1992 (9) TMI 360 - HC - Central Excise

Issues Involved:
1. Recovery of supervision charges under Section 58A of the Bombay Prohibition Act, 1949 with retrospective effect.
2. Levy of duties on breakages or villages of foreign liquor prior to removal from bonded warehouses under Sections 105 and 106 of the Bombay Prohibition Act, 1949.

I. Supervision Charges:

The appellants and petitioners contended that the respondents' demand for supervision charges retrospectively under Section 58A of the Bombay Prohibition Act, 1949, was unlawful. They argued that there was no provision in the Act or the Rules for the retrospective recovery of such charges. They relied on the Supreme Court's decision in Income-tax Officer v. M.C. Ponnoose, which stated that retrospective operation of laws requires express words or necessary implication indicating the legislature's intention.

However, the court found that Section 58A allowed the State Government to recover the cost of supervisory staff, and the relevant Rules required licensees to pay these costs. The court noted that the increased supervision charges resulted from a retrospective rise in staff emoluments, effective from May 5, 1970, due to government resolutions. The petitioners had agreed to bear the entire cost of supervision, and the demand for additional charges was valid as the statutory liability to pay the cost of supervisory staff existed.

The court rejected the petitioners' claim of promissory estoppel, stating that the advance payment of supervision costs for administrative convenience did not constitute a promise that no further charges would be recovered. The court held that the Division Bench at Nagpur was incorrect in limiting the cost of staff to the period goods were stored in the bonded warehouse. The petitioners were bound to pay the revised supervision charges, including those demanded retrospectively from January 1, 1986, due to the adoption of new pay scales.

The court also dismissed the argument that the demand for additional supervision charges was unreasonable and arbitrary. It stated that the petitioners could pass on the increased costs to their customers and that the demand was not unreasonable or arbitrary.

II. Excise Duty on Breakages and Villages:

The petitioners argued that excise duty could not be levied on liquor lost due to breakages or villages before removal from bonded warehouses, as per Sections 105 and 106 of the Bombay Prohibition Act, 1949. They contended that duty was only leviable upon the issue of goods for sale from bonded warehouses.

The court found no merit in this submission. It explained that excise duty is a tax on the manufacture of goods, and countervailing duty is imposed on imported goods to balance the excise duty on similar locally manufactured goods. Section 105 described the points at which such duties could be imposed, while Section 106 dealt with the manner of levying these duties, allowing for collection either at the time of import or upon issue for sale from a bonded warehouse.

The court referred to the Supreme Court's decision in Shroff and Co. v. Municipal Corporation of Greater Bombay, which clarified that excise duty is attracted at the point of manufacture or import, and collection could be deferred for administrative convenience. The court held that countervailing duty became payable when goods were imported into the State, and subsequent losses due to breakages or villages did not affect the duty liability.

The court rejected the petitioners' reliance on Allahabad High Court judgments interpreting the U.P. Excise Act, 1910, which were not applicable to the Bombay Prohibition Act, 1949. It also noted that the Supreme Court had upheld the validity of excise duty on excess transit wastage under the U.P. Excise Act.

The court concluded that the two circulars demanding duty on breakages and villages were valid in law, and the petitioners' challenge to these circulars was dismissed.

Conclusion:

The appeals and writ petitions were dismissed, and the Rules were discharged. There was no order as to costs.

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