The duty attaches statutorily to the production of liquor or to the quantity of liquor 'that is not forthcoming' out of the distillery, and the levy of duty may be imposed at a stage later than the production or passing out of the liquor.

Gopalan Nambiyar, C.J.

1. The appeal is against the judgment of a learned Judge, who dismissed the appellant's writ petition to quash Ext. P-1 demand notice under the provisions of the Kerala Abkari Act 1 of 1077 and other consequential reliefs.

2. The appellant, M/s Mcdowell and Co. is a public limited company which has its' registered office in Madras and branches all over the country. It owns several distilleries one of which is situated in Sherthallay. It is engaged in manufacturing foreign liquor. Ext. P-1 notice, dated 18th June 1975 stated that as a result of local audit of the appellant company, it was informed by the Accountant General that a huge amount by way of abkari dues was due from the appellant company. Attention was drawn to R.34 of the Kerala Distillery and Warehouse Rules, 1968 (Part I), under which, an account is to be taken of the distillers in each quarter, and the distiller has to pay to Government the duty at the rate prescribed for rectified spirit, on all spirit which are not forthcoming in excess of 1 per cent allowed for wastage. It was stated that during the local audit made in July 1973 it was found that excess storage wastage of Rs. 15,412.77 proof litre (P.L.) of spirit had occurred between April 1970 and March 1973, and that this quantity had been allowed duty free. The non collection of duty on this account was worked out at Rs. 2,38,398 at the rate applicable to rectified spirit. The petitioner was called upon to make good the above loss to which attention was drawn by the Accountant General.

3. The substance of the argument of the petitioner is that the duty payable under the provisions of the Excise Act had to be levied either at the stage of production of the liquor or at the stage when the quantities of liquor were passed out of the distillery, and not, at any point of time beyond and outside these stages. It was pointed out that the facts disclosed would show and that Ext. P-1 itself had proceeded on the basis that there was an omission to levy and collect the duty at the appropriate stage, and till the company drew attention to this, the requisite authorities themselves had not been alerted about it. They have, it was said, proceeded to make good the remissness on their part by issuing a notice of the type of Ext. P-1, to realise the duty, payable by the distiller. It was argued that for failure or omission to levy the duty at the appropriate stage, or for short levy of the same, as the case may be, there was no provision at all either for the Accountant General to alert the Government, or the appropriate authorities, or for the Government and the authorities to rectify their omission to act in time to realise the appropriate duty. This, in brief, was the argument of Counsel for the appellant.

4. On the side of the Government, it was pointed out with respect to the provisions of the Statute and the Rules that there can be no question of any levy or assessment of duty under the provisions of the Abkari Act in the same way in which an assessment of tax is provided for and made under the provisions of the Income Tax Act, or the Sales Tax Act; and that under the scheme of the provisions of the Act and the Rules, the duty attaches statutorily to the production of liquor or to the quantity of liquor "that is not forthcoming" out of the distillery; and that, on the facts and the circumstances shown and disclosed in this case, it was perfectly open to the authorities and competent on their part to take action on the basis of the Accountant General's report, and to demand collection of duty that was due from the petitioner.

5. To appreciate the contentions raised by either side, it is necessary to examine the scheme and the provisions of the Statute, -- The Kerala Abkari Act 1 of 1077 and the Rules. S.17 of the Act, in so far as it is material, provides:

"17. Duty on liquor or intoxicating drugs, -- A duty of excise or luxury tax or both shall