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TMI Blog1977 (1) TMI 168X X X X Extracts X X X X X X X X Extracts X X X X ..... d sells arrack in pursuance of a licence granted to him. Under R. 15 of the Andhra Pradesh Excise (Arrack Retail Vend Special Conditions of Licences) Rules, 1969 (referred to in this judgment as 'Vend Rules') which were made in exercise of the power conferred under Section 72 of the Excise Act, it is provided that no licensee shall purchase arrack less than the specified minimum guaranteed quantity in any month. If in any month, quantity less than the minimum guaranteed quantity fixed for that month is drawn, at the end of that month issue price to the extent of deficit purchase shall be deducted from the advance money paid by the licensee and the licensee shall be called upon to indemnify the amount so adjusted by the end of the succeeding month in which short drawn quantity had occurred. Though this rule provides only for adjustment at the end of each month, in the case of a purchase by the licensee of quantity less than the minimum guaranteed quantity, it was held in V. Narasimha Rao v. Superintendent of Excise, (FB) that Rule 15 fixes the liquidated damages in the case of a breach of the contract on the part of the licensee by not lifting the minimum guaranteed quantity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding the rates mentioned in the schedule, as may be specified in the notification. 4. Section 22 provides that Excise Duty under Section 21 shall be levied in one or more of the following modes: (a) rateably, on the quantity of any excisable article produced or manufactured in or issued from a distillery, brewery or manufactory or warehouse, or imported in the State; (b) ................................................................................................................................................... (c) in case of toddy. (d) by fees on licence for the manufacture, supply or sale of any excisable article. The schedule to the Act provides that in respect of arrack the duty is to be levied on the quantity issued from the distillery or warehouse at the maximum rate of ₹ 8/- per Litre on the strength of pure spirit. In exercise of the powers under Section 21 a notification was also issued in G. O. 1025 Rev. D/- 30-9-1968 prescribing the rate of excise duty on several articles including arrack. The first question that is referred to us is whether excise duty is part of the issue price. 5. The expression 'issue price' is not defined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of duty but it only provides the stage at which duty on liquor manufactured and produced can be assessed and collected. Even assuming as observed in that case that Sub-section 21 and 22 should be construed in the manner stated above, it is clear from these two provisions read with schedule that the stage at which the excise duty can be assessed and collected is only when it is issued and the duty is dependent on the quantity issued. If there is no issue of liquor from the distillery we are unable to see how under the provisions of the Act excise duty can be assessed and collected on undrawn or unlifted liquor. On a reading of the relevant provisions of the Act and the rules we are of the view that no excise duty can be levied or even assessed and collected on undrawn liquor or liquor which is not issued from the distillery. In our view the decision in V. Narasimha Rao v. Supdt. of Excise, (supra) is not correct as far as this aspect is concerned. This view of our receives support from a number of decisions of the Supreme Court. 8. In B. C. Banerjee v. State of M.P. , it was held that the liquor which the contractor fails to lift is not an excisable article and a notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpose, levy, assess or collect excise duty which it cannot collect under the provisions of the Act by labelling it as compensation or damages. A similar situation arose in Excise Commr. U.P. v. Ram Kumar , . In that case, the condition incorporated in the Licence provided that in case of default the licensee be liable to pay compensation equal to the amount of the excise duty leviable on the unlifted quantity. It was held that the provision was not valid. It was observed that this point was no longer res integra in view of the decision in B.C. Banerjee v. State of M.P. (supra) . It was observed that though the demand was described as compensation it was in reality a demand for excise duty on the unlifted quantity of liquor which is not authorised by the provisions of U.P. Excise Act. In view of the above decision of the Supreme Court we have no hesitation in holding that though R. 15 does not in terms provide for levy of excise duty, it is in effect a provision enabling levy, assessment and collection of excise duty on undrawn liquor and is therefore contrary to the provisions of the Act. 10. The decision in B.C. Banerjee v. State of M.P. (supra) was cited before the Full Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranteed sum it amounted to recovery of excise duty as the issue price was inclusive of excise duty and therefore enforcement of the guaranteed amount meant realisation of excise duty. The Supreme Court held that the lump sum amount payable for the exclusive privilege of vending liquor is not to be confused with the issue price. The issue price is payable when the contractor takes delivery of a particular quantity of specified value of country liquor. The issue price relates only to liquor drawn by the contractor and does not pertain to undrawn liquor. The contractual obligation of the licensees to pay the stipulated amount is not dependent upon the quantum of liquor sold by them which is relevant only for the purpose of remission to be earned by them under the licence. No excise duty is charged or chargeable on undrawn liquor under the licence. To suggest that the licence obliges the contractors to pay excise duty on undrawn liquor is totally misreading the conditions of the licence. The excise duty is collected only in relation to the quantity and quality of the country liquor which is drawn. No excise duty can be predicated in respect of undrawn liqour. The decision in B.C. Baner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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