it to an L-2 licensee, the taxable event occurs. However, on account of exemption, the State's right to recover tax or the dealer's liability to pay it does not arise.
20. A perusal of entry at Sl. No. (iii) in Schedule "C" as amended by Section 6, shows that the tax is leviable "at the stage of sale made for the first time in the State of Haryana by an excise licensee". Thus, any sale made after the initial purchase by the licensee would not be the first sale in the State of Haryana. Thus, when an L-1 licensee sells the goods to an L-2 licensee or an L-2 licensee sells the goods in retail out of the stocks existing on the midnight of June 25, 2001 on any subsequent date, viz., June 26, 2001 or thereafter, the sale shall not be the first sale. It shall be a second or a subsequent sale. The tax being leviable only on the first sale in the State of Haryana from June 26, 2001, the sale of stocks existing on the mid-night of June 25, 2001 shall not attract the levy of sales tax.
21. A fact which deserves mention is that the above-noted position shall prevail only when the goods in stock had been purchased by the licensee in the State of Haryana. In a case where the goods have been purchased by an L-1 licensee from a brewery outside the State of Haryana, the sale of goods after the import would be the first sale in the State of Haryana.
22. Mr. Surya Kant contends with reference to Section 16-A of the Act that sale of liquor has become taxable on June 26, 2001. Thus, every purchase or sale made before that date has to be ignored, The first sale alone has to be seen from June 26, 2001 onwards.
23. This contention cannot be accepted. The taxable event is the "sale made for the first time in the State of Haryana by an excise licensee". The entry does not read--"at the stage of sale of liquor made for the first time in the State of Haryana by an excise licensee on or after June 26, 2001". The express words of the entry clearly militate against the contention that any sale made before June 26, 2001 has to be ignored.
24. In view of the above, it is held that the sale of stocks which had been purchased by the petitioners till the midnight of June 25, 2001 in the State of Haryana would not attract the levy under the Act as it would not be the first sale in the State of Haryana. Resultantly, the demand as sought to be made on the basis of the stocks existing on June 25, 2001 cannot be sustained.
25. Resultantly, the authority is directed to re-consider the matter on the hypothesis that the sales tax shall not be leviable on the sale of the stocks purchased by the petitioners till the midnight of June 25, 2001 in the State of Haryana. The competent authority shall pass the order of assessment. The petitioners shall be entitled to seek their remedy, if so advised, in accordance with law.
26. The writ petition is, accordingly, disposed of. No costs.