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McDowell & Co. Ltd. Versus State of Bihar

2010 (8) TMI 1065 - PATNA HIGH COURT

Civil Writ Jurisdiction Case No.8691 of 1994 - Dated:- 17-8-2010 - S.K. KATRIAR AND BIRENDRA PRASAD VERMA JJ. For The Petitioner: Mr. G.P. Bimal, Advocate and Mr. Satyabir Bharti, Adv. For the State: Mr. Anil Kumar Verma, A.C. to S.C,3, JUDGEMENT S.K. Katriar, J: This writ petition is directed against the order dated 05.09.1994 (Annexure-2), passed by the learned Excise Commissioner, Government of Bihar, whereby he has affirmed the Demand Notice dated 12.05.1994(Annexure-1), issued under the sig .....

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brief statement of facts essential for disposal of this writ petition may be indicated. The petitioner is a Public Limited Company having its manufacturing unit at Hathidah, district Patna. It relates to manufacture of Extra Neutral Alcohol (ENA in short ), which is an improved version of spirit, is an industrial product, and is also used as a raw material for manufacture of alcohol fit for human consumption. During the period 1992-93, it had transported 1,85,476.00 L.P. Litres of ENA to Seramp .....

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es, Rule 33 of the Rules permits admissible wastage of .5% only i.e., 1,008.30 LPL. There was thus an excess wastage of 665.80 L.P.L. occasioned by evaporation and leakage in the tanker during the course of transit. This was detected during the course of audit of the register maintained jointly. Extract of Audit No. 78/93-94 (Item No. 5), is marked as Annexure-1A, which, inter-alia, stated that penal duty of ₹ 29,961.00 P (Rs.45/- per L.P.L.), was imposed upon the petitioner. This was foll .....

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roduced hereunder : Finally the petitioner has challenged the right to levy excise duty by the State. The contention is that State can levy duty only on potable liquor and not on rectified spirit. In this case the Extra Neutral Alcohol was exported under bond for manufacture of IMFL. The purpose of export was to manufacture potable liquor. Thus it was not duty on rectified spirit but on potable spirit. Hence this writ petition. 3. While assailing the validity of the impugned order, learned couns .....

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03) 11 SCC 478. (iii) State of Bihar Vrs. Industrial Corporation Pvt. Ltd. and others( 2003) 11 SCC 465, (paragraph 24). (iv) State of U.P. and others Vrs. Modi Distillery and others (1995) 5 SCC 753 and (v) McDowell & Company Ltd. Vrs. State of Bihar and others, 2006 (4) P.L.J.R. 269 (paragraph-13). 4. Learned counsel for the respondents submits that the penalty has been imposed, not on non-payment of excise duties on the loss of the product in transit beyond permissible limit, but for non- .....

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t. Just the same issues fell for consideration of this Court as well as the Supreme Court, which have been relied upon by the petitioner. Except the case of State of U.P. Vrs Modi Distillery (Supra), the other four judgments dealt with the Act and Rules and the Constitution. 6. The first judgment on this point is of a Division Bench of this Court in New Swadeshi Sugar Mills Ltd. Vrs. State of Bihar (Supra ). That was a case where rectified spirit was sought to be subjected to levy under the Act .....

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rter can claim evaporation or leakage beyond the quantity specified under rule 33. The rule precludes the transporter from raising a plea of unlimited losses due to uncontrolled leakage or evaporation. Even if the leakage is total and evaporation is 100%, the reduction will be only that which is provided in rule 33. In other words, it is merely a protection, assumed by the State to itself, against unscrupulous transporters. This rule means nothing beyond that. It does not create a right in any a .....

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prior stage where it is not fit for human consumption, duty cannot be levied at the prior stage where it is not fit for human consumption. 7. It is thus evident that the Division Bench held that section 27 of the Act is the charging section, and the duties of excise under the Act can be levied only on the products described as Excisable Article in the Act which reads as follows: S. 27 : Power to impose duty on import, export, transport and manufacture- (1) An excise duty or a countervailing dut .....

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espect of clause (b) or clause (c) of section 13, or (f) any excisable article manufactured in any distillery or brewery licensed, established, authorized or continued under this Act. (2) A duty, at such rate or rates as the State Government may direct, may be imposed, either generally or for any specified local area, on any tari drawn under any license granted under section 14, sub-section (1) 7.1 It was further held therein that ENA , an industrial item not fit for human consumption, can be pu .....

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memorandum of appeal before the learned Excise Commissioner. He was bound by the same and ought to have followed the same. The relevant portion of the memorandum of appeal is reproduced herein below: There are several decisions of the various High Courts on the subject that the State of Government cannot levy duty on excise on rectified spirit and other alcoholic liquor not fit for human consumption. A reference may be made to the decisions of: (a) Patna High Court in C.W.J.C. No. 1327 of 1979 i .....

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of this Court, is reproduced herein below: - 1. We find that the conclusion of the High Court that no duty can be levied by the appellant State on rectified spirit, having regard to the provisions of the Constitution, has been upheld by this Court in the case of Synthetics and Chemicals Ltd. v. State of U.P. It has been held there that the provisions in various State Acts which purport to levy a tax or charge upon industrial alcohol, also called rectified spirit and alcohol used and usable for i .....

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duty which was claimed in the sum of ₹ 8,62,678. Duty itself not being leviable, that claim must also be held to be invalid. 3. The appeal is, accordingly, dismissed. There shall be no order as to costs. 9. Identical issue under the Act and Rules fell for the consideration in the Supreme Court in the case of State of Bihar and others Vs. Industrial Corporation Pvt. Ltd. and others (Supra ). After full length discussion on this issue, the Supreme Court noticed the order of Division Bench of .....

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ound thereby. Even otherwise, it appears that the question as to whether any excise duty can be levied by the State upon the industrial alcohol or rectified spirit usable for industrial purposes is concluded by a decision of this Court in State of Bihar v. New Swadeshi Sugar Mills Ltd. which arose out of a judgment of the Patna High Court in New Swadeshi Sugar Mills Ltd. v. State of Bihar. 10. Identical issues under the U.P. Excise Act 1910, read with U.P. Excise Act 1910, fell for the considera .....

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) . The Division Bench recapitulated a large number of decisions of the Supreme Court as well as this Court some of which have been discussed herein above, and reached the same conclusion. Paragraphs-13 and 14 of the judgment is reproduced herein below: 13) On careful consideration of the case laws, noticed above, and the relevant constitutional provisions, it is clear that Bench of three Judges of the Supreme Court in the case of State of U.P. vs. Modi Distillery ( supra ) have relied upon judg .....

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in the judgment in the case of Deccan Sugar and Akhari Co. Ltd. vs. Commissioner of Excise ( supra) by three judges of the Supreme Court clearly supports the stand of the petitioner that State Legislature cannot impose any excise duty on rectified spirit because it does not fall under the category of potable liquor fit for human consumption. 14) So far as judgments cited by the learned Advocate General are concerned, they deal only with situations requiring administrative control over manufactur .....

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by way of penalty under the Excise Act. So far as this issue is concerned, the stand of the petitioner is fully supported by judgments of the Apex Court cited on behalf of the petitioner on the basis whereof it can safely be held that State cannot levy excise duty on rectified spirit or other kind of alcohol unfit for human consumption and it cannot do so even by resorting to levy penalty on the ground of alleged loss or inefficiency in the system of a distiller engaged in manufacture of indust .....

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