ORDER
G.P. Singh, C.J.
1. The question of law to be decided in this petition is whether the coal mines welfare cess, stowing duty and rescue cess recovered by the petitioner from its customers when coal is despatched to them by road forms part of the sale price of coal and is includible in the turnover for assessment of sales tax.
2. Section 3 of the Coal Mines Labour Welfare Fund Act, 1947, provides that “there shall be levied and collected as a cess for the purposes of this Act a duty of excise on all coal and coke despatched from the collieries in the territories to which this Act extends, at such rate not less than four annas and not more than eight annas per ton, as may from time to time be fixed by the Central Government by notification in the official Gazette”. The duty of excise imposed by Section 3 is popularly known as coal mines welfare cess. Section 4 of the Act provides that the proceeds of the duty levied under Section 3 shall be paid by the collecting agencies into the Reserve Bank of India in the prescribed manner and shall be credited to a fund to be called the Coal Mines Labour Housing and General Welfare Fund, and apportioned under the two separate accounts, to be called the housing account of the Fund and the general welfare account of the Fund, in such manner as the Central Government from time to time may, by notification in the official Gazette, determine. Section 10(1) empowers the Central Government to make rules to provide for “the manner in which the duty levied under Sub-section (1) of Section 3 shall be collected, the persons who shall be liable to make the payments, the making of refunds, remissions and recoveries, the deduction by collecting agencies of a percentage of the realisations to cover the cost of collection, and the procedure to be followed in remitting the proceeds to the Reserve Bank of India”. The procedure for recovery of excise duty imposed by Section 3 of the Act when coal and coke is despatched by rail from collieries to any station in India is prescribed by rules 27 to 29 of the Coal Mines Labour Welfare Fund Rules, 1949. The scheme of rules 27 to 29 is that the railway administration collects the duty by means of a surcharge on freight. The duty is recovered from the consignee if the freight is collected at destination and from the consignor if freight is prepaid. The amount of duty so collected is to be remitted by the railway administration to the Reserve Bank of India after deducting such percentage as the Central Government may fix towards the cost of collection. The procedure for recovery of duty on coal and coke despatched otherwise than by rail is prescribed by rules 32 to 38. By Rule 32 every owner of a colliery is required to maintain a register of despatches and to submit monthly returns of such despatches. Rule 33 provides that the amount of duty of excise payable for any month and recorded in the register maintained under Rule 32 shall be deemed to be a provisional assessment of the duty and shall be subject to a final assessment under Rule 37. Rule 34 requires the owner of a colliery to pay the duty so deemed to be assessed into the nearest treasury not later than the last day of the following month. Rule 35 makes the owner of the colliery liable for penalty if there is delay in submission of returns. Rule 37 provides for final assessment of duty. A demand notice follows the final assessment for the balance of the amount of duty. Rule 37A provides for assessment of duty in respect of despatches of coal or coke which have escaped assessment. Rule 38 makes the unpaid duty and penalty recoverable as arrears of land revenue.
3. Section 8 of the Coal Mines (Conservation, Safety and Development) Act, 1952, provides for imposition of excise duty on all coal raised and despatched and on all coke manufactured and despatched and additional excise duty on all coke raised and despatched from the collieries in India. The excise duties imposed by Section 8 are popularly known as stowing duty. Section 10 provides that the duties of excise levied shall be collected by such agencies and in such manner as may be prescribed. Section 17(2)(b) empowers the Central Government to make rules for the levy, collection and payment of the duties imposed by Section 8. The procedure for recovery of excise duties when coal or coke is despatched by rail from a colliery is prescribed by rules 24 to 28 and the procedure for recovery of excise duties on coal or coke despatched by means other than rail, namely, road, river and tramways, etc., is prescribed by rules 29 and 30. The scheme of these rules is similar to that of the corresponding rules, i.e., rules 27 to 29 and rules 32 to 38 of the Coal Mines Labour Welfare Fund Rules, 1949.
4. Section 58(u) of the Mines Act, 1952, empowers the Central Government to make rules “for providing for the levy and collection of a duty of excise (at a rate not exceeding six pies per ton) on coke and coal produced in and despatched from mines”, the utilisation of the proceeds thereof for the creation of a central rescue station fund and the administration thereof. Rule 13 of the Coal Mines Rescue Rules, 1959, made in exercise of this rule-making power, provides for imposition and recovery of excise duty on all coal and coke despatched at the rate mentioned therein. This duty is popularly known as rescue cess. Sub-rule (3) of Rule 13 provides for the procedure for recovery of excise duty when coal or coke is despatched otherwise than by rail. The scheme of these rules is the same as is the scheme of the corresponding rules of the Coal Mines Labour Welfare Fund Rules, 1949.
5. The petitioner is a Government of India undertaking engaged in mining of coal and sale thereof in Madhya Pradesh at Korba. The petitioner is registered as a dealer under the Madhya Pradesh General Sales Tax Act, 1958. The periods with which we are concerned in this petition are : 1st April, 1962, to 31st March, 1963, 1st April, 1967, to 31st March, 1968, 1st April, 1969, to 31st March, 1970y and 1st April, 1970, to 31st March, 1971. The practice of the petitioner is that freight is paid by the purchaser when despatches of coal to the purchasers are made by rail. The welfare cess, stowing duty and rescue cess payable in respect of these despatches are collected by the railway administration from the consignees, i.e., the purchasers. Apart from these despatches made by rail, the, petitioner also makes despatches of coal to its purchasers by road. The petitioner recovers the amount of welfare cess, stowing duty and rescue cess payable by it on these despatches from the purchasers along with the price of the goods despatched. The amounts so recovered for the aforesaid periods are respectively Rs. 7,27,593, Rs. 5,42,669, Rs. 2,33,252 and Rs. 3,59,618. The Regional Assistant Commissioner of Sales Tax, by different orders passed in respect of the aforesaid periods, held that the said amounts constituted part of the sale price. The amounts were, therefore, included in the turnovers for assessment of sales tax. The petitioner preferred three revisions in respect of the first three periods which were decided by the Additional Commissioner of Sales Tax by his order dated 29th January, 1975, in which the view taken by the Regional Assistant Commissioner was upheld. The petitioner preferred an appeal against the order of the Regional Assistant Commissioner in respect of the fourth period which was decided by the Deputy Commissioner of Sales Tax by his order dated 6th May, 1975. The Deputy Commissioner also took the same view as taken by the Regional Assistant Commissioner. The petitioner then filed this petition under Article 226 of the Constitution challenging the aforesaid orders.
6. The coal mines welfare cess, stowing duty and rescue cess are in their true sense excise duties. The statutory provisions under which they are levied and collected, to which reference has already been made above, clearly mention that they are duties of excise. The railway administration collects these duties from the consignee as a surcharge on freight in respect of despatches made by rail when freight is payable by the consignee. When freight is .payable by the consignor, the railway administration collects the duties from the consignor, i.e., the owner of the coal mine. After deducting the percentage, as may be fixed by the Government for meeting the collection charges, the railway administration remits the collections so made to the Government. In respect of despatches made otherwise than by rail, the duties are always payable by the owner. There is no provision in the Acts or in the Rules enabling the owner to collect the duties from the purchaser. The owner has to maintain regular account of despatches in a register, has to file monthly returns and has to pay the amount of the duties by the last date of the following month on the basis of self-assessment. The balance amount of duties, if any, after final assessment or reassessment is recovered from the owner. Having regard to the above scheme of the Acts and the Rules, we are unable to agree with the learned counsel for the petitioner that the owner is merely a collecting agent and that the real incident of the duties is on the purchaser. It is only in cases where despatches are made by rail and freight is to be paid by the consignee that the duties are payable by the consignee. In all other cases, the liability to pay the duties is on the owner of the coal mine. There is a marked distinction between the capacity of the railway administration and the owner. The railway administration is merely a collecting agency to collect the duties either from the consignee or the consignor depending upon the fact whether freight is payable by the consignee or the consignor. It is for this reason that the railway administration is allowed to deduct collection charges while remitting the duties to the Government. The position of the owner is entirely different. When the owner pays these duties as consignor to the railway administration in case of despatches made by rail, the owner does not act as a collecting agent. The owner is primarily liable for the payment. Similarly, when the despatches are made by road, the assessment of duties is made on the owner and it is he who pays the duties every month. It is very significant that the owner is not allowed to make any deduction for collection charges and there is nothing in the Act and the Rules enabling the owner to recover the amount of duties from the purchaser. Had the Acts and the Rules intended to make the owner merely a collecting agent, the owner would have, like the railway administration, been allowed to make deduction for collection charges before paying the duties to the Government and provision would have also been made for enabling the owner to collect the duties from the purchasers. The only manner in which the owner can recover the duties from the purchaser is by including them in the sale price as valuable consideration for the goods sold. Therefore, if the owner recovers the duties from the purchaser on despatches of coal made by road, it has to be held that the amount of duties so recovered forms part of the sale price.
7. The duty of excise is a tax on the production or manufacture of goods produced or manufactured within the country. Although the tax may be collected at any subsequent stage, the taxing event is the manufacture or production. The duty is primarily on the manufacturer or producer who passes it on to the ultimate consumer by including the duty as part of the sale price. When the producer or manufacturer is made liable by the Acts and the Rules with which we are concerned for paying the excise duties and when there is no provision making the purchaser liable for payment of the duties or for enabling the manufacturer or producer to collect the same from the purchaser, it is impossible to hold that the liability to pay the duties is not on the producer or manufacturer and that he is merely a collecting agent. As earlier stated by us, the manufacturer or producer is no doubt able to pass on the duties to the purchaser, but that he does not by force of any statute but under the contract of sale by charging the duties as part of the sale price. The amount of duties so recovered by the manufacturer or producer forms part of his circulating capital and is used by him in his business before he pays the amount as tax to the Government. It may here be recalled that the petitioner’s liability to pay the duties in case of despatches otherwise than by rail arises on the last date of the following month and not as and when the despatches are made. For some period, therefore, the petitioner is able to utilise the amount of duties recovered as part of the price from the purchaser as its circulating capital. This is another reason for holding that the amount of duties collected forms part of the sale price.
8. In George Oakes (Private) Ltd. v. State of Madras [1961] 12 S.T.C. 476 (S.C.), the Supreme Court quoted with approval the following observations of Goddard, L.J., in Love v. Norman Wright (Builders) Ltd. [1944] 1 All E.R. 618: “Where an article is taxed, whether by purchase tax, customs duty, or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay.” It was held in the case of George Oakes [1961] 12 S.T.C. 476 (S.C.) that the sales tax collected by the seller from the buyer is really part of the entire consideration and forms part of the sale price and has to be included in the turnover for assessment of sales tax. In another case bearing the same title, George Oakes (Private) Ltd. v. State of Madras [1962] 13 S.T.C. 98 (S.C.), Hidayatullah, J. (as he then was), said that one of the reasons for inclusion of the tax recovered by the dealer from the purchaser in the turnover is that the dealer who realises the tax does not hand it over forthwith to the Government but keeps it with him, and turns it over in his business before he parts with it; the tax becomes, for the time being, a part of the circulating capital of the tradesman. The second reason is that the price paid by the purchaser is not so much money for the article plus tax but a composite sum. Therefore, in calculating the total turnover, observed Hidayatullah, J., there is nothing wrong in treating the tax so paid as part of the turnover, because the turnover means the amount of money which is turned over in the business. These principles were applied in Delhi Cloth & General Mitts Co. Ltd. v. Commissioner of Sales Tax [1971] 28 S.T.C. 331 (S.C.). This case dealt with the definition of “sale price” as contained in Section 2(o) of the Madhya Pradesh General Sales Tax Act, 1958, with which we are concerned here. “Sale price” as defined therein means, “the amount payable to a dealer as valuable consideration for the sale of any goods, less any sum allowed as cash discount according to ordinary trade practice but including any sum charged for anything done by the dealer in respect of the goods at the time or before delivery thereof other than the cost of freight or delivery or the cost of installation when such cost is separately charged”. The Supreme Court in this case held that as the liability to pay sales tax is that of the dealer and as there is no statutory power given to the dealer to collect sales tax from the purchaser, if the dealer passes on his tax burden to the purchaser, he does it only by adding the tax in question to the price of the goods sold and thereby the price fixed for the goods including the tax payable becomes the valuable consideration given by the purchaser for the goods purchased and the tax collected by the dealer becomes a part of the sale price as defined in Section 2(o) of the Act. This ruling fully applies here. Duties of excise paid under the three Acts by the petitioner and collected by it from the purchasers must, on the same reasoning, be held to be forming part of the sale price.
9. The learned counsel for the petitioner referred to us the case of Joint Commercial Tax Officer v. Spencer & Co. [1975] 36 S.T.C. 188 (S.C.). In that case sales tax collected by the seller of foreign liquor from the purchaser was held not to form part of the taxable turnover of the selling dealer. The reason why it was so held was that under Section 21-A of the Madras Prohibition Act, 1937, the seller was required to collect the tax from the purchaser. The burden of the tax was on the purchaser and the seller collected the tax under a statutory obligation. The case is clearly distinguishable because, as we have pointed out earlier, the petitioner collects the duties of excise payable under the three Acts from the purchasers to whom the goods are despatched not under any statutory provision but only as valuable consideration for the goods sold. The learned counsel for the petitioner also referred to the case of McDowell & Co. Ltd. v. Commercial Tax Officer [1977] 39 S.T.C. 151 (S.C.). In this case it was held that the excise duty or the countervailing duty paid directly to the excise authorities or deposited directly in the State exchequer in respect of Indian liquor by the buyers thereof before removing it from the distillery or the bonded warehouse and not included in the sale bills issued either by the manufacturer or the owner of the bonded warehouse could not form part of their turnover. The relevant statutory rules in that case made the intending buyer of the Indian liquor liable for payment of excise duty before obtaining the distillery pass and lifting the quantity mentioned therein from the distillery. The excise duty and countervailing duty were at no stage paid to the manufacturer or the owner of the warehouse and did not become part of his circulating capital. This case is also distinguishable. As pointed out by us, the Acts and the Rules with which we are concerned nowhere make the purchaser liable for payment of the excise duties and the purchasers pay these duties to the petitioner as part of the valuable consideration for the goods purchased and the duties so paid become part of his circulating capital. The learned counsel for the petitioner also relied upon the case of New Gobindpur Coal Co. (P.) Ltd. v. State of Bihar [1974] 33 S.T.C. 530. In this case it was no doubt held by a Division Bench of the Patna High Court that the duties of excise with which we are concerned in this case, realised by a company carrying on the business of raising and selling coal do not form part of the valuable consideration and cannot be included in its turnover. This case does support the learned counsel for the petitioner, but for reasons already given, we are respectfully unable to agree with this decision. The learned Judges came to the conclusion that the mine owner was only a collecting agency like the railway administration even in those cases where the goods were despatched by road. We are unable to agree. A reading of the relevant rules leaves no manner of doubt that in respect of despatches made by road the liability is squarely on the mine owner to pay the excise duties. There is no statutory provision in the rules to enable him to collect the duties from the purchasers. The railway administration while remitting the duties can deduct the collection charges, but there is no such provision made for the mine owner. The mine owner is clearly not a collecting agent. Simply because it is the incidence of despatch which makes the duties payable, it cannot be said that the duties cannot form part of the sale price. In the absence of any statutory provision the only manner in which the mine owner can recover the duties from the purchaser is by making the same part of the valuable consideration for the goods sold ; there is no other way in which he can recover the duties of excise from the purchaser.
10. In our opinion, the sales tax authorities were right in treating the duties of excise, i.e., the coal mines welfare cess, stowing duty and rescue cess, recovered by the petitioner from the purchasers as part of the sale price for the goods sold.
11. The petition fails and is dismissed, but without any order as to costs. The security amount be refunded to the petitioner.