( 1. ) THE petitioner/company which is a licence holder in Form D-2 for manufacturing liquor and having licence in Form D-1 for wholesale supply of spirit has filed this petition calling in question the orders passed by the respondents by which an amount of Rs. 6,142/- had been imposed by way of penalty.

( 2. ) IT is the case of the petitioner that the Collector had issued a show-cause notice on 23-9-1987 in which it was alleged that there was loss of 275. 4 proof liters of rectified spirit in transit. The show-cause notice indicates that as to why penalty should not be imposed on the petitioner/company for the aforesaid transit loss. In reply, the petitioner contended that for shortage of rectified spirit, the State Government has no power to impose any excise duty. The reply was rejected and the Collector vide order, Annexure P-5, dated 1-2-1989, imposed the aforesaid penalty.

( 3. ) BEING aggrieved by the aforesaid order, an appeal was filed before the Excise Commissioner which has been rejected vide order dated 10-1-1990, Annexure P-4 and a second appeal was filed before the Board of Revenue which had also been rejected by order dated 1-9-1997, Annexure P-3.

( 4. ) SHRI Bhadoriya, learned Counsel appearing for the petitioner submitted that under the provisions of the Madhya Pradesh Excise Act, 1915 (hereinafter referred to as the Act), the State Government has got power to levy the duty on articles which are excisable and excisable articles are defined in Sub-section (6) of Section 2 of the Act, rectified spirit is not alcoholic liquor fit for human consumption or intoxicating drug. As such, it is argued by him that rectified spirit is not an excisable article. It is submitted by him that the excise duty under Section 2 (6) (a) of the Act can be levied only on excisable items. It is also put forth by him that Section 2 (13) of the Act defines "liquor". "liquor" means intoxicating liquor, and includes spirit or wine and other materials as contemplated under Sub-section (13) of Section 2 of the Act. According to him, rectified spirit is not excisable, and therefore, no excise duty can be levied on the said item. It is, therefore, submitted by him that imposing excise duty on rectified spirit was not permissible. In support of his submission, he has placed reliance on a judgment of the Supreme Court in the case of State of U. P. and Ors. v. Modi Distillery and Ors. , (1995) 5 SCC 753 and another judgment in the case of Synthetics and Chemicals Ltd, and Ors. v. State of U. P. and Ors. , (1990) 1 SCC 109.

( 5. ) RELYING on the aforesaid judgments, it is argued by him that the State can levy excise duty only on the material which is alcoholic required fit for human consumption and as rectified spirit is not alcoholic liquor fit for human consumption. Action of the respondents in imposing excise duty cannot be sustained. Apart from the aforesaid, inviting attention to various entries made in VII Schedule of the Constitution of India, it has been argued by him that the State does not have any power to levy excise duty on rectified spirit.

( 6. ) IT is, therefore, his submission that by the impugned order, levy of excise duty on rectified spirit cannot be sustained and the entire action is liable to be quashed.

( 7. ) REFUTING the aforesaid submission, Shri K. N. Gupta, learned Govt. Advocate has submitted that the argument of the learned Counsel for the petitioner is misconceived. Inviting my attention to the observations made in the order, Annexure P-4, dated 10-1-1990 passed by the Excise Commissioner, it is argued by him that what is being recovered is not excise duty as contended by the learned Counsel for the petitioner but the penalty is being levied for the loss caused in transit in excess of the permitted limit. Inviting attention to Rule 6 of the Madhya Pradesh Distillery Rules, 1995 and the agreement entered into between the petitioner and the State Government, it is argued by Shri Gupta that as per the agreement, the