The duty on wastage during blending and reducing operation was found to be illegal and set aside, highlighting the court's interpretation of the provisions in the Abkari Act and the Kerala Distillery and Warehouse Rules.

T.V. Ramakrishnan, J.

1. The petitioner, a Cooperative Society wherein Government is having more than 50% of its share capital is challenging the sustainability of Ext. P16 order whereby the Board of Revenue has found the Society liable to pay excise duty on liquor under various heads as per the provisions in the Abkari Act (for short "the Act") and the Kerala Distillery and Warehouse Rules (for short "the Rules").

2. Petitioner - Society is having a distillery and has entered into an agreement for the manufacture and supply of arrack with the Government of Kerala, a true copy of which is produced as Ext. P1. As per the conditions contained in Ext. P1 the petitioner - Society is to act as a contractor for the manufacture and supply of arrack to vendees as directed by the Government from time to time. The entire quantity of arrack manufactured is intended for supply to the vendees on production of proof for payment of duty to the Government. The Society as a supply contractor is entitled to collect only the puce of arrack supplied to the vendees which price is also fixed by the Government from time to time. Thus as per the terms and conditions contained in Ext. P1 agreement, the Society has no liability to pay excise duty on the arrack manufactured and supplied to vendees, the same being the liability of the vendees, since the vendees have to pay such duty in advance so as to entitle them to get arrack from the Society as per the agreement. However, on the basis of certain objections noted by the Auditors at the time of audit,, demand notices were issued to the petitioner to pay excise duty under various heads of account on the basis that the Society was liable to pay such duty under the provisions of the Act and Rules and has illegally omitted to pay the same. Before issuing the demand notices based upon the audit objections, admittedly no attempt was made to make any assessment with notice to the Society. On receipt of the notices the Society submitted written representation raising various factual and legal objections against the demands made as per the notices before the Board of Revenue, Trivandrum. Ext. P16 is the common order passed with reference to such objection petitions referred to therein as Exts. P4, P8, P10(c), (e), (f), (i), (k), (m) and (p). The petitioner has produced the copies of objection petitions disposed of as per Ext. P16 as Exts. P3, P8 (b), (d), (e), (i). (c), (g) and (h) respectively in this O. P. Even before the disposal of the objection petitions revenue recovery steps were, also taken against the petitioner. According to the allegations in the O. P., the total amount of excise duty covered by the demand notices comes to Rs. 1,04,18,309,70. Out of the said amount a total amount of Rs. 42,01, 471. 15 has already been paid on several occasions as conditions for the grand of slay of recovery proceedings initiated under the Revenue Recovery Act. It is relevant to note at this stage itself that Ext. P16 order was in fact passed on the basis of a direction from this Court contained in Ext. P15 Judgment in O. P. No. 6245 of 1987, an O. P. filed by the petitioner challenging the sustainability of the demands made and the revenue recovery notices issued for the recovery of the excise duty covered by such demand notice.

3. In Ext. P16 the second respondent has considered the points raised in the 9 petitions/representations submitted the by petitioner, separately. Most of the points raided in the several petitions/representations are common points as acted by the second respondent in his order itself and were disposed of by him on the basis of common reasoning also. All the objections have been rejected as per Ext. P16 and the order is under challenge in its entirety.

4. S.17 and 18 of the Act are the relevant section in the Act defiling with the levy of excise duty on liquor and luxury tax on intoxicating drugs. As the question raised in the O. P. relates only to excise duty on liquor, I am not referring