S.B Sinha, J.:—Whether the State of Bihar is a ‘seller’ of alcoholic liquor for human consumption within the meaning of Section 44AC and Section 206C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) is the question involved in this writ application?

2. Admittedly the State of Bihar, exercises control in respect of alcoholic liquor for human consumption from the stage of manufacture of spirit to that of consumption of alcoholic liquor by the consumes in terms of the provisions of Bihar Excise Act, 1930 and the rules framed thereunder.

3. According to the petitioners it merely realises a fee in lieu of transfer of privilege to the persons intending to deal with the goods, but it does not transfer any ‘goods’ in the nature of alcoholic liquor for human consumption to any person.

4. It is the case of the petitioners that alcoholic liquor all along remains the property of the whole-sale dealers and the State or its Officers are not owners thereof cannot be ‘seller’ within the aforementioned provisions of the Act.

5. The respondent No. 2, however, issued a letter dated 27.7.1990 addressed to the Excise Commissioner, Bihar (Petitioner No. 2) stating therein that the Excise Department is the seller and thus it is bound by the terms of Section 206C of the Act. The petitioner however, in its reply dated 25.10.1990 as contained in Annexure-2 to the writ application denied its liability on the basis of an opinion of the learned Additional Advocate General No. I. Another letter dated 13.12.1990 was addressed by the Resp. I to the Petitioner No. 2 wherein it was reiterated that the Excise Department is ‘seller’ inter alia on the ground that in terms of the provisions of Act; the other States including the State of U.P are collecting tax in terms of Section 206C of the Act.

6. The petitioners again sought for the opinion of the learned Additional Advocate General No. 1 and in reply to the respondent No. 1's aforementioned letter, the Deputy Commissioner of Excise by his letter dated 14.3.1991 (Annexure-4) denied the petitioner liability by annexing a copy of the opinion received by him.

7. By reason of various orders demands which are contained in Annexure-5 series, however assessment orders were passed and demands were made by the respondents No. 3 to 9 holding that the petitioner Nos. 4 to 11 who are Superintendents of Excise were required to deposit the amounts mentioned therein and they have failed to collect the amount of lax and credit the same to the Central Government's Account, in terms of the aforementioned provisions, they are bound to pay amount mentioned in the respective orders/demands.

8. Mr. K.N Jain, learned Additional Advocate General No. I appearing on behalf of the petitioner has taken us through various provisions of the Bihar Excise Act and the Rules framed thereunder and submitted that from a perusal thereof, it would appear that Excise Department is not dealing in liquor and thus it is and cannot be ‘seller’ within the meaning of Section 44AC of the Act and consequently it has no liability in terms of Section 206C thereof.

9. The learned counsel pointed out that the distillers transport ‘Spirit’ manufactured by them to the warehouses where the same is processed and thereafter sold to the retailers. It was submitted that the Excise Department merely regulates the transactions and realises the duties payable to the State of Bihar from the licensees.

10. Our attention was further drawn to the fact that the prices paid by the retail dealers are credited in separate account and paid to the distillers by the State of Bihar.

11. According to Mr. Jain as at no point of time, the ‘goods’ become the property of the State of Bihar, the question of its being a ‘seller’ under the said Act does not arise.

12. It was further pointed out that one lock and key of the warehouses remains with the owner, as would appear from the Rule 49 of the Rules framed by the Board of Revenue and the products of the distillers are brought to the warehouses at the risk of the whole-sale dealers and the loss if any, is also to be on account of the owner.

13. It was submitted by Mr. Jain that the Excise Authorities are merely the Controlling Authorities in respect of the intoxicants and thus only because the State is collecting the duly payable to it also the cost price of the liquor, it cannot become a ‘seller’ as has been opined by the Commissioner of Income Tax as also the respondent Nos. 3 to 9 in their impugned orders and demands as contained in Annexure-5 series.

14. Mr. Rastogi, the learned Sr. Standing Counsel of the Income Tax Department, on the other hand, submitted that as the State is collecting the cost price of the liquor and thus it is bound to collect the tax also from the retail dealers.

15. According to the learned counsel from a perusal of the impugned orders as contained in Annexure-5 series, it would appear that in the past tax had also been collected by the respondents, but as there has been short payments, proceedings had been initiated as against the petitioners Nos. 1 to 11 under the provisions of the said Act.

16. It was further submitted that as the cost price is being deposited in the account of the Excise Department by the retail dealers alongwith the excise duty by challans, there cannot be any doubt that the State of Bihar is a ‘seller’ within the meaning of Section 206C of the Act.

17. The learned counsel in this connection has drawn our attention to the explanation appended to section 44AC of the Act. It was further submitted that in view of sub-section (1) of Section 40 of the Bihar Excise Act, there is no bar for Government to deal in liquor and thus it must be presumed that the State is a ‘seller’ in respect of the ‘goods’ in question.

18. Mr. Jain, in reply submitted that only right to deal in liquor is transferred by the State which is a distinct right and the said right does not come within the purview of word ‘goods’. It was submitted that right to vend is an intangible right whereas by reason of sale of goods, possession of moveable property passes from the ‘seller’ to the ‘purchaser’.

19. According to the learned counsel, there are in fact two separate transactions meaning thereby the transfer of right to vend by the State of Bihar to the whole-sellers and sale of liquor for human consumption by them to the retail dealers.

20. It is stated at the bar that cases questioning the constitutional validity of provisions of Section 44AC and Section 206C are pending consideration before the Hon'ble Supreme Court of India and various High Courts including this court.

21. In this case we are concerned only with the interpretation of the aforementioned provisions and not the constitutional validity thereof.

22. The High Courts of Kerala and Andhra Pradesh have upheld the validity of the said provisions. In the Kerala High Court the matter came up for consideration before a learned single Judge in Kunhammed Kutty Haji v. Union Of India (1989) 176 I.T.R (481) wherein the constitutional validity of the aforementioned provisions were upheld. The said decision was upheld by a Division Bench of the said High Court in T.K Aboobaker v. Union of India (1989) 177 ITR 358 wherein the principle challenged was with regard to the legislative competence. However, the Andhra Pradesh High Court in Sanyasi Rao v. Government of Andhra Pradesh (1989) 178 ITR 31 held that Section 44AC is violative of Articles 14 and 1.9 of the Constitution of India but despite the same upheld the said provisions by reading down the same, holding that Section 44AC is merely an adjunct to and explanatory to the provisions of Section 206C and thus a regular assessment of income of the assessees has to be made in accordance with Suction 28 to 43(c) of the Act.

23. The decision of Andhra Pradesh High Court in A. Sanyasi Rao has been followed by the Orissa High court in Shri Venkateswara Timber Depot v. Union of India (1991) 189 ITR 741 and by the Punjab and Haryana High court in Sat Pal and Co. v. Excise and Taxation Commissioner reported in (1990) 185 ITR 375.

24. Section 44AC and Section 206C of the Act read as follows:

“Section-on-44A C.-Special provision for computing profits and gains from the business of trading in certain goods.— (1) Notwithstanding anything to the contrary contained in Sections 28 to 43C, in the case of an assessee, being a person other than a Public Sector Company (hereinafter in this section referred to as the buyer), obtaining in any sale by way of auction, tender or any other mode, conducted by any other person or his agent (hereinafter in this section referred to as the seller):

(a) any goods in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor), a sum equal to forty per cent of the amount paid or payable by the buyer as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head ‘profits and gains of business or profession:

Provided that nothing contained in this clause shall apply to a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act;

(b) The right to receive any goods of the nature specified in column (2) of the table below, or such goods, as the case may be, a sum equal to the percentage specified in the corresponding entry in column (3) of the said Table, of the amount paid or payable by the buyer in respect of the sale of such right or as the purchase price in respect of such good shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head “profits and gains of business or profession.”

Sl. No. Nature of goods Percentage (1) (2) (3) (i) Timber obtained under a forest lease Thirty five percent (ii) Timber obtained by any mode other than under a forest lease Fifteen percent. (iii) Any other forest produce not being timber. Thirty-five percent.

(2) For the removal of doubts, it is hereby declared that the provisions of sub-section (1) shall not apply to a buyer (other than a buyer who obtains any goods from any seller which is a public sector company) in the further sale of any goods obtained under or in pursueance of the sale under sub-section (1).

(3) In a case where the business carried on by the assessee does not consist exclusively of trading in goods to which this section applies and where separate accounts are not maintained or are not available, the amount of expenses attributable to such other business shall be an amount which bears to the total expenses of the business carried on by the assessee the same proportion as the turnover of such other business bears to the total turnover of the business carried on by the assessee.

Explanation.— For the purposes of this Section, “Seller” means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or provisincial Act, or any company, or firm, or to co-operative society.”

25. Section 206C.—Profits and gains from the business of trailing in alcoholic liquor, forest produce, Scrap, etc.

(i) Every person being a seller referred to in section 44AC, shall at the time of debiting of the amount payable by the buyer referred to in that section to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft, or by any other mode, whichever is earlier, collect from the buyer of any goods of the nature specified in column (2) of the Table below, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said table, of such amount as income tax on income comprised therein.

Sl. No. Name of goods Percentage (1) (2) (3) (i) Alcoholic liquor for human consumption (other than Indian-made foreign liquor) Fifteen percent. (ii) Timber obtained under a forest lease Fifteen percent. (iii) Timber obtained by any mode other than under a forest lease Five percent. (iv) Any other forest produce not being timber Fifteen percent.

Provided that where the Assessing Officer, on an application made by the buyer, gives a certificate in the prescribed form that to the best of his belief any of the goods referred to in the aforesaid table are to be utilised for the purpose of manufacturing, processing or producing articles or things and not for trading purposes, the provisions of this-sub-section shall not apply so long as the certificate is in force.

(2) The power to recover lax by collection under sub-section (1) shall be without prejudice to any other mode of recovery.

(3) Any person collecting any amount under sub-section (1) shall pay within seven days the amount so collected to the credit of the Central Government or as the Board directs.

(4) Any amount collected in accordance with the provisions of the provisions of this section and paid under sub-section (3) shall be deemed as payment of tax on behalf of the person from whom the amount has been collected and credit shall be given to him for the amount so collected on the production of the certificate furnished under sub-section (5) in the assessment made under this act for the assessment year for which such income is assessable.

(5) Every person collecting tax in accordance with the provisions of this section shall within ten days from the date of debit or receipt of the amount furnished to the buyer to whose account such amount is debited or from whom such payment is received, a certificate to the effect that tax has been collected, and specifying the sum so collected, the rate at which the tax has been collected and such other particulars as may be prescribed.

(5A) Every person collecting tax in accordance with the provisions of this section shall prepare half yearly returns for the period ending on 30th September and 31st March in each financial year, and deliver or cause to be delivered to the prescribed income-tax authority such returns in such form and verified in such manner and setting forth such particulars and within such time as may be prescribed.

(6) Any person responsible for collecting the lax who fails to collect the tax in accordance with the provisions of this section, shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Govt. in accordance with the provisions of sub-section (3)

(7) Without prejudice to the provisions of sub-section (6), if the seller does not collect the lax or after, collecting the tax fails to pay it as required under this section, he shall be liable to pay simple interest at the rule of two per cent per month or part thereof on the amount of such tax from the date on which such lax was collectable to the date on which the tax was actually paid.

(8) Where the tax has not been paid as aforesaid, after it is collected, the amount of the tax together with the amount of simple interest thereon referred to sub-section (7) shall be a charge upon all the assets of the seller.”

26. As indicated hereinbefore, the question which arises for consideration is as to whether the State of Bihar Sells any ‘goods in the nature of alcoholic liquor for human consumption’ to the retail dealers by collecting the cost price thereof on behalf of the manufacturer of spirit or whole-sale dealers.

27. For the purpose of interpreting the aforementioned provisions, it is necessary at the outset, to consider the relevant provisions of the Excise Act, 1915 and the rules framed thereunder.

28. The Excise Act was enacted as it was considered expedient to amend the law in the province of Bihar and Orissa relating to the import, export, transport, manufacture, possession, and sale of certain kinds of liquor and intoxicating drugs, as would be evident from the preamble thereof.

29. Under Section 13 of the Excise Act, a licence for manufacture is given on terms and conditions in terms whereof a distiller may manufacture pure spirit, which remain under the control of the Excise Department. The said product is transported to the warehouses for being processed into alcoholic liquor for human consumption commonly known as country liquor.

30. Section 15 of the Excise Act provides that establishment of distilleries, breweries or warehouses cannot be done by any other person except by or under the authority of the Excise Commissioner and subject to the provisions laid down therein.

31. Section 22 of the Excise Act provides for grant of exclusive privilege for manufacture and sale of country liquor in certain circumstances.

32. Section 89 of the Excise Act empowers the State to frame rules to carry out the object of the said Act and in particular the matters enumerated in Clauses A to N referred to sub-section (2) thereof.

33. Section 90 confers power upon the Board of Revenue to make rules inter-alia for regulating the manufacture, supply or storage of any intoxicant and the matters enumerated in clauses (a) to (f) of sub-section (1) and sub-sections (2) to (15) thereof.

34. Rules 44 to 62 framed by the Board deal with the matters relating to maintenance of warehouses for the country spirits. Under rule 44 warehouses for supply of country liquor to the retail vendors are to be established at the convenient places at the expenses of the Government, but in special circumstances such warehouses may be constructed by a wholesale supply contractor or licensed vendor. Each such warehouse is required to be supplied with country spirit by the manufacturer or wholesale dealer and such warehouses are to remain in charge of an Excise Officer. The licensee is further required thereunder to provide for suitable quarters for the Excise Officers and the Guards in charge of the warehouse close to the warehouse buildings or in lieu thereof to pay to each of them monthly, in advance, such house allowance as may be fixed by the Excise Commissioner.

35. Under Rule 45 supply to warehouse is made under a Bond and at the sole risk and responsibility of the whole-sale dealer. It is the duly of the person licenced to supply to such warehouse to keep the minimum stock of spirit as the Excise Commissioner from time to time direct. Under Rule 46, no spirit is to be issued from a warehouse, except under a pass. Under rule 48, as soon as a consignment is received at the warehouse, the Officer-in-Charge thereof is required to open the vessel and measure and test the spirit in each vessel and if any excessive deficiency is found after measure of the spirit by Bung-Rod, the actual deficiency is to be ascertained. The result is then noted in the prescribed register as also on the pass covering the consignment. One copy of the pass is immediately returned to the Officer who issued the consignment and the other is retained at the warehouse. Rule 49 provides that every warehouse shall be locked with a Chhubb's lock or any other suitable lock of Indian make approved by the Commissioner and the key thereof shall remain with the Officer-in-Charge and the duplicate deposited with the Treasury Officer. The owner of the spirit is further required to affix his own lock in addition on the warehouse door and keep the key of the spirit with his legal agent, who shall be bound to remove the lock whenever required by the Officer-in-Charge for operation of the warehouse. Under Rule 50 if the spirit supplied is not found of good quality as corresponding with the sample approved by the Commissioner or is found to be unfit for human consumption, a sample of such spirit is submitted to the Commissioner, whose orders thereon is final, including an order for destruction of such spirit, and during the pendency of the decision of the Commissioner, the issue of such spirit is stopped. Under Rule 51 the Licensee is required to supply the Officer articles and appliances required for blending, reducing or issue of spirit and it is the Licensee who is to bear the cost thereof. Under Rule 53 the Collector prescribes the working day for a warehouse, on which date it has to remain open for 8 hours and the issue of spirit is to be given in the order in which the vendors present challans or money-order-receipts showing payment of duty and cost price after getting their transit drums ready. Under Rule 54 the reduction of spirit of high strength to the strength prescribed for issue is to be made according to the rules framed by the Board in this behalf. Under Rule 54A the samples of water used for reduction purposes are required to be sent to the Chemical Examiner for examination twice a year, unless ordered otherwise and the cost of the despatch of the samples as also the prescribed fee of the examiner of the spirit is also paid by the contractors. Rule 55 provides for the retail vendors to obtain their supply only from a spirit warehouse allotted to them except that for special reasons they may be directed to take their supply from any other warehouse assigned to the same wholesale dealer. Under Rule 56 the retail vendors have to pay the duty leviable on the supply to be obtained into the Treasury or the sub-Treasury where such warehouse is situated. On receipt of such receipt/challan showing payment of the amount due the warehouse Incharge has to be prepare a transit pass in the prescribed form. Under Rule 60 it is the duty of the Officer-in-Charge to see that the spirit in excess is not issued therefrom. Under Rule 62 it is the whole-sale dealer who is responsible for any excessive wastage found to occur from any negligence on his part in supplying unsound casks, tanks or vats or on the part of any person conducting the operation on his behalf.

36. It is not in dispute that the retail vendors purchase country liquor by paying the cost price as also the State Excise duty by chalian to the Excise Departments.

37. It is now well settled that no person has any inherent right to manufacture or sell any intoxicant. The right to vend excisable articles is exclusively owned by the State and ‘fee’ is realised as the price of the privilege.

38. It is also well settled that the State is competent to regulate the trade of intoxicant in a manner different from other trades or businesses.

39. Reference in this connection may be made to Cooverjee B. Bharukha v. Excise Commissioner, Ajmer reported in AIR 1954 S.C 220, in Sadiq Ali v. Election Commission of India reported in AIR 1972 S.C 188 and Excise Commissioner, U.P v. Premjeet Singh reported in AIR 1983 S.C 1956 and Har Shankar v. Dy. E. & T. Commr. reported in 1975 S.C 1121.

40. The provisions of Section 206C read with Section 44AC have to be read in the light of the legislative intent.

41. Section 44AC has been brought into force with effect from 1st April, 1989 (Assessment year-1989-1990), whereas section 206C was brought into the statute book with effect from 1.4.1988 The memorandum explaining the provisions in the financial bills 1988 sets out the reason for which, and the objects to achieve the said provisions were inserted.

42. Paragraph 25 of the memorandum reads thus (see 1988) 170 I.T.R 1987 (Statute)

“New provisions to counteract tax evasion by liquor contractor, scrap dealers, dealers in forest products, etc.— Considerable difficulty has been felt in the past in making assessment of incomes in the case of persons who take contracts for sale of liquor, scrap forest products etc. It has been the Department's experience that for taking such contracts, firms or associations of persons are specifically constituted and very often no trace is left regarding them or their members after the contract has been executed. Persons have also been found to have taken contracts in Benami names by floating undertakings or associations for short periods. Since tax is payable in the assessment years in respect of the incomes of the previous years, the time by which the incomes from such sources become assessable, such persons are not traceable. At the time of assessment in these cases, either the accounts are not available or they are grossly incorrect or incomplete. Thus even if assessments could be made on ex parte basis, it becomes almost impossible to collect the tax found due, either because it becomes difficult to establish the identity of the persons and trace them or because of the fact that the persons in whose names contracts are taken are men of no means.

With a view to combat large scale tax evasion by persons deriving income from such businesses, the Bill seeks to insert a new section 44AC to provide for determination of income in such cases. Taking into account the experience gained in the past regarding the ratio of profit to the sale consideration, the proposal is to prove that sixty percent, of the amount paid or payable by such persons on sale would constitute income of the taxpayers i.e the buyer.

The Finance Minister, in his Budget speech for 1988-1989 described this as “an anti-evasion measure”.

This bill provided that the profits and gains of purchasers of specified goods shall be deemed to be 60% of the purchase price. It also provided for collecting 20% of the purchase price at source. This provision was sought to be made applicable not only to purchasers of alcoholic liquor for human consumption (other than Indian-made foreign liquor) and forest produce, but also to purchasers of scrap and waste as well. Parliament, however, confined the operation of the said provisions only to alcoholic liquor, timber and forest produce (referred to this judgment as “specified goods”). It also altered the percentage of profits and gains, as well as the precentage of deduction, as mentioned hereinbefore.”

After the Finance Act, 1988, was passed, a Press Note was issued by the Press Information Bureau explaining sections 44AC and 206C. According to the Press Note, Section 44AC is a special provision for computing profits and gains in the cases of persons engaged in the trading in specified goods. It applies only to persons “engaged in the trading in goods” specified in the section. If the goods are destroyed or lost subsequently, there would be no occasion for trading in such goods and, therefore, the tax collected under section 206C may have to be refunded on such loss being proved. On the meaning of the expression “Purchase price”, it says, “the purchase price for this purpose will be the cost of the commodity inclusive of any excise duty, sales lax or any other levy, whatever its nomenclature, paid for by the buyer for obtaining the goods. “Purchase price” will not, however, include any freight or transportation charges. In the case of buyers of liquor, the purchase price will include cost of bottle, label and scaling charges etc. It clarifies that the deductions provided by chapter VI-A of the Income Tax Act would be permissible from the profit determined under section 44AC.”

43. It is, therefore, clear that the aforemntioned provisions had to be inserted in order to solve the problems of tax evasion by those operators who are called “fly by night”. The measure was, therefore, brought into the Statute Book for plugging the loop-holes relating to collection of revenue.

44. Section 206C of the Act makes a person liable to deduct tax at the rate of 15% in respect of Alcoholic liquor for human consumption (other than India-made foreign liquor) at the time of debiting of the amount payable by the buyer referred to in that section to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or any other mode whichever is earlier, by way of income tax as income price therein.

45. The said provision has been made without prejudice to any other mode of recovery. The persons responsible for collecting tax in case of default to deposit the same within ten days from the date of the debit as provided under sub-section (5) of Section 206C thereof faces the consequences as specified in sub-sections (6), (7) and (8) thereof.

46. The words ‘Seller’ and ‘Buyer’ in view of the provision contained in Section 206C of the Act have to be assigned the same meaning as referred to in section 44AC of the Act.

47. In terms of the said provision a buyer is a person who obtains goods in any sale by way of auction, tender or any other mode conducted by any other person or his agent.

48. The person thus who conducts sale, by way of auction, tender or any other mode or his agent is the seller. ‘Seller’ inter alia means the State Government.

49. It however, expressly excludes ‘person’ or a Hindu Undivided Family.

50. If a literal meaning is assigned to the words ‘any goods’ as Mr. Jain pursuades us to do, it may be held that in terms of the provisions of the Excise Act and rules framed by the Board, the State never becomes the owner of ‘the goods’ in the nature of alcoholic liquor for human consumption, but in our opinion, such a restricted meaning would lead to an illogical conclusion and defeat the purpose for which the Statute has to be brought in the said Act.

51. If the contention of Mr. Jain, is correct, the State will, have no liability to collect the tax at all.

52. Mr. Jain has accepted that the cost price of the country liquor is realised by the State alongwith the duty by way of challan and kept in a separate account; and the State debits the cost of price in the account of the distiller. For the purpose of Section 206C of the Act, tax has to be deducted not only on the basis of cost price but for that purpose the amount of excise duty has also to be taken into consideration.

53. From the scheme of the provision of the Excise Act and the rules as noticed hereinbefore, it is clear that the ‘spirit’ all along remains in joint possession of the State and the distillers/whole-sale dealers. The State in truth and substance exercises all controls over the intoxicants.

54. The whole-sale dealer has no say in the matter of sale of the intoxicants. The ‘right to vend’ country liquor in retails being the privilege of the State, the same can be exercised only by persons in whose favour settlement of shops are made by the State.

55. The distiller/whole-seller has at no point of time has any independent possession or control over the same. Even it cannot fix the price of the country liquor. The same also lies within the domains of the State. The distillers have to wait for receipt of the price of the spirit as only when the State debits the same in its account they became entitled to the same.

56. The settlement of country liquor shops thus is made either by way of auction, tender or any other mode by the State itself. In my opinion, therefore, the State comes within the purview of the provision of section 44AC and 206C of the Act. The State has to perform various duties under the Act for and on behalf of the distillers/wholesellers in the matter of transfer of the goods in the nature of alcoholic liquor for human consumption, in true sense it is the seller. In any event, in my opinion, the State is undoubtedly the agent of the distiller/whole-seller inasmuch as, it not only conducts the sale but also realises the cost price for and on behalf of the distiller/whole-seller together with the duty receivable by it.

57. Thus, at no stage, the distiller/whole-seller has any direct contact with the retailers nor has it any independent say in the matter whatsoever.

58. The word ‘Seller’ as referred to in Section 44AC has to be read not only in the context of the word ‘buyer’ but also upon taking into consideration the purpose for which the said provisions as also section 206C had been inserted by the Parliament.

59. If distiller/wholeseller is the ‘Seller’ within the meaning of Section 44AC of the Act it will be responsible to realise 15% of the tax together with the price in terms of Section 206C of the Act, in a case where it comes within the purview of the explanation appended to Section 44AC i.e except in the case of an individual or Hindu Undivided Family, but in view of the provisions of the Excise Act and the rules framed by the Board of Revenue the distiller/whole-seller cannot to do so evidently for the simple reason that it does not realise the cost price of the country liquor.

60. It is now well known that for the purpose of construction of a statute the same has to be read as a whole. It is also well known that in order to construe the provisions of a statute it would be just and proper as observed by the Supreme Court in Goodyear India Limited v. State of Haryana (1989 (4) Judgments Today (SC) page 229) = (1990) 2 SCC 71 to see what was the position before the amendment and find out what was the mischief sought to be remedied and then discover the true rationale for such remedy.

61. The Supreme Court in Goodyear's case quoted with approval the following observations of Lord Reid in Black Clawson International Ltd. v. Papierwerke Waldhff Aschaffenburg Ag. (1975) All E.R 810.

“It has always been said to be important to consider the ‘mischief’ which the Act was apperently intended to remedy. The word, ‘mischief’ is traditional. I would expand it in this way. In addition to reading the Act you look at “the facts presumed to be known to Parliament when the Bill which became the Act in question was before it, and you consider whether there is disclosed some unsatisfactory state of affairs which Parliament can properly be supposed to have intended to remedy by the Act.”

62. It is well known that a construction leading to failure to achieve the object must be avoided (See Commissioner Of Income Tax, Delhi v. S. Teja Singh (AIR 1959 S.C 352).

63. It is also well settled that where the language of a statute leads to a manifest contradiction of the apparent purpose or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put by the court which modifies the meaning of the words and even the structure of the sentence. (See Tirath Singh v. Bachitar Singh) (AIR 1955 S.C 830)

64. Lord Denning in Seaford Court Estates Ltd. v. Asher (1949 (2) All E.R page 155 at page 164 stated:

“Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were. This is where the draftsmen of Acts of Parliament have often been unfairly criticised. A Judge, believing himself to be fettered by the supposed rule that he must look to the language and nothing else, laments that the draftsmen have not provided for this or that, or have been guilty of some or other ambiguity. It would certainly save the judge's trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appear a judge cannot simply fold his hands and blame the draftsmen. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give “Force and life” to the intention of the Legislature. That was clearly laid down (3 Co. Rep. 7b) by the resolution of the judges (SIR ROGER MANWOOD, C.B, and the other barons of the Exchequer) in Heydon's case (4), and it is the safest guide to day. Good practical adviec on the subject was given about the same time by plowden in his note (2 Plowd. 465) to Eyston V. Studd (5). Put into homely metaphor it is this: A judge should ask himself the question how, if the makers of the Act and themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases.”

65. Yet recently the Supreme Court in Pandey Oraon v. Ram Chandra Sahu reported in 1992 (1) PLJR page 89 (S.C) approved the observations of the House of Lords in D. (a Minor) v. Bershire C.C (1987 (1) All E.R page 20 that broad and liberal construction should be given to give full effect to the legislative purpose.

66. In Pandey Oraon's case, (supra), the Supreme Court while construing the word ‘Transfer’ used in Section 71(A) of the Chotanagpur Tenancy Act held:—

“In Section 71A in the absence of a definition of transfer and considering the situation in which exercise of jurisdiction is contemplated, it would not be proper to confine the meaning of transfer under the Transfer of Properly Act or a situation where transfer has a statutory definition. What exactly is contemplated in the provision is where possession has passed from one to another and as a physical fact the member of the Scheduled Tribe who is entitled to hold possession and a non-member has come into possession would be covered by transfer and a situation of that type would be amenable to exercise of jurisdiction within the ambit of Section 71A of the Act.”

67. In Reserve Bank of India v. Peerless Co. ((1987) 1 SCC 424) it has been held:

“Interpretation must depend on the text and the context. They are the basis of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither can be ignored. Both are important. That interpretation match the contextual. A statute is best interpreted when we know why it was enacted, with this knowledge the statute must be read, first as a whole and then section by section clause by clause, phrase by phrase and word by word. If a statute is looked at, in the context of its enactment, with the glasses of the statute maker provided by such context, its scheme, the sections, clauses, phrases and words may take colour and appear different than when the statute is looked at without the glasses provided by the context. With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation, statutes have to be considered so that every word has a place and everything is in its place.”

68. In this connection, reference may be also made to “The interpretation and application of Statutes” by Reed Dickersen. The author at page 135 has discussed the subject while dealing with the importance of context in the following terms:

“The essence of the language is to reflect express, and perhaps even effect the conceptual matrix of established ideas and values that identifies the culture to which it belongs. For this reason, language has been called “conceptual map of human experience.”

69. For the reasons aforementioned, I am of the opinion that keeping in view the intention of the Legislature and the reasons for insertion of the aforementioned provisions, the State of Bihar would come within the meaning of word ‘seller’ as envisaged under Section 44AC and Section 206C of the Act.

70. In the result, this application is dismissed but in the facts and circumstances of the case, there will be no order as to costs.

I.P Singh, J.:—I agree.