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2015 (8) TMI 945 - SC - VAT and Sales TaxValuation - Price fixation of rectified spirit - Earlier HC has declared the provisions of Rule 17 unconstitutional in the case of Gowri Industries 1993 (10) TMI 354 - KARNATAKA HIGH COURT as, Rule 17 in so far as it empowers of the fixation of price of rectified spirit, is therefore, declared as unconstitutional, and ultra vires the provisions of the State Act. Held that - The contention of learned counsel for the Appellant is that the State is not entitled to take away the extra profit of ₹ 1/- per litre which the Appellant earns because molasses is available in its own premises. This argument, however, conveniently ignores the fact that the Respondent State had made it incontrovertibly clear that it would permit the Appellant to sell rectified spirit at the common fixed rate of ₹ 6/- provided it transferred ₹ 1/- per litre to the State. If the Appellant was serious in questioning the legal capacity of the Respondent State recover the said ₹ 1/- per litre, it perforce had to challenge the Government Order dated 12.5.1992. Having failed to do so it cannot, thereafter, challenge the Demand dated 15.12.1993 which is predicted on the Government Order itself. There were three Appellants before the Division Bench of the High Court of Karnataka in the case of but only one of them, i.e. the Appellant before us, has decided to further challenge the Demand of ₹ 13,32,000/- being accorded at ₹ 1/- per litre sold by the Appellant. It is also relevant to mention that the Appellant has not challenged the Demand of transportation charges of 1/- per litre for any subsequent charges - Appellant had full knowledge of the fact that it had been permitted to supply rectified spirit to third parties who are engaged in the business of production of arrack on the condition that of the general fixed price of ₹ 6/- per litre, ₹ 1/- per litre would have to be made over to the Respondent State. - Decided against assessee.
Issues:
1. Challenge to the judgment of the Division Bench of the High Court of Karnataka. 2. Classification of the Appellant as a non-captive unit. 3. Validity of Rule 17 of the Karnataka Excise (Manufacture and Bottling of Arrack) Rules, 1987. 4. Interpretation of Rule 13 regarding the trade of arrack. 5. Recovery of dues by the Respondent State. 6. Challenge to the demand of Rs. 13,32,000/- by the Appellant. 7. Applicability of transportation charges. Analysis: 1. The judgment in question challenges the Division Bench of the High Court of Karnataka's decision, which upheld the judgment of the learned Single Judge. The competent authority was directed to examine the Appellant's claim for classification as a non-captive unit. The impugned judgment was not stayed during the proceedings. 2. The Appellant, a captive distillery, supplied rectified spirit at Rs. 6/- per litre as per a Government Order. The State fixed the price at Rs. 6/- per litre, with captive distilleries entitled to Rs. 5/- per litre, and the State receiving Rs. 1/- per litre. The Appellant did not challenge its classification as a captive distillery or the Government Order. A demand for Rs. 13,32,000/- was raised, leading to the writ petition. 3. Rule 17 empowered the State to fix the price of rectified spirit. However, the judgment declared Rule 17 as unconstitutional and ultra vires, as it lacked guidelines for price fixation, exceeding the permissible limits of legislative delegation. 4. Rule 13 outlined the process of rectified spirit trade, indicating the Commissioner's role in allotting quantities to a warehouse. The Appellant's argument against the State taking the extra profit was dismissed, emphasizing the conditions set by the State for selling rectified spirit. 5. The Respondent State sought to recover dues based on the predetermined rates, as declared in the Government Order. The Appellant challenged the demand of Rs. 13,32,000/-, emphasizing the State's prior knowledge and agreement to the conditions of sale. 6. The Appellant's challenge to the demand of Rs. 13,32,000/- was dismissed, noting the clear terms under which rectified spirit was supplied. The Court found no merit in the Appeal and upheld the State's right to recover dues. 7. The Appeal was ultimately dismissed without costs, affirming the State's entitlement to the predetermined amount per litre sold. The judgment highlighted the Appellant's awareness of the conditions set by the State for supplying rectified spirit.
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