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TMI Blog1976 (5) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... f manufacture, storage and sale of various kinds of Indian made foreign liquors and had its plants for manufacture and production of beer and distillation and production of the said liquors at Solan (in Himachal Pradesh), at Mohan Nagar (in Uttar Pradesh), at Lucknow (in Uttar Pradesh) and at Kasauli (in Himachal Pradesh) held in the years 1967, 1968 and 1969 a licence in From B.W.H. 2 under section 22 of the Punjab Excise Act (1 of 1914) (hereinafter referred to as 'the Act') read with Rule 2 of the Punjab Bonded Warehouse Rules, 1957 (herein after referred to as 'the 1957 Rules') which were framed by the Financial Commissioner under section 59 read with section 22 of the Act, permitting it to run on conditions specified therein a Bonded Warehouse at Chandigarh for storage of bottled and bulk liquor and issue thereof under bond or on payment of duty to the licensees of Punjab, Haryana, Himachal Pradesh etc. One of these conditions required the appellant to observe the provisions of the Act as also the Rules framed and instructions issued thereunder from time to time. Rules 7 to 10 of 1957 Rules governing the appellant's licence ran thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their destination with a view to checking and verifying the quantities thereof with those shown in the permits and discovered that they suffered from shortage which exceeded the wastage allowance of 1 per cent permissible under Rule 8 of the said Rules. As a sequel to the detection of the aforesaid shortages. the Excise and Taxation Commissioner exercising the powers of Financial Com missioner, Chandigarh Administration, who is the first respondent here in, issued notices calling upon the appellant to show Cause why duty at the prescribed rate of Rs. 20/- per proof litre be not levied against it on the wastage in excess of the prescribed limit "as if the same had been removed from its Bonded Warehouse at Chandigarh." In the written representation submitted on behalf of the appellant in reply to the notices, it was pleaded that the liquor evaporated during transit: that the Bonded Warehouse was in its initial stage and the method of measurement of spirit was crude; that at the time of measurement, the temperature of spirit was not taken and that apart from evaporation, wastage occurred by leakage of drums in transit. By his detailed orders dated January 10, 1969 and February 10, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of section 31 of the Act. but it seems to be overlooked that the impugned rules do not impose any one of the aforesaid duties or prescribe the rates thereof or create any liability in respect thereof. They are in essence and substance of a regulatory character meant to guard against perpetration of fraud or deception on the Revenue. They provide for and regulate the storage of liquor ill the Bonded Warehouse without payment at the initial stage of the duty payable under the Act and subsequently the removal of the liquor from the Warehouse on payment or otherwise of the duty which. as correctly pointed out by the High Court, is chargeable under the Fiscal Rule of 1937 issued by the state Government. The powers exercised by the Financial Commissioner were clearly available to him under sections 59 and 22 of the Act and he has not, in our opinion, overstepped the same. The first contention raised on behalf of appellant is, therefore, overruled. It is next contended by counsel for the appellant that Rules 8 and 9 of the 1957 Rules are also invalid as they go beyond the scope of sections 16, 23 and 31 and Entry Sl of List ll of the Seventh Schedule to the Constitution. Dwelling on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulating the time, place and manner as the Financial Commissioner may prescribe, such duty shall be levied rateably, on the quantity of excisable article imported, exported, transported, collected or manufactured in, or issued from, a distillery, brewery or warehouse; Provided that duty may be levied- (a) on intoxicating drugs by an acreage rate levied on the cultivation of the hemp plant, or by a rate charged on the quantity collected; (b) on spirit or beer manufactured in any distillery established, or any distillery or brewery licensed, under this Act in accordance with such scale of equivalents calculated on the quantity of materials used, or by the degree of attenuation of the wash or wort, as the case may be, as the state Government may prescribe; (c) on tari, by a tax on each tree from which the tari is drawn: Provided further that, where payment is made upon issue of an excisable article for sale from a warehouse established or licensed under section 22(a), it shall be made- (a) if the state Government by notification so directs, at the rate of duty which was in force at the date of import of that article or (b) in the absence of such direction by the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es power to the State Legislature to impose duties of excise on alcoholic liquors for human consumption where the goods are manufactured of produced in the State. It also gives power to levy countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India. The fact that countervailing duties may be imposed at the same or lower rates suggests that they are meant for counterbalance the duties of excise imposed on goods manufactured in the State. They may be imposed at the same rate as excise duties or at a lower rate, presumably to equalise the burden after taking into account the cost of transport from the place of manufacture of the taxing State. It seems, therefore, that countervailing duties are ment to equalise the burden on alcoholic liquors manufactured or produced in the State. If no alcoholic liquors similar to those imported into the state are produced or manufactured, the right to impose counterbalancing duties of excise levied on the goods manufactured in the state will not arise. It may, therefore, be accepted that countervailing duties can only be levied is similar goods are actually produced or manufactured in the state on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant as well. The decision of this Court in Bimal Chandra Banerjee v. State of Madhya Pradesh ([1971] 1 S.C.R. 844) which is strongly relied upon on behalf of the appellant is not applicable to the present case. In that case, the condition introduced by the state Government in the purported exercise of its power under clause (d) and (h) of section 62(2) of the Madhya Pradesh Excise Act, 1915, in the appellants' licenses prescribing the minimum quantity of liquor to be purchased by them from the Government and enjoining them to make compulsory payment of excise duty on the quantity of liquor which they failed to take delivery of was held to be invalid as it went beyond. The provisions of sections 25, 26 27, 62(1) and' clauses (d) and (h) of section 62(2) of the aforesaid Act. In the present case, however, the liquor was lifted by the appellant from its distilleries in Uttar Pradesh and a portion thereof remained unaccounted for, as already stated, on arrival of the consignments at their destination. For the foregoing reasons, the respondents were right in demanding the duty on the shortages. In the result, the appeals fail and are dismissed with costs, limited to one set. Appeal ..... 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