SUPREME COURT OF INDIA

Before:- G.B. Pattanaik, S.N. Phukan and S.N. Variava, JJ.

Civil Appeal No. 2000 of 1997. D/d. 06.03.2002.

Cooperative Co. Ltd. - Appellants

Versus

State of U.P. - Respondents

Uttar Pradesh Excise Act, 1910, Section 28 - Wastage of Liquor - Excise duty - Levy of - Until the rectified spirit becomes fit for human consumption as a country liquor any wastage of the rectified spirit as such would not be liable for levy of excise duty.

[Para 3]

Cases Referred :-

State of U.P., v. Modi Distillery, (1995) 5 SCC 753.

Vam Organic & Chemicals Ltd. v. State of Uttar Pradesh, 1997 (1) JT SC 625.

Mohan Meak in Ltd. v. Excise & Taxation Commissioner, H.P., 1997 (2) SCC 193.

Synthetics and Chemicals Ltd. v. State of U.P., (1990)1 SCC 109.

ORDER

G.B. Pattanaik, J. - The Order of the Deputy Commissioner of Excise dated 17th of June,1994 levying excise duty on storage wastage amounting to Rs. 1,57,26,260/-, was assailed by the appellant by filing a writ petition in Allahabad High Court. One of the contentions of the appellant was that in the garb of levying duty on wastage of liquor, the concerned authorities are levying duty on rectified spirit even before the same has be come fit for human consumption. The High Court by judgment dated 8th April, 1996, dismissed the writ petition on a finding that the levy is being imposed after complete manufacture of the liquor and the storage and bottling are subsequent to the process which a rise after manufacture and there fore in view of the decision of this Court in the State of U.P. & Ors. v. Modi Distillery & Ors.[(1995) 5 SCC 753]. there is no infirmity with the impugned levy.

2. When the afore said judgment of the High Court was as sailed before this Court, a judgment arising out of the Punjab & Haryana High Court on the similar point, at the behest of the State of Haryana, had also been as sailed. A Bench of two learned Judges, on considering the earlier judgments in Vam Organic & Chemicals Ltd.v. State of Uttar Pradesh, [1997 (1) JT SC 625]. as well as the Modi Distillery's case (supra) and several other decisions including the decision in Mohan Meak in Ltd.v. Excise & Taxation Commissioner, H.P. & Ors.[1997 (2) SCC 193],. was of the opinion that the legislative power conferred upon the State by the Constitution and recognised even in Synthetics and Chemicals Ltd. & Ors. v. State of U.P.& Ors. (1990)1 SCC 109, should include all incidental and ancillary powers and it is this aspect which was emphasised by the Court in the Bihar Distillery v. State of Bihar case. The Court was further of the opinion that the different decisions referred to there under having projected different points of view, to evolve a coherent and effective formula, the appeals should be placed before a Constitution Bench. Pursuant to the afore said order both the appeals arising out of the judgment of the Punjab and Haryana High Court as well as the judgment of the Allahabad High Court, with which we are concerned in the present appeal, were placed before the Constitution Bench. The Constitution Bench being of the opinion that it is impermissible for a Bench of two learned Judges to refer a matter to the Constitution Bench, directed that the matter be placed before a Bench of three learned Judges by order dated 13th December, 2001. Pursuant to the said direction of the Constitution Bench, these appeals have been placed before us. Be it stated that the civil appeal filed by the State of Haryana arising out of the judgment dated 22nd of July, 1996 of the Punjab and Haryana High Court has since been heard and disposed of by a Bench of three learned Judges by judgment dated 12th February, 2002.

3. Mr. M.L. Verma, the learned senior counsel appearing for the appellants trenuously contended that the cryptic conclusion of the High Court in the impugned judgment that the levy is being imposed after complete manufacture of the liquor is not supported by the materials on which the levy was being imposed. The learned counsel placed before us the order of the Deputy Commissioner dated 17th June, 1994 as well as the report of the Excise Inspector Incharge of the Co-operative Company Limited, Bottling Unit, Sahibabad dated 24th May, 1994 to indicate that the excise authorities are of the view that even excise duty can be levied on the wastage of rectified spirit before the same is made fit for human consumption and obviously this power, the excise authority do not have in view of the two decisions already referred to, namely, Synthetics and Chemicals Ltd. and Modi Distillery case. Mr. Rakesh Dwivedi, learned senior counsel appearing for the State of U.P. on the other hand contended that there is no dispute with the proposition laid down by this Court in Modi Distillery case but he vehemently contended that factually the levy is being made only on wastage of country liquor which is being manufactured at Sahibabad and the mode of as certaining the wastage is in accordance with the Rules. Mr. Dwivedi further urged that this position is now clear in view of the recent judgment of this Court in Civil Appeal No.1999 of 1997 Government of Haryana v. Haryana Brewery Ltd. & Anr where in this Court has examined material provisions of the Punjab and Haryana Excise Rules and has recorded a conclusion as to how wastage in that case was being calculated. In the facts of that case the Court was concerned with the wastage in the manufacture of beer. In the case in hand, we are concerned with the so-called wastage in the manufacture of country liquor. According to Mr. Dwivedi, the process of manufacture of country liquor is nothing but dilute ether satisfied spirit with water and stirring to make it fit for human consumption. Even if we accept this contention of Mr. Dwivedi, still then, until the rectified spirit becomes fit for human consumption as a country liquor any wastage of the rectified spirit as such would not be liable for levy of excise duty, as has been held by this Court in Modi Distillery case supra Having examined the very order of the Deputy Commissioner as well as the report of the Excise Inspector who was the incharge of the appellant's manufacturing Unit, it is difficult forus to come to the conclusion that the levy in question was being made only on the wastage of the country liquor after the rectified spirit being made fit for human consumption. In the aforesaid premises, we set aside the impugned demand raised by the Deputy Commissioner as well as the judgment of the Division Bench of the Allahabad High Court and remit the matter to the competent Excise Authorities to decide the question of the levy of excise duty bearing in mind the judgment of this Court in Modi Distillery case (supra) as well as the recent judgment of this Court in Civil Appeal No.1999/1997 disposed of on 12th February, 2002 and also the relevant provisions of the U.P. Excise Manual. Since the duty has to be levied on determination of certain facts, it would not be possible either for this Court or the High Court to get into the same. The appeal is allowed to the aforesaid extent. Be it stated that the amount already paid pursuant to the interim order of this Court would be taken into account after the ultimate order passed by the Excise Authorities.

4. The appeal accordingly stands disposed of.

.