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The High Court, on a challenge being made by the respondents, decided in their favour and came to the conclusion that this excise duty which was in fact paid by the Beverages Corporation would not be regarded as being part of their turn over for the purpose of levy of turn over tax.
Mr. T.L.V. Iyer, learned senior counsel has drawn our attention to a decision of this Court in the case of Mohan Breweries & Distilleries Ltd. v. Commercial Tax Officer, Madras and Ors., [1997] 7 SCC 542. In that case this Court was concerned with the levy of turn over tax in respect of liquor which was produced and sold to the State Marketing Corporation. It is the contention of Mr. Iyer that the provisions of the law in Tamil Nadu relating to the levy of this tax is more or less parimateria with the corresponding provisions of law in Kerala. In particular, reliance was placed on paragraph 7 of the aforesaid decision which reads as follows:
`These cases establish that in order to be an excise duty (a) the levy must be upon `goods' and (b) the taxable event must be the manufacture or production of goods. Further the levy need not be imposed at the stage of production or manufacture but may be imposed later."

(Emphasis added) Relying upon the aforesaid observations of this Court, in cases referred to hereinabove, Mr. Nariman contends that the observations of this Court in Mohan Breweries' case (supra) seem to run counter to the earlier decisions of the Constitution Benches. He submits that the Constitution Benches have laid down in no uncertain terms that an excise duty need not necessarily be regarded as being a levy only on the manufacturer and it is possible for a law to provide that excise duty may be levied not on the manufacturer but at a later point of time. He, therefore, contends that the observation to the contrary in Mohan Breweries ` case does not reflect the position in law correctly and he submits that in the present cases, on a correct interpretation of Sections 17 and 18 of the Abkari Act of Kerala, it must be held that the levy of excise duty, is not on the manufacturer but is at the stage when the liquor is removed by the Beverages Corporation from the warehouse and therefore the same cannot form part of the respondents' turn over.

The State in its counter-affidavit contended inter alia that the excise duty paid by the Kerala State Beverages Corporation formed part of the sale turnover of the manufacturer, since it is the obligation of the manufacturer to pay excise duty, though it may be discharged by others. Relying upon the decision of this Court in Mohan Breweries and Distilleries Limited v. Commercial Tax Officer, Madras and Ors., [1997] 7 SCC 542 it was contended that excise duty element formed part of the total turnover which was chargeable to turnover tax under Section 5(2C) of the Kerala General Sales Tax Act, 1963.

The second batch of writ petitions was disposed of by a common judgment and order of the High Court dated August 9, 2002. The High Court while disposing of the second batch of writ petitions considered the binding precedents on the subject and observed that irrespective of the manner in which the rules and agreements between the parties changed the point of collection, excise duty in its true character is always a duty payable by the manufacturer of an article and remains the liability of the manufacturer. If as a result of the rules and the agreements it is discharged by someone else such discharge must be held on account of the manufacturer himself. The learned Judges referred to the decision of this Court in Mohan Breweries and Distilleries Limited (supra) which according to the learned Judges squarely governed the case. After noticing several judgments of this Court the learned Judges were not inclined to agree with the view of the earlier Bench on this aspect of the matter, but finding themselves bound by the earlier decision, they proceeded to dispose of the writ petitions on the basis that the manufacturers/distillers were not liable to pay turnover tax under the Abkari Act. It held that the earlier judgment could not be said to have been rendered per incuriam because the judgment was rendered after considering the binding judgments of the Supreme Court. The High Court also noticed the fact that appeals were pending before this Court against the judgment in the first batch of writ petitions.