1984 Supreme(Raj) 353
RAJASTHAN HIGH COURT AT JAIPUR BENCH
K.S.Sidhu, J.
M/s Sona Distilleries Ltd. and Ors. - Appellant
Versus
Excise Commissioner and Ors. - Respondent
S.B.C.W.P. No. 764 of 1983.
Decided On : 2-07-1984
A private distiller who has agreed to pay compensation for the loss of revenue suffered by the State Government due to excessive wastage of rectified spirit is liable to pay such compensation, and the Wastage Rules, which provide for such compensation, are valid and enforceable.
Headnote:
RAJASTHAN EXCISE ACT, 1950 - SECTION 16, 17, 28, 42 - RAJASTHAN DISTILLERY RULES, 1977 - RULE 4, 10, 11 - RAJASTHAN STOCK TAKING AND WASTAGE OF LIQUOR RULES, 1959 - RULE 4 - EXCISE DUTY - WASTAGE OF RECTIFIED SPIRIT - COMPENSATION - VALIDITY OF RULES - EXCESS WASTAGE - LIABILITY TO PAY DUTY - INTERPRETATION OF STATUTES AND RULES.
Fact of the Case:
The petitioner, a private distiller, challenged the demand notice issued by the Excise Department for payment of duty on excess wastage of rectified spirit. The petitioner contended that the demand was tantamount to excise duty, which could not be levied on rectified spirit, and that the Wastage Rules were arbitrary and unreasonable, violating the petitioner's fundamental rights under Articles 14 and 19 of the Constitution.
Finding of the Court:
The court held that the demand notice was not a demand for excise duty, but rather a demand for payment of compensation for the loss of revenue suffered by the State Government due to the petitioner's excessive wastage of rectified spirit. The court found that the petitioner had agreed to pay such compensation as a condition of the license granted to him by the Excise Commissioner. The court also held that the Wastage Rules were not arbitrary or unreasonable, and that they were validly made under Section 42 of the Rajasthan Excise Act, 1950.
Issues: 1. Whether the demand notice issued by the Excise Department was a demand for excise duty or a demand for payment of compensation for loss of revenue due to excessive wastage of rectified spirit? 2. Whether the Wastage Rules were arbitrary and unreasonable, violating the petitioner's fundamental rights under Articles 14 and 19 of the Constitution? 3. Whether the petitioner was liable to pay duty on the excess wastage of rectified spirit?
Ratio Decidendi: 1. The court held that the demand notice was not a demand for excise duty, but rather a demand for payment of compensation for the loss of revenue suffered by the State Government due to the petitioner's excessive wastage of rectified spirit. The court found that the petitioner had agreed to pay such compensation as a condition of the license granted to him by the Excise Commissioner. 2. The court held that the Wastage Rules were not arbitrary or unreasonable, and that they were validly made under Section 42 of the Rajasthan Excise Act, 1950. The court found that the rules were necessary to regulate the manufacture, supplies, storage, or sale of an excisable article and to prevent excessive wastage of rectified spirit. 3. The court held that the petitioner was liable to pay duty on the excess wastage of rectified spirit, as per the terms of the license granted to him.
Final Decision: The court dismissed the writ petition filed by the petitioner, upholding the validity of the demand notice issued by the Excise Department and the Wastage Rules.
Judgement Key Points
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JUDGMENT
1. - The petitioner M/s Sona Distilleries Ltd. is a public limited company incorporated under the Companies Act, 1956. It is engaged in the business of manufacture and distillation of liquor, its distillery is situate at Alwar in the State of Rajasthan. Rectified spirit from which liquor is manufactured by the petitioner is obtained by it from other distilleries and is stored in storage vats kept in the bonded ware house of the premises of the petitioner's distillery. The receipt, storage and issue of the rectified spirit is conducted under the direct control and supervision of the Excise Department of the State. Wastage of the rectified spirit occurs due to evaporation in the process of storage, distillation, redistillation, blending and bottling of the potable liquor. The unfinished spirit which is good enough for redistillation remains stored in the distillery premises under the control and supervision of the excise officers of the State Government.
2. Section 16, Rajasthan Excise Act, 1950 (for short, the Act) which deals with manufacture of excisable articles including liquor enjoins inter alia that no distillery shall be worked except under the authority and subject to the terms and conditions of a licence granted in that behalf by the Excise Commissioner. Section 17 of the Act confers power on the Excise Commissioner to licence the construction and working of a distillery or pot-still on such conditions as the State Government may impose. One of the conditions imposed by the State Government (See notification No. F. 1(197)FD/RI/64, dated 16th May, 1967) Lays down that the distiller shall make adequate arrangements and be responsible for the safe custody of the stocks of spirit etc. as directed by the Excise Commissioner in the distillery and shall be liable to make good any loss of revenue caused to the Government by his mistake, fraud, or negligence or that of his employees and agents. In exercise of his powers under Section 42 read with Section 16 and 17 of the Act, the Excise Commissioner has made rules, called the Rajasthan Distillery Rules, 1977 (for short, the Distillery Rules). Rule 4 of the Distillery Rules provides that licence for the construction and working of a private distiller, like the petitioners in the present case, for the manufacture of Indian Made Foreign Liquor (IMFL) shall be granted in form RDI A reference to form R.D. 1 as given in the Distillery Rules would show that one of the contention of the grant is that the licence shall comply with all rules as may be made from time to time by the Excise Commissioner and the State Government for the security of Excise revenue and for regulating the manufacture of IMFL Another condition in the licence is to the effect that any infraction by the licensee of the terms and conditions of the licensee shall involve forfeiture of the licence. Rules 10 and 11 of the Distillery Rules are also imported in that they make it further clear that the Government shall not be liable for the loss of any spirit started in the distillery by fire or theft or by gauging or proof or by any other cause whatever, and that the distiller shall be liable to make good any loss of revenue thereby caused to the Government.
3. Having regard to the feet that some loss or wastage of spirit is unavoidable in storage in the ware house, manufacturing in the distillery and in the process of blending, reducing and bottling operations, the Excise Commissioner has made rules under Section 42 of the Act, called the Rajasthan Stock taking and Wastage of Liquor Rules, 1959 (for short, the Wastage Rules) providing for free allowance for the wastage of different kinds of spirits. Sub-rules (1) and (5) of rule 4 of the wastage Rules prescribe limits for free allowance for wastage in the different process of manufacture of potable liquor as mentioned above. Sub-rule (2) of rule 4 provides that in the event of wastage being found in excess of the prescribed limit the officer-incharge of the dist
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