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8. In the instant case before us, the State relied upon the decision of the Supreme Court in McDowell & Company Limited v. Commercial Tax Officer [1985] 59 STC 277 (known as Second McDowell case) to contend that the ratio of Cawasji's case [reported in (1969) 1 Mys LJ 461] is no longer good law and therefore demand of sales tax on the amount paid as excise duty by the licensee is perfectly valid.

9. Under the provisions of the Andhra Pradesh Excise Act read with the relevant rules, excise duty was leviable on the manufacturers of liquor, but the manufacturer cannot remove, the liquor from the distillery unless the duty imposed has been paid. The appellant before the Supreme Court was a licensed manufacturer of liquor. The procedure was, for the buyers from appellant's distillery to obtain distillery-passes for release of liquor after making payment of excise duty and present the same at the distillery, whereupon the bill of sale or invoice was prepared by the distillery showing the price of liquor but excluding the excise duty. When the authorities sought to include the excise duty paid by the buyers, in the turnover of the appellant-manufacturer, the same was successfully challenged on the ground that such an excise duty did not go into the common till of the appellant and did not become a part of its circulating capital; therefore it was not competent to include the same in the turnover of the appellant-manufacturer. After the pronouncement of the judgment by the Supreme Court, the State of Andhra Pradesh amended its relevant rules by stating that, without the payment of excise duty by the D2 licensee (manufacturer), the liquor shall not be released from the distillery. In this background, the Second McDowell case [1985] 59 STC 277, came up before the Supreme Court.

Reference was made to the earlier McDowell's case , and it was held :

"On an examination of the provisions of the Excise Act, the rules framed thereunder and the pronouncements referred to above, we are of the view that the conclusion of this Court at page 921 of the Reports [at page 158 of that intending purchasers of the Indian liquors who seek to obtain distillery passes are also legally responsible for payment of the excise duty is too broadly stated. The 'duty' was primarily a burden which the manufacturer had to bear and even if the purchasers paid the same under the Distillery Rules, the provisions were merely enabling and did not give rise to any legal responsibility or obligation for meeting the burden."

The principles deducible from this decision [Second McDowell's case are :

(i) Excise duty is a levy on the manufacture of goods and normally it is payable by the manufacturer.
(ii) Collection of excise duty at a point later to manufacture and from some one else is a matter of administrative convenience, and is related to the machinery of collection.
(iii) The rules providing for collecting the excise duty from the buyers are only enabling provisions, which in no way result in imposing an exclusive obligation on them to meet the tax burden.

In Cawasji's case 1969 (1) Mys LJ 461, the Bench proceeded on the assumption that the point of collection itself was the point of levy and such a levy was statutory, having regard to the provisions of sections 22 and 23 of the Excise Act, read with rule 2 of the relevant Rules.

Section 22 creates a charge by levying the excise duty and countervailing duty on any excisable article manufactured and section 23 prescribes the ways of levying the excise duty. Section 23 in essence directs the levy of excise duty rateably on the quantity of goods produced in or manufactured in or issued from a distillery, brewery, manufactory or warehouse, or imported into the State. Sub-section (aa) thereof pertains to litre-fee levied on the quantity of excisable article imported by any person or recovered by any person when issued from a distillery, brewery, manufactory or warehouse as the case may be. Here again, the State is empowered to adopt one of the ways as may be prescribed. As per rule 2 of the Rules, excise duty or litre-fee or both shall be levied when such excisable articles are issued from any distillery, warehouse or other place of storage. Thus the charge is on the manufacture of goods; and the "ways" of levy is as prescribed. But these provisions, specifically do not charge the tax on the buyer. If so, the impost being an excise duty, should be primarily charged on the manufacturer and the collection of the same from a subsequent buyer cannot be equated to imposition of the charge on the latter; the buyer is made to discharge the burden fastened on the goods on its manufacture, as held by the Supreme Court in the Second McDowell's case [1985] 59 STC 277.