JUDGMENT

K.N. SAIKIA, J.:—The State of U. P. by special leave appeals from the judgment of the High Court of Allahabad dated 26-10-19791 allowing the respondents writ petition and holding that the State of U. P. and the Excise authorities were not entitled to levy excise duty on the wastage of liquor in transit. The respondents are manufacturers of high strength spirit classified as other sorts of spirit not otherwise specified under S. 28 of the United Provinces Excise Act, 1910, hereinafter referred to as the Act.After manufacture they transport those spirits in big containers from the distilleries to their warehouses, transporting them on passes issued under S. 16 of the Act. In the bonded warehouses the same are sometimes diluted, separately bottled and sold. They also used to manufacture and bottle military rum under a licence and supply the same to the defence personnel inside and outside the State of U. P. The Officer Commanding Rail Head Depot A,S.C., Pathankot having obtained permits from the State of Punjab for the import of litary rum, against those permits the respondents exported military rum from their distillery, under different passes. The excise duty on military rum for export was Rs. 7 / per L. P. Litre while the rate for consumption within the State was Rs. 21 / - per L. P. Litre. If the exported military rum was under bond thereupon duty was realised by the importing State from the importer thereof. The respondents bottled the rum according to rules and supplied the same to the consignees at the distillery premises and the consignments were taken by the consignees under the seal of the railway authorities to their respective destinations.

2. It appears by Notification dated March 26, 1979 in exercise of the powers under Ss. 28 and 29 of the Act, read with S. 21 of the U. P. General Clauses Act, 1904, and in supersession of the earlier Government Notification the Governor was pleased to direct that with effect from April 1, 1979 duty shall be imposed on country spirit at the rates specified in the schedule thereto and the duty was payable "before the issue from the distillery or bonded warehouse concerned save in the case of issued under bond". By order dated 13-10-1970 notice was issued to the respondents demanding Rs. 4,295.55 p. on the wastage which was termed as "excess transit wastage" of rum calculated at the maximum rate of Rs. 21 / - per L. P. Litre. A representation of the respondents dated November 9, 1970 was rejected by order dated 15-1-1972. Another representation through the All India Distillers Association was also rejected by order dated August 28, 1972.

3. Several writ petitions challenging simifar orders were filed by others before the Allahabad High Court for quashing the orders. The respondents also filed Civil Miscellaneous Writ No. 7168 of 1972 under Art. 226 of the Constitution of India praying for appropriate writ, order or direction quashing the impugned orders dated 13-10-1970, 9-11-1970, 15-1-1972 and 28-8-1972 and for a mandamus commanding the State of U. P. not to realise or adjust an amount of duty towards wastage from the respondents advance duty account otherwise than in accordance with law and restraining them from giving effect to the impugned orders. The High Court by the impugned judgment dated 26-10-1979 relying on an earlier Division Bench decision of the same High Court in M/ s. Mohan Meakin Breweries Ltd. v. State of Uttar Pradesh. (Writ Petition No. 2604 of 1973, decided on 11-9-1979) allowed the writ petition and quashed the impugned orders thereby holding that no excise duty could legally be levied on the excess wastage that occurred during the transport of liquor in course of export, that is, taking of U. P. otherwise than across a customs frontier as defined by the Central Government.

4. Mr. Raja Ram Agarwal, the Learned counsel for the appellants, submits that the duty has been levied keeping in mind the fact that in U.P. excise duty is levied at two different rate