1987 (3) TMI 520 - SC - Central Excise

Summary

Issues Involved:

1. Whether the Government is entitled to claim the 'excise duty component' in the issue price of unlifted liquor.
2. Validity of the Andhra Pradesh Excise Amendment Act X of 1984.
3. Whether the issue price includes excise duty and its implications on the excise contractors.

Summary:

1. Government's Entitlement to Claim 'Excise Duty Component':
The primary question was whether under the 'Excise-Law' prevailing in Andhra Pradesh, the Government could claim from the Excise Contractors who failed to lift the 'Minimum Guaranteed Quantity' of liquor the amount representing the 'excise duty component' in the issue price of such unlifted liquor. Initially, a Full Bench of three judges in V. Narasimha Rao v. Superintendent of Excise, AIR 1974 AP 157 held that the Government could, but this was overruled by a Full Bench of Five Judges in Atluri Brahmanandam v. Tahsildar of Gannavaram AIR 1977 AP 196, which held that the Government could not. The Supreme Court reversed the judgment of the Five Judge Full Bench, stating that the amount required to be paid by the contractors was not excise duty on undrawn liquor but part of the price agreed for the privilege to sell liquor.

2. Validity of the Andhra Pradesh Excise Amendment Act X of 1984:
To cure the defects pointed out by the Five Judge Full Bench and validate the demands raised, the Andhra Pradesh Legislature enacted the Andhra Pradesh Excise Amendment Act X of 1984. The Supreme Court found that the amendments to Sections 17 and 23 of the Andhra Pradesh Excise Act were sufficient to remove the defects pointed out by the Full Bench. The amendments clarified that the payment was for the exclusive privilege of manufacturing or selling liquor and not merely excise duty. The petitions challenging the amending Act were dismissed, and the demands made by the excise authorities were upheld.

3. Issue Price and Excise Duty:
The Court emphasized that the 'issue price' is a single pre-determined sum and not the total of separate sums representing various components like cost price, excise duty, etc. The issue price, once determined, becomes a chemical compound and not a mechanical mixture, meaning the excise duty loses its identity and becomes an inseparable part of the issue price. The Court rejected the argument that excise duty, as a part of the issue price, retains its character and can be severed and dealt with separately. It was held that the amount which contractors were required to pay or have adjusted was not excise duty on undrawn liquor but part of the price for the privilege to sell liquor.

Conclusion:
The Supreme Court allowed the appeals filed by the State of Andhra Pradesh, reversing the judgment of the High Court in Atluri Brahmanandam v. Tahsildar of Gannavaram. The amendments made by the Andhra Pradesh Legislature were deemed effective in removing the defects pointed out by the Full Bench, and the demands made by the excise authorities were validated. Appeals and petitions challenging the amending Act and the demands were dismissed.