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1997 Supreme(Gau) 134
GAUHATI HIGH COURT
D.N.Chowdhury, J.
Bikul Das : Mirdul Hati Baruah : Mukul Saikia : Diganta Kumar Baruah : Hemanta Baruah and anothers -Appellant
Versus
State of Assam -Respondent
Civil Rule Nos. l033, 1034,1035, 1036 and 1423 of 1995
Decided On : 01-08-1997
G.K.Joshi, S.K.Kejriwal, C.Barua
The lessees of country liquor shops in Assam are not liable to pay tax at source under section 206C of the Income Tax Act, 1961, because the provisions of section 206C are meant for recovery of tax at source from the class of persons specified in section 206C itself, and the lessees of country liquor shops do not come within the purview of the provisions.
Headnote:
INCOME TAX - Levy and collection of tax at source under section 206C of the Income Tax Act in respect of profit and gain and trade in alcoholic liquor - Legality and validity of actions of respondents in collecting tax at source under the provision of section 206C - Scope and applicability of section 206C - Interpretation of terms 'buyer' and 'seller' - Constitutional validity of provisions 44AC and 206C not challenged - Lessees of country liquor shops in Assam not liable to pay tax at source under section 206C - Impugned directions and communications quashed.
Fact of the Case:
The petitioners, lessees of country spirit shops in Assam, challenged the legality and validity of the actions of the respondents in collecting tax at source under the provision of section 206C of the Income Tax Act, 1961, in respect of profit and gain from the business of trading in alcoholic liquor.
Finding of the Court:
The court held that the rigors of the provision contained in section 206C are not applicable to the lessees of country liquor shops in Assam. The court interpreted the terms 'buyer' and 'seller' in section 206C and held that the lessees of country liquor shops do not come within the purview of the provisions. The court also held that the constitutional validity of provisions 44AC and 206C was not challenged in the case.
Issues: Whether the lessees of country liquor shops in Assam are liable to pay tax at source under section 206C of the Income Tax Act, 1961.
Ratio Decidendi: The court held that the lessees of country liquor shops in Assam are not liable to pay tax at source under section 206C of the Income Tax Act, 1961, because: * The provisions of section 206C are meant for recovery of tax at source from the class of persons specified in section 206C itself. * The Parliament explained and defined the term buyer and seller in clear and unequivocal terms. * All buyers of specified articles do not come within the purview of the provisions. * The legislature in its wisdom explained the provision and exempted the public sector company from the term buyer and those engaged in further sale of such goods obtained in pursuance of such sale; or 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. * The legislative provisions in this regard are clear. * The fiscal measure in imposing liability of tax must be construed strictly and from a common sense point of view, it must be understood. * It is required to be understood in conformity with the popular meaning and in commercial parlance. * A citizen is not to be taxed without a clear mandate of the legislature to that effect and an Act of Parliament is to be read according to its natural meaning. * Words must be ascribed the natural, popular, and ordinary meaning which they have in relation to the subject matter with reference to which and the context in which they have been used.
Final Decision: The court allowed the writ petitions and quashed the impugned direction contained in the communication No.C-1/CTS/ACIY/ GHY/94-95 dated 18.8.94 (Annexure A), the impugned communication F.No.C-l/ACIT/TDS/94-95 issued by the Assistant Commissioner of Income Tax (Annexure B), as well as the communication bearing No.Ex.317/93/24 dated 6th December, 1994 (Annexure C).
2. The subject matter involved here is related to the levy and collection of tax at source under section 206C of the Income Tax Act in respect of profit and gain and trade in alcoholic liquor. The facts and the legal issues set forth in Civil Rule No. 1423 of 1995 (Hemanta Baruah & others vs. State of Assam & others) would only be taken up for consideration in adjudicating the issues involved in these cases.
3. The petitioner at all relevant time are/were the lessees of the country spirit shop under Assam Excise Act, 1910 and the Assam Excise Rules. 1945. The trade of country spirit is regulated by the Assam Excise Act, 1910 and Rules framed thereunder.
4. The country spirit (liquor) is first imported in the State as envisaged in Rule 77 to Rule 80 of the Assam Excise Rules and thereafter those are brought to the Excise Warehouse owned and controlled by the State Govt.. The import of spirit (liquor) is settled by the tender system. After the country spirit is brought to the warehouse owned and controlled by the State Govt., these are bottled in the specified manner in the warehouse under the supervision of the State Govt. for supply to the retailers i.e. the country spirit shops. The bottling contract is also settled by tender system. Under the Act and the Rules the settlement of the country liquor spirit shops are made by tender system in conformity with the statutory rules made under the Act for a period specified by the competent authority. The lessee of the concerned country spirit (liquor) shop can operate the trade on the strength of licence under the Act on payment of vent fee fixed by the Govt. for the specified period and subject to restriction and condition imposed in the licences. Under the Rules the holder of licence, permit or pass shall be bound by the conditions specified therein and shall observe all directions, prohibitions and orders of the Excise authorities and the directions contained in the Excise laws for the time being in force whether such directions, prohibitions and orders be embodied in the conditions of his licence, permit or pass or not, and all directions, orders and prohibitions contained in Rules lawfully made under the Excise laws. The Rules as well as licence prescribed that the time and conditions for keeping open the shops in question and the holders of licence, permit or pass on the expiry of the licence is to return to the officer who granted it to the licencee. The Collector will fix the minimum with reference to the average daily consumption and the time required for replenishing the stock from the nearest warehouse. Each retail vendor of country spirit should report to the District Collector of the Excise Superintendent on the 1st of each month the stock he has in hand. Under Rule 305 the holder of licence for the retail sale of country spirit shall not sell such spirit at prices higher or lower than those specified in the Rules as well as in the licences. The lessee of the country shop buy liquor in bottles from the Govt. Warehouse and deposit cost price fixed by the State Govt. along with sales tax and excise duty fixed by the same by the treasury challan. The lessees of the country spirit shops then sell the same to the consumers at a price fixed by the Stale Govt. under the law for the time being in force. As motioned earlier country liquor shop are settled by the tender system and not auction sale. The duration of acquiring of licence for country liquor shops are three years commencing from the 1st April or any other date as may be specified by the State Govt. from time to time. The licence of country spirit shop in Assam can be obtained on fixed vend fees prescribed by the State Govt.. In case, the licencee of country spirit shops fails to sell the total quantity of liquor brought by him under the licence, the same has to be s
