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IN THE HIGH COURT OF JAMMU AND KASHMIR AND LADAKH AT JAMMU
MOKSHA KHAJURIA KAZMI, J.
Gupta Modern Breweries – Petitioner
Versus
State of J&K and Others – Respondents
OWPED No. 312 of 2000, I.A. No. 322 of 2000
Decided On : 24-08-2023
Excise Duty - Rectified Spirit - Jammu & Kashmir Distillery Rules, 1946 - Summary
Fact of the Case:
The petitioner, a Small Scale Industrial Unit, sought quashment of inquiry report, order, and demand notice passed by the respondents. The petitioner challenged the imposition of Excise Duty on rectified spirit, claiming it was not fit for human consumption.
Finding of the Court:
The court held that the imposition of Excise Duty on rectified spirit, not fit for human consumption, was beyond the jurisdiction of the State Legislation. The impugned orders were quashed, and the petitioner was entitled to a refund of the deposited amount with interest.
Issues: The main issues were the legislative competence to levy Excise Duty on rectified spirit and the validity of the imposition of Excise Duty on presumptive production of liquor.
Ratio Decidendi: The court relied on the constitutional scheme, statutory provisions, and previous judgments to establish that the State had no legislative competence to levy Excise Duty on rectified spirit not fit for human consumption. It held that the imposition of Excise Duty on presumptive production of liquor was ultra vires to the Excise Act, 1958.
Final Decision: The petition was allowed, and the impugned orders were quashed. The Rules 107 and 108 of the J&K Distillery Rules, 1946, were read down to the extent of the case. The petitioner was entitled to a refund of the deposited amount with interest.
JUDGMENT :
MOKSHA KHAJURIA KAZMI, J.
1. The instant writ petition has been filed seeking quashment of inquiry report dated 14.03.2000 bearing Order No. 08/EXC of 2000 dated 10.04.2000 passed by respondent No. 2 and Demand Notice No. DECDJ/727-29 dated 25.04.2000 issued by respondent No. 4. The petitioner also seeks a direction upon the respondents to restrain them from making any recovery from the petitioner pursuant to impugned order dated 10.04.2000 and demand notice dated 25.04.2000. The petitioner has further challenged Rule 107 and 108 of Jammu & Kashmir Distillery Rules, 1946 being ultra-vires to the Jammu and Kashmir Excise Act, 1958 and to the Constitution of India.
Brief facts of the case are as under:
2. The petitioner, a Small Scale Industrial Unit, is registered with District Industrial Centre, Jammu, which is duly licensed by respondent No. 2, i.e. Excise & Taxation Commissioner.
3. On 18th of November, 1991, a fire incident took place in the factory of the petitioner in which the contents of storage tank No. 4 also got involved, resulting in blowing away of the shed and lid of the tank due to pressure that built within the tank.
4. Due to the said incident, the spirit contained in Tank No. 4 got destroyed and damaged. The matter was reported to the Excise Department and a report was lodged with the police concerned. The Excise Department then ordered an enquiry in terms of Rule 108 of the Jammu & Kashmir Distillery Rules, 1946. The Excise and Taxation Officer (Enquiry Officer) who was the in-charge of M/s Gupta Modern Breweries, conducted an enquiry and submitted its report on 18.02.1992, stating therein that the spirit was destroyed due to the fire incident which took place due to short circuit in Tank No. 4 and that the said incident was beyond petitioner’s control.
5. The Audit report dated 31.07.1992, prepared by the Audit Party recommended that the loss of the liquor due to the alleged fire incident be examined by a committee of officers. Accordingly, a Committee comprising Deputy Excise Commissioner (Executive), Deputy Excise Commissioner (Accounts) and Deputy Excise Commissioner (Warehouse) was constituted in terms of letter dated 26.08.1992 for conducting an enquiry into the incident in question.
6. The Deputy Excise Commissioner (Executive), one of the members of the committee, informed the Excise Commissioner vide his letter dated 09.10.1992, that the loss of spirit had, in fact, occurred due to a fire incident.
7. It is further averred that, though, the Enquiry Officer and the Enquiry Committee have found that the damage was due to the fire incident but the Excise Commissioner came to a different conclusion, and by his order dated 06.07.1993, held that there was no loss of spirit due to fire incident and directed to recover the Excise Duty under Rule 108 of Jammu and Kashmir Distillery Rules.
8. Aggrieved of the order passed by Excise Commissioner on 06.07.1993, the petitioner filed the writ petition bearing OWP No. 739 of 1993 challenging the demand of the Excise Duty of 18,60,929.48/-. The said writ petition was disposed of by holding as under:
9. As the respondents were directed to hold a fresh enquiry, the same was conducted a
The State had no legislative competence to levy Excise Duty on rectified spirit not fit for human consumption, and the imposition of Excise Duty on presumptive production of liquor was ultra vires to....
State is only empowered to levy excise duty on alcoholic liquor for human consumption – State has no power to levy excise duty on wastage of liquor after distillation.
The demand for excise duty on the designated quantum of rectified spirit was found to be a contractual obligation rather than genuine excise duty, ruling that contractors could not evade payment desp....
Excise duty is levied on the production of liquor, and destruction of unfit stocks does not exempt the bonded warehouse from duty liability.
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