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1989 Supreme(Online)(Ker) 3
KERALA HIGH COURT
, J
State – Appellant
Versus
M/s. Mc. Dowell & Co. Ltd. – Respondent
Writ Appeal | No. 27192 of 1988
For the Appellants/Petitioners: K. K. Venugopal
For the Respondents:Advocate General
The timelines for producing verification certificates under the Kerala Abkari Act are directory, allowing substantial compliance rather than strict adherence for assessing excise duty on exported liquor.
Headnote:(A) Kerala Abkari Act, 1977 - Sections 17 and 18 - Excise duty on exported liquor - Dispute regarding production timelines for verification certificates and applicable duty rates - The court held that the notification stipulating timelines is directory, allowing for substantial compliance rather than strict adherence. (Paras 3, 9, 19, 23)
(B) Procedural Compliance - The timing for producing verification certificates is not a rigid requirement and is subject to external factors - The fulfilment of proof regarding export is essential for duty assessment but should accommodate delays in verification. (Paras 12, 19, 22)
Facts of the case:
The petitioner, an exporter of Indian made foreign liquor, produced necessary permits for shipments between 1977-1983. The State demanded higher excise tax, claiming verification certificates were not timely produced. The company contested the legality of the demands based on the notification's language.
Findings of Court:
The court found the condition to produce certificates was directory, not mandatory. The demands for higher excise duty were illegal as certificates were presented prior to tax demands, proving the lawful export.
Issues: The main issue addressed was whether the timeline for producing verification certificates was mandatory or directory regarding duty collection on exported liquor.
Ratio Decidendi: The court ruled that although verification certificates are necessary, the timelines for their submission are directory, thus allowing for situations where good cause for delays exists, ensuring that exporters are not unfairly penalized for procedural delays.
Result: Writ Appeal dismissed; the demands for higher duty deemed illegal.
| Table of Content |
|---|
| 1. export process and verification certificate requirements. (Para 1 , 2) |
| 2. judicial interpretation of certificate requirements. (Para 3) |
| 3. state's claims on verification delays. (Para 4) |
| 4. historical context of amendments and administrative extensions. (Para 5 , 6 , 7) |
| 5. the nature of notification conditions: mandatory vs. directory. (Para 8 , 9) |
| 6. the argument for substantial compliance vs strict adherence. (Para 10 , 11) |
| 7. legal principles governing mandatory vs directory provisions. (Para 12 , 13 , 14 , 15 , 16) |
| 8. court's position on verification certificate timeliness. (Para 18 , 19 , 20 , 21 , 22) |
| 9. final ruling on excise duties based on export documentation. (Para 24) |
| 10. consideration of interest on deposits and final outcome. (Para 30) |
| 11. conclusion and dismissal of the appeal. (Para 31 , 32) |
1. The Kerala Abkari Act, the Rules and notifications, made and issued thereunder enable the export of Indian made foreign liquor from bonded distilleries/warehouses in this State to places outside this State. The short question is whether the slightest delay in the production of the verification certificates from the Excise authorities of the importing State can alter the rate of excise duty even in case where, before the demand is made, there is proof that the liquor has been exported and delivered in another State.
2. This appeal is by the State, aggrieved by the decision of a learned Single Judge quashing the demand and the proceedings for recovery of excise duty from the petitioner, M/s. Mc. Dowell & Co. Ltd. The brief facts are these. The petitioner engaged in the business of distilling blending, compounding and bottling of Indian made foreign liquors in this State bad valid licences and permits issued by the Excise department from time to time under the Kerala Abkari Act and the Rules made thereunder. They obtained the necessary permits to export Indian made foreign liquor, from their bonded distilleries and warehouses in this State to places outside the State. It is now admitted that during the years 1977-1983, 839 cases of Indian made foreign liquor were exported by the petitioner to some of the States outside Kerala on the strength of valid export/transport permits, and after executing the necessary bonds, and producing the required "no objection certificates" from the Excise authorities of the importing State, and after prepayment of duty at the rate of 50 paise per proof litre. It is not in dispute that liquor was delivered in the other States and the excise officers bad issued necessary verification certificates. These certificates have since been produced before the authorise in this State also. Under the relevant notification, verification certificates from the excise authorities of the importing State had to be produced within fifteen days/forty two days of verification, in the importing State. The excise authorities demanded excise duty from the petitioner for these 839 cases at the rate of Rs. 14/- per proof litre and initiated revenue recovery proceedings in 1983 on the ground that the verification certificates were not produced during the currency of the export permit. The petitioner therefore approached this Court under Art.226 of the Constitution of India for quashing the excise demands and the notice issued under the Revenue Recovery Act, contending that there was do legal basis for insisting (a) that the verification certificates should have been produced within fifteen days of the date of export; and (b) that they should have been produced during the currency of the export permit. The State supported the demands asserting that these two contentions had to be fulfilled for earning the right to pay excise duty at the reduced rate of SO paise per proof litre.
3. The learned Judge held that the relevant notification issued under the Kerala Abkari Act did not insist that the verification certificate from the excise authorities of the importing State should be produced within forty two days "of the
