TMI Blog2019 (8) TMI 583X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted belatedly beyond the period of time prescribed and thus the same are rejected. For the Excise year 2018-19, out of about 1,405 export permits said to have been issued, approximately in 51 cases, EVCs were submitted belatedly for which explanation offered shows that destination States issued the EVCs belatedly due to various factors which was beyond the control of the petitioner and the same can not be rejected outrightly. As could be seen, furnishing of verification certificates is only for proof of the export and the quantity exported. This Court is of the considered opinion that production of EVCs is mandatory to avail the benefit of reduced duty pursuant to export of liquor to other States. Some proof is necessary to substantiate the liquor exported has reached the destination/other States. However, describing the time limit of sixty/ninety days for production of EVCs can be held to be directory, since the production of such EVCs within the prescribed period is dependant on the functioning of the authorities of different States, which is beyond the control of the person exporting the liquor. Any EVCs submitted beyond the prescribed period with sufficient cause show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic beverages from its distillery located in Nanjangud, Karnataka. The manufactured liquor is supplied within the State of Karnataka and exported to other States in India as well. 4. In cases where the petitioner intends to export liquor manufactured in Nanjangud, as per the provisions of the Excise Act and Rules thereunder, the petitioner applies for an export permit, furnishes a bank guarantee as prescribed and then exports the liquor. The petitioner applies for and follows up with the Excise Department in the destination State for issuance of Export Verification Certificates (EVCs) for the consignments exported. No sooner the EVCs are issued, the petitioner submits the same to the Karnataka Excise Department. 5. It is the contention of the petitioner that in some cases, for reasons beyond the control of the petitioner, the destination State issues EVCs only after the expiry of 60 days from the date of export. In such cases, the petitioner submits that EVCs to the respondents belatedly i.e., after expiry of the period of 60 days. In this regard, respondent No.2 passed an order impugned dated 11.02.2019 demanding ₹ 76,06,281/- as excise duty on liquor export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which notice was issued as to why action should not be initiated under Section 29 of the Act. The said case was compounded by levying fine. It is found that the petitioner has violated Rule 20(2) of the Rules on multiple occasions. 9. Learned AGA argued that Rule 20 (2) of the Rules, is regulatory in nature and it is intended to ensure that liquor manufactured in the State is not diverted and misused in the course of export. The rule is a necessary obligation imposed on the licencee (manufacturer) to comply with the restrictions to carry the trade in liquor. The object of fixing the time limit for obtaining the verification report is to avoid any reasonable doubt; whether the liquor is really exported to the distinct location as in the permit or is being diverted/misused resulting in loss of revenue to the State. Thus it is to prevent misuse of the export provision by the petitioner ensuring timely and proper action, submitting the EVCs as early as possible within sixty or ninety days (defence supplies) is necessary. 10. It was submitted that the required EVCs for the consignment exports were not totally submitted by the petitioner within the time frame and as suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction made in the State of Karnataka is called in question in the teeth of the scheme of Excise Act. 17. In the circumstances, the points that arise for consideration of this Court are: i) Whether the delay caused in furnishing of EVCs collected from the Excise authorities of the destination States would alter the rate of excise duty despite the liquor has been exported and delivered in another State has been otherwise proved by substantial material rendering Rule 20(2) of the Rules ultra vires the Constitution? ii) Whether furnishing of EVCs within the time prescribed i.e., sixty days/ninety days (defence supplies) is mandatory or directory? 18. These two questions are intrinsically interconnected. It is a well settled law that excise duty is a duty on manufacture or production. Chapter V of the Act deals with excise duty and countervailing duty. 19. Rule 2 of the Karnataka Excise (Excise Duties and Fees) Rules, 1968 ( Excise Duty Rules for short) provides the manner of levy of excise duties. Rule 2(A)(B) of the Excise Duty Rules provides for the levy of additional excise duty and additional countervailing duty. Rule 3 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to judicial interpretation in the case of Ramanathan, supra, wherein the Hon ble Apex Court has held thus: 18. The word regulation cannot have any rigid or inflexible meaning as to exclude prohibition . The word regulate is difficult to define as having any precise meaning. It is a word of broad import, having a broad meaning, and is very comprehensive in scope. There is a diversity of opinion as to its meaning and its application to a particular state of facts, some courts giving to the term a somewhat restricted, and others giving to it a liberal, construction. The different shades of meaning are brought out in Corpus Juris Secundum, Vol. 76 at p. 611: Regulate is variously defined as meaning to adjust; to adjust, order, or govern by rule, method, or established mode; to adjust or control by rule, method, or established mode, or governing principles or laws; to govern; to govern by rule; to govern by, or subject to, certain rules or restrictions; to govern or direct according to rule; to control, govern, or direct by rule or regulations. Regulate' is also defined as meaning to direct; to direct by rule or restriction; to direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their , is to make procedure not the handmaid but the mistress and form not as subservient to substance but as superior to the essence : Charles K. Sakria v. C. Mathew, (1980) 2 SCC 752 : AIR 1980 SC 1230. 33. We have no hesitation in holding that the provision in the notification regarding the time limit fixed for the production of the verification certificate is only directory and not mandatory. It is therefore unnecessary for us to consider whether the forty two days time limit allowed by the Department from 1977-1987 can be permitted only when the notification was statutorily amended on 25-7-1987, whether the amendment was only declaratory or clarificatory in nature; and whether the power to extend the period conferred by the amendment on 5-2-1980 can be exercised for the period, 1977-1980 also. 34. On the facts now placed before us it is admitted that all the 839 cases of liquor were exported by the petitioner on the strength of permits/licenses issued by the State during the year 1977-1983. Before demands were made in 1983, the Excise authorities had before them the verification certificates showing the exact quantity of liquor that has peen imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Commissioner, 1940 PC 230. ..... It is a well settled general rule that 'an absolute enactment must be obeyed or fulfilled exactly, but it is sufficient if a directory enactment be obeyed or fulfilled substantially. The two aspects were elaborately considered in the light of the principles enunciated in Montreal Street Railway Company v. Dormand, 1917 PC 142, R.B. Sugar Company v. Rampur Municipality, , A.V. Fernandez v. State of Kerala, and Gursahat v. Income Tax Commissioner, and answered as under : A provision in a statute or notification is mandatory or directory is dependent on the intent of the Legislature. This intention can be gathered from the object of the statute, the purpose of which the provision has been inserted, the setting in which it appears, and the consequences which would follow by adopting a construction one way or the other. This is thus an ordinary rule of construction which, without doing violence to the language used, achieves the object sought to be realised. A distinction for the purpose of interpretation, has to be made between the charging provisions in a taxing statute and the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the benefit of reduced duty pursuant to export of liquor to other States. Some proof is necessary to substantiate the liquor exported has reached the destination/other States. However, describing the time limit of sixty/ninety days for production of EVCs can be held to be directory, since the production of such EVCs within the prescribed period is dependant on the functioning of the authorities of different States, which is beyond the control of the person exporting the liquor. Any EVCs submitted beyond the prescribed period with sufficient cause shown requires to be considered, if it is otherwise established that the liquor was exported to other States by adequate material evidence. No straight jacket formula can be fixed for consideration of the sufficient cause or satisfactory explanation offered by the person exporting the liquor, the same depends on the facts and circumstances of the case. In such circumstances, credit has to be adjusted depending upon the facts and circumstances of the case. Furnishing of such EVCs belatedly would not disentitle the petitioner to avail the reduced rate of duty to which he is otherwise entitled to. Unless such a pragmatic approach i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances beyond his control, he met with an accident would the court be powerless to grant him relief? This illustration would suffice to the intendment of the legislature that it never used the word 'shall' to make it so imperative as to render the court powerless. 31. The question whether the expression shall partakes the character of may depends upon the intent of legislation, which requires to be achieved not only from the phraseology of the provision, but considering its nature, design and the consequences. Applying this principle, the word shall used in rule 20(2) requires to be read as may . Adopting such a construction, Rule 20(2) has to be read. The principle of the rules would govern to achieve its object and intent particularly, to make it workable. Any other interpretation would invalidate the provision as hit by Article 265 of the Constitution. 32. Hence, the following: ORDER i) Furnishing of EVC Forms in terms of Rule 20(2) of the Export Rules is mandatory, but the time prescribed of sixty/ninety days (defence supplies) for furnishing of such EVC Forms is merely directory. Subject to the same, Rule 20(2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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