1989 (8) TMI 356 - HC - Central Excise

Summary

Issues Involved:
1. Authority to recover excise duty on breakages caused in transit or in the Bonded Warehouse.
2. Difference in supervision charges leviable under Section 58-A of the Bombay Prohibition Act.

Detailed Analysis:

1. Authority to Recover Excise Duty on Breakages:

The petitioner challenged the authority of the respondents to recover excise duty on breakages caused in transit or in the Bonded Warehouse, based on circulars issued by the Commissioner of Prohibition and Excise on April 19, 1980, and April 6, 1981. The circulars directed that excise duty should be recovered on all breakages of Indian-made foreign liquor in transit before ordering their write-off, in view of Rule 20 of the Maharashtra Foreign Liquor (Import and Export) Rules, 1968. The respondents contended that Sections 105 and 106 of the Bombay Prohibition Act permitted the recovery of excise duty on breakages and ullages, asserting that the taxing event was the import of the goods, and the duty was payable irrespective of whether the goods were stored in a Bonded Warehouse or not.

The court examined Sections 105 and 106 of the Bombay Prohibition Act, which vest the power in the State Government to impose excise duty on alcoholic liquor for human consumption at various stages, such as import, export, transport, possession, manufacture, or sale. Section 106 prescribes the manner of levying excise duties, allowing the duty to be levied either at the time of import or upon issue for sale from a warehouse. The court noted that the word "or" between sub-clauses (i) and (ii) of Clause (a) of Section 106 indicated that the State must choose one mode of levying excise duty, and it cannot impose duty in both ways. The court concluded that the circulars (Annexures C and D) were without authority of law as they purported to impose excise duty on breakages, which was impermissible under the taxing statute. Thus, the circulars were quashed, and the respondents were restrained from demanding excise duty on breakages based on these circulars.

2. Difference in Supervision Charges:

The petitioners also challenged the recovery of supervision charges with retrospective effect from May 5, 1970, based on a circular dated April 7, 1981. The circular directed that revised rates of supervision charges should be communicated to all license-holders, and undertakings should be obtained from them to pay all amounts towards arrears of supervision charges within fifteen days from the date of communication. The respondents argued that Section 58-A of the Bombay Prohibition Act vested the State Government with the power to impose supervision charges, and it was open to the State Government to vary the quantum, taking into account the circumstances.

The court examined Section 58-A of the Bombay Prohibition Act, which authorizes the State Government to direct that the cost of supervision staff shall be paid by the person engaged in the concerned activity. The court noted that the advance payment of supervision charges had to be made at the beginning of each quarter, and without payment of those charges, the articles could not be removed from the Bonded Warehouse for sale. The court held that neither Section 58-A nor the relevant rules and conditions of the license clothed the State Government or the Commissioner with the authority to charge supervision charges with retrospective effect. The court concluded that the circular dated April 7, 1981 (Annexure F), was without authority of law and quashed it. The respondents were directed to forbear from claiming any levy, charge, or excise duty on the debonded goods based on the circulars and communications.

Conclusion:

The court quashed the circulars dated April 19, 1980, April 6, 1981, and April 7, 1981, as well as related communications, and directed the respondents to forbear from claiming any levy, charge, or excise duty on the debonded goods based on those circulars and communications. The rule was made absolute in all the petitions, with no order as to costs.