1976 (5) TMI 99 - SC - Central Excise

What is material is whether permits were obtained for import from Uttar Pradesh of alcoholic Liquor meant for human consumption and the quantity showing in the permits left Uttar Pradesh? Held that - In the present case the liquor for which permits were obtained by the appellant was admittedly in existence and was meant for human consumption and did leave the appellant s distilleries in Uttar Pradesh for being transported to his Warehouse in Chandigarh at his own risk and responsibility. It is also not denied on behalf of the appellant that Portion of the liquor which exceeded the permissible limit of wastage did not reach the appellant s Warehouse and was not found therein and the shortage remained unaccounted for. It is thus evident that duty is not sought to be charged on an excisable article which was not in existence as contended on behalf of the appellant but is sought to be charged on liquor which was actually manufactured and left Uttar Pradesh but was found short beyond the permissible limit and no reasonable explanation was tendered by the appellant in respect thereof. There is accordingly no merit or substance in the second contention advanced on behalf of the appellant as well. In the present case however the liquor was lifted by the appellant from its distilleries in Uttar Pradesh and a portion thereof remained unaccounted for as already stated on arrival of the consignments at their destination. For the foregoing reasons the respondents were right in demanding the duty on the shortages. Appeals dismissed

Summary

Issues Involved:
1. Validity of Rules 8 and 9 of the 1957 Rules under the rule-making power of the Financial Commissioner.
2. Whether Rules 8 and 9 go beyond the scope of sections 16, 23, and 31 of the Act and Entry 51 of List II of the Seventh Schedule to the Constitution.

Issue-wise Detailed Analysis:

1. Validity of Rules 8 and 9 of the 1957 Rules under the rule-making power of the Financial Commissioner:

The appellant contended that Rules 8 and 9 of the 1957 Rules, which imposed duty on wastage exceeding the permissible limit, were ultra vires the rule-making power of the Financial Commissioner. The argument was based on the premise that the state alone has the power to impose duties and make rules under sections 31 and 58(1) of the Act, and section 13(a) prohibits the state Government from delegating these powers.

The Court rejected this contention, stating that the impugned rules did not impose any new duties or prescribe rates but were regulatory in nature. They were meant to prevent fraud and ensure proper storage and removal of liquor from the Bonded Warehouse. The rules were framed under sections 59 and 22 of the Act, which empowered the Financial Commissioner to regulate the storage and removal of liquor. Therefore, the Financial Commissioner did not overstep his authority, and the first contention was overruled.

2. Whether Rules 8 and 9 go beyond the scope of sections 16, 23, and 31 of the Act and Entry 51 of List II of the Seventh Schedule to the Constitution:

The appellant argued that Rules 8 and 9 imposed a duty on wastage as if the liquor had been removed from the Warehouse, which was beyond the scope of the Act and the Constitution. The contention was that the taxing power was limited to existing alcoholic liquor for human consumption, and the rules imposed duty on non-existent liquor.

The Court examined sections 3(6-b), 31, 32, 16, and 23 of the Act and Entry 51 of List II of the Seventh Schedule to the Constitution. It noted that the Act allowed for the imposition of excise duty or countervailing duty on excisable articles, including those imported, exported, or transported. The term "countervailing duty" was clarified in the case of Kalyani Stores v. State of Orissa, where it was defined as a duty meant to counterbalance duties on similar goods produced in the state.

The Court found that the liquor in question was meant for human consumption, was in existence, and was transported from Uttar Pradesh to Chandigarh. The wastage exceeding the permissible limit was unaccounted for, and the duty was imposed on this shortage. The rules did not impose a duty on non-existent liquor but on liquor that was manufactured and transported but found short. Thus, the second contention was also dismissed.

Conclusion:

The Court upheld the validity of Rules 8 and 9 of the 1957 Rules, stating that they were within the regulatory powers of the Financial Commissioner and did not exceed the scope of the Act or the Constitution. The appeals were dismissed with costs, limited to one set.