1973 (3) TMI 150 - HC - Central Excise

Summary

Issues:
Whether excise duty can be levied on rectified spirit under the U.P Excise Act, 1910.

Detailed Analysis:
The appellants manufactured rectified spirit and sent consignments to Punjab, where excess wastage led to the imposition of excise duty. The appellants challenged this duty through a writ petition after their revision was rejected by the State Government. The Single Judge dismissed the petition, leading to this appeal.

Two grounds were raised in the appeal: first, whether rectified spirit is an excisable article under the U.P Excise Act, 1910, and second, the lawfulness of levying excise duty on wastage. The Court decided in favor of the appellants on the first ground, rendering the discussion on the second ground unnecessary.

The Court referred to Sec. 28 of the Act empowering the imposition of excise duty on an excisable article defined in Sec. 3(22a) as "any alcoholic liquor for human consumption" or "any intoxicating drug." While rectified spirit is acknowledged as an intoxicating liquor, the crucial question was whether it is "for human consumption." The Court disagreed with the interpretation that it means "capable of human consumption," asserting it should be "intended or meant for human consumption" at the manufacturing stage.

The Court examined the specifications for rectified spirit in the U.P Excise Manual, noting two grades meant for pharmaceutical, medicinal, and industrial uses, but not directly for human consumption. It highlighted that rectified spirit is not sold in the market for human consumption, as it is only available for specific purposes under strict licensing regulations.

The Court emphasized that while rectified spirit can be converted into potable liquors fit for human consumption, this capability does not categorize rectified spirit itself as an "alcoholic liquor for human consumption." Citing a precedent, the Court concluded that rectified spirit is not an excisable article under the U.P Excise Act, and excise duty imposed on it was unlawful. Consequently, the demand notices for excise duty were quashed, and any recovered duty was ordered to be refunded to the appellants.

In conclusion, the appeal was allowed, the Single Judge's judgment was set aside, and the demand notices were quashed, with costs awarded to the appellants.