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TMI Blog2007 (1) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... quantum of liquor so manufactured and issued in the factory premises at No. 13, Green Fields, Bannerghatta Road, Bangalore - 560 029. 2. The present writ petition is regarding the dispute as to whether the petitioner was liable to pay duty in respect of certain quantum of such liquor which had underwent some process and which according to the respondents had become portable and which had been stored in storage tanks but which were destroyed in fire due to an accident that took place in the factory premises as on 10-6-1997 and if so as to whether the petitioner was still liable to pay the excise duty at the rate applicable to the type of liquor that were stored in such storage tanks at the rate prevailing at the relevant point of time though they had not been issued. 3. It is because of this controversy, the petitioner has approached this Court for relief when the respondent-State sought to enforce the demand based on the liability for payment of duty in respect of the quantity that was stored in the storage tanks but which got destroyed in the fire accident that took place in the factory as on 10-6-1997. Some correspondences/communications emanating from the respondents also indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Annexure-J. 7. Writ petition was admitted and respondents were put on notice as early as on 9-4-2002 and the matter had been heard on several occasions and in fact had been disposed of once and was restored to file and has come up for final hearing now. 8. Respondents are represented by Sri. M. Keshava Reddy, learned Additional Government Advocate. Respondents have also filed statement of objections. 9. Writ petition is opposed. It is essentially contended that manufacturing process of Indian made liquor was over by the time they were stored in the storage tanks and when they were destroyed in the fire accident; that the liability for excise duty is at the manufacturing point and the manufacturing of Indian made liquor having been complete and the schedule to Rule-2 of the Karnataka Excise [Excise Duties & Fees) Rules, 1968 [for short 'the rules') having indicated that such liquor is to be subjected to tax at the rate of Rs. 45/- for bulk litre, it is inevitable that this duty is payable by the petitioner who had manufactured the quantity of liquor which no doubt was destroyed in the fire accident; that it is not necessary that the petitioner should sell for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention of the court to the charging section - Section 22 of the Act, the manner of collection - Section 23 of the Act and Rule-2 of the rules providing for rate of duty etc.,. 13. Sections 22 and 23 of the Karnataka Excise Act, 1965 read as under 22. Excise duty or countervailing duty on excisable articles - [1] An excise duty at such rate or rates as the State Government may prescribe, shall be levied on any excisable article manufactured or produced in the State under any licence or permit granted under this Act. [2] A countervailing duty at such rate or rates as the State Government may prescribe shall be levied on any excisable article manufactured or produced in India outside the State and imported into the State under a licence or permit granted under this Act. [3] The rates prescribed under Sub-sections (1) and (2) may be different for different kinds of excisable articles and may also be different when levied in the different ways specified in Section 23. 23. Ways of levying much duties- Subject to such rules regulating the time, place and manner, as may be prescribed, excise duty and countervailing duty under Section 22 shall be levied in one or more of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in terms of the rules and Rule-2 in turn effectuates the charge only when the manufactured liquor is issued from any distillery or warehouse or other place of storage established or licenced in the State and it is only then the charge is complete at the rate as mentioned in schedule-A to the rules; that the charge is complete only at the issue point in terms of Section 22 of the Act read with Rule-2 of the rules and this event not having occurred, charge levied is incomplete and therefore there is no liability on the petitioner. 16. In support of such submission, learned Counsel would draw the attention of the court to an unreported Judgment of single Bench of this Court in the case of 'United Breweries Ltd. and Anr. v. State of Karnataka and Anr. rendered on 4-2-1992 in W.P. No. 1024/1987 and submits that even in terms of the law laid down by this decision which was a decision rendered in the context of the very provisions of Section 22 of the Act read with Rule 2 of the rules, the court having concluded that there cannot be any liability created otherwise than in accordance with the statutory provisions, the demand notice at Annexure-J being not fully in consonance with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tra, Sri Keshava Reddy, learned Additional Government Advocate appearing for the respondents has very strongly urged that the demand in terms of Annexures-J & L is one which is sustainable; that the amount has been rightly demanded from the petitioner, that when once the manufacturing stage was over and the quantum of liquor manufactured was well known and the rate of duty at Rs. 45 for bulk litre having been indicated in schedule-A to Rule-2 of the rules, automatically the quantum of duty is determined in terms of Sections 22 and 23 of the Act read with Rule-2 and schedule-A to the rules and the duty amount called upon to be paid being such amount, there is no illegality in demanding such payment; that it is an amount which is to be paid by the petitioner and therefore the writ petition is to be dismissed. 21. Substantiating the contention what is urged by learned Government Advocate is that the provisions of Section 22 which is the charging section creates a charge in respect of liquor manufactured or produced; that the liability for payment of duty gets crystallised the moment the manufacturing takes place; that in the instant case, it had already taken place; that the rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the manner to either destroy the effect of the charging section or in any manner to reduce the rigor of the charging section; that it is only for furthering the object of the charging section and effectuating the charging section and if so by an understanding or by an interpretation of the rule a person cannot be relieved of the liability which has already been created even in terms of the charging section i,e., at the time of manufacture of the liquor and once the liquor had come into existence, the liability for payment of duty has arisen and crystallised and the rule cannot be understood or interpreted so as to relieve a tax payer from such liability. 26. Let me examine the rival pleadings and rival contentions in the light of the submissions made and decisions relied upon. In any taxing statute, the liability is in terms of the charging Section. It is only accordingly the liability can be enforced and in the manner as provided under the statutory provisions. Under the Act, the liability is created under Section 22 of the Act on the manufacture of any excisable article or same being produced in the state. The rates may be as prescribed and this is done in terms of the Rules. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. It is for such prescription, the rule is framed and the rule also in turn links the levy to Clause-(b) of Sub-rule (1) of Rule 2 of the Rules i.e. the article manufactured, article issued from any distillery, warehouse or other place of storage established or licensed in the state under any of the provisions of the Act. Of course the rate is provided in the schedule, which is again a schedule to the Rules and not to the Act. In other words, the charging section will be complete only when it is read with Rule-2 and the schedule thereto and not otherwise. One cannot reach the schedule without going through Rule 2 and if Rule 2 is one supplementing the charging section for effectuating the charge, the manner of levy as prescribed under Rule 2 of the Rules cannot be ignored even for such purpose. The condition as stipulated in Clause-(b) of Sub-rule (1) of Rule 2 of the Rules is very much part of Rule 2 and is one which has to be necessarily taken into consideration for completion of the charge. If one were to read the Section, Rule and the schedule together, the charge is complete only when the manufactured article is issued from any distillery or factory and not otherwise. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sought to be subjected to duty is potable alcohol. 31. While there is force in the submission made by the learned Counsel for the petitioner that the levy in terms of Section 22 and with Rule 2(1)(b) of the Rules is not effectuated and therefore the demand in terms of Annexure-J is without legal support, let me examine the manner in which it is countered on behalf of the respondents by the learned Government Advocate. 32. Submission that in taxing statute, any understanding and interpretation of the provisions should be in the light of the object of the Act i.e. the revenue to the state and should be one for effectuating or achieving the object of raising revenue and not for curtailing this object. While this is the general principle, it should be borne in mind that in interpreting any statute in the sense the provisions, should be understood in consonance with the object of the legislature and for the purpose for which the law is made. In so far as the creation of the liability under any taxing statute is concerned, it is squarely in terms of the charging section. Submission that the charging section should be so interpreted or understood as to give effect to the creation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no escape from the link into the provisions of Rule 2 for completing the charge. It is here that the rule of interpretation may come in if there was such a scope of eschewing any part and independently if Section 22 could have brought about the completion of the charge. Learned AGA would submit that that can be achieved by not taking into consideration the stipulation under Clause-(b) of Sub-rule (1) o Rule 2 of the Rules; that it is only the manner of levy and not the very levy itself and though the word 'levy' is used in the Rule, it is not levy under the Rule but the levy is realty under the Section and therefore this part of the Rule can be kept apart and the Section effectuated by only reading that part of Clause-(b) of Sub-rule (1) o Rule 2 of the Rules with the schedule and once rate is known the charging Section 22 can be complete, the demand which is in consonance should be sustained. 34. I am afraid I cannot accept this argument for the reason that this will be clearly contrary to the very ruling of the Supreme Court, which in fact has been relied upon by the learned Government Advocate in the case of The Commissioner of Wealth Tax, Bihar and Orissa, Patna v. Kr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a procedural provision and for the purpose of the provision of Section 23 of the Act, as noticed earlier, there is no other rule which supplement Section 22 of the Act - the charging section - and for effectuating the charge. In fact it is only under this rule the rate of duty also being prescribed, it can be taken to be forming part of the statutory scheme and cannot be merely characterized as a procedural provision. It is in fact more a substantial provision than a procedural provision, both for effectuating the charge as well as for determining the rate of duty. 38. If such is the significance of Rule (2) of the Rules, then the language of Rule (2) cannot be ignored, the charge is effectuated only in terms of the language of Rule 2 and if so, the charge is not complete till the article is issued and the levy in terms of the demand under Annexure-J being at a stage when the charge had not been effectuated cannot be sustained. It is for this reason that the demand in terms of Annexure-J is quashed by issuing a writ of certiorari. 39. Writ petition is accordingly allowed. Rule made absolute. 40. If any amount has already been recovered from the petitioner, pursuant to the dema ..... X X X X Extracts X X X X X X X X Extracts X X X X
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