TMI Blog2012 (12) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... how-cause notice dated 6th April 1994, threatening action for black listing for future exports on account of non-payment of the aforenoted amount, there is not even a whisper as to how and why rectified spirit in question was being subjected to Excise duty by the State. As stated above, this Court having categorically held in Synthetics And Chemicals (1989 (10) TMI 214 - SUPREME COURT OF INDIA) that the State Legislature had no legislative competence to impose Excise duty on rectified spirit (industrial alcohol), the Commissioner of Excise could not demand Excise duty on rectified spirit contained in the tank wagon which, later on, was found to be empty, without returning a finding that the said spirit had been diverted/converted into potable alcoholic liquor fit for human consumption, on which the State was empowered to impose duty. It bears repetition that such a finding could not be recorded by the Commissioner without affording due opportunity to the appellant to explain its stand in this regard for which, the onus lay on them as transporter and the executant of the bond. We are convinced that in the present case, before imposing the impugned demand of penalty and interest, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olic litre, on spirit not so delivered, after making the allowances aforesaid. 3. On 8th January, 1989, M/s Daurala Sugar Works consigned a rake of 15 tank wagons, loaded with 3,54,413 bulk litres of rectified spirit under PD-25 pass for export against order dated 15th October, 1988. The said consignment was dispatched through the Northern Railway to Kandla Port. However, out of 15 tank wagons only 14 tank wagons reached the Kandla Port. On 16th January, 1989, it was discovered that the 15th tank wagon was lying empty at Gandhi Dham Railway Station. 4.On 2nd October, 1992, a notice was issued by the Excise Commissioner to the appellant alleging that since the pass in form PD-25, issued to the appellant by the concerned Collector in terms of Rule 633 of the Excise Manual had not been received back along with certificate from the Collector for due delivery, they were liable to deposit in the Government Treasury, Excise duty on the rectified spirit @ Rs.40/- per alcoholic litre, which amounted to Rs.8,71,744/- along with interest at the rate of 18% per annum (Rs.5,49,199/-). 5. The appellant having failed to deposit the said amount, another notice was issued by the Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ength not less than 95% by volume of ethyl alcohol, the High Court held that though the State of U.P. did not have jurisdiction to levy and demand Excise duty on the rectified spirit (industrial alcohol), which disappeared during transit, but Rule 633 of the Excise Manual empowered the State to impose penalty at the same rate at which the Excise duty was payable for breach of conditions in the Bond. The High Court also held that it could be presumed that the appellant had diverted the rectified spirit into potable alcohol on which penalty and penal interest could be levied and, therefore, it was not a fit case where it should exercise its jurisdiction under Article 226 of the Constitution of India and quash demand notice dated 6th April, 1994. Accordingly, the writ petition was dismissed. Being dissatisfied, the appellant is before us in this appeal. 9. We have heard learned counsel for the parties. 10. Assailing the decision of the High Court, Mr. D.K. Agarwal, learned senior counsel appearing for the appellant, strenuously urged that in light of decision of this Court in Synthetics And Chemicals (supra), which was duly noticed in the impugned judgment, the High Court exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, parties are ad-idem that in view of the judgment of this Court in Synthetics And Chemicals (supra), the State was not empowered to levy Excise duty on the said consignment. In the said decision, while interpreting Entry 84 of List I, Entry 8 and 51 of List II and Entry 33 of List III of the Seventh Schedule to the Constitution of India, it was held that the State legislature has no power to enact law levying duty on the spirit, which is not meant for human consumption. It was also held that the State has the power to impose duty only on spirit, which is meant for human consumption under Entry 51 of List II of the Seventh Schedule. In light of the said decision, it is clear that under Section 28 of the Act, the charging Section, an Excise duty or a Countervailing duty, as the case may be, can be imposed by the State on alcoholic liquor only when it reaches the stage of human consumption and not on high strength rectified spirit (industrial alcohol), a Central subject. Therefore, the High Court is correct in law in holding that the State did not have the jurisdiction to levy Excise duty on rectified spirit, loaded in 15 tank wagons. 14. However, Rule 633 of the Excise Manual, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r export there shall be legibly cut or painted: (i) the name and mark of the exporting distillery; (ii) the number of the cask or other vessel and its capacity; (iii) the nature, quantity and strength of its contents. These particulars shall correspond with those entered in the pass. (5) On a written application being made to the Collector of the exporting district establishing sufficient cause for the grant of an extension of time, or on the production before him of a certificate from the Collector, Deputy Commissioner, or other officer specially appointed in this behalf, of the district of destination, to the effect that there are good and sufficient reasons for extending the currency of the pass or bond, it shall be competent for the Collector of the exporting district, if he thinks fit, to extend the time specified in the pass or bond for the due arrival of the spirit at its destination. (6) In the case of spirit exported under special bond the Collector of the exporting district shall discharge the bond on receipt of the pass in form P.D.-25 and certificate mentioned in clause (3), provided that none of the conditions of the bond have been infringed. The duty on cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice is also not capable of a precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly i.e. fair play in action. As observed by this Court in A.K. Kraipak amp; Ors. Vs. Union of India amp; Ors. (1969) 2 SCC 262, the aim of rules of natural justice is to secure justice or to put it negatively to prevent miscarriage of justice. These rules can operate only in areas not covered by any law validly made. They do not supplant the law but supplement it. (Also see Income Tax Officer; Ors. Vs. M/s Madnani Engineering Works Ltd., Calcutta (1979) 2 SCC 455). 18. In Swadeshi Cotton Mills Vs. Union of India R.S. Sarkaria, J., speaking for the majority in a three-Judge Bench, lucidly explained the meaning and scope of the concept of natural justice. Referring to a catena of decisions, his Lordship observed thus: Rules of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not possible to make an exhaustive catalogue of such rules. But there are two fundamental maxims of natural j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of natural justice has undergone a great deal of change in recent years. Rules of natural justice are not rules embodied always expressly in a statute or in rules framed thereunder. They may be implied from the nature of the duty to be performed under a statute. What particular rule of natural justice should be implied and what its context should be in a given case must depend to a great extent on the fact and circumstances of that case, the framework of the statute under which the enquiry is held; 20. The question with regard to the requirement of an opportunity of being heard in a particular case, even in the absence of provisions for such hearing, has been considered by this Court in a catena of cases. However, for the sake of brevity, we do not propose to refer to all these decisions. Reference to a recent decision of this Court in Sahara India (Firm), Lucknow Vs. Commissioner of Income Tax, Central-I amp; Anr. (2008) 14 SCC 151; would suffice. In that case, the question for adjudication was whether in the absence of a provision in the Income Tax Act, 1961, an opportunity of hearing was required to be given to an assessee before an order under Section 142(2-A) of the said A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quasi-judicial function which involves due application of mind to the facts as well as to the requirements of law. Therefore, it is plain that before raising any demand and initiating any step to recover from the executant of the bond any amount by way of penalty, there has to be an adjudication as regards the breach of condition(s) of the bond or the failure to produce the discharge certificate within the time mentioned in the bond on the basis of the explanation as also the material which may be adduced by the person concerned denying the liability to pay such penalty. Moreover, the penalty amount has also to be quantified before proceedings for recovery of the amount so determined are taken. In our view, therefore, if the requirement of an opportunity to show-cause is not read into the said Rule, an action thereunder would be open to challenge as violative of Article 14 of the Constitution of India on the ground that the power conferred on the competent authority under the provision is arbitrary. 22.Thus tested, in the instant case, vide his letter dated 2nd October 1992, the Excise Commissioner called upon the appellant to deposit an amount of Rs.14,20,943/- towards Excise du ..... X X X X Extracts X X X X X X X X Extracts X X X X
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