TMI Blog2006 (5) TMI 535X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.2001 allegedly adopted a policy decision for the excise year 2001-02 which commenced from 01.04.2001 to the effect that the distilleries had to obtain and affix security holograms issued by the department to prevent evasion of duty and smuggling of liquor. The Excise Commissioner issued a circular on 21.02.2001 providing that every distillery would receive holograms from his office, where for plants had been established. Another circular letter was issued on 24.03.2001 directing that holograms on bottles, pouches and canes would be affixed by the distilleries. The excise duty was payable on the bottles, pouches and canes etc. on which holograms had been affixed. Different kinds of holograms had been provided for different sizes of bottles/pouches, for different quantities and qualities of liquor. Procedures to be followed for obtaining the said holograms, transporting etc. thereof by the distilleries were also provided. It was provided that the distilleries would be entitled to receive holograms from the incharge excise inspector on day- to-day basis and a register was required to be maintained as regards the stock of the holograms issued, the number of holograms wasted and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.02.2001, 24.02.2001, 16.06.2001, 29.10.2001, 08.11.2001 and 19.11.2001 issued by the Excise Commissioner, inter alia, on the ground that no presumption could be raised that wasted security holograms which could not be produced for verification before the Authorized Committee would be deemed to have been misused. By reason of the impugned judgment, the said writ petitions have been allowed. The State is, thus, before us. 8. The High Court in passing the impugned judgment, inter alia, opined : (i) that the duty cannot be charged on the basis of loss of holograms, as excise duty was payable in terms of the notification issued under Section 29 of the Act; and (ii) no notification having been issued, excise duty demanded only on the basis of the circulars issued by the Excise Commissioner on account of holograms, is bad in law. 9. Mr. Rakesh Dwivedi, the learned Senior Counsel appearing on behalf of the Appellant, submitted that by reason of the circular letters issued by the Excise Commissioner only effect was given to the rules frame by the State dated 19.03.2001. Our attention, in this connection, has been drawn to the indemnity bond as prescribed in Form No. PD-16-A in te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be issued in terms whereof directions as enumerated in the clauses mentioned therein should be made. Section 31 provides for the forms and conditions of licences on the terms mentioned therein. In terms of Section 41 of the Act, the Excise Commissioner may make rules. 11. Indisputably, the rules in terms of the said provisions providing for issuance of such holograms have been made for the first time in 2004. Pursuant to or in furtherance of such rule making power, however, rules have been framed. Indisputably, in terms of the said rules, manufacture, processing, distribution, and payment of excise duty, transport etc. are regulated. Rule 715 provides for accounts to be kept by distillers. Rule 716 provides that such accounts would be open to inspection at all times by the officer-in-charge and all superior officers. Rule 719 empowers the Excise Commissioner to appoint officer to the charge of distilleries, in the following terms: 719. Excise Commissioner to appoint officer to the charge of distilleries. - The Excise Commissioner will appoint such officers of the Excise Department as he may see fit to the charge of distilleries. The pay of such officers, will be met by G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as provided for in the rules. Mr. Dwivedi was also not correct in relying upon the indemnity bond purported to have been executed by the appellant in terms whereof the licensees agreed to keep the State indemnified for the loss of security of holograms, inasmuch as the indemnity bonds were executed after the period in question, 2004 Rules to which our attention has also been drawn are also indisputably not applicable. 15. Our attention has also been drawn to the licences granted in favour of the distillers which allegedly contained clauses relating to payment of duty, in case of damages or shortages of security holograms by the licensees in their personal capacity. The licence, to which our attention has been drawn by the appellant, was issued on or about 01.04.2004 i.e. after the coming into force of the 2004 Rules. 16. The State indisputably is entitled to take recourse to such measures as it may think necessary, with a view to prevent evasion of payment of excise duty or for the purpose of preventing adulteration etc. The State does not say that prevention of adulteration was the purpose for which the said circular letters were issued. We have noticed hereinbefore that du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... security holograms shall be made only to such authorized representative of Distillery/Breweries/Vintinery/license holders of Foreign liquor bond whose signatures have been attested in the indent form by the officer incharge of the Distillery/Brewery/Vintinery/license holder of foreign liquor bond and a photo identity card jointly signed by the officer incharge of the Distillery / Brewery / Vintinery / license holder of foreign liquor bond and the incharge of the indenting unit. Such an identity card had to be produced before the officer incharge (hologram) Excise Headquarter Allahabad at the time of issue of security holograms. 10. The Distillery / Brevery / Vintinery / license holders of foreign liquor bond shall as per their requirement obtain the security holograms from the officer incharge (Excise) of the concerned unit and their daily receipt shortage, use, wastage etc. shall be recorded in the prescribed register HG-6. The wasted security holograms during its use by the concerned unit shall be kept safe in an envelop and the code number mentioned on such hologram shall be recorded in the register and a fortnightly statement of wastage of such holograms shall be made av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The said rules were not applicable at all and the question of giving any relaxation from the rigours thereof did not and could not arise. The distillers were asked to execute bonds. Such bonds had been executed in November 2001, which is beyond the period in question. Only in terms of such indemnity bonds, the concept of payment of damages and that too in the form of liquidated damages, was evolved. The position came to be clarified only by the rules framed by the State on 23.01.2004 wherein it was stated: 6(c) The licensee shall submit the Security Hologram/Holographic Shrink Sleeves intact received from the approved supplier with Hologram Removal pass to officer in charge of the distillery. In case of shortage in Security Hologram/Holographic Shrink Sleeves the licensee shall be liable to deposit the excise duty involved in the missing Hologram/Holographic Shrink Sleeves. Thus, by reason of the circular letter, the concept of payment of damages measured in terms of the excise duty had not been conceptualized. The legislative field in regard to levy of excise duty is covered by Entry 51, List II of the Seventh Schedule of the Constitution of India. It may be true that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statute under which the subordinate legislation is made specially authorises the imposition. In the present case, the Legislature has levied excise duty or countervailing duty on the excisable articles which have been either imported, exported, transported, manufactured, cultivated or collected under any licence granted under Section 13, or manufactured in any distillery or brewery established or licensed under the Act; and the State Government has not been empowered to levy any duty on liquor which the contractors failed to lift. Therefore, the State Government was exercising a power which it did not possess and hence the rule imposing the condition in the licences and the demand notices are invalid. 22. In State of U.P. and Ors. v. Modi Distillery and Ors. MANU/SC/0788/1995MANU/SC/0788/1995 : (1995)5SCC753 , this Court opined Mr. Sehgal submitted, in the alternative, that if it was the ultimate beverage which alone was exigible, the process of determining the wastage and levying excise duty thereon was only regulatory and, therefore, permissible. We are here concerned with the demand of the State for excise duty. The power of the State to demand excise duty is limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xceeding the wastage allowance permissible under Rule 8 of the Punjab Bonded Warehouse Rules, 1957. The Excise and Taxation Commissioner, exercising the powers of the Financial Commissioner, issued a show cause notice and then ordered the appellant to pay duty on the wastage in excess. The show cause notice required the appellant to pay duty on excess wastage in course of import of liquor from U.P. and the rules governing the appellant's licence provided for a wastage allowance not exceeding 1 per cent of the actual loss in transit by leakage or breakage of vessels or bottles containing liquor, and if the wastage exceeded the prescribed limit the licensee should be liable to pay duty at the prescribed rate as if the wastage in excess of the prescribed limit had actually been removed from the warehouse, and it was also provided that the Financial Commissioner could in his discretion on good cause being shown remit the whole or a part of the duty leviable on such wastage, and these provisions were challenged. This Court held that the impugned rules did not impose any new duty or create any liability and that they were in essence and substance of a regulatory character meant to gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there existed any agreement or statutory provision therefore. Such a power did not vest in the Commissioner of Excise or the Superintendents of Excise who had issued the impugned demand notices. It is, therefore, manifest that the duty has to be levied only in terms of the provisions of the statute and not de' hors the same. 25. It is accepted by Mr. Dwivedi that legislation relating to excise duty is relatable to Entry 51, List II of the Seventh Schedule of the Constitution of India. If that be so, provision for imposition of such duty or evasion thereof must be provided in terms of the law. By reason of an executive order, a presumption cannot be raised. No penalty can be levied. The matter would have been different, if the same was provided for, as has been sought to be done now, by way of terms and conditions of licence or in terms of the rules. By reason of an executive instruction, the provisions of the law cannot be effaced. A legislative policy, furthermore, must be laid down by the State. The matter relating to an excise policy must be framed by the State. It cannot be done by the Excise Commissioner. A distinction must be borne in mind between the concept of e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
