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SUPREME COURT OF INDIA
A.M. KHANWILKAR, DINESH MAHESHWARI, KRISHNA MURARI, JJ.
State of U.P., Through Secretary (Excise) & Ors. - Appellants
Versus
M/s Mcdowell and Company Limited - Respondent
Civil Appeal No(s). 169-170 of 2022 (Arising out of SLP(C) Nos. 11596-11597 of 2020)
Decided On : 05-01-2022
| Table of Content |
|---|
| 1. the incident and demand for excise duty arose from a fire. (Para 2 , 5 , 15) |
| 2. arguments revolve around negligence and liability. (Para 11 , 18 , 19) |
| 3. court analyzed the negligence and control aspects. (Para 16 , 38 , 46) |
| 4. determination of legal liability and excise duty applicability. (Para 37 , 42 , 59) |
| 5. final decision overwhelmingly supports appellant's claims. (Para 72) |
JUDGMENT :
Dinesh Maheshwari, J.
| Contents | |
| Preliminary and brief outline | 2 |
| Relevant factual aspects and background: The fire incident and demand of excise duty on the liquor destroyed | 6 |
| Before the fire | 6 |
| The fire incident and relevant reports | 8 |
| Demand of excise duty on the liquor lost in fire | 11 |
| Writ petition in the High Court and interim order therein | 17 |
| Impugned orders dated 10.04.2017 and 06.11.2019: High Court allowed the writ petition and passed consequential orders | 18 |
| Rival submissions | 21 |
| Questions for determination | 33 |
| Relevant statutory provisions | 34 |
| Whether the demand in question is authorised by law? | 41 |
| Whether respondent company remains liable to pay excise duty on the liquor lost in fire | 49 |
| Control of Department over the distillery and godown: effect of | 50 |
| Negligence | 52 |
| Act of God | 56 |
| Inevitable accident | 61 |
| Res ipsa loquitur | 63 |
| The respondent company remains liable | 65 |
| Insurance coverage only of the value of liquor: effect of | 70 |
| Summation | 74 |
| Conclusion | 75 |
Preliminary and brief outline
Leave granted.
2. By way of these appeals, the State of Uttar Pradesh and its officers related with the Excise Department as also the District Magistrate, Shahjahanpur have essentially questioned the order dated 10.04.2017 in Misc. Bench No. 4493 of 2006, whereby the High Court of Judicature at Allahabad, Lucknow Bench, Lucknow,1[Hereinafter also referred to as ‘the High Court’.] quashed the demand raised against the writ petitioner company (respondent herein) towards loss of excise revenue because of destruction of liquor in fire. The appellants have also questioned the order dated 06.11.2019 in C.M. Application No. 90936 of 2019, whereby the High Court directed the appellant No.2 (Excise Commissioner, Uttar Pradesh,2[Hereinafter also referred to as ‘the Excise Commissioner’.] ) to expeditiously take a final decision on the application for refund of the amount that was deposited by the writ petitioner pursuant to the interim order passed in the said writ petition.
3. Before dilating on the issues raised in this case, we may draw a brief outline of the matter to indicate the contours of forthcoming discussion.
3.1. The genesis of the present litigation had been in a fire incident that took place in a godown of the distillery of the respondent company on 10.04.2003. As many as 35,642 cases of Indian Made Foreign Liquor,3[‘IMFL’ for short] of different brands got destroyed in this fire. After receiving the initial reports that the fire possibly took place due to short circuit of electricity, the department proposed to recover the amount of excise duty lost, due to such destruction of liquor, from the respondent company. The respondent maintained that there was no negligence on its part and, therefore, no case for recovery of the alleged loss of excise duty was made out under Rule 7(11) of the UTTAR PRADESH BOTTLING OF FOREIGN LIQUOR RULES , 1969,4[Hereinafter also referred to as ‘the Rules of 1969’.] and Rule 709 of the Uttar Pradesh Excise Manual,5[Hereinafter also referred to as ‘the Excise Manual’.].
3.2. However, the Excise Commissioner, by his order dated 11.07.2006, rejected the submissions of the respondent and raised a demand to the tune of Rs.6,39,32,449.44 towards loss of excise revenue on account of destruction of liquor. Accordingly, the District Magistrate, Shahjahanpur asked the respondent to dep
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