THE EXCISE COMMISSIONER KARNATAKA & ANR. versus MYSORE SALES INTERNATIONAL LTD. & ORS.

Citation: [2024] 7 S.C.R. 287 · Decided: 08-07-2024 · Supreme Court of India · Bench: B.V. NAGARATHNA · Disposal: Appeal(s) allowed

cites 2 · see the full citation network in Lexace

Judgment (excerpt)

[2024] 7 S.C.R. 287 : 2024 INSC 484
The Excise Commissioner Karnataka & Anr. 
v. 
Mysore Sales International Ltd. & Ors.
(Civil Appeal No. 2168 of 2007)
08 July 2024
[B.V. Nagarathna and Ujjal Bhuyan,* JJ.]
Issue for Consideration
Whether provisions of Section 206C of the Income Tax Act is 
applicable in respect of the appellant and whether the liquor 
vendors (contractors) who bought the vending rights from the 
appellant on auction, can be termed as “buyer” within the meaning 
of Explanation(a) to Section 206C of the Income Tax Act or excluded 
from the said definition of “buyer” as per clause (iii) of Explanation 
(a) to Section 206C of the said Act. Relatable to the above core 
issue is the question as to, whether, the High Court was justified 
in rejecting the challenge to the said orders made by the appellant.
Headnotes†
Income Tax Act, 1961 – Explanation(a)(iii) to section 206C – 
Karnataka Excise Act, 1965 – Karnataka Excise (Arrack 
Vend Special Conditions of Licenses) Rules, 1967 – Rule 4 – 
Karnataka Excise (Lease of the Right of Retail Vend of Liquors) 
Rules, 1969 – Karnataka Excise (Manufacture and Bottling 
of Arrack) Rules, 1987 – By the order dated 17.01.2001, the 
assessing officer held that the appellant is a “seller” and the 
liquor vendors are “buyers” in terms of Section 206C of the 
Income Tax Act and hence the appellant was under a legal 
obligation to collect income tax at source from the liquor 
vendors (contractors) – The challenge to the said order dated 
17.01.2001 was negatived first by the Single Judge and then 
by the Division Bench of the High Court – Justified or not:
Held: Explanation(a)(iii) to section 206C of the Income Tax Act, 
1961 visualizes two conditions for a person to be excluded from 
the meaning of “buyer” as per the definition in Explanation(a) – The 
first condition is that the goods are not obtained by him by way of 
auction – The second condition is that the sale price of such goods 
to be sold by the buyer is fixed under a state enactment – These two 
* Author
288
[2024] 7 S.C.R.
Digital Supreme Court Reports
conditions are joined by the word ‘and’ – The word ‘and’ is conjunctive 
to mean that both the conditions must be fulfilled; it is not either of 
the two – Therefore, to be excluded from the ambit of the definition 
of “buyer” as per Explanation(a)(iii), both the conditions must be 
satisfied – In the instant case, Mysore Sales is the licensee for the 
manufacture and bottling of arrack for specified area(s) – By a process 
of auction or tender or auction-cum-tender etc., excise contractors 
are shortlisted who are thereafter granted permits to vend arrack by 
retail in their respective area(s) – These retail vendors i.e. excise 
contractors have to procure the arrack from the warehouse or depot 
maintained by Mysore Sales on payment of the issue price fixed by 
the Excise Commissioner – The arrack is procured in sealed bottles 
or in sealed polythene sachets – So, there are two transactions, each 
distinct – The first transaction is shortlisting of excise contractors by 
a process of auction etc. for the right to retail vend – The second 
transaction, which is contingent upon the first transaction, is obtaining 
of arrack for retail vending by the excise contractors on the strength 
of the permits issued to them post successful shortlisting following 
auction – Therefore, it is evidently clear that arrack is not obtained 
by the excise contractors by way of auction – What is obtained by 
way of auction is the right to vend the arrack on retail on the strength 
of permits granted, following successful shortlisting on the basis of 
auction – Thus, the first condition under clause (iii) is satisfied – Rule 
4 of the 1967 Rules enables the excise contractor to sell the arrack in 
retail at a price within the range of minimum floor price and maximum 
ceiling price which is fixed by the Excise Commissioner – The price 
of arrack to be sold in retail is not dependent on the market forces 
but pre-determined within a range – Therefore, though price range 
is provided for by the statute, it cannot be said that because there 
is a price range providing for a minimum and a maximum, the sale 
price is not fixed – The sale price is fixed by the statute but within a 
particular range beyond which price, either on the higher side or on 
the lower side, the arrack cannot be sold by the excise contractor in 
retail – Since both the conditions as mandated under Explanation(a)

Excerpt shown. Read the full judgment & AI analysis in Lexace.