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TMI Blog1977 (1) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... levied to meet the expenditure on supervision and control of export of liquors. Even after the commencement of the Constitution, the rates of export duty continued to be the same except that such rates were expressed in decimal coinage. The Government has by stages increased the rates of export duty enormously. Such increase in the rates of export duty has seriously affected the petitioners trade in exporting alcoholic liquors. The present rates of export duty cannot be justified as fee because the State Government does not render any service to the petitioners in return for such export duty. Besides export duty, the petitioners required to pay a duty on manufacture of liquors called the still head duty, which is payable before issue of such liquors from their distilleries. The payment of still head duty is governed by Rules 152 and 153 of the U.P. Excise Rules. Neither the Constitution nor the Act empowers imposition of export duty on liquors and rectified spirit. If export duty is allowed to be charged by this State, the same liquors will be taxed twice over. Export duty on liquors is also violative of Article 301 of the Constitution inasmuch at it impedes free flow of trade and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export duty on liquors is warranted by the provisions of the Constitution and the U.P. Excise Act, and (iii) Whether the levy of export duty is violative of Articles 301 of the Constitution. 5. In Delhi Cloth and General Mills Co. Ltd. vs. Excise Commissioner U.P. and others a Division Bench of this Court held that rectified spirit is no an article meant for human consumption and hence does not come within the ambit of the word alcoholic liquor for human consumptionoccurring in Entry No. 51 of List II to the Seventh Schedule to the Constitution and that the State Legislature has no competence to impose excise duty on rectified spirit. In the light of the aforesaid ruling of this Court the levy of export duty on rectified spirit exported from the State of Uttar Pradesh to other State and Union Territories in India, is clearly unsustainable. 6. However, the learned Advocate General who appeared for the State and its Excise authority, submitted that in the aforesaid decision of this Court, the following three aspects of the question of levy of excise duty on rectified spirits, had not been considered. The first according to him was that after certain process, rectified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export means to take out of Uttar Pradesh otherwise across customs frontier as defined by the Central Government. The relevant portion of S. 13 of the Act reads : No intoxicant shall be exported or transported unless (a) The duty, if any imposed under S. 28 or (b) .............................. has been paid or a bond has been executed for the payment thereof. Sub-S. (1) of S. 28 of the Act reads : 28. Duty on excisable articles. - (1) An excise duty or a countervailing duty as the case may be, at such rate or rates as the Local Government shall direct, may be imposed, either generally or for specified local area, on any excisable article - (a) imposed in accordance with the provisions of S. 2(1); or (b) exported in accordance with the provisions of S. 13; or (c) transported; or (d) manufactured; cultivated or collected under the licence granted under S. 17; or (e) manufactured in any distillery established, or any distillery or brewery licenced, under S. 18 : Provided as follows :- (i) duty shall not be so imposed on any article which has been imported into British India and was liable on such importation to duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of duty chargeable in the importing State or Union Territory in case the Indian made foreign liquor is imported in State or Union Territory with which the State of Uttar Pradesh has entered into reciprocal arrangements for the adjustment of excise duty by book transfer, (d) the rate of duty charged in the importing State or Union Territory and the fact that it has been realised in advance in cases of import other than those covered by clause (c). (3) On receipt of the permit the exporter shall deposit into the treasury; (a) Export duty on the total quantity of liquor to be exported; and (b) Where the export is made to a State or Union Territory with which the State of Uttar Pradesh has entered into a reciprocal arrangement for the adjustment of the excise duty by book transfer and the rate of duty in the importing State or Union Territory is higher than that enforced in the State of Uttar Pradesh and that payable in the importing State of Union Territory on the total quantity of liquor to be exported. (4) On receipt of the permit and the treasury receipt the wholesale vendor shall prepare a pass in Form F.L. 23 in quadruplicate and submit it to the Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is not lost. The method of collection does not effect the essence of the duty, but only related to the machinery of collection for administrative convenience. Whether in a particular case the tax ceases to be in essence an excise duty, and the rational connection between the duty and the person on whom it is imposed ceased to exist, is to be decided on fair construction of the provisions of a particular Act. 13. In R. C. Jalls cases the cess imposed on coal was empowered to be collected by the Railway Administration by means of a surcharge on freight for carrying coal. Such surcharge was recovered from the consignor if the freight was prepaid at the time of consignment, and from the consignee if the freight was collected at the destination of the consignment. The Supreme Court held that such surcharge was a duty of excise and that the Central Government was legally competent to evolve a suitable machinery for collection of such duty. 14. S. 28 of the Act provides, inter alia, that excise duty may be imposed on any excisable article exported in accordance with the provisions of S. 13 or manufactured in any distillery established or licensed under S. 178. So long as the levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities of this State will issue a pass in quadruplicate for export of such liquors. After satisfactory proof of such liquors having reached the importing State or Union Territory, the Excise authorities of this State will refund to the exporter the difference between the amount of still head duty which had already been paid to this State on such liquors and the amount of countervailing duty payable on such liquors in the importing State or Union Territory if the latter is lower than the rate of still head duty in this State and the amount of duty in retained by this State will be credited to the importing State or Union Territories by book adjustment after the close of the excise year. Rule 633 permits a manufacturer of liquors in this State to export such liquors to other States and Union Territories without prepayment of still head duty to this State, if he exports such liquors in bond. For so exporting, he should make a written application to the Collector of the district in which his distillery is situate. Such application must accompany. (i) a permit from the appropriate authority of the importing State or Union Territory authorising import of liquors; and (ii) a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of small quantities. Mr. O. Donnel stated that the Government of the United Provinces would be in favour of adopting this general principle but that they would require to be compensated for the expense incurred and the work done by them on behalf of other provinces. Their claim was not to any share of the duty as such, but was an agency claim for a refund of the actual cost of excise administration undertaken on behalf of consuming provinces. It was agreed that the claim was equitable and should be provided for but Mr. Donald pointed out that in Bengal payment for excise services is taken from the distilleries direct. In this way the sale price is correspondingly raised against the province of consumption and with the same result as would be reached by payment of compensation between provinces. The Whole question was referred for consideration and report to the Conference and report to the Conference to a Committee consisting of Sir Charles Todhunder, Mr. J. Donald, Mr. S. P. O. Donnel, Mr. B. P. Standen. x x x Excise - The report of the Committee on Excise (Annexure A) was presented and accepted by the Conference. 20. The Report of the Committee on Excise whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p the expenditure for issuing permits for their export to the consuming Provinces or States. Learned counsel for the petitioners submitted that the framers of the Constitution were aware of this long standing agreement between the then provinces and that there is nothing in the Constitution to indicate that any departure from this long standing agreement between the Provinces or States in regard to levy of excise duty, should be given a go by and that the manufacturing State and the consuming States should both have the power to levy excise duty, resulting in double taxation of the same liquor by two different States. Learned counsel for the petitioner urged that Entry No. 51 of List II of the Seventh Schedule to the Constitution should be construed in the light of the long standing agreement between the Provinces or States regarding the exercise of the power to levy tax on alcoholic liquors for human consumption. 22. Though the formal deed of agreement between the then British Provinces regarding levy of excise duty on liquors manufactured in one Province and consumed in another Provinces, has not been produced, it seems very likely that such agreement existed between those Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes or Union Territories on liquors imported into them by adjusting the still head duty collected by this State from him towards such countervailing duty and by calling upon him to pay the difference between such countervailing duty of the other State and the still head duty of this State where the former is higher than the latter. Shri Khare maintained that there is no legislative sanction of the U.P. Legislature for the Excise authorities of this State compelling the exporter of liquors in this State to pay the countervailing duty levied by the importing States or Union Territories and that the mere existence of an inter-State arrangement for adjustment of excise duty by book transfer between this State and other States or Union Territories cannot confer any such power on the Excise authorities of this State. 25. The above argument of Shri Khare overlooks the dual character of the U.P. Excise Act, namely that it is not merely a taxing statute but also a regulatory Act, regulating manufacture, transport, export, import, possession and sale of liquors. S. 15 of the Act empowers the State Government to regulate by issue of passes and permits transport, import and export of liquor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iny. As stated earlier, the duty which is levied under nomenclature export duty is really an excise duty on liquor manufactured in this State, but is levied at the stage of export from this State to other States or Union Territories, an excise duty on production though levied for the sake of convenience at the point when such liquors are exported outside this State. As pointed out earlier, the Supreme Court has clearly laid down that excise duty can be levied at any convenient stage so long as it is related to manufacture or production. 30. As explained by Gajendragadkar, J. (as he then was) in Atiabari Tea Co. Ltd. vs. the State of Assam restrictions from freedom which is guaranteed by Article 301 would be such restrictions as directly and immediately restrict or impede the free flow or movement of trade. In Andhra Sugar Ltd. vs. State of Andhra Pradesh the Supreme Court said that a non-discriminatory tax on goods does not offend Article 301 unless it directly impedes free movement or transport of goods. 31. It is competent for this State to levy still head duty on liquors manufactured in this State but exported to other States and Union Territories at the same rate at wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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