1995 Supreme(Raj) 715

RAJASTHAN HIGH COURT AT JODHPUR BENCH
B.R.Arora, P.P.Naolekar, JJ.
Udaipur Distillery and Co., Udaipur - Appellant
Versus
State of Rajasthan and others - Respondent
D.B. Civil Special Appeal Nos. 793/1994; 821/1994, 822/1994.
Decided On : 3-02-1995

Excise duty can be charged on the transit wastage of rectified spirit and I.M.F.L. as per the rules, and the appellant-petitioner is bound by the conditions of the Licence, which are statutory and have a binding force.

Headnote:

EXCISE DUTY - TRANSIT WASTAGE - RECTIFIED SPIRIT/I.M.F.L. - LEVY AND CHARGE - RULES AND BYE-LAWS - STATUTORY CONTRACT - DEEMING CLAUSE - NATURAL JUSTICE - JURISDICTION - INDUSTRIAL ALCOHOL: 1. In the absence of specific provision under the Act or the Rules for the levy or charge of the excise duty, the excise duty cannot be recovered under the regulatory or residuary powers. 2. The excise duty can be charged on the transit wastage as per the rules as the spirit/I.M.F.L. both are excisable articles. 3. The appellant-petitioner is bound by the conditions of the Licence, which are statutory and have a binding force and the appellant-petitioner cannot resile from these contractual obligations. 4. The deeming provision that the liquor, which is lost in transit, has been consumed in the exporting State, is applicable in the present case. 5. The State Government is entitled to realise the excise duty on the wastage of I.M.F.L. during the transit as per the terms of the contract. 6. The State of Rajasthan has no power or jurisdiction to levy excise duty on the rectified spirit which is unfit for human consumption.

Fact of the Case:

The appellant, a private undertaking engaged in the business of manufacturing High-standard Rectified Spirit and Indian-Made Foreign Liquor (I.M.F.L.), dispatched rectified spirit and I.M.F.L. under Bond to other states. However, the quantity of spirit and liquor received by the consignees was less than the quantity dispatched. The appellant acknowledged the transit wastage and claimed it as Transit Wastage, not paying excise duty on the alleged transit wastage. The Excise Authorities raised demands for excise duty on the transit wastages, which the appellant challenged by filing writ petitions. The writ petitions were dismissed by the Single Judge, leading to these appeals.

Finding of the Court:

The Court held that: 1. The excise duty can be charged on the transit wastage as per the rules as the spirit/I.M.F.L. both are excisable articles. 2. The appellant-petitioner is bound by the conditions of the Licence, which are statutory and have a binding force and the appellant-petitioner cannot resile from these contractual obligations. 3. The deeming provision that the liquor, which is lost in transit, has been consumed in the exporting State, is applicable in the present case. 4. The State Government is entitled to realise the excise duty on the wastage of I.M.F.L. during the transit as per the terms of the contract. 5. The State of Rajasthan has no power or jurisdiction to levy excise duty on the rectified spirit which is unfit for human consumption.

Issues: 1. Whether excise duty can be levied on the transit wastage of rectified spirit and I.M.F.L. in the absence of specific provisions under the Act or the Rules? 2. Whether the appellant-petitioner is bound by the conditions of the Licence, which are statutory and have a binding force? 3. Whether the deeming provision that the liquor, which is lost in transit, has been consumed in the exporting State, is applicable in the present case? 4. Whether the State Government is entitled to realise the excise duty on the wastage of I.M.F.L. during the transit as per the terms of the contract? 5. Whether the State of Rajasthan has the power or jurisdiction to levy excise duty on the rectified spirit which is unfit for human consumption?

Ratio Decidendi: 1. The Court held that the excise duty can be charged on the transit wastage as per the rules as the spirit/I.M.F.L. both are excisable articles. It relied on the judgment in M/s. Mohan Meakin Breweries Limited v. Excise and Taxation Commissioner, Chandigarh and others, (1976) 3 SCC 421, where the Supreme Court held that excise duty can be charged on the liquor wasted in transit beyond the permissible limit. 2. The Court held that the appellant-petitioner is bound by the conditions of the Licence, which are statutory and have a binding force and the appellant-petitioner cannot resile from these contractual obligations. It referred to the judgment in The State of Haryana and others v. Lal Chand and Others, AIR 1984 SC 1326, where the Supreme Court held that Equitable Jurisdiction vested in the Courts under Article 226 of the Constitution of India cannot be used to facilitate the avoidance of obligations voluntarily incurred by the petitioner-appellant while taking the Licence etc. 3. The Court held that the deeming provision that the liquor, which is lost in transit, has been consumed in the exporting State, is applicable in the present case. It relied on the judgment in M/s. Mohan Meakin Breweries Limited v. Excise and Taxation Commissioner, Chandigarh and others, (1976) 3 SCC 421, where the Supreme Court held that the State had a reason to believe that the liquor wasted in transit has been used or disposed of otherwise than by export and, therefore, it can impose the excise duty on it. 4. The Court held that the State Government is entitled to realise the excise duty on the wastage of I.M.F.L. during the transit as per the terms of the contract. It referred to the judgment in The State of Haryana and others v. Lal Chand and Others, AIR 1984 SC 1326, where the Supreme Court held that Equitable Jurisdiction vested in the Courts under Article 226 of the Constitution of India cannot be used to facilitate the avoidance of obligations voluntarily incurred by the petitioner-appellant while taking the Licence etc. 5. The Court held that the State of Rajasthan has no power or jurisdiction to levy excise duty on the rectified spirit which is unfit for human consumption. It relied on the judgment in Synthetics & Chemicals Limited v. the State of Uttar Pradesh, AIR 1990 SC 1927, where the Supreme Court held that the States are not authorised to impose the impost they have purported to do in respect of industrial alcohol.

Final Decision: The Court dismissed the appeals, upholding the demands raised by the Excise Authorities for excise duty on the transit wastages.