THE COMMERCIAL TAX OFFICER & ANR. versus MOHAN BREWERIES AND DISTILLERIES LIMITED

Citation: [2020] 6 S.C.R. 865 · Decided: 29-06-2020 · Supreme Court of India · Bench: A.M. KHANWILKAR · Disposal: Disposed off

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Judgment (excerpt)

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[2020] 6 S.C.R. 865
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THE COMMERCIAL TAX OFFICER & ANR.
v.
MOHAN BREWERIES AND DISTILLERIES LIMITED
(Civil Appeal No. 7164 of 2013)
JUNE 29, 2020*
[A. M. KHANWILKAR AND DINESH MAHESHWARI, JJ.]
Tamil Nadu General Sales Tax Act, 1959 – s.7-A – The assessee
is engaged in the business of manufacture of Beer and IMFL
products – For the purpose of the said business of manufacture of
Beer and IMFL, the assessee purchased empty bottles from
unregistered dealers situated outside the State as well as from non-
dealers – The High Court held that the purchase of empty bottles
from unregistered dealers is exigible to purchase tax u/s.7-A of the
1959 Act but, the assessee is entitled for the benefit of Clarifications
dated 09.11.1989 and 27.12.2000 issued by the revenue till the
same were withdrawn prospectively by the Clarification dated
28.01.2002 – Held: When the principles laid down by the
Constitutional Bench in Nandanam Construction Co. are applied
to the phraseology of Clause (a) of sub-s. (1) of s.7-A of the 1959
Act, four eventualities are covered thereunder, with reference to the
treatment of goods in question viz., (i) when they are consumed in
manufacture of other goods for sale; or (ii) when they are consumed
otherwise; or (iii) when they are used in manufacture of other goods
for sale; or (iv) when they are used otherwise – The bottles in
question have neither been consumed in manufacture of Beer/IMFL
nor they could be said to have been used in such manufacture of
Beer/IMFL, hence elements (i) and (iii) does not exist – The empty
bottles are filled up with liquor but such filling up has not resulted
in the bottles themselves being used up and bottles have retained
their basic identity, hence the activity in question does not fall within
the ambit of element (ii) – Insofar as (iv) element ‘when they are
used otherwise’ is concerned, the process of bottling with the use of
bottles was the unalienable part of the complete chain of processes
that the assessee was obliged to undertake for its business i.e.
manufacturing and selling the liquor – By this process, the bottles
*as corrected to the extent as per order dated 11/04/2022 in Miscellaneous Application
No. 608/2022 in Civil Appeal No. 7164/2013 by a two Judge Bench comprising of
Hon’ble Mr. Justice A.M. Khanwilkar and Hon’ble Mr. Abhay S. Oka.
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SUPREME COURT REPORTS
[2020] 6 S.C.R.
were used by the assessee in such a manner that they were no longer
available for sale in the form they were purchased from unregistered
dealers – That being the position, the bottles have indeed been ‘used
otherwise’ by the assessee – Therefore, the activity of assessee in
relation to the bottles in question is clearly covered by element (iv)
of Clause (a) of sub-s. (1) of s.7-A of the Act and making it exigible
to purchase tax – As far as benefit of Clarifications dated 09.11.1989
and 27.12.2000 are concerned, the Constitution Bench in Ratan
Melting & Wire Industries held that no direction can be issued to
enforce a Clarification or Circular contrary to the declaration of
law by the Courts – Thus, the High Court after having found that
purchase tax was leviable on the turnover in question u/s. 7-A of
the Act, could not have issued directions for benefit with reference
to the Clarifications/ Circulars dated 09.11.1989 and 27.12.2000,
particularly when such Clarifications/ circulars do not stand in
conformity with the statutory provisions and its interpretation by
the Courts – Hence, the order of the High Court as regards the
operation and effect of Clarifications/Circulars dated 09.11.1989
and 27.12.2000, cannot be approved.
Tamil Nadu General Sales Tax Act, 1959 – Taxability of Cash
discount on price – The assessee is engaged in the business of
manufacture of Beer and IMFL and for the said purpose purchased
empty bottles from unregistered dealers – The Assessing Officer
disallowed the exemption on cash discount allowed by the assessee
to Tamil Nadu State Marketing Corporation Limited and levied tax
on the said cash discount – The assessee submitted that any cash or
other discount on the price of goods sold cannot be included in the
turnover for the levy of tax – The High Court relying on the decision
in Neyveli Lignite Corporation Ltd. took the view that as per
Explanation 2(iii) to s.2(r) of the Act, cash or other discount on the
price of goods sold cannot be included in the turnover for the levy
of tax and accordingly allowed in favour of the a

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