1990 (10) TMI 371 - SC - Central Excise

Summary

Issues Involved:
1. Levy of excise duty on wastage of liquor in transit.
2. Validity and interpretation of relevant rules and regulations.
3. Competence of the State Government to impose differential duty.
4. Double taxation concerns.

Summary:

1. Levy of Excise Duty on Wastage of Liquor in Transit:
The Supreme Court addressed whether the State of U.P. and the Excise authorities were entitled to levy excise duty on the wastage of liquor in transit. The respondents, manufacturers of high-strength spirit, transported the spirit from distilleries to warehouses under passes issued u/s 16 of the United Provinces Excise Act, 1910. The High Court of Allahabad had previously ruled that no excise duty could legally be levied on the excess wastage that occurred during the transport of liquor in the course of export.

2. Validity and Interpretation of Relevant Rules and Regulations:
The appellants argued that the duty was levied considering the fact that U.P. excise duty is charged at different rates for liquor sold inside the state and for liquor exported outside the state. They cited Rule 636 and Rule 814 of the United Provinces Excise Manual Rules, which allowed for the imposition of differential duty on excess wastage. The Court noted that Rule 814 provided for an allowance for loss in transit and mandated that any wastage above the allowable limit would be subject to excise duty at the highest rate.

3. Competence of the State Government to Impose Differential Duty:
The Court examined whether the differential duty was justified under the Act and the Rules. It was held that the differential duty did not cease to be an excise duty even if levied at a stage subsequent to manufacture or production. The Court emphasized that the taxable event was still the production or manufacture of the liquor. The Court also referred to Section 77 of the Act, which states that all rules and notifications shall have effect as if enacted in the Act from the date of publication in the Official Gazette.

4. Double Taxation Concerns:
The respondents contended that the imposition of differential duty on excess wastage amounted to double taxation since countervailing duty was already paid in the importing state. The Court rejected this argument, stating that countervailing duty paid in the importing state does not affect the excise revenue of the exporting state. The Court noted that the differential duty was meant to safeguard the excise revenue of the exporting state and was not a case of double charging or multiple point charging.

Conclusion:
The Supreme Court set aside the judgment of the Allahabad High Court, holding that the imposition of differential duty on excess wastage in transit was valid. The appeal was allowed, but without any order as to costs. The Court emphasized that the differential duty was a regulatory measure to prevent evasion of duty and ensure that the state received the appropriate excise revenue.