STATE OF KERALA AND ORS. v. MAHARASHTRA DISTILLERIES LTD. AND ORS

132 SUPREME COURT REPORTS [2005) SUPP. I S.C.R.

A construction of the provisions of a particular Ac!."

The next decision of this Court which may be notjced is the decision of the Full Court in Re : The bill to amend Section 20 of the Sea Customs Act, 1878 and Section 3 of the Central Excises r,md Salt, Act, 1944 [1963] 3 SCR 787 in which the law was stated in the following w~rds :- B ,;This will show that the taxable event in the case of duties of excise is the m~nufac~re of goods .and the duty is not ~irectly on the goods but on the manufacture thereof. We may in this connection contrast sales tax which is also imposed with reference to g.oods sold, where the taxable event is the act of sale. Therefore, though' both excise duty and sales-tax are levied with refere_nce to goods, the two are very different imposts ; in -one case the impositions is on the act of manufacture or produ~tion while in the other it is on the act of sale. In neither case therefore can it be said that the excise duty or sale tax is a tax directly on the goods for in'that event they will really become the same tax. It would thus appear that duties o'f excise partake of the nature of indirect taxes as known to standard works on economics and are to be distinguished from direct taxes like taxes on property and income."

E The principle was stated in some what similar terms in Mis. Guruswamy and Co. etc. v. State of Mysore and Ors., [1967] 1 SCR 548 which is as follows :-

'These cases estabilsh that in ord~r to be' an excise duty (a) the levy must be upon 'goods' and (b) the taxable event must be the F manufacture or production. of goods. Further' the levy need not be imposed at the stage of production or manufacture but may be imposed later."

We shall deal with the submissions urged on the basis of the decisions H of this Court in Mohan Breweries (supra) and Madras Rubber Factory, (supra)

ST A TE OF KERALA ''· MAHARASHTRA DISTILLERIES LTD. [B.P. SINGH, J .] 133

later. A In the light of these principles we now proceed to examine the question as to whether the imposition of duty in the instant case under Section 17 of the Abkari Act was really a 'duty of excise'.

As we have noticed earlier the duty on liquor is imposed under Section B 17 of the Abkari Act. There is no doubt that it is described as a 'duty of excise'. The Government has a discretion to levy or not to levy such duty on all liquor and intoxicating drugs in cases covered by clauses (a) to (g) of Section 17. Clauses (d) and (e) which relate to liquor manufactured under any licence granted under Section 12 or manufactured at any distillery, brewery, winery or other manufactory established under Section 14, no doubt relate to imposition of duty of excise properly so called because the duty levied on liquor manufactured under a licence granted under Section 12 or 14 is duty on manufacture and will squarely falls within the meaning of the term 'duty of excise'. However, clauses (b), (c), (f) and (g) contemplate events which are not related to manufacture, such as liquor permitted to be exported or permitted to be transported under clauses (b) and (c) or liquor issued from a distillery under clause (f) or sold in any part of the State under clause (g). If the duty of excise is levied under Section 17 read with clauses . (b), (c), (f) and (g) it may not be possible to contend that what is levied is a duty of excise since the taxing event envisaged under the aforesaid clauses do not relate to manufacture. Learned counsel for the respondents, in particular, emphasized clause (f) of Section 17 because it is their contention that in the instant case the levy of duty is under clause (f) of Section 17 since the State intended to recover duty from KSBC on the issue of liquor from its warehouses in course of its monopoly wholesale trade. It was further emphasized that Section l 8A which related to grant of exclusive or other privilege of manufacturing or supply by wholesale etc. enabled the State to grant such privilege on the basis of annual rental by way of consideration for the grant of such privilege and the rental could be collected to the exclusion of or in addition to the duty or tax le~iable under Sections 17 and 18. G So viewed there can be no doubt that the levy of duty under Section 17 need not necessarily be. a duty of excise stricto sensu. In each case the Court has to consider whether, having regard to the nature of levy, it is a duty of excise or other impost.

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A We have earlier noticed that under Rule 11 of the Foreign Liquor (Storage in Bond) Rules, 1961, foreign liquor stored in the bonded warehouse can be removed only to the premises licensed under FL 9 licence held by a ''bonded warehouse licensee and such removal shall be,under cover of a pass granted in that behalf and on payment of excise duty due. The same Rules provide that any person desiring to store in bond foreign liquor shall make B an application for licence in that behalf to the Commissioner of Excise containing the particulars mentioned therein. It also obliges the applicant to execute an agreement in Form A undertaking to abide by the provisions of the Act, the Rules and orders made thereunder and the conditions of the. Jice'nce and aiso agrees to pay the prescribed duty therefor. Rule 14 of the C Rules provides for the issuance of a licence in Form BWI to KSBC for the purpose of storage in bond and supply of foreign liquor in wholesale to FL9 licensee under the Foreign Liquor Rules, 1953. Rule 13(9) of the Foreign Liquor Rules mandates that licence in Form FL9 shall be issued by the Excise Commissioner only to KSBC possessing licence in Form BWl under D the Foreign Liquor (Storage in Bond) Rules, 1961.

These Rules leave no manner of doubt that they create a complete monopoly in favour of KSBC insofar as wholesale trade in IMFL is concerned. The manufacturer m~st sell all their produce to KSBC which alone is e~titled to the issuance of licence in Form FL9 and which is also issued a licence in ' '

E Form BWI. The Corporation has also executed an agreement in Form A which,obliges it to pay duties payable on the liquor. In view of these Rules, it was submitted that in effect the State ofKerala has parted with its privilege of wholesale business in IMFL in favour of KSBC for a consideration. The licence issued in favour of KSBC obliges it to pay the duty and it does so F not on behalf of anyone else but in terms of its own licence.

Learned counsel for the parties have also drawn our attention to the Notifications issued by the Government from time to time under Section 17 of the Act. The relevant portion of the Notificatiosn reads thus :-

G "SRO 60/61

The Government of Kerala hereby direct. that the duty under the said Section shall be levied on the following kind of liquors manufactured in the area where the said Act is in force or manufactured elsewhere in India and imported into the said area by land or under bond by sea, ,,,· H at the rates mentioned against each kind of liquor."

STATE OF KERALA v. MAHARASHTRA DISTILLERIES LTD. [B.P. SINGH, J.] 135

It was argued that the Notifications suggest that such duties are levied A. either on goods manufactured in the area or imported into the area. It was also submitted that an essential characteristic of 'duty of excise' is a uniformity of incidence. It cannot vary from notification to notification.

From a perusal of Notification No. SOR 60/61 issued on 18th March, 1961 it appears that different rates of duties have been prescribed for different kinds of liquor. So far as Indian Made Foreign Spirits, except that consumed by defence services personnel, the rate of duty prescribed was Rs. 12/- per proof litre. For the Indian Made Foreign Spirits for defence services the rate was Rs. 3 per proof litre. This was subsequently substituted by Notification dated 23rd April, 1964 whereunder for the Indian Made Foreign Spirits when exported by distillers to Goa and not re-imported into the State, the rate of duty was 45 np. per proof litre subject to the enumerated conditions being satisfied. In other cases it was Rs. 14/- per proof litre. However, in the case oflndian Made Foreign Spirits for defence services personnel supplied through Canteen Stores Department etc. the duty is Rs.3/- per proof litre. Similarly under J;lotification No. 330 of 1996 the rate of duty on Indian Made Foreign Liquor when exported by distillers and not re-imported into the State was Rs. 51- per proof litre subject to the conditions being satisfied. In other cases the rate of excise duty levied was an amount equivalent to I 00 % of its value. It is, therefore,. apparent that under the same Notification purported to be · issued under Sections 6, 7, 17 and 18 of the Abkari Act duties were levied on liquors manufactured in the State or exported outside the State,_ or manufactured elsewhere in India and imported into the State by land or sea under bond. The duty levied on import of liquor would be impermissible under'Entry 5 I of List II. Apparently, therefore, the duty is referable to Entry 8 of List II. It was rightly submitted that if the duty imposed was in the nature of excise duty on manufacture, different rates could not have been prescribed depending upon whether it is sold in the market or consumed by the defence services personnel.

It should also be noticed that having regard to the language of the Notifications it cannot be said that duty is levied on manufacturer because G (. Notifications suggest that such duty would be levied either on the goods manufactured in the area or imported in the area. As earlier observed, the duty levied ori import of liquor· is referable orily to Entry 8 of List II and not Entry 51 thereof.

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A We may also .notice that the stand of KSBC bef@re the High Court and before. this. Court has ·been that supplies were effected to it by the manufacturers/distillers in accordance with the relevant Rules without charging excise duty when the_ supplies were effected. In accordance with the provisions of the Abkari Act and Rule I I of the Foreign Liquor (Storage in Bond) Rules, I961, goods ·purchased by the Corporation during the relevant period were without payment of excise duty ·and the excise duty thereon was payable at the time of removal of goods from the bonded warehouse to FL9 premises. The Corporation .remitted turnover tax on the total value of turnover of the Corporation for each' year at the rate of turnover tax prevalent during the relevant year. The turnover of the Corporation was computed so as to include the value of the goods at which the supplies were received by the Corporation, exeise' duty paid by the Corporation, profit margin of the Corporation and sales tax paid by the Corporation. It is thus admitted by the Corporation that under Rule I I of the (Storage in Bond) Rules the duty was payable when the goods moved out from its bonded warehouse to FL9 premises. This also supports the submission of the respondents that the· duty was levied at the stage of movement of the goods from the bonded warehouse of the Corporation to the FL9 premises arid,' therefore; the levy of duty in terms of Rule I I must . necessarily be traced to Section I 7(f) which levied duty on liquor "issued from a distillery, brewery, winery or other manufactory or warehouse licensed or established under Section I2 or Section 14". Even the parties understood that it was for the KSBC to pay the duty in terms of licence. Notifications · have been issued under· Section I 7 and not specifically under any of the sub- clauses thereof. It would, therefore, not be correct to contend that the duty was levied on manufacture only.

F In this connection we may usefully refer to the decision of this Court in State of Punjab and Anr. v. Mis. Devans Modern Brewaries Ltd and Anr., (supra); In that case the State of Kerala was also a party. The State had imposed tax on import of potable liquor manufactured in other States. The stand of the State was that it was within the province of the State to impose restriction on import of potable liquor by imposing import duty. The aforesaid G duty had not been imposed by the State in exercise of its statutory power conferred upon it in terms of Entry 51 List II of the Seventh Schedule to the Constitution but regulatory power as envisaged in Entry 8 thereof. The contention raised on behalf of the respondents was that the requirements of· Articles 30 I & 304 of the Constitution of India were to be complied with in view of the iact that the duty of import must conform to the provisions of ·H

STATE OF KERALA v. MAHARASHTRA DISTILLERIES LTD. [B.P. SINGH, J.] 137

Entry 51 of List II. The submission of the respondents was rejected and those advanced on behalf of the State ofKerala were accepted. This Court observed that the word 'fee' is not used in the strict sense to attract the doctrine of quid pro quo. This was the price or consideration which the State Government had · charged for parting with its privilege and granting the same to the vendors. Therefore, the amount charged was neither a fee nor a tax but was in the nature of price of a privilege which the purchaser had to pay in any trading and business in noxious article/goods. This Court held that the permissive privilege to deal in liquor is not a 'right' at all. The levy charged for parting with its privilege is neither a tax nor a fee. It is simply a levy for the act of granting permission or for the exercise of power to part with that privilege. This Court referred to numerous decisions of this Court which have clearly held that the State has a right to exercise all forms of control in relation to all aspects regarding potable alcohol and the State Legislature has exclusive competence to frame laws in that regard. The State has exclusive right in relation to potable liquor and there was no fundamental right to do trade or business in intoxicants. The State in its regulatory power has the right to prohibit absolutely every form or activity in relation to intoxicants - its manufacture, storage, export, import , sale and possession and all these rights_ are vested in the State and indeed without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants. Jn Devans Modern, case (supra) this Court held :- E "The Kerala State Beverages Corporation has licence only for wholesale and retail and retail of liquor which will not authorize them to import liquor and that the only licence issued to import liquor into the State is the permit issued on payment of the import fee and, therefore, it is seen that the levy of import fee is authorized by F sections 6 and 24 of the Abkari Act, 1077. It is not excise duty or countervailing duty referable to Entry 51 of List II. It is a collection failing under Entry 8 of List II. It is the price paid to the State for parting with its exclusive privilege of dealing in liquor which includes every fact of it including its import. In my view, the State has the f right to prohibit every form of activity in relation to intoxicant G --· including its import."

It, therefore, held that the levy was permissible and authorized under Sections 6, 7, 17 and 18 of the Abkari Act. This decision supports the view that the levy of so called excise duty under the Abkari Act may be referable H

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A to Entry 8 of List II and not Entry 5 r thereof.

In the passing we may observe that the majority decision has also referred to the judgment of the Kerala High Court in the first batch of appeals before us, and two passages from the impugned decision have been quoted with approval in paragraph 335 of the report, which reads as under:- B "The manufacture and sale ofliquor ..are the exclusive privilege of the State and the State, by the process of licensing, is parting with the said privilege and what is charged by the State is on.ly the privilege price through the process of licensing and it is not excise duty." c "The concept of excise duty on production and manufacture as understood in the Central Excise Act cannot be equated in the case of excise duty under the Abkari Act since the manufacture and the sale of liquor are the exclusive privilege of the State and the State, by the process of licensing is parting with the said privilege and what is charged by the State is only the privilege price through the process of licensing the price and it is not excise duty."

We have carefully perused the impugned judgment but we find that the passages quoted therein were not the findings of the High Court but the submissions advanced on behalf of the petitioners (respondents herein) which are to be found in paragraphs 15 and 44 of the impugned judg!Ilent. In fact as we have noticed earlier in this judgment, the High Court in the first batch of writ petitions proceeded on the basis that the duty levied was a duty of excise but the liability did not fall on the manufacturers/distillers and· was payable only by the KSBC after sale of the liquor by the manufac.turers. F So far as the judgment in. Mohan Breweries, (supra) is concerned it may be noticed that the question which has been raised in this batch of appeals was not raised therein, and the Court proceeded on the basis that the levy was in the nature of duty of excise as is ordinarily understood. In Madras Rubber Fact01y, case (supra) the charging section imposing the rubber cess was quite clear. Sub-section (I) provided for the levy and collection as a cess a duty of excise on all rubber produced in India at such rate not exceeding one anna per pound of rubber so produced as the Central Government may, by the same or a like notification, from time to time fix. Sub-section (2) provided that the said duty of excise shall be payable by the owner of the estate on which the rubber is produced, and shall be paid by him

STATE OF KERALA v. MAHARASHTRA DISTILLERIES LTD. [B.P. SINGH, J.] 139

to the Board within one month from the date on which he received a notice of payment therefore from the Board. In view of the clear language of the charging section which saddled the owner of the estate on which the rubber is produced with the liability to pay the said duty of excise, this Court held that the liability to pay the said amount of cess got attached to the rubber so produced _and, therefore, if the rules did not provide for the excise duty to be paid by the producer then who ever purchased the said rubber would be purchasing goods to which the liability of payment of duty was attached. We do not find such a provision in the Kerala Abkari Act.

From the above discussions the following conclusions emerge:- c l. Section 17 of the Kerala Abkari Act deals with imposition of duty not necessarily connected with manufacture of liquor and, therefore, the duty levied must in each case be examined before coming to a conclusion as to whether it is in reality a duty of excise. D

2Copy pinpoint2. The use of the words "duty of excise" in Section 17 of the Act is not conclusive and it is for the Courts to examine in each case as to whether it is in fact a "duty of excise".

3Copy pinpoint3. In order that a duty may be characterized as "duty of excise" it must be shown that it is a duty on manufacture of goods. If it is unrelated to the manufacture of goods, it may be any other impost permitted by law, but would not qualify as a duty of excise.

4Copy pinpoint4. Section I SA of the Act permits the State of Kerala to grant exclusive or other privilege of manufacture etc. on payment of rentals which includes the privilege of supplying liquor by wholesale or by retail. The annual rental payable under Section I SA may be collected to the exclusion of or in addition to duty or tax leviable under Sections· 17 and 18 of the Act.

5Copy pinpoint5. That the State of Kera la by amendment of the Act and the relevant G Rules created a monopoly in favour of the Kerala State Beverages Corporation. Licences in Form FL9 and BWl have been given exclusively to the aforesaid Corporation which has also executed an agreement in Form A undertaking to pay the duty.A monopoly has been created in favour of the aforesaid Corporation in the H

140 SUPREME COURT REPORTS [2005] SUPP. 1 S.C.R.

A wholesale trade of IMFL. In view of Rule 11 of the (Storage in Bond) Rules duty is payable on the movement of IMFL from the bonded warehouse of the Beverages Corporation to the FL9 licensed premises. It is payable when IMFL is issued from the bonded warehouse of the Corporation.

6Copy pinpoint6. The levy of duty on IMFL issued from a bonded warehouse licensed or established under Section 12 or Section 14 of the Act is referable to the duty levied under Section l 7(f) of the Kerala Abkari Act.

7Copy pinpoint7. The Notifications issued by the Gov~rnment relate both to goods c manufactured in the area or imported into the area .

8Copy pinpoint8. The duty levied is on goods and not on manufacture.

Taking all these factors into account and having regard to the Scheme of monopoly introduced by the State ofKerala in the year 1984 we must hold D that the levy of duty is not a levy in the nature of 'duty of excise' but is the privilege price payable by KSBC in consideration of the State parting with its exclusive privilege of wholesale trade in IMFL in favour of the aforesaid Corporation.

E It was alternatively submitted on behalf of the State that even if it is ,f'

held that what is levied is privilege price it will still form part of the sale price of the liquor sold by the distillers to the' Beverages Corporation and hence part of the taxable turnover for the purpose of levy of turnover tax. The respondents on the other hand contend that by its very nature the privilege price must be paid by the beneficiary and is not capable of being transferred F to the manufacturers/distillers from whom the IMFL is purchased for wholesale trade.

We are of the view that ifthe privilege price is a part of the consideration payable by the Corporation to the manufacturers for supply of IMFL to the G Corporation it will certainly be a component of the sale price of the liquor sold by the manufacturers to the Beverages Corporation. If it is not so, then the respondents are right in contending that having regard to its very nature, privilege price is a price which the beneficiary, in whose favour the State parts with its privilege, must pay. In this case since the State has parted with its exclusive privilege of wholesale trade in IMFL an<l that right has been conferred exclusively on the Beverages Corporation, it is the Beverages

STA TE OF KERALA v. MAHARASHTRA DISTILLERIES LTD. [BP. SINGH, J.] 141

Corporation which must pay the privilege price in addition to the annual rental payable by it.

In view of our above finding, it is not necessary to consider the alternative submission of Mr. Nariman that even if the levy is found to be a duty of excise, its incidence did not fall on the manufacturer or the producer. B In view of our finding that the duty imposed is not,a duty of excise but represents the privilege price charged by the Government from KSBC as a consideration for parting with its exclusive privilege to sell liquor by,wholesale in the State of Kerala, the respondents are not liable to include that duty paid by the Beverages Corporation in their turnover. However, the position changed radically with effect from January 5, 1999. The High Court noticed this fact in paragraph 67 of the judgment, namely - that with effect from January 5, 1999 in view of the amendment to Foreign Liquor Rules, the KSBC could not purchase IMFL from the manufacturers/distillers without payment of duty. In view of the amendment, the KSBC had to pay duty before it could lift the stock of IMFL from the manufacturers' warehouse to its own licensed premises. Thus the KSBC paid to the manufacturers the duty payable in respect of IMFL and consequently the amount of duty paid formed part of the consideration for which the property in goods passed to the KSBC. We have earlier noticed the amendments made to the Foreign Liquor Rules which leave no room for doubt that with effect from January 5, 1999 the manufacturers/ distillers (respondents herein) were bound to include in their turnover the am·ount paid to them by the KSBC by way of duty levied under the Abkari Act together with the price of the liquor purchased from them. The learned Judges noticed this fact but granted relief in broad terms as prayed for by the respondents. In our view the High Court fell into an error in doing so. It ought to have held that in any event with effect from January F 5, 1999 the respondents - manufacturers/distillers were bound to include in their turnover the amount of duty paid to them by the KSBC since that formed part of the consideration for sale of IMFL to the said Corporation. We, therefore, hold that from January 5, 1999, the date with effect from which the KSBC started paying duty to the manufacturers/distillers before G lifting the stock of IMFL to its own licensed premises, the amount of duty paid formed part of the consideration paid by the Corporation to the manufacturers and consequently it formed part of the turnover of the manufacturers.

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A Mr. Ashok Desai, Senior Advocate appearing on behalf of some of the respondents strenuou'sly urged before us that in view of the provisions of Section 5(1) and Section 5(2C) of the Kerala General Sales Tax Act, there was no liability on the manufacturer of liquor to pay turnover tax on the sale of IMFL. We find no merit in this submission.

B The levy of tax under the Kerala General Sales Tax Act, 1963 is by virJ:ue of Section 5. Section 5(1) deals with levy of Sales Tax, whilst Section 5(2C)(i) deals with turnover tax. The relevant portion of this Section reads as follows :-

C "5. Levy of tax on sale or purchase of goods :- (l) Every dealer (other than a casual trader or agent of a non-resident dealer) whose total turnover for a year is not Jess than 'two Jakh rupees and every casual trader or agent of a non-resident dealer, whatever be his total turnover for the year, shall pay tax on his taxable turnover for that year,- D (i) in the case of goods specified in the First or Second Schedule, at the rates and only at the points specified against such goods in the said Schedules."

"5(2C)(i) Notwithst~nding anything contained in this Act or the Rules E made thereunder every dealer shall pay turnover tax on the turnover of goods as specified hereunder, namely :-

(b) by any dealer in Foreign Liquor (Indian made) or Foreign Liquor F (Foreign made} as specified in entries against serial numbers 53 and 54 of the First Schedule at the rate of five percent on the turnover at all points."

Thus under Section 5(1)(i) tax is payable (a) on goods specified in the G First and Second Schedule, (b) at the rates and (c) at the points specified against such goods in the said Schedules. However, under Section 5(2C) which is the charging Section "Notwithstanding anything contained in this Act or the Rule_s" "every dealer shall pay turnover tax." Thus, no dealer is exempted from paying turnover tax. The turnover tax is to be paid "as specified hereunder", and not at rates and at points specified in the First Schedule. The H ·rate is specified in (2C)(i)(b) at 5% on the turnover at all points. Thus under

STATE OF KERALA v. MAHARASHTRA DISTILLERIES LTD. [B.P. SINGH, J.] 143

Section 5(2C)(i) every dealer has to pay at the rate of 5% at all points. The A opening part of Section 5(2C)(i)(b), i.e., the words "by any dealer in Foreign Liquor (Indian made) or Foreign Liquor (Foreign made) as specified in entries against serial numbers 53 and 54 of the First Schedule", do not detract from this portion. Here also the tax is to be paid by "any dealer", "as specified in . entries against serial numbers 53 and 54 of the First Schedule" go with the words "in Foreign Liquor (Indian made) or Foreign Liquor (Foreign made)". It is the Foreign Liquor which is specified in entries 53 and 54. The words "By any dealer" only go with "in Foreign Liquor (Indian made) or Foreign Liquor (Foreign made)". In other words, it is the goods, which are specified in entries 53 and 54 of the First Schedule. This becomes very clear if one looks at the First Schedule. The First Schedule deals with "goods in respect of which a single point of tax is leviable under sub-section (1) or sub-section (2) of Section 5". The four columns in the First Schedule set out (1) the Serial Number, (2) Description of goods, (3) Point of levy and (4) Rate of Tax - %. In the First Schedule there is no column for dealer. The reference to a dealer is only in column (3) which will indicate the point of time at which a dealer will pay tax. If under the charging Section the point of time is not to be as per the First Schedule, then one will not consider column (3) at all. This is clear as the only items are "goods'', "point of levy" and "Rate of Tax - %". With this in mind if one now look at Section 5(l)(i) it becomes clear that thereunder the Sales Tax is payable on the "goods", "at the points" and "at the rates" specified in the Schedules. Whilst considering point and rate at which levy is to be made under Section 5(1 )(i) the levy and rate will be as per the First Schedule but under Section 5(2C)(i)(b) the levy is at all points and at 5% of the turnover. It is only if one has to see at what point and at what rate the levy is ·to be made that one will take columns (3) and (4) of the First Schedule into consideration. As against this under Section F 5(2C)(i) the turnover tax is on "Foreign Liquor" specified in entries 53 and 54, i.e., in column (2) of entries 53 and 54. The turnover tax is at the fixed rate of 5% on the turnover at all points. Thus, in Section 5(2C)(i) there is no reference to columns (3) and (4) of the First Schedule. This is clear from the fact that under Section 5(2C), which is the charging Section, turnover tax is payable by "all dealers". The term "dealer" is defined in Section 2(viii) and G admittedly covers the Respondents. If the interpretation sought to be placed by the Respondents is accepted then there would be a conflict between Section 5(2C)(i) which prescribed rate of 5% on the turnover at all points and columns (3) and (4) of the First Schedule under which tax is only at point of first sale in the State and at rate of 75%. It must, therefore, follows that the words H

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A "goods as specified" in Section 5(2C)(i), has reference only tc;> the description of goods under Entry 53 of Schedule I, namely "Foreign Liquor (Indian made)". In the case of inconsistency, Section 5(2C)(i) must prevail over the Schedule in view of the non obstante clause.

If submission on behalf of the Respondents is accepted and it is h~ld that the words "as specified in entries against serial numbers 53 and 54 of the First Schedule" go with the words "by any dealer", even then under column (3) of Entries 53 and 54 of the First Schedule the relevant words are "by a dealer who is liable to pay tax under Section 5". Admittedly, the Respondents are dealers who.are liable to pay tax under Section 5. They only get exempt from paying tax under Section 5(l)(b) because the sales tax is to be paid "at the rates" and "only at points specified against the g~ods in .the First Schedule". Under column (3) of the First Schedule in entries S3 and 54 the points of levy are (a) for the Kerala State Beverages Corporation the point of levy is at time of sale, (b) by a dealer, who is liable to tax under Section 5, the levy is at point of first sale. However, if the first sale is' to Kerala State Beverages D · Corporation then at that point there is no levy under Section 5(1 )(b) because . the charging Section provide that the levy is to be as per the Schedule. Section 5(2C)(i) does not lay down that tax is to be paid at the point and at the rate specified against the goods in the Schedule. Under Section 5(2C)(i) the tax is at the rate of 5% on the turnover at all points. E Thus the Respondent would in any event be liable to pay turnover tax on their turnover. Further, in the 1st judgment there is no discussion on this aspect at all. In the 2nd judgment the decision is against the Respondents on this aspect against which they have filed no Appeal. We entirely concur with the view of the High Court in the second batch of writ petitions on this aspect of the matter.

The High Court, however, held that the amendment of Section 5(2C) of the Kerala General Sales Tax Act by adding an explanation which was brought into effect retrospectively from July 1, 1987, did not remove the constitutional invalidity in the statute because in view of the finding recorded by the High Court that the manufacturers were not liable to pay excise duty, an amendment to the Sales Tax Act could serve no purpose unless lacuna was removed by appropriate amendment to the Abkari Act. We find ourselves in complete agreement with the view of the High Court because if the Act imposing the levy did not impose upon the manufacturers the liability to pay excise duty, by an amendment of the Sales Tax Act the same could not be

STA TE OF KERALA v. MAHARASHTRA DISTILLERIES LTD. [B.P. SINGH, J.] J45

included in their turnover. A In the result Civil Appeal Nos.2249-2257 of 2000 are partly allowed and it is declared that the respondents - manufacturers/ distillers are liable to pay turnover tax. It is declared that the respondents - manufacturers are liable to include in their turnover the amount of duty paid to them by KSBC and included in the consideration for sale of IMFL to the aforesaid Corporation B with effect from January 5, 1999 and pay the turnover tax accordingly.

Civil Appeal Nos. 95 of 2003; 102 of 2003 ; 622 of 2003 ; Appeal arising out of SLP (c) No. 1032 of 2003 ; Civil Appeal Nos. 5099 of 2003 ; 5100 of2003; 5101 of2003; 5102 of2003; 5103 of2003; 6515 of2003 C ; 6516 of 2003 ; 7952 of 2003 and 7954 of 2003 are dismissed.

No order as to costs.

D.G. Appeals disposed of.