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2018 DIGILAW 760 (ORI)

Saraswati Sahu v. State Of Orissa

2018-08-24

BISWAJIT MOHANTY, I.MAHANTY

body2018
JUDGMENT Mahanty, J. - Heard learned counsel for the petitioners, Mr. S.K. Jena, learned counsel appearing for Odisha State Beverages Corporation Ltd., for short, "OSBCL" and Mr. L. Samantaray, learned Standing Counsel. Since according to learned counsel for the petitioners issue involved in all these writ petitions is same and pertains to demands for recovery of TCS amount included in MRP by "OSBCL", this Court while taking up all these matters together for disposal, thinks it proper to take up W.P.(C) No.5679 of 2015 as the lead case. 2. In W.P.(C) No.5679 of 2015, the petitioner-Saraswati Sahoo, who is a licensee of several IMFL 'OFF' shops located at Nachuni, Tangi, Balugaon, Banapur and Badapadar has sought to challenge the respective demands made under Annexure-3 series for recovery of T.C.S. amount included in maximum retail price (MRP) for the period 01.04.2010 to 31.8.2013. The said demands for the respective F.L. 'OFF' shops are quoted hereunder : Nachuni F.L. OFF shop-Rs. 7,07,271/- Tangi F.L. OFF shop-Rs. 6,66,020/- Balugaon F.L. OFF shop-Rs. 13,43,144/- Banapur F.L. OFF shop-Rs. 10,63,701/- Badapadar F.L. OFF shop-Rs. 1,35,537/- 3. The entire basis for raising these demands has been provided by the "OSBCL" in its counter affidavit filed through the Managing Director. In the counter, it has been stated that in the audit carried out by the Office of the Accountant General, Odisha, it was pointed out that during the financial years 2010 to 2013, the "OSBCL" has sold 4.53 lakh cases of beer and IMFL and collected Rs. 62.51 crores as T.C.S. from the retailers at the time of sale and, thereafter, deposited the same with the Income Tax Department. It is further averred that the retailers obtained certificates of T.C.S. from "OSBCL" to avail credit against assessment of their income tax liabilities and most importantly also recovered the same from the consumers through maximum retail price (MRP) which had been inadvertently included in the price (MRP) fixed by the Price Fixation Committee (PFC). It is further averred that the retailers obtained certificates of T.C.S. from "OSBCL" to avail credit against assessment of their income tax liabilities and most importantly also recovered the same from the consumers through maximum retail price (MRP) which had been inadvertently included in the price (MRP) fixed by the Price Fixation Committee (PFC). The copy of the procedure adopted by OSBCL for calculation of issue price of IMFL per case for the years 2009 to 2013 was appended as Annexure-A/1 to the counter affidavit which is extracted herein below: Offer price A Offer price submitted by the supplier and accepted by the OSBC after approval by the Price Fixation Committee Import fee (If any) B Import fee on the stock imported from outside the State as per the Excise Policy for the year Entry Tax C (A+B+F) 1% in case of stock sourcing from outside the State and (A+E) 1% for stock sourcing from inside the State Landing Cost D A+B+C = Landing Cost Margin E OSBC Margin, as fixed from time to time by the Board of Directors of O.S.B.C.Ltd. State Excise Duty F As Notified by the government under the Excise Policy of the State for the year Total Issue price rounded up to next 0.50 paise Issue price G (D+E+F) OSBC Issue price VAT @ 20% H As per Government Notification Sub-Total I (G+H) Wholesale issue price to retailer/ licensee I.T. component T.C.S. @ 1% J As per provisions U/D 27-C of the I.T. Act Surcharge on TCS @ 1% K As per provisions of I.T. Act Edn. Cess @ 3% L As per provisions of I.T. Act Total M (I+J+K+L) Price inclusive of taxes to licensee" 4. It is further averred that in terms of the Liquor Sourcing Policy (LSP) for the year 2010 to 2013, the income tax component i.e. T.C.S. had been inadvertently included, as a result of which the tax burden was passed on to the consumers giving the retailers undue benefits of Rs. 75.01 crores. The retailers/petitioners not only collected the amount of T.C.S. component but also collected their percentage of Margin of Rs. 12.50 crores of the T. C.S. from the consumers, which they were not entitled to and for which they were/are unjustly enriched. However, after such observations made by the Accountant General, necessary rectification procedures have been carried out by the "OSBCL" after due approval of the Government. 12.50 crores of the T. C.S. from the consumers, which they were not entitled to and for which they were/are unjustly enriched. However, after such observations made by the Accountant General, necessary rectification procedures have been carried out by the "OSBCL" after due approval of the Government. For the present, the mode of computation of sale price to the retailers and MRP for IMFL for the year 2015-16 onwards has been annexed as Annexure B/1 and extracted herein below: "Procedure adopted for calculation of OSBC's Sale Price to Retailer and MRP: Offer price A Offer price submitted by the supplier when accepted by the Corporation becomes the approved Offer price for the Corporation. Import fee B Import fee on the stock imported from outside the State as per the Excise Policy for the year Entry Tax C 1% of (A+B+E) Landing Cost D A+B+C State Excise Duty E As Notified by the government under the Excise Policy of the State for the year Purchase Price F D + E Profit G OSBC profit as fixed from time to time by the Board of directors of OSBC. (See Para 30.2) Additional Rounding Off License Fee H Additional rounding off license fee for rounding off the MRP to nearest rupee t. This amount is to be paid to the State Government Sale Price I F + G + H VAT J As per Government Notification. Now it is @ 25% of (I). (20% for C.S.) Total K I+J TCS L @ 1% of K as per provisions under section 27 C of the I.T. Act Amount payable by Retailer M K+L (i.e. the total invoice amount raised on the retailer) MRP per Case N K + retailer's margin as per the rate fixed by the Government from time to time. MRP per Bottle O N. divided by the number of bottles in the Case. 5. It is submitted on behalf of the "OSBCL" that since the petitioners/retailers have got undue advantage on account of an inadvertent mistake committed by the "OSBCL", the impugned demand has come to be raised against the petitioner for different periods. 6. It is submitted by Mr. Jena, learned counsel for the "OSBCL" that the mode adopted by the corporation under Annexure-A/1 was erroneous which led to a situation where the retailers benefited on account of such error committed in Annexure-A/1. 6. It is submitted by Mr. Jena, learned counsel for the "OSBCL" that the mode adopted by the corporation under Annexure-A/1 was erroneous which led to a situation where the retailers benefited on account of such error committed in Annexure-A/1. He justified the demand based on changed policy under Annexure-B/1. However, he fairly admits that in the fact situation no direct loss has been caused to the "OSBCL" and insists that the error of computation, if any, was on account of the "OSBCL" following the mandate of Liquor Sourcing Policy as quoted hereinabove at Annexure-A/1. 7. Mr. Samantaray, learned Additional Government Advocate supports the contention advanced by Mr. Jena, on behalf of the "OSBCL" and submits that the retailers having reaped undue benefit on account of an error committed by the "PFC" & "OSBCL", it is entitled to effect recovery of the same though no counter affidavit has come to be filed by the State. 8. Learned counsel for the petitioner asserts that the entire basis of the demand notices is fallacious, as no loss has been caused to "OSBCL" . He further submits that the corporation admits that the manner in which they computed the MRP (maximum retail price) has been in tune with Liquor Sourcing Policy of the years 2009 to 2013 as would reveal from Annexure-A/1. Further it is submitted at the bar that even in the Excise Policy of 2009-10 of Government, maximum retail price was required to be displayed on all merchandise sold in terms of Clause-23 of the Excise Policy for 2009-10, which is extracted hereunder: "23. MAXIMIM RETAIL PRICE: Maximum Retail Price (MRP will be displayed on each bottle of IMFL, Beer and Country Spirit and sold accordingly. The vendors will issue Cash Memo on demand to the consumers, failing which the vendors shall be penalized with fine upto Rs. 10,000/-" 9. Similarly in the Excise Policy of the year 2012-13 at page 40 of Annexure-2 series, the manner in which MRP was to be fixed is stipulated in Clause-24 thereof and extracted hereunder: "24. MAXIMUM RETAIL PRICE: Maximum Retail Price (MRP) will be displayed on each bottle of IMFL, Beer and Country spirit and sold accordingly. The vendors will issue Cash Memo on demand to the consumers, failing which the vendors shall be penalized with fine upto Rs. 10,000/-. MAXIMUM RETAIL PRICE: Maximum Retail Price (MRP) will be displayed on each bottle of IMFL, Beer and Country spirit and sold accordingly. The vendors will issue Cash Memo on demand to the consumers, failing which the vendors shall be penalized with fine upto Rs. 10,000/-. A. The MRP shall be decided on the principle of landing cost + all taxes/duties + OSBC Margin + Retailer Margin. B. While the landing cost will be decided by the Price Fixation Committee and OSBC margin will be decided by OSBC Ltd., the Retailer margin will be decided in the following manner. IMFL upto Rs. 850/- landing cost per case IMFL above Rs. 850/- landing cost per case FMFL/Scotch Beer 25% 20% 15% 25%" 10. It is submitted on behalf of the petitioner that by the time "OSBCL" sells its products to licensed retailers, the maximum retail price (MRP) is always as fixed by the "PFC". Further in terms of the Government policy, it would be clear that the maximum retail price fixed would be inclusive of all taxes and levies on the product therefrom. Thus no wrong has been committed while fixing MRP for the years 2009 to 2013. 11. It is further submitted by learned counsel for the petitioner that there has neither been any loss to the "OSBCL" nor any loss to the Income Tax Department and more importantly, he highlights that once the "PFC" fixes the price at which "OSBCL" will sale its products to the retailers and the maximum price at which the retailers will sale to the consumers, the retailer has no right to sale above the maximum retail price. It is further submitted that there is nothing to show that the retailers like petitioners have sold above the maximum retail price. Consequently no demand for recovery of TCS can be made. It is also asserted that such a demand is not backed by any law/agreement. Lastly, it is submitted that on his/her income, the petitioner also pays further income tax. In any case, there exists no demand either by Government or by the Income Tax Department. In such background, prayer is made for quashing the demand for recovery of TCS. 12. It is also asserted that such a demand is not backed by any law/agreement. Lastly, it is submitted that on his/her income, the petitioner also pays further income tax. In any case, there exists no demand either by Government or by the Income Tax Department. In such background, prayer is made for quashing the demand for recovery of TCS. 12. It appears from the submissions made at the bar and from the records that the method adopted by the authorities is firstly to determine the price at which various excisable products will be procured into the State of Odisha from the manufacturers/suppliers. Thereafter they determine the rate at which such goods are to be sold to retailers (after including profit of margin therein for the "OSBCL") and thirdly they also indicate at what maximum retail price (MRP) that a retailer can sale the product. These three determinations are done by a committee formed by the State known as the Price Fixation Committee (PFC). It is the case of the "OSBCL" that it has strictly complied with the guidelines issued by "PFC" from time to time for the purpose of pricing both at the time of procurement, sale to the retailers as well as fixing the maximum price at which the retailers can sale the products to the consumer. 13. In the present case after hearing the learned counsel for the respective parties, we are of the considered view that there appears to be some confusion at the end of the "OSBCL" insofar as the manner for determining the "maximum retail price". From time to time the state policy has expanded the definition of maximum retail price "to include retailers margin and all taxes & duties". It is also a matter of fact that after the Accountant General Audit pointed out certain errors in the computation being made by the "OSBCL", it is now following the revised method in terms of Annexure-B/1 extracted hereinabove. Now the only issue that remains for determination relates to the demands for a period which is prior to the period covered under the notification annexed as Annexure-B/1. The earlier MRP was fixed as per the policy relating to calculation of MRP prevailing during 2009-2013 as is revealed from Annexure-A/1. The new calculation policy under Annexure-B/1 which was implemented with effect from 2015-16, which does not have any retrospective operation. The earlier MRP was fixed as per the policy relating to calculation of MRP prevailing during 2009-2013 as is revealed from Annexure-A/1. The new calculation policy under Annexure-B/1 which was implemented with effect from 2015-16, which does not have any retrospective operation. Therefore, the impugned demands for a prior period having been made relying on such new calculation policy, are clearly arbitrary and unreasonable thus inviting the mischief of Article-14 of the Constitution of India. Further it is not disputed that "OSBCL" has not suffered any loss. Moreover, we are of the considered view that there has been no undue enrichment by the petitioner inasmuch as there is no allegation of even a single retailer selling above the maximum retail price i.e. MRP. It may further be noted that the term maximum retail price as defined and as accepted is not necessarily the rate at which the products are always sold. It is verily possible that products are sold below the MRP and any assumption that the entire stock purchased by the retailers was sold at the maximum retail price would be an assumption which in our considered view may not be correct, without any evidence thereof being brought on record. The aforesaid facts have been noted by us to highlight the aspect that in the case at hand, even though maximum retail price has been fixed, yet, it is the market conditions that determine whether a retailer can sale their products at the maximum retail price or offer a discount thereon. 14. Consequently the assumption on behalf of the corporation that the petitioner made an undue profit in our considered view, is misplaced. 15. It would be appropriate to take note of the fact that in the instant case "OSBCL" had acted in terms of the Policy (as then in force) for the years 2009 to 2013 under Annexure-A/1. Therefore, no fault can be attributed to the "OSBCL" for having followed the same while computing the rate at which the sales would be effected to the retailers as well as while computing the MRP since it was inconsonance with the Policy as it stood then. Assuming for the sake of argument that any error existed in the Policy, no fault can be found either with the "OSBCL" or with the retailers. The said Policy subsequently changed and the changed policy under Annexure-B/1 is presently in force. Assuming for the sake of argument that any error existed in the Policy, no fault can be found either with the "OSBCL" or with the retailers. The said Policy subsequently changed and the changed policy under Annexure-B/1 is presently in force. It would be also important to note herein that Annexure-B/1 relied upon by the "OSBCL" was issued pursuant to Liquor Sourcing Policy of 2015-16, which amended the mode of computation of MRP. As indicated earlier, such policy cannot have retrospective effect and only prospective effect. Consequently, applying the new formula to the transactions which had already taken place for the earlier years, in our considered view, would be clearly arbitrary, irrational and unreasonable. 16. Apart from the above, when we queried from the counsel for the "OSBCL" as to under which law or contract the present impugned demand has come to be made, he has fairly stated there is no such specific law or terms in the contract under which "OSBCL" has made the demand except highlighting the fact that the same is being done on the basis of the Audit Report. Thus, there appears to be no law for such recovery and the assumption that the retailers have made undue profit itself appears in our considered view not supported by any documentary evidence on record. In view of the aforesaid discussions, we are of the view that the impugned demands raised towards recovery of TCS amount included in the MRP for the period stated in the impugned demand and the amount stated therein have no legal foundation or basis to stand. Accordingly, this writ application is allowed and the impugned demands stand quashed. 17. Since rest of the batch of writ petitions involve the similar issue, accordingly the impugned demands pertaining to the said writ petitions are also accordingly quashed. 18. It is made clear that if any of the petitioners have made any payment to the "OSBCL" against the impugned demands which have been set aside by this order, the "OSBCL" shall refund/adjust the same immediately within a period of three months from today visa-vis such petitioners. Free copy of this order be handed over to the learned counsel for the state for necessary communication and compliance.