Amarendra Nath Sen, J. - (1.) The question of constitutional validity of the Mysore Sales Tax (Amendment) Act, 1969 (Mysore Act of 1969), (hereinafter referred to as the 'Act') falls for determination in these two appeals preferred by the appellants with certificate granted by the High Court under Art. 133 (1) of the Constitution.
(2.) The question arises under the following circumstances:- The appellants are Excise Contractors who had secured excise privilege of retail sale of Toddy, Arrack or Special Liquor. The State Government has the monopoly of the first sale of Arrack which is country liquor other than Toddy. The manufacture of Arrack by distillation is done in the State under State control and the entire quantity manufactured by distillation in the State is sold to the State Government which in its turn supplies Arrack to bonded depots in Taluks. Under the Mysore Excise Act Arrack is liable to excise duty at the rates prescribed by the Government. The State does not collect excise duty from the distillers. From the distillary Arrack is transferred to Bonded Depots and excise duty together with cesses thereon is collected from the contractors who are given the privilege or right to effect retail sales of Arrack. The exclusive privilege of retail vending of Arrack for each excise year which commences on the first day of July and ends on 30th June of the following year, is sold by the State by auction. The successful bidders whose bids are accepted are granted licences for the exclusive privilege of retail vending. The .retail selling price of Arrack by the licensees is fixed by the State Government at or before the time of notifying sales of the exclusive privilege in respect of each year. The excise duty of Arrack together with cesses thereon is collected from the licensees before the date of delivery. Under the terms and conditions governing the licenses, granted to the contractor whose bid is accepted and to whom the licenses for exclusive privilege of vending Arrack is granted, the licensees are required to deposit in the State Treasury under separate heads of account the sales tax payable to the State Government and the excise duty with cesses. There was no dispute as to the amount of sales tax payable by the licencees up to 1-4-1966. However, with effect from 1-4-1966, the State Government started collecting sales tax computed on the sale price of Arrack together with excise duty and cesses payable thereon. So computed sales tax came to about 24 paise a litre which was collected along with the price of Arrack sold to the licensees.
(3.) Challenging the validity of the collection of the sales tax on the aforesaid basis the appellant filed a writ petition in the High Court of Mysore at Bangalore being Writ Petition No. 644 of 1966. As this Writ Petition No. 644 of 1966 related to the excise year 1966-67 only, the appellant filed two other writ petitions being Writ Petitions Nos. 1012 and 1013 both of 1966 for subsequent excise years. These three writ petitions of the appellant along with similar writ petitions filed by other contractors were disposed of by a common judgment by a Division Bench of the Mysore High Court on 12th July, 1968. The Mysore High Court for reasons recorded in the judgment held:- "We allow the rest of the petitioners only to the extent of holding that the State Government is not entitled to collect from the petitioners any amount by way of Sales Tax on the following viz., Excise Duty, Health Cess and Education Cess imposed on Arrack or Special Liquor. In the said petitions, we hereby issue writs directing the State Government to forbear from collecting from the petitioners any amount representing Sales Tax on the following viz. Excise Duty, Health Cess and Education Cess imposed on Arrack or Special Liquor, and to refund to the petitioners any amount that might have been collected from them, by way of Sales Tax on items of Excise Duty, Health Cess and Education Cess on Arrack or Special Liquor". The Division Bench in the course of the judgment in, D. Cawasji and Co. Mysore v. State of Mysore (1969) 1 Mys LJ 461, observed at page No. 483:- "It is difficult to see how Excise Duty paid, not by the seller but by the purchaser, to the State Government, can become a part of the price at which the goods are sold by that seller to that purchaser. If that is the true position, we think the State Government cannot, under S. 19 of the Sales Tax Act, collect Sales Tax on Excise Duty which is not a part of its selling price".;