IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 12^TH DAY OF DECEMBER, 2025

BEFORE

THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA WRIT PETITION NO.20478 OF 2022 (EXCISE)

BETWEEN:

M/S. SPR SPIRTS PVT. LTD.,

(EARLIER KNOWN AS M/S. SPR GROUP

HOLDINGS PVT. LTD.,)

REGISTERED UDNER COMPANIES ACT, 1956

MANCHANAYAKANAHALLI VILLAGE,

BIDADI HOBLI, RAMANAGAR TLAUK,

RAMANAGARA DISTRICT

REPRESENTED BY ITS MANAGING DIRECTOR

SRI M.T. THIMMEGOWDA. …PETITIONER

(BY SRI VIVEK HOLLA, ADVOCATE FOR

SRI SHARATH S. GOGI, ADVOCATE)

AND:

1. THE COMMISSIONER EXCISE

Digitally signed by

MAHALAKSHMI B M EXCISE COMMISSIONER OFFICE,

Location: HIGH 2^ND FLOOR, TTMC ‘A’ BLOCK,

COURT OF BMTC, SHANTHINAGAR,

KARNATAKA

BENGALURU-560 027.

2. THE DEPUTY COMMISSIONER OF EXCISE,

RAMANAGARA SUB-DIVISION,

RAMANAGAR-562159. …RESPONDENTS

(BY SRI REUBEN JACOB, AAG A/W

SRI RAJ KUMAR M., AGA)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227

OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR THE ENTIRE RECORDS IN FILE NO.ECS/40/REV/RAMNAGAR/2016-17 ON THE FILE OF FIRST RESPONDENT; QUASH THE IMPUGNED ORDER

DATED 25.08.2022 PASSED BY THE FIRST RESPONDENT IN NO.ECS/40/REV/RAMNAGAR/2016-17 ANNEXURE-A AND ETC.

THIS PETITION COMING ON FOR DICTATING ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MRS. JUSTICE K.S. HEMALEKHA

ORAL ORDER

The principal issue that arises for consideration is whether, under the Excise Act and Rules, Excise duty becomes leviable at the stage of manufacture or only upon the stage of “issue of liquor from the distillery”, and whether the impugned order suffers from jurisdictional and legal infirmities.

2. The petitioner has called in question the impugned order dated 25.08.2022, passed by the Excise Commissioner, whereby, a cumulative demand of (cid:1)15,21,64,591.04/-, has been confirmed against it, together with consequential directions for recovery as arrears of land revenue and re-imposition of charge/boza over petitioner's immovable properties.

3. The petitioner is a distillery and bottling unit holding licence under the Karnataka Excise Act, 1965 (‘Act’ for short). During 2016-17 audit staff of the accountant general noted shortages of malt spirit. On 06.02.2017, when the unit was not operational, a leakage incident occurred and shortages of various categories of unfinished and finished spirit were recorded. Samples drawn thereafter were found unfit for consumption. On 27.12.2017, 16,30,916 cases of bottled Indian Made Liquor (IML) were found stored without issue and chemical analysis reported deterioration.

4. Based on audit, shortage reports and deterioration of bottle stock, the commissioner estimated loss of the revenue of (cid:1)15.21 crores and by the impugned order confirmed the liability and directed coercive recovery.

Objection by respondent Nos.1 and 2:

5. Respondent Nos.1 and 2 submit that the petitioner is responsible for leakage, shortage and deterioration of spirit, resulting in heavy loss to the State and under Section 22 of the Act, duty is leviable on manufactured and Rule 22 and 23 of the Karnataka Excise (Distillery and Warehouse) Rules 1967 (‘Rules’ for short), imposes responsibilities for shortages. Further, Rule 18 absolves the State from any loss of spirit. Deterioration of 16,30,916 IML cases, cost loss of potential duty of (cid:1)4.30 crore, and the audit objections are binding and conclusive and that the commissioner acted within its jurisdiction.

6. Heard Sri Vivek Holla, learned counsel for Sri Sharath S Gogi, learned counsel for the petitioner, Sri Reuben Jacob, learned AAG along with Sri Raj Kumar M., learned AGA for State.

7. Learned counsel for the petitioner contends that the excise duty becomes leviable only upon issue, not at manufacturer, by virtue of Rule 2 (b) of Karnataka Excise (Excise Duties and Fees) Rules 1968 (‘Rules, 1968’ for short) and this position has been conclusively affirmed in Sree Balaji Enterprises, Bangalore Vs. Excise Commissioner, Karnataka and Others, 1(2007) 2 Kant LJ 372 (Balaji Enterprises).

8. It is admitte