1997 (9) TMI 128 - HC - Central Excise

Summary

Issues:
1. Alleged clearance of ethyl alcohol without Central Excise duty payment.
2. Alleged leakage and wastage of rectified spirit under U.P. Excise Act, 1910.
3. Challenge to the order for levying Central Excise duty and penalty.
4. Interpretation of State's authority to levy duty on industrial alcohol not for human consumption.

Analysis:

Issue 1:
The petitioner was accused of clearing ethyl alcohol without paying Central Excise duty, leading to the loss of 31331 bulk litres of rectified spirit. Central Excise authorities imposed duty and penalty under Rule 9 of the Central Excise Rules, 1944, and Section 11A of the Central Excises and Salt Act, 1944.

Issue 2:
Proceedings were initiated under the U.P. Excise Act, 1910, for leakage and wastage of rectified spirit. The loss of 36,512.3 alcohol litres was calculated at Rs. 45/- per alcohol litre, amounting to Rs. 15,35,593.50. The petitioner was asked to pay this amount as a loss of revenue due to the negligence resulting in the wastage.

Issue 3:
The petitioner challenged the order on various grounds, primarily arguing that industrial alcohol not for human consumption falls outside the State's authority to levy duty. Citing relevant entries from List I and List II of the Constitution, the petitioner contended that the State Legislature can only levy duty on alcoholic liquors for human consumption. Several Supreme Court decisions were referenced to support this argument.

Issue 4:
The Court analyzed the jurisdiction over rectified spirit, emphasizing that until the spirit is cleared for potable purposes, the Central Government has exclusive authority to levy excise duty. The State cannot impose duty on wastage occurring before the stage where excise duty applies. Referring to past judgments, the Court ruled that no duty can be levied on the wastage of rectified spirit not fit for human consumption. The order levying Rs. 15,35,593.50 as loss of revenue was quashed, and the petitioner's challenge succeeded with no costs awarded.

This detailed analysis of the judgment outlines the key issues, arguments, and the Court's reasoning behind quashing the order for levying Central Excise duty and penalty on the petitioner.