TMI Blog2013 (8) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction, manufacture, possession, transport, purchase and sale of intoxicating liquor. The present levy seeks to levy fee on the import of rectified spirit to be utilized for the purpose of, firstly for manufacture of ENA through re-distillation process and then for manufacture of IMFL. Rectified spirit is not fit for human consumption and it therefore does not come within the meaning of intoxicating liquor as contained in Entry 8 of List II - Board of Revenue in exercise of power conferred under section 90 of the Excise Act, 1915 has chosen to levy fee on the import of rectified spirit which is used for manufacture of ENA through re-distillation process and then for the purpose of manufacture of IMFL at the time before bottling @ ₹ 6.00 per LP Litre. Industrial alcohol / non-potable spirit i.e. rectified spirit being not alcoholic liquor fit for human consumption, cannot be the subject matter of any regulation or control by the State under Entry 8, 51 and 66 of List II of Seventh Schedule of the Constitution Held that:- The levy of import fees on rectified spirit therefore by the State Legislature before bottling of IMFL by shifting the event of taxation, cannot be held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of foreign liquor / beer as also for the sale of foreign liquor / beer through licencee distributors as also to import or transport the same under bond. The petitioner has a licence for bottling of potable foreign liquor under Form-20 for which it pays fees in advance of ₹ 50,000/- for the year. In Form-25 it has been granted licence to manufacture denatured spirit at its distillery / warehouse. The petitioner also has a licence under Form-28(A) to manufacture spirit in distillery not used in the manufacture of potable liquor for which it also pays a licence fees. It is the contention of the petitioner that it is paying establishment charges on the posting of excise official at its premises. Therefore, the respondent State have not been able to justify the impugned levy on rectified spirit on the basis of services provided in lieu thereof - The notification dated 10thNovember 2012 issued by the Board of Revenue, Jharkhand in exercise of powers conferred under section 90 of the Jharkhand Excise Act, 1915, cannot be sustained in law and it is accordingly quashed – Decided in favor of Assessee. - W.P.(T) No. 7499 of 2012 - - - Dated:- 25-7-2013 - Hon'ble the C.J. Pra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture and sale of IMFL, the petitioner either imports rectified spirit which is converted into ENA after undertaking the due process of manufacture or directly imports ENA from other distilleries. Both raw materials i.e. the rectified spirit and ENA are the spirit of over proof strength and are non-potable liquor. The rectified spirit received from other distilleries is meant to undergo the process of re-distillation under licence granted in Form-28A which is licence for manufacture of spirit for use in the manufacture of potable liquor from which ENA is manufactured. After ENA is manufactured, it is compounded and blended for manufacture of IMFL. The aforesaid activities of compounding and blending are undertaken under the cover of licence in Form-19 of the Act in terms of rule 34 of the Rules. After ENA undergoes the process of compounding and blending, IMFL is manufactured which is bottled under the cover of licence in Form-20 of the Act. After the IMFL is bottled, it is kept in store room under double lock, one of the keys is kept in the custody of the Excise Officer posted at the distillery. The quantity of IMFL kept in the store room is under bond meaning thereby that no duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y such excise duty, or countervailing duty, as the case may be, as is mentioned in Entry 51 of List II in the Seventh Schedule of the Constitution; (9) Excise-revenue means revenue derived or derivable from any duty, fee, tax, payment (other than a fine imposed by a Criminal Court) or confiscation imposed or ordered under this Act or any other law for the time being in force relating to liquor or intoxicating drugs; (12) import except the phrase import into India means to bring into the State otherwise than across a customs frontier as defined by Central Government; (12a) intoxicant means- (i) any liquor, or (ii) any substance from which liquor may be distilled and which is declared by the State Government by notification in the official Gazettee to be an intoxicant for the purpose of this Act, or (iii) intoxicating drug, or (iv) medicinal preparation as defined under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955. (14) Liquor includes all liquids consisting of or containing alcohol, such as spirits of wine, spirit, wine, fermented tari, pachwai and bear, and also unfermented tari, and also any other substance which the State Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are meant for alcoholic liquor for human consumption which contains 19% to 43% v/v of alcohol. These standards are laid down as per ISI specification. Counsel for the petitioner further submits that sections 9 and 10 of the Act provides for restriction of import or export or transport of intoxicant which activities cannot be carried out without permission of the State Government and for which any duty has been paid or has been executed for the payment thereof. Section 12 of the Act also provides for pass for import, export or transport. In the aforesaid background of the provisions of the Excise Act, 1915, learned counsel for the petitioner submits that the legislature of the State is empowered under Article 245 and 246(2) of the Constitution to make laws in respect of any of the matter enumerated in List-II of the Seventh Schedule of the Constitution, while the Parliament has the exclusive jurisdiction to make laws in respect of the matter enumerated in List-I of Seventh Schedule of the Constitution. For the purposes of the challenge to the impugned provisions in the present writ application, learned counsel for the petitioner submits that the reference to Entry-52, 84 and 97 of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory in nature. 7. In support of the aforesaid contentions, learned counsel for the petitioner has relied upon a judgment rendered by the Hon'ble Supreme Court of India in the case of Synthetics and Chemicals Ltd and others versus State of U.P. And others reported in (1990) 1 SCC 109. As per the learned counsel for the petitioner, the intoxicating liquor and intoxicant has been held to mean liquor which is fit for human consumption. Therefore, the State has no authority to levy duty or tax on alcohol which is not fit for human consumption. In the instant case, there is no element of quid pro quo. Learned counsel has also relied upon the judgment rendered in the case of State of U.P. And others versus Modi Distillery and others reported in (1995) 5 SCC 753. According to the learned counsel, in the said case, the Hon'ble Supreme Court has gone to the extent of holding that levy of excise duty on high strength spirit of 80% to 85% from distillery to warehouse is beyond the competence of the State Legislature. So also, pipeline wastage of IMFL during the process of manufacture before dilution is not leviable to excise duty by the State Legislature and the same is beyond its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r jurisdiction upon the State Legislature to levy the import fees on rectified spirit which is not within a domain of the State Legislature. The impugned levy is therefore bad in law and is fit to be quashed. 8. Learned AAG Mr. Ajit Kumar, appearing on behalf of the State, has supported the impugned levy. According to the learned counsel, rule 106(tha) aims to charge the impugned levy in the name of import fee on the quantity of pure alcoholic content of rectified spirit imported for the purpose of manufacture of potable foreign liquor only after the process of compounding, blending and reduction of strength. The impugned levy empowers the Excise Authorities to charge import fee @ ₹ 6.00 per LP Litre on the quantity of pure alcoholic content present in spirit imported for the purpose of manufacturing foreign liquor and nothing is charged in advance so long as imported spirit is non potable and till it is in the form of raw material. Therefore, nothing is charged on industrial alcohol and it does not violate any provision of the Constitution, nor is there any arbitrary exercise of powers under section 90(7) by the Member, Board of Revenue. The import fee is payable only aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured by the petitioner, the impugned levy which is basically levied on the import of rectified spirit, cannot be sustained in law as the State Legislature does not have the legislative competence to tax on import of rectified spirit. Learned counsel in support of his contention, relied upon Annexure-6 series being notings obtained under the Right to Information Act to show that the impugned levy on import of rectified spirit is meant for raising revenue and notified only on the basis of an audit objection. Therefore, it is a colourable exercise of power by the State and delegetee, the Board of Revenue without having any legislative competence to do so. Learned counsel has relied upon the judgement rendered by the Constitution Bench of the Hon'ble Supreme Court in the case of State of W.B. Versus Kesoram Industries Ltd. and others reported in (2004) 10 SCC 201, Para-33 thereof. He submits that the Constitution Bench in the said judgment has held that the measure employed for assessing a tax must not be confused with the nature of the tax. A tax has two elements, first, the person, thing or activity on which the tax is imposed, and second, the amount of tax. The amount may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India:- (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotic, but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry. 66. Fees in respect of any of the matters in this List, but not including fees taken in any court. The Union Legislature is empowered to enact laws in respect of levy of duties of excise on tobacco and other goods manufactured or produced in India except (a) alcoholic liquors for human consumption and (b) opium, Indian hemp and other including medicinal and toilet preparations containing alcohol or any substance included in sub-para (b) of this entry. narcotic drugs and narcotics,, but including medicinal and toilet preparations containing alcohol or any substance included in sub-para (b) of this entry. On the other hand, Entry 8 of List-II in Seventh Schedule of the Constitution provides for legislative field on which the State Legislature c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppears,therefore, that industrial alcohol which is ethylalcohol (95 per cent) by itself is not only non-potable but is highly toxic. The range of spirits ofpotable alcohol is from country spirit to whiskyand the ethyl alcohol content varies between 19to about 43 per cent. These standards areaccording to the ISI specifications. In otherwords, ethyl alcohol (95 per cent) is not alcoholicliquor for human consumption but can be used asraw material input after processing andsubstantial dilution in the production of whisky,gin, country liquor, etc. In many decisions, it washeld that rectified spirit is not alcohol fit forhuman consumption. Reference may be made inthis connection to Delhi Cloth and General MillsCo. Ltd. v. Excise Commissioner, U.P. Allahabad.In this connection, it is important to bear in mindthe actual provision of Entry 8 of List II. Entry 8of List II cannot support a tax. The above entrycontains the words intoxicating liquor .Themeaning of the expression intoxicating liquor has been rightly interpreted by the Bombay High Court in the Balsara case. The decision of theBombay High Court is reported in Nusserwanji Balsara v. State of Bombay. In that light,perhaps, the obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to levy fee on the import of rectified spirit which is used for manufacture of ENA through re-distillation process and then for the purpose of manufacture of IMFL at the time before bottling @ ₹ 6.00 per LP Litre. Industrial alcohol / non-potable spirit i.e. rectified spirit being not alcoholic liquor fit for human consumption, cannot be the subject matter of any regulation or control by the State under Entry 8, 51 and 66 of List II of Seventh Schedule of the Constitution. The State has the power to levy fees under the garb of grant of privilege from those who deal in liquor or alcohol fit for human consumption i.e. potable liquor as distinct from non-potable liquor or alcoholic liquor unfit for human consumption. Under Entry 51 of List-II, State has been empowered to levy excise duty on alcoholic liquor fit for human consumption manufactured or produced in the State and countervailing duty at the same rate or lower rates on similar goods manufactured or produced elsewhere in India. Even under the instant Entry, the rectified spirit which is non potable liquor, does not come within the meaning of alcoholic liquor fit for human consumption on which the State can levy exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axand the standard by which the amount of tax is measured must not be lost sight of. These aredescribed respectively as the subject of a tax andthe measure of a tax. It is true that the standard adopted as a measure of the levy may be indicative of the nature of the tax, but it does not necessarily determine it. The nature of the mechanism by which the tax is to be assessed isnot decisive of the essential characteristic of the particular tax charged, though it may throw lighton the general character of the tax. 15. The subject of taxation on rectified spirit does not fall within the field of State Legislature and the nature of mechanism by which tax is to be assessed is not decisive of the essential characteristic of the tax charged. The State while levying the tax on the subject of import of rectified spirit, has only shifted the event of taxation which cannot justify the imposition of levy as the same is not within the domain of the State Legislature. The opinion of the Hon'ble Supreme at para-45 and 47 in the case of Godfrey Phillips India Ltd. And Another (Supra) is apposite, to be quoted hereunder: 45. This view has also been reiterated in HoechstPharmaceuticals Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for compounding and blending of foreign liquor is given. In Form-19(B), petitioner has been granted licence for the manufacture of foreign liquor / beer as also for the sale of foreign liquor / beer through licencee distributors as also to import or transport the same under bond. The petitioner has a licence for bottling of potable foreign liquor under Form-20 for which it pays fees in advance of ₹ 50,000/- for the year. In Form-25 it has been granted licence to manufacture denatured spirit at its distillery / warehouse. The petitioner also has a licence under Form-28(A) to manufacture spirit in distillery not used in the manufacture of potable liquor for which it also pays a licence fees. It is the contention of the petitioner that it is paying establishment charges on the posting of excise official at its premises. Therefore, the respondent State have not been able to justify the impugned levy on rectified spirit on the basis of services provided in lieu thereof. Besides this, the petitioner has been paying licence fee for issuance of licence under different forms in the nature of a regulatory fee. The impugned levy therefore, is not justifiable on this account as well. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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