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2007 Supreme(Kar) 31
Karnataka High Court
SREE BALAJI ENTERPRISES, BANGALORE - Appellant
Versus
EXCISE COMMISSIONER IN KARNATAKA, BANGALORE - Respondent
Decided On : 01-11-07
Writ Petition No. 34408 of 2001 (EXCISE).
Sri Basavaprabhu S. Patil,Mis. Basavaprabhu S. Patil,M. Vinayakeerthy, M.P. Subbaiah, D.N. Mamatha,D.N. Nanjunda Reddy,Sri M. Keshaya Reddy
The liability for excise duty is created only when the manufactured liquor is issued from a distillery or warehouse, as per the provisions of the Karnataka Excise Act, 1965 and Rule 2 of the Karnataka Excise (Excise Duties and Fees) Rules, 1968.
Headnote:
Excise Duty - Liability for Payment of Duty - Karnataka Excise Act, 1965, Sections 22 and 23 - The court quashed the demand notice for excise duty as the charge was not effectuated until the liquor was issued from the distillery or warehouse. The demand was found to be without legal support.
Fact of the Case:
The writ petitioner, a firm, manufactured Indian made liquor under a license and stored it in storage tanks. The liquor was destroyed in a fire accident. The dispute was whether the petitioner was liable to pay excise duty on the destroyed liquor.
Finding of the Court:
The court found that the liability for excise duty is created only when the manufactured liquor is issued from a distillery or warehouse, as per the provisions of the Karnataka Excise Act, 1965 and Rule 2 of the Karnataka Excise (Excise Duties and Fees) Rules, 1968. As the charge was not effectuated until the liquor was issued, the demand for excise duty was quashed.
Issues: The main issue was whether the petitioner was liable to pay excise duty on the liquor destroyed in a fire accident before it was issued from the distillery or warehouse.
Ratio Decidendi: The court held that the liability for excise duty is created only when the manufactured liquor is issued from a distillery or warehouse, as per the provisions of the Karnataka Excise Act, 1965 and Rule 2 of the Karnataka Excise (Excise Duties and Fees) Rules, 1968.
Final Decision: The court quashed the demand notice for excise duty as the charge was not effectuated until the liquor was issued from the distillery or warehouse. The demand was found to be without legal support.
Writ petitioner is a firm which claims to be a lessee of one M/s. Bangalore Grape Winery (Private) Limited and licence holder for manufacture of Indian made liquor in bulk. It appears using the licence, the petitioner manufactures such liquor and marks it under the brand name of products of M/s. Shaw Wallace and Company with whom they have an independent arrangement. The activity of manufacturing such liquor attracts liability for payment of duty under the provisions of the Karnataka Excise Act, 1965 (for short 'the Act), in terms of the provisions of Sections 22 and 23 of the Act. The petitioner is paying such duty on the quantum of liquor so manufactured and issued in the factory premises at No. 13, Green Fields, Bannerghatta Road, Bangalore-560 029.
2. The present writ petition is regarding the dispute as to whether the petitioner was liable to pay duty in respect of certain quantum of such liquor which had underwent some process and which according to the respondents had become potable and which had been stared in storage tanks but which wee destroyed in fire due to an accident that took place in the factory premises as on 10-6-1997 and if 80 as to whether the petitioner was still liable to pay the excise duty at the rate applicable to the type of liquor that were stored in such storage tanks at the rate prevailing at the relevant point of time though they had Lot been issued.
3. It is because of this controversy, the petitioner has approached this Court for relief when the respondent-State sought to enforce the demand based on the liability for payment of duty in respect of the quantity that was stored in the storage tanks but which got destroyed in the fire accident that took place in the factory as on 10-6-1997. Some correspondences/communications emanating from the respondents also indicate that the quantum of such liquor which got destroyed had the details of names and quantity etc., as per the communication of the petitioner addressed to the Joint Commissioner in terms of Annexure-D, dated 12-6-1997, details of which read as under:
"DETAILS OF BLENDED IML LOSS:
Sl. No. Brand Tankwise Blend
Trank. No. Quantity
1. Haywards Fine Whisky 1 6042 B.L.
2. Old Tavern Whisky 2 8294 BL.
3. V.S.O.P. Exshaw Brandy 3 13610 B.L.
4. Golconda Brandy 4 5560 B.L.
5. Gold Meddal 5 12159 B.L.
6. V.S.O.P. Exshaw Brandy 6 6658 B.L.
7. - 7 Nil
8. Golconda Brandy 8 625 B.L.
9. Haywards Fine Whisky 9 1576 B.L.
10. - 10 Nil
11. - 11 Nil
12. - 12 Nil
Total Blend 54,524 B.L.
4. So far as quantity of such liquor that got destroyed is concerned, it appears there is not much dispute between the parties, but the dispute relates to the liability for payment of duty on such quantity of liquor destroyed.
5. The respondents having admitted enforcing such liability in terms of the order/demand notice dated 23-9-2000 (copy at Annexure-J to the writ petition) calling upon the petitioner to remit the duty liability of Rs. 24,53,580/- on the premise that the petitioner having not taken proper care of the liquor and the carelessness Of the petitioner having resulted in loss of this quantity of liquor in turn resulting in loss of revenue of this amount to the State, the petitioner was liable to pay that amount to the State; that though the total loss to the State in sales tax and excise duty was to the tune of Rs. 63,07,487/-, the liquor having been destroyed before the sale, the liability was only in respect of the manufacture of liquor and therefore the petitioner was being called upon to remit the amount o1'Bs. 24,53,580/-.
6. Petitioner disputing such liability had preferred an appeal to the Karnataka Appellate Tribunal, Bangalore, purporting to be an appeal in terms of the provisions of Section 61(3) of the Act. Unfortunately for the petitioner, the Appellate Tribunal. being of the view that the appeal itself was not tenable, particularly, as no appeal is provided for under Section 61(3
