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Andhra Pradesh High Court
Judges : A.SEETHARAM REDDY
Anab-e-Shahi Wines - Appellant
Versus
Government Of A.P. - Respondent
Decided On : 02-25-81
EXCISE - ANDHRA PRADESH EXCISE ACT, 1968 - RULE 67 - LEVY OF EXCISE DUTY ON WASTAGES - ULTRA VIRES - RULE-MAKING POWER - SCOPE - RULE 67 SEEKS TO LEVY EXCISE DUTY ON QUANTITIES OF SPIRIT FOUND DEFICIT OVER AND ABOVE 7 PER CENT ALLOWED FOR WASTAGE - RULE 67 IS ULTRA VIRES THE A P. EXCISE ACT.
Fact of the Case:
PETITIONER, A DISTILLERY, CHALLENGED THE DEMAND FOR EXCISE DUTY ON WASTAGES UNDER RULE 67 OF THE ANDHRA PRADESH DISTILLERY RULES, 1970, ARGUING THAT IT WAS ULTRA VIRES THE ANDHRA PRADESH EXCISE ACT, 1968.
Finding of the Court:
THE COURT HELD THAT RULE 67 WAS ULTRA VIRES THE ACT AS IT SOUGHT TO LEVY EXCISE DUTY ON WASTAGES IN EXCESS OF ALLOWABLE EXEMPTION AND NOT ON THE FINISHED PRODUCT AS PRESCRIBED UNDER THE SCHEDULE TO SECTION 21 OF THE ACT.
Issues: WHETHER RULE 67 OF THE ANDHRA PRADESH DISTILLERY RULES, 1970, WHICH SEEKS TO LEVY EXCISE DUTY ON QUANTITIES OF SPIRIT FOUND DEFICIT OVER AND ABOVE 7 PER CENT ALLOWED FOR WASTAGE, IS ULTRA VIRES THE ANDHRA PRADESH EXCISE ACT, 1968.
Ratio Decidendi: THE COURT HELD THAT THE LEVY OF EXCISE DUTY IS ON THE FINISHED PRODUCT WHICH IS PRODUCED OR MANUFACTURED AT THE DISTILLERY OR OTHER PLACES MENTIONED IN THE ACT. THE LEVY, AS PER THE SCHEDULE, IS ON THE QUANTITY OF THE FINISHED PRODUCT WHICH IS ISSUED FROM THE DISTILLERY. RULE 67 SEEKS TO LEVY EXCISE DUTY ON THE SPIRIT WHICH IT IN DEFICIT AND WHICH COULD NOT BE ACCOUNTED FOR IN EXCESS OF 1-I PER CENT ALLOWED FOR WASTAGE. NONE OF THE PROVISIONS OF THE ACT SEEKS TO LEVY EXCISE DUTY ON ANY SPIRIT WHICH IS FOUND IN DEFICIT OVER AND ABOVE THAT ALLOWED FOR WASTAGE. SECTION 72 EMPOWERS THE GOVERNMENT TO MAKE RULES FOR CARRYING OUT ALL OR ANY OF THE PURPOSES OF THE ACT. SECTION 72 IS RESTRICTIVE IN ITS OPERATION AND DOES NOT CLOTHE THE GOVERNMENT WITH ANY POWER TO LEVY DUTY DEHORS THE PROVISIONS CONTAINED IN SECTION 21 AND 22 OF THE ACT. THEREFORE, RULE 67 TRAVERSES NOT ONLY BEYOND THE SCOPE OF THE ACT BUT BEYOND THE RULE-MAKING POWER.
Final Decision: THE COURT STRUCK DOWN RULE 67 AS ULTRA VIRES THE ACT AND ISSUED A WRIT OF MANDAMUS RESTRAINING THE RESPONDENTS FROM IMPLEMENTING THE IMPUGNED PROCEEDINGS DATED 4-5-1979.
( 1 ) THIS petition is filed for the issue of a writ in the nature of mandamus restraining the Commissioner of Excise from collecting the amount demanded as duty on wastages by his order in cr. No. 29578/ex/75/g. 4 dated 4-5-1979.
( 2 ) THE petitioner, M/s. Anab-e-Shahi Wines and Distilleries Private limited, Hyderabad, is a distillery carrying on manufacture of Indian made liquors like Brandy, Whisky, Gin, Rum etc. , as per the licence granted under the Andhra Piadesh Distillery Rules, 1970. hereinafter referred to as the distillery Rules . Under the said licence, the petitioner will purchase and transport alcohol from the alcohol manufacturing units and it will be kept in the bond in the Distillery premises under lock and seal by the Excise officer in charge of the Distillery. As and when the alcohol is required for the manufacture of liquors, the Excise Officer of the Distillery will issue It after making the necessary entries in the register. The alcohol obtained will be processed and will be kept in the wooden vats of maturation for a specified period. The finished product will be separately bottled and labled and packed in the boxes, and the same will be kept under the custody of the Excise Officer in charge of the distillery. Before the commodity is removed, the excise duty will be paid by the purchaser. In fact he goods will be released only after the challan in proof of payment of the necessary excise duty is produced. Thus, the entire storing and manu. factoring and release of the goods are directly under the supervision of the Excise Officer in charge of the Distilleries. But, during the manufacturing process, at different levels, there will be some wastage by evaporation, absorption and spilling over inspite of best care and attention by the manufacturer to avoid the wastage. But, however, under Rule 67 of the Distillers Rules, any wastage over and above the allowable limit of 7 per cent in total would be liable for payment of excise duty.
( 3 ) IT is further averred that on 19-4 1978, a notice has been served demanding Rs. 1,07,557-62 P. as duty on wastages. The petitioner replied to the demand stating that the demand is not sustainable under the A P Excise Act a id the Rule framed is impermissible. Nevertheless, the Commissioner of Excise (2nd respondent herein) issued the impugned order dated 4-5-1979 stating that the Accountant General, Andhra pradesh, has pointed out that during the local audit of the receipt of the distillery Officer in charge of certain Distilleries, the excise duty as indicated against each of the Distilleries is to be collected even after allowing the maximum wastages contemplated under Rule 67 of the Distillery rules as amended on 13-7-1978. The impugned order, is, therefore, challenged in this writ petition on the followins grounds: (1) Sub-rule (3) of Rule 67 is ultra-vires the rule-making power conferred on the Government under Section 72 of the A P Excise act as it is beyond the scope of the main statute itself. (2) Under Section 21 of the Act, the Government may levy excise duty on any excisable article manufactured or produced in the state at such rate mentioned in the Schedule; and under Section 22 of the act, the mode of levy rateably on the quantity of any excisable article produced or manufactured in or issued from a Distillery, is laid down so, Rule 67 (3), which seeks to lay down a new type of levy of excise duty, is not contemplated either by Section 21 or by Section 22 of the act.
( 4 ) THE counter averment made in the affidavit on behalf of the respondents is that, on a representation made by the interested persons to the effect that 1 1/2 per cent wastages allowed was neither adequate nor compared favourably with similar allowances with regard to wastages fixed in the neighbouring States, the Government issued G. O. Ms. No. 391 revenue, dated 18-4-1977 revising upward the limits of wastages in manufacture of Indian liquors upto 7 per cent. Under Sub-
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