A.L Bahri, J.:— Vide this order a bunch of Civil Writ Petitions (C.W Ps. Nos. 5085, 5086, 5501, 5502, 5503, 5513, 5514, 5988, 5989-A, 6060, 6062, 6305, 6306, 6487, 6488, 6987, 7523, 7552, 7668 and 8521–22 of 1992) are being disposed of as the question of fact and law involved therein is common. The main judgment is prepared in C.W.P No. 5085 of 1992 (K.K Mittal and Co. v. Union of India).

2. The petitioners in all the cases are L-13 licensees of liquor. They deal with the sale of country liquor and have been granted licences for the period April 1, 1992, to March 31, 1993. The licences have been granted to them at a fixed licence fee. At the time of purchase of liquor, income-tax at the rate of 15 per cent, was charged by the distilleries. Some of the distilleries have also been impleaded as respondents. Apart from the income-tax, an additional surcharge at the rate of 1.8 per cent, of the total purchase price is also being charged. The distilleries are supposed to deposit this amount deducted towards income-tax into the treasury. Those distilleries are respondents Nos. 3 to 6. The petitioners purchased country liquor from them at the price fixed by the Excise and Taxation Department and further the petitioners are supposed to sell the liquor at the price fixed by the Excise and Taxation Department. The details of the price fixed are also given, i.e, the petitioner is supposed to sell the liquor at the rate of Rs. 140.77 per box, after purchasing the same at the fixed price of Rs. 58.96 plus Rs. 79.20 as still head duty total being Rs. 138.16 per box. The prices are fixed under rule 38(15) of the Haryana Liquor Licence Rules, 1970. A copy of the letter fixing such price is annexure P-1.

3. In the earlier year also, the distilleries used to deduct the alleged income-tax and surcharge in view of sections 44AC(1) and 206C of the Income-tax Act. The writ petition was filed by K.K Mittal and Co. (Writ Petition No. 7161 of 1989—[1991] 187 ITR 208 (P & H)). The writ petition was admitted for hearing and ad interim stay of recovery was ordered. Ultimately, the writ petition was decided on May 4, 1990. The writ petition was allowed prohibiting the distilleries from deducting or charging income-tax from L-13 licensees. Further, a direction was given not to charge or deduct income-tax on excise duty payable by the wine contractors of L-14 licensees. The Income-tax Act was amended. Section 44AC was deleted. However, its substantive portion was included in section 206C. Thus, for the current year 1992–93, the distilleries again started deducting income-tax as referred to above on the sale of liquor from the petitioners who are L-13 licensees. The petitioners have approached this court in these writ petitions. The case of the petitioners is that the ratio of the decision of this court in K.K Mittal's case which is reported as [1991] 187 ITR 208, would be applicable to the provisions of section 206C of the Income-tax Act as amended, as there is no practical change in the phraseology used with respect to L-13 licensees.

4. On the other hand, the stand taken by the State in the written statement is that the validity of the provisions of sections 44AC and 206C of the Income-tax Act was unsuccessfully challenged in Sat Pal and Co. v. Excise and Taxation Commissioner, [1990] 185 ITR 375, a Division Bench case of this court. That being the position, even from L-13 licensees, income-tax could be deducted at the time of purchase of liquor by them from the distilleries which is to be deposited in the treasury. The question as to whether the assessee would in fact be liable to pay tax to that extent, would be determined by the income-tax authorities when the return for the relevant year is filed and adjudicated. It is further asserted that usually L-13 licence is granted to those persons who are already L-14 licensees. With respect to L-14 licences, it was alleged that income-tax could be deducted at the initial stage of purchase of liquor.

5. Since the petitioners in all the writ petitions which are being disposed of by this order are L-13 licensees only, the implication of the provisions applicable to L-14 licensees need not be gone into.

6. It is not disputed that L-13 licences are granted on a fixed licence fee for the relevant year and that such licences are not granted on auction. On grant of such licences, the licensees are supposed to purchase liquor from the distilleries at the price fixed by the Financial Commissioner. Likewise, they are supposed to sell the liquor at the price fixed by the Financial Commissioner from time to time. This position is further clarified from rule 38(15) of the Haryana Liquor Licence Rules, 1970 (the position in Punjab is also similar). Rule 2 provides the mode of grant of licence and in respect of L-13, i.e, wholesale vend of country spirit, the mode of grant is by a fixed fee. Under rule 38(15), sub-rule (a), the licensee is to sell the country spirit to the retailers at a price so fixed by the Financial Commissioner from time to time. Sub-rule (g) further provides that the licensee shall sell country spirit at such rates as may from time to time be fixed by the Financial Commissioner and endorsed on the licence. Before K.K Mittal's case, [1991] 187 ITR 208 (P & H) was decided by this court, the matter was considered by the Himachal Pradesh High Court in Gian Chand Ashok Kumar and Co. v. Union of India, [1991] 187 ITR 188, and the case of Sat Pal, [1990] 185 ITR 375 (P & H), referred to above, was dealt with and distinguished and with respect of L-13 licensees, it was held that income-tax could not be deducted from the sales made to them by the distilleries under sections 44AC and 206C of the Act. The judgment of the Himachal Pradesh High Court was agreed to and relied upon in K.K Mittal's case, [1991] 187 ITR 208 by the Division Bench of this court.

7. In Gian Chand's case, [1991] 187 ITR 188, at page 202, it was held by the Himachal Pradesh High Court as under:

“Examination of the fundamental provisions governing the grant of L-13 licences clearly shows that the provisions of sections 44AC and 206C were unduly harsh and arbitrary in their application to cases where the transaction was strictly to be carried out in accordance with the specific provisions. It was this mischief which was intended to be eliminated by the new amendment. Otherwise, as calculated by the petitioners, they were to pay much more tax than the expected returns which could not be considered to be the object of the legislation as it originally stood. L-13 licensees appear to be a class which, in view of the existing system of the transaction of sale of country liquor, cannot be considered to be a class evading payment of tax and thus falling under the category of others for whom sections 44AC and 206C were brought into the statute book, the history and object and reasons of which we have specifically dealt with quite elaborately in the initial part of this judgment.

8. The net result of our examination of the matter is that the present petitioners (L-13 licensees) come within the purview of this proviso and the provisions of section 206C and the other parts of section 44AC(1) do not apply to buyers covered by the proviso.

9. The demand of tax at the purchase point from the petitioners by the respondents has no authority of law and they are restrained from doing so.”

10. In K.K Mittal's case, [1991] 187 ITR 208 (P & H), which is also reported in the same volume at page 208, the aforesaid passage from the judgment in Gian Chand's case, [1991] 187 ITR 188 (HP) was reproduced and it was observed as under (at page 215):

“Therefore, so far as the case of L-13 licensees are concerned, the verdict rendered by the Himachal Pradesh High Court in Gian Chand Ashok Kumar's case, [1991] 187 ITR 188 is the complete answer to the questions of law raised before us. We also have ourselves closely examined the matter at our level. We see no reason why the view taken by the Himachal Pradesh High Court should not be endorsed in the case of the petitioners before us so far as it relates to L-13 licensees. Accordingly, we might observe, though at the cost of repetition, that the persons holding L-13 licences are not liable to pay tax at the stage of purchase of the country liquor, in view of the proviso to clause (a) of sub-section (1) of section 44AC of the Act: circulated by the Central Board of Direct Taxes, Delhi, dated June 26, 1989 (annexure P-1).”

11. Section 206C of the Income-tax Act, 1961, as amended by the Finance Act, 1992, reads as under:

“206C. (1) Every person, being a seller shall, at the time of debiting of the amount payable by the buyer 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:

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

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 purposes 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….

Explanation.— For the purposes of this section,—

(a) ‘buyer’ means a person who obtains in any sale, by way of auction, tender or any other mode, goods of the nature specified in the Table in sub-section (1) or the right to receive any such goods but does not include;—

(i) a public sector company,

(ii) a buyer in the further sale of such goods obtained in pursuance of such sale, or

(iii) 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) ‘seller’ means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm or co-operative society.”

12. A perusal of the aforesaid amendment of section 206C shows that there was no significant change from the provision as it existed in sections 44AC and 206C before its amendment. Section 44AC stands repealed but its substantive portion has been included in section 206C. That being the position, the ratio of the decision in K.K Mittal's case, [1991] 187 ITR 208, decided by this court, would apply to the present case. The collection of income-tax from L-13 licence holders would be arbitrary if 16.8 per cent, is collected from the petitioners at the time of making purchase of the liquor, otherwise income-tax is payable on the income and, in the case of L-13 licensees, this income would be marginally nominal profit, i.e, difference between the purchase price and the selling price, as stated above. Learned counsel for the respondent has pointed out that the Supreme Court, on March 31, 1992, stayed the operation of the judgments of three High Courts including the judgment of this court in K.K Mittal's case, [1991] 187 ITR 208. and thus the judgment in K.K Mittal's case, [1991] 187 ITR 208 (P & H), cannot be followed as a precedent. Learned counsel for the petitioner has pointed out that the S.L.P in K.K Mittal's case was dismissed on the ground of delay, vide order dated April 16, 1992. Photostat copy of the order was shown. In these circumstances, the ratio in K.K Mittal's case, [1991] 187 ITR 208, decided by this court can be applied to the case in hand. It is not known to the parties as to whether S.L.Ps filed against the judgments of two other High Courts are still pending or not.

13. For the reasons recorded above, these writ petitions are allowed with a direction to the respondents not to deduct/charge income-tax from the petitioners, the L-13 licensees, in view of section 206C of the Income-tax Act. There will be no order as to costs.