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2011 Supreme(Cal) 1250
High Court of Judicature at Calcutta
BHASKAR BHATTACHARYA & SAMBUDDHA CHAKRABARTI
M/s. Shaw Wallace Distilleries Ltd. & Another
Versus
State of West Bengal & Others
W.P.T.T. No.17 of 2011
Decided On : 09-09-2011
For the Petitioners:J.P. Khaitan, Nirmalya Biswas, Anirban Dutta, Advocates.
For the Respondents:Pranab Dutta, Joytosh Majumder, Advocates.
The State has the power to impose regulatory measures to prevent wastage in the process of distillation of rectified spirit, but it does not have the power to impose duty for violation of such regulatory measures unless specifically authorized by the legislature.
Headnote:
BENGAL EXCISE ACT - RULE 14A - IMFL - CUT SPIRIT - DUTY - LEVY - ULTRA VIRES - POLICE POWER - TAXING POWER - DISTINCTION - REGULATORY MEASURES - CONDITIONS PRECEDENT - LEGISLATIVE AUTHORIZATION - EXCESSIVE FEE OR LEVY - FISCAL MATTER - DELEGATED AUTHORITY - IMPLIED INTENT OR INCIDENTAL AND ANCILLARY POWER - SYNTHETICS & CHEMICALS LIMITED VS. STATE OF U.P. - FOLLOWED - WRIT PETITION - ALLOWED.
Fact of the Case:
The writ-petitioner, a manufacturer of India Made Foreign Liquor (IMFL), challenged the West Bengal Taxation Tribunal's order upholding the validity of Rule 14A of the Consolidated Rules framed under Section 86 of the Bengal Excise Act, 1909, insofar as it related to payment of duty at the highest rate leviable on IMFL on unutilized cut spirit obtained after second redistillation. The petitioner contended that the provision was ultra vires the Act and sought cancellation of the demand notice issued by the respondent for payment of duty on the unutilized cut spirit.
Finding of the Court:
The court held that the imposition of duty under sub-rule (4) of Rule 14A was ultra vires the Bengal Excise Act, 1909, as the legislature had not conferred the power to levy such duty for violation of the regulatory measures prescribed under the Rules framed in exercise of power under Section 86 of the Act. The court distinguished between the police power and the taxing power of the State and held that the provisions of Rule 14A were regulatory in nature and not intended to raise revenue. The court further held that the State had the power to impose other regulatory measures prescribed in Rule 14A, except for the imposition of duty, and could enforce those measures by invoking Section 54A of the Act.
Issues: 1. Whether Rule 14A of the Consolidated Rules framed under Section 86 of the Bengal Excise Act, 1909, insofar as it relates to payment of duty at the highest rate leviable on IMFL on unutilized cut spirit obtained after second redistillation, is ultra vires the Act? 2. Whether the State has the power to impose regulatory measures to prevent wastage in the process of distillation of rectified spirit? 3. Whether the State has the power to impose duty for violation of the regulatory measures prescribed under the Rules framed in exercise of power under Section 86 of the Act?
Ratio Decidendi: 1. The court held that Rule 14A(4) of the Consolidated Rules was ultra vires the Bengal Excise Act, 1909, as the legislature had not conferred the power to levy duty for violation of the regulatory measures prescribed under the Rules framed in exercise of power under Section 86 of the Act. 2. The court held that the State had the power to impose regulatory measures to prevent wastage in the process of distillation of rectified spirit, as such measures fell within the police power of the State. 3. The court held that the State did not have the power to impose duty for violation of the regulatory measures prescribed under the Rules framed in exercise of power under Section 86 of the Act, as the Act did not confer such power and the imposition of duty was not authorized by the legislature.
Final Decision: The writ petition was allowed, and a declaration was issued in terms of prayers (a) to (c) of the writ-application.
Bhaskar Bhattacharya, J.
By this writ-application under Article 226 of the Constitution of India, the writ-petitioners, while challenging the order dated April 22, 2010 passed by the West Bengal Taxation Tribunal in R. N. No.427 of 2004, has challenged Rule 14A of the Consolidated Rules framed under Section 86 of the Bengal Excise Act, 1909 so far as it relates to payment at the highest duty leviable on IMFL on unutilized cut spirit obtained after second redistillation as ultra virus the provisions of the Bengal Excise Act, 1909 in addition to the prayer for direction upon the respondent to cancel/rescind/withdraw the demand notice dated 23rd August, 2004 by which the respondent imposed an amount of Rs.1,74,63,538/- towards payment on unutilized cut spirit.
Since the writ-petitioners challenged the aforesaid provision of the Rules as ultra virus the Act, a notice was given to the learned Advocate-General and consequently, Mr. Dutt, the learned Advocate, has appeared on behalf of the State to oppose the prayer for the writ-petitioner.
The case made out by the writ-petitioner No.1 in the writ-application may be summed up thus:
a) The writ-petitioner carries on business in manufacture, production and sale of India Made Foreign Liquor (“IMFL”) at Bengal Distillery, P.S. Bhadrakali in the District-Hooghly.
b) At the material point of time and prior to the year 1995, the said Bengal Distillery used to import Rectified Spirit imported from outside the West Bengal and also used to purchase spirit already distilled once from other primary distillers for the purpose of manufacture of potable alcoholic drinks.
c) The Bengal Distillery at Bhadrakali was holding large stock of about 79887.50 bulk litre of cut spirit in their storage vats since 1995, 1996 and 1997, from which it was not at all possible to manufacture IMFL due to impurity and lower strength.
d) One M/s. Super Spirit Warehouse of 52-B, Hazra Road, Kolkata, pursuant to a letter written on 29th May, 2001 by Shaw Wallace wherein they had intimated that they were in a position to supply 85,000 bulk liters of cut spirit, replied in their letter dated 2nd July, 2001 that they intended to purchase the entire quantity for the purpose of manufacturing ordinary de-natured spirit at their bonded warehouse at Budge Budge subject to the permission of West Bengal Excise Authorities.
e) In response to the said request furnished by the said Super Spirit Warehouse, the writ-petitioner had made communication with the Respondent through letter dated 13th July, 2001, inter alia, seeking approval for the above purposes to meet such request of M/S Super Spirit Warehouse.
f) The petitioner No.1 subsequently received a demand notice dated 31st July, 2001 purportedly imposing an amount of Rs.1,25,38,799/-allegedly on unutilized cut spirit which was obtained after redistillation in exercise of the power conferred under Sub-Rule (4) of Rule 14A of the Consolidated Rules.
g) In response to the said demand notice, the writ-petitioner by a letter dated 7th August,
2001 made representation to the District Magistrate and Collector seeking permission to allow them a period of 90 days to verify the records pertaining to the period against which the alleged wastage on re-distillation was made.
h) By a letter dated 18th October, 2001, the Superintendent of Excise through a letter had acceded to the said request and deferred the purported demand for three months.
i) By a letter dated 22nd October, 2001, the writ-petitioner sent a representation to the Excise Authorities praying for the following documents/information:
1) The direction by the Collector of Hooghly to impose the aforesaid demand.
2) Whether they scrutiny of any record and register during the period when the alleged redistilled cut spirit was obtained, was done with the prior notice of M/s. Shaw Wallace and the following actions, in relation thereto.
3) To furnish the audit report on the basis of which such purported demand wa
