2023 (1) TMI 635 - HC - VAT and Sales Tax

Refund of Tax paid on beer - unsold stock due to Covid Pandemic - Constitutional Validity of retention by the respondents, of the amount paid as import and countervailing duties on the stock whose shelf life has expired and which is not to undergo removal for retail-sale - vires of Articles 14, 19 (1)(g), 265 and 300A of the Constitution of India - refund of the amount paid as import and countervailing duties on the stock - HELD THAT - The undisputed facts from the pleadings on record reveal that the petitioner supplied beer in the State of Jharkhand kept in the warehouse of the Respondent No. 3 from its factories situated outside the State. Substantial quantity of which said to be 1,84,725 cases of beer valued at Rs. 14.00 crores could not be removed for sale from warehouses due to restriction on sale imposed by the Government during the lockdown which started due to Covid in March 2020. The prescribed shelf life of beer of six months expired in the meantime. Petitioner claimed refund of excise duty paid by it on the stock of beer which could not be removed for sale. The sheet anchor of the petitioner is that the excise duty / countervailing duty (CVD) under the Jharkhand Excise Act, 1915 was paid in advance as no liquor can be brought into the State of Jharkhand without payment of duties as per the restrictions imposed under the provisions of Chapter III of the Act. In view of proviso to Section 28(1) of the Act, duty is levied only on issuance of the goods from the warehouse and as such, payment made prior to the date of issuance is only an advance liable to be refunded, if no duty is leviable at all due to non-removal of beer from the warehouse for sale - According to the petitioner, the amount collected from the Respondent No. 3 was only an advance paid, which is subject to the final determination of duties on the date of removal of the goods from the warehouse. Charging provision cannot be effectuated at all before the event of removal takes place. Therefore, State cannot unjustly enrich itself by claiming duties on products which are destroyed on account of their action. It is the case of the petitioner that since retention of the said amount by the State was in contravention of Article 265 of the Constitution of India, it is liable to refund the amount paid when there was no liability. Therefore, writ petition is also maintainable. There is no uncertainty or vagueness in defining the taxable event. Proviso to Section 28(1) only indicates the rate of tax which is to be levied at the time of removal for sale from the warehouse - The decision in the case of Sree Balaji Enterprises, Bangalore 2007 (1) TMI 645 - KARNATAKA HIGH COURT does not fit into the case of the petitioner as the dispute was whether excise duty i.e. goods manufactured inside the State could be levied when the goods were destroyed. In the present case, as per the provisions of the Act, CVD is levied at the time of import itself and only a facility for postponement of collection is provided - it is apparent that a licence for distributorship in Form 19C can be issued only if the licence holder undertakes to make payment of countervailing duty in advance. Further, condition-8 of the said licence stipulate that such distributor, for import from outside the State shall also obtain an import permit for payment of countervailing duty and import fee. In Rule 8-A, liquor can only be imported by way of an import pass granted by the Collector on prepayment of duty as well as any import pass fee into the Treasury of the importing district. Under licence as also under Rule 7(3), import can be done only on payment of countervailing duty and on obtaining an import permit. As such, the plea of the petitioner that non-removal of beer from the warehouse during the period of its shelf life on account of Covid lockdown would not make it liable for payment of countervailing duty in terms of proviso to section 28(1) of the Act, does not hold good in the eye of law since the taxable event occurs on the import of liquor into the territory of the State, as per the provisions of Section 27 (1) (a) of the Act. The principles applicable on levy of countervailing duty upon import of liquor in the State under the Bihar and Orissa Excise Act, 1915 and the decisions on the point, the plea of the petitioner for refund of the amount to the tune of Rs. 1,53,68,480/- paid as import and countervailing duty on the stock, is not tenable in law and on facts - petition dismissed.

Summary

Issues Involved:
1. Legality of retention of import and countervailing duties on expired stock.
2. Refund of import and countervailing duties on unsold stock.
3. Interpretation of the Jharkhand Excise Act, 1915 regarding the levy of duties.
4. Applicability of legal precedents on the levy of duties.
5. Jurisdiction and maintainability of the writ petition.

Detailed Analysis:

1. Legality of Retention of Import and Countervailing Duties on Expired Stock:
The petitioner argued that the retention of duties on expired stock is illegal, arbitrary, and violates Articles 14, 19(1)(g), 265, and 300A of the Constitution of India. The petitioner contended that the duties paid were only advances and should be refunded as the beer was not removed from the warehouse for sale due to the lockdown. The court, however, found that under Section 27(1)(a) of the Jharkhand Excise Act, 1915, the incidence of levy of countervailing duty is the factum of import itself. The duty is levied at the time of import to ensure a level playing field with excisable articles manufactured within the state. The court referred to the Supreme Court's decision in S.K. Pattanaik v. State of Orissa, which clarified that countervailing duty is imposed at the time of entry into the state, regardless of whether the goods are sold or destroyed later.

2. Refund of Import and Countervailing Duties on Unsold Stock:
The petitioner sought a refund of Rs. 1,53,68,480/- paid as duties on the stock that could not be sold due to the lockdown. The court rejected this plea, stating that the taxable event for countervailing duty is the import of liquor into the state, and the duty is payable at the time of import. The court emphasized that the duty is not contingent upon the sale or removal of goods from the warehouse. The court cited the Supreme Court's ruling in Mohan Meakin Breweries Ltd., which held that the duty is payable upon import, irrespective of whether the goods are consumed or not.

3. Interpretation of the Jharkhand Excise Act, 1915 Regarding the Levy of Duties:
The court analyzed the provisions of the Jharkhand Excise Act, 1915, particularly Sections 27 and 28, which govern the levy of excise and countervailing duties. Section 27(1)(a) authorizes the imposition of countervailing duty on any excisable article imported into the state. Section 28 outlines the ways of levying such duty, including payment upon importation or upon issue for sale from a warehouse. The court concluded that the duty is levied at the time of import, and the rate applicable is determined on the date of removal for sale from the warehouse.

4. Applicability of Legal Precedents on the Levy of Duties:
The petitioner relied on various legal precedents, including Kiran Spinning Mills v. Collector of Customs and Govind Saran Ganga Saran v. Commissioner of Sales Tax, to argue that the duty should be levied only upon the removal of goods from the warehouse. The court found these precedents inapplicable, as they pertained to different statutory provisions under the Customs Act. The court reiterated that under the Jharkhand Excise Act, the levy of countervailing duty occurs at the time of import, not upon removal from the warehouse.

5. Jurisdiction and Maintainability of the Writ Petition:
The petitioner argued that the writ petition was maintainable as there was no alternative remedy for seeking a refund from the state. The court, however, dismissed the petition, stating that the claim for a refund was not tenable under the law. The court held that the petitioner was liable to pay countervailing duty at the time of import, and there was no provision for a refund of such duty under the Jharkhand Excise Act.

Conclusion:
The court dismissed the writ petition, holding that the petitioner was not entitled to a refund of the import and countervailing duties paid on the stock of beer that could not be sold due to the lockdown. The court emphasized that the levy of countervailing duty occurs at the time of import, and the duty is payable regardless of whether the goods are eventually sold or destroyed. The court's decision was based on the interpretation of the Jharkhand Excise Act, 1915, and relevant legal precedents.