Case Note & Summary
The petitioner, Mohan Meakin Breweries Ltd., manufactured Indian made foreign liquor at distilleries in Himachal Pradesh and Uttar Pradesh, and had depots in Patna and Ranchi, Bihar. It imported such liquor into Bihar before October 13, 1967, for sale, paying duty at the then prevailing rate of Rs. 14.40 per L.P. litre. Duty on liquor from Himachal Pradesh was paid by deposits in the State Bank of India at Patna and Ranchi upon or before importation, while duty on liquor from Uttar Pradesh was paid upon importation by deposits with that State’s Government. By notification dated October 13, 1967, the duty was enhanced to Rs. 26.20 per L.P. litre effective from November 1, 1967. The Superintendent of Excise, Patna, on January 3, 1968, directed the company to pay the difference in duty on the opening balance of stock lying on November 1, 1967. The company challenged this demand by a writ petition under Article 32 of the Constitution. The legal contest centered on whether the Bihar and Orissa Excise Act, 1915, and the Rules framed thereunder authorized such a demand. Duty on imported foreign liquor is chargeable under Section 27, and Section 28 provides two methods of levy: (i) payment upon or before importation, used for non-bonded imports, and (ii) payment upon issue from a warehouse, used for bonded imports. The proviso to Section 28 fixes the duty rate as on the date of issue for bonded imports. The petitioner’s liquor was imported not under bond, so duty had been paid under method (i) at the old rate. The State sought to justify the demand under the proviso to Rule 147, which states that upon revision of duty, the difference shall be realized from or credited to the licensee on the quantity of article remaining in his possession when the revised rate comes into force. The Supreme Court held that Sections 27 and 28 do not authorize levy of enhanced duty on liquor imported before the date of enhancement but lying with the importer on that date. It then examined Rule 147. The main part of the Rule applies to foreign liquor imported under bond and stored in a warehouse, providing for duty payment before removal. The proviso must be read with the main rule and applies only to excisable articles on which duty is payable before removal from the warehouse or distillery, i.e., bonded imports or distillery stock. The expression ‘excisable article’ in the proviso means such articles, not all imported foreign liquor. Since the petitioner’s liquor was not imported under bond, the proviso did not apply, and the demand was unauthorized. Consequently, the Court quashed the order dated January 3, 1968, prohibited its enforcement, and awarded costs to the petitioner. The constitutionality of Section 27 and the vires of the proviso to Rule 147 were not decided.
Headnote
A) Excise Law - Levy and Collection of Duty - No Retrospective Levy on Non-Bonded Imports - Bihar and Orissa Excise Act, 1915, Sections 27, 28 - The petitioner imported foreign liquor before November 1, 1967 and paid duty at the then prevailing rate. On November 1, 1967, duty was enhanced. Held, Sections 27 and 28 do not authorize levy of the enhanced duty on liquor imported prior to that date but lying with the importer on that date. The method of levy under Section 28(a)(i) (payment upon or before importation) exhausts the duty liability for non-bonded imports. B) Excise Law - Interpretation of Rules - Scope of Proviso to Rule 147 - Bihar and Orissa Excise Rules, 1915, Rule 147 - The proviso to Rule 147, which provides for crediting or debiting difference in duty upon rate revision, applies only to articles on which duty is payable before removal from excise warehouse or distillery, i.e., goods imported under bond or manufactured in distillery. It does not cover foreign liquor not imported under bond and cleared on payment under Section 28(a)(i). The petitioner's stock consisted of non-bonded imports; therefore, the demand for difference was unauthorized. Held, the order demanding differential duty was quashed.
Issue of Consideration
Whether enhanced rate of duty on foreign liquor could be levied on imports that had arrived and for which duty was fully paid before the date from which the increased duty became payable; and whether the proviso to Rule 147 of the Bihar Excise Rules justified such levy on goods not imported under bond.
Final Decision
The Supreme Court allowed the petition, quashed the order dated January 3, 1968 of the Superintendent of Excise, Patna demanding difference in duty, and prohibited enforcement of the order. The respondents were directed to pay costs to the petitioner.
Law Points
- Legal points not extracted
- Duty on imported foreign liquor is chargeable under Section 27 of the Bihar and Orissa Excise Act
- 1915
- Section 28 provides two methods of levy: payment upon or before importation for non-bonded imports and payment upon issue from warehouse for bonded imports
- First proviso to Section 28 fixes rate as on date of issue for bonded imports
- Enhanced duty cannot be levied on goods imported earlier and already cleared on payment of duty at the old rate under Section 28(a)(i)
- Proviso to Rule 147 must be read with the main rule and applies only to excisable articles on which duty is payable before removal from warehouse/distillery
- i.e.
- bonded imports or distillery stock
- The expression 'excisable article' in the proviso means foreign liquor imported under bond and other articles on which duty is payable before removal from excise warehouse or distillery
- For non-bonded imports
- duty is paid before or upon importation and the article is not kept in a warehouse
- so the proviso does not apply
- Demand for difference in duty on non-bonded stock held on the date of revision is unauthorized.
