Jharkhand Excise Act, 1915 – s.90 – Revenue Board notification dated 06.11.2012 – r.106 (Tha) – Levy of import fee on rectified spirit – The Board of Revenue in exercise of power conferred u/s.90 of the Act inserted the Rule 106 (Tha) and levied fee on the import of rectified spirit by notification dated 06.11.2012 – Writ Petition – High Court held that the State had no legislative competence to levy tax/fee on the import of rectified spirit, as it is a non-potable liquor i.e. alcohol not fit for human consumption – Appellant-State contended that import fee was not on rectified spirit in its raw form as such, but on pure alcoholic liter ‘LPL’ in the form of potable liquor – On appeal, held: On perusal of the impugned provision as a whole, it follows that the substance of the provision is to levy charges on the product Indian Made Foreign Liquor (IMFL) produced or manufactured by use of imported rectified spirit – In that sense, the levy is not on the input (imported rectified spirit) of the final product as such but is on the manufactured or produced product being potable alcohol palatable to human consumption – For the purposes of computing the levy, the yardstick of Rs.6 LPL on the total quantity of imported rectified spirit utilized for production of IMFL is reckoned – Thus, the impost is not on the imported rectified spirit as such but only on the produced foreign liquor before it is bottled for sale in the wholesale or retail market, as the case may be – It is a case of legislation in respect of potable alcohol, the State is competent to legislate in that regard and levy charges-be it for regulating the same or impost for parting with its rights regarding manufacture, storage, export, sale and possession thereof.
Jharkhand Excise Act, 1915 – s.90 – Revenue Board notification dated 06.11.2012 – r.106 (Tha) – Nature of tax or excise duty – The Board of Revenue u/s.90 of the Act chose to levy fee on the import of rectified spirit by notification dated 06.11.2012 – Appellant-State contended that the levy of charges or impost is neither in the nature of a tax nor excise duty – Held: There is merit in the contention of appellant-State that the impost is neither in the nature of a tax nor excise duty but it is towards the charges by whatever name, for regulating the production of potable liquor to preserve public health and morality including for parting with its rights or privileges regarding manufacture, supply or sale of potable liquor or intoxicating liquor and to regulate the use of imported rectified spirit for production and sale of potable liquor – In such a case, the State need bear no quid pro quo to the services rendered to the licencee for production of foreign liquor (IMFA). Allowing the appeal, the Court
HELD : 1. The Rule 106 (Tha) noted in the notification dated 06.11.2012, makes it amply clear that the levy or impost fructifies only upon completion of distillation process (in two stages-first from rectified spirit to Extra Neutral Alcohol (ENA) and then from ENA to Indian Made Foreign Liquor (IMFL)) and in particular converting into a final product “IMFL”. The collection of impost is, however, deferred until the bottling of that product. In other words, the levy is not at the stage of import of rectified spirit within the State; nor at the stage of initial distillation thereof to ENA and not until the product IMFL is ready for bottling as such. Thus, the levy under the impugned rule ripens or fructifies only after the original raw material (imported rectified spirit) has undergone distillation process at two different stages and transmute and mutate into an intoxicant or potable alcohol palatable to human consumption, but its (impost) collection is effected just before bottling it in that form (potable liquor). Indeed, the levy predicated in this rule is on the total quantity of imported rectified spirit utilised for mutating it in the form of IMFL, a new produce. The last part of the rule stipulates the quantum of charges to be levied on such utilized imported rectified spirit for production of the foreign liquor. For that limited purpose, the quantity of imported rectified spirit utilized in the production of potable liquor, is reckoned. [Para 10] [1086-D-H; 1087-A]
2. Reading the impugned provision as a whole and line by line or word by word in this perspective, it must follow that the substance of the provision is to levy charges on the product IMFL produced or manufactured by use of imported rectified spirit. In that sense, the levy is not on the input (imported rectified spirit) of the final product as such but is on the manufactured or produced product being potable alcohol palatable to human consumption. For the purposes of computing the levy, the yardstick of Rs.6 per LPL on the total quantity of imported rectified spirit utilized for production of IMFL is reckoned. Thus, the impost is not on the imported rectified spirit as such but only on the produced foreign liquor before it is bottled for sale in the wholesale or retail market, as the case may be. If so understood, the whole edifice of the argument of respondents regarding the interpretation of the impugned rule must collapse. For, the challenge to the impugned rule is on the assumption that it permits the competent authority to levy charges on the imported rectified spirit and not fit for human consumption but which has the potency of being used for producing intoxicants or potable liquor though exclusively meant for industrial purposes. Once that assumption is discounted or disregarded, nothing more survives for consideration. This Court says so because, it is well established that the State may pass any legislation in the nature of prohibition of potable liquor referable to Entry 6 and 8 of List II and may also laydown regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable alcohol. Had it been the case of levy on non-potable alcohol (imported rectified spirit) per se, only then the question about the competency of the State Legislature or the justness of the levy on the doctrine of quid pro quo may become relevant. However, if it is a case of legislation in respect of potable alcohol, as has been noted by this Court hitherto, the State would be competent to legislate in that regard and levy charges – be it for regulating the same or impost for parting with its rights regarding manufacture, storage, export, sale and possession thereof. [Para 11] [1087-B-G]
3. The next question is whether the levy is in the nature of tax or excise duty. If it is a case of excise duty on potable liquor produced by use of imported rectified spirit, the State has jurisdiction to legislate in respect of duty on the production or manufacture of such goods produced or manufactured within the State. In the present case, there is merit in the submissions of the appellant State that the impost is neither in the nature of a tax nor excise duty but it is towards the charges by whatever name, for regulating the production of potable liquor to preserve public health and morality including for parting with its rights or privileges regarding manufacture, supply or sale of potable liquor or intoxicating liquor and to regulate the use of imported rectified spirit for production and sale of potable liquor. In such a case, the State need bear no quid pro quo to the services rendered to the licencee for production of foreign liquor (IMFA). [Para 14] [1092-F-G; 1093-A]
4. The fact that the manufacturer-respondent has already obtained requisite licences for import of rectified spirit and production of foreign liquor (IMFA) on payment of fixed rates does not mean that the State has surrendered all facets of its rights in respect of every form of activity in relation to potable liquor – its manufacture, storage, export, import, sale and possession. The amended provision is an enabling provision authorising the State to levy charges or impost for ceding its one or more of the activity in respect of foreign liquor (IMFL) produced by use of imported rectified spirit. Such impost can be in addition to the general power of the State to issue licence on payment of fees for production and sale of potable liquor. As observed in Har Shankar case, the State need bear no quid pro quo to the services rendered to the licensees of producer of foreign liquor. [Para 15] [1093-B-D]
Har Shankar and Ors. v. The Dy. Excise and Taxation Commissioner and Ors. (1975) 1 SCC 737 : [1975] 3 SCR 254 – followed.
Deccan Sugar & Abkari Co. Ltd. v. Commissioner of Excise, A.P. (2004) 1 SCC 243 – relied on.
State of U.P. & Ors. v. Vam Organic Chemicals Ltd. and Ors. (2004) 1 SCC 225 : [2003] 4 Suppl. SCR 957 ; Synthetics and Chemicals Ltd. and Ors. v. State of U.P. and Ors. (1990) 1 SCC 109 : [1989] 1 Suppl. SCR
623 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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