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2019 (7) TMI 316 - SC - Indian LawsLegislative competence of State to levy tax/fee on the import of rectified spirit, as it is a non-potable liquor i.e. alcohol not fit for human consumption - powers u/s 90 of the Jharkhand Excise Act, 1915 - effect of Notification dated 6th November, 2010 as published on 10th November, 2012 - doctrine of quid pro quo - whether notification is in the nature of legislation by the State on the subject of industrial alcohol? HELD THAT:- Alcohol can generally be classified into the following categories: Isopropyl alcohol (or IPA or isopropanol), Methyl Alcohol (or Methanol) and Ethyl alcohol, (also known as Ethanol) - the first two categories are poisonous, toxic and fatal for human consumption, rendering its use only for industrial purposes. It is stated that Isopropanol and methanol, because of their inherent chemical properties, cannot be purified and used for the production of ‘intoxicating liquor’ or ‘potable liquor’ by adopting ‘physical means’ like decantation, filtration, redistillation, fractional distillation etc. The third category namely, Ethyl Alcohol or Ethanol (in India is usually produced from molasses derived from sugarcane) in its concentrated form and it is also known as “Rectified Spirit” and its strength measured in LPL signifies the strength of alcohol by volume, 13 parts of which weigh exactly equal to 12 parts of water at 51 degrees Fahrenheit. The substance of the provision is to levy charges on the product IMFL produced or manufactured by use of imported rectified spirit. In that sense, the levy is not on the input (imported rectified spirit) of the final product as such but is on the manufactured or produced product being potable alcohol palatable to human consumption. For the purposes of computing the levy, the yardstick of ₹ 6 per LPL on the total quantity of imported rectified spirit utilized for production of IMFL is reckoned. Thus, the impost is not on the imported rectified spirit as such but only on the produced foreign liquor before it is bottled for sale in the wholesale or retail market, as the case may be. If so understood, the whole edifice of the argument of respondents regarding the interpretation of the impugned rule must collapse. If it is a case of legislation in respect of potable alcohol, as has been noted by us hitherto, the State would be competent to legislate in that regard and levy charges – be it for regulating the same or impost for parting with its rights regarding manufacture, storage, export, sale and possession thereof. Whether the levy is in the nature of tax or excise duty? - HELD THAT:- The impost is neither in the nature of a tax nor excise duty but it is towards the charges by whatever name, for regulating the production of potable liquor to preserve public health and morality including for parting with its rights or privileges regarding manufacture, supply or sale of potable liquor or intoxicating liquor and to regulate the use of imported rectified spirit for production and sale of potable liquor. In such a case, the State need bear no quid pro quo to the services rendered to the licencee for production of foreign liquor (IMFA) - he fact that the manufacturer-respondent has already obtained requisite licences for import of rectified spirit and production of foreign liquor (IMFA) on payment of fixed rates does not mean that the State has surrendered all facets of its rights in respect of every form of activity in relation to potable liquor – its manufacture, storage, export, import, sale and possession. The amended provision is an enabling provision authorising the State to levy charges or impost for ceding its one or more of the activity in respect of foreign liquor (IMFL) produced by use of imported rectified spirit. Such impost can be in addition to the general power of the State to issue licence on payment of fees for production and sale of potable liquor. However, having opined that the purport of the impugned Rule 106(Tha), is to permit impost on the final processed product being foreign liquor “IMFL”, before bottling as fit for human consumption, the State has jurisdiction to legislate on that subject and need bear no quid pro quo to the services rendered to the licencee of manufacturer of foreign liquor (IMFL). Appeal allowed.
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