IMPORTANT POINT
Excise duty is levied on the production of liquor, and destruction of unfit stocks does not exempt the bonded warehouse from duty liability.

JUDGMENT :

(Arun Dev Choudhury, J.) :

1. Heard Mr. S. K. Singh, learned Senior Counsel assisted by Mr. B. Pushilal, learned counsel for the petitioner. Also heard Mr. I. Borthakur, learned Standing Counsel for the Excise Department and Mr. D. Bhattacharya, learned counsel for respondent No. 4.

2. The petitioner is aggrieved by a demand of excise duty for Rs. 36,51,060/-. The facts of the case in a nutshell are recorded herein below:-

I. The petitioner is having a license of bonded warehouse in terms of the Assam Bonded Warehouse Rules, 1965 (hereinafter referred to as Rules, 1965).

II. By a communication dated 14.03.2016, the Officer-in-Charge of the bonded warehouse asked the petitioner to physically segregate the old inferior stock of beer with the rest of the stocks. After segregation, by a communication dated 15.03.2016, the Superintendent of Excise, North Lakhimpur, requested the Commissioner of Excise, Assam seeking his approval to destroy the inferior stocks.

III. Thereafter, the Commissioner of Excise, Assam by his communication dated 28.03.2016, asked the Superintendent of Excise, North Lakhimpur to send samples of unfit/sedimented beer. Such samples were sent and on 03.05.2016, the Chemical Examiner of Excise, Assam, prepared eight different reports confirming that the stocks of beer became unfit for human consumption.

IV. On 10.05.2016, the petitioner sought for permission from the Superintendent of Excise, North Lakhimpur to destroy the unfit stocks. In turn, the Superintendent of Excise, North Lakhimpur by its communication dated 25.05.2016, sought approval from the Commissioner of Excise, Assam to destroy the unfit stocks and while seeking such approval for destruction, the Superintendent of Excise, North Lakhimpur also forwarded the copies of the Chemical Examiner’s report.

V. Thereafter, on 31.05.2016, the Commissioner of Excise, Assam accorded permission for the destruction of the unfit stocks as per the provision of Rules, 1965 and with a further direction that the entire process should be documented and a report be sent to the Commissioner. Accordingly, on 08.06.2016, the Superintendent of Excise, North Lakhimpur directed the Officer-in-Charge of the petitioner’s bonded warehouse to destroy the unfit stocks

VI. Thereafter, the destruction was carried out on the 19th, 24th, 25th and 26th of June, 2016 in the bond premises and accordingly, a report was submitted by the Officer-in-Charge of the bonded warehouse to the Commissioner of Excise, Assam by its communication dated 13.07.2016.

VII. Thereafter, by its communication dated 16.08.2016. the petitioner prayed before the Commissioner of Excise, Assam for exemption from payment of ad valorem excise duty by its communication dated 16.08.2016. The Commissioner of Excise, Assam by its communication dated 30.08.2016 intimated his approval for exemption subject to any objection by the Audit

VIII. However, subsequently, there were audit objections as regards exemption and accordingly, demands were made. Being aggrieved, the present writ petition is filed.

3. Mr. S. K. Singh, learned Senior Counsel for the petitioner referring to Rules 41 and 42 of the Rules, 1965, submits that as the beers were destructed within the premises of the bonded warehouse without sale and therefore, the petitioner, under the Excise Act,1910 and the Rules, 1965 framed thereunder, is not liable for payment of excise duty. According to the learned Senior Counsel, when liquors kept in a bonded warehouse, are transferred or removed for sale, then only, such goods can be subjected to excise duty in terms of Section 22(c) (ii) of the Excise Act, 1910. It is his further case that the destruction was carried out with due approval from the Commissioner and under the supervision of the excise authority and approval for exemption was also duly granted. Therefore, the authority now cannot turn around and change the decision to the detriment of the petitioner.

4. Per contra, Mr. I. Choudhury, learned Standing Couns