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PETITIONER: MOHAN MEAKIN BREWERIES LTD.

       Vs.

RESPONDENT: COMMISSIONER OF EXCISE, BIHAR & ORS.

DATE OF JUDGMENT15/04/1986

BENCH: OZA, G.L. (J) BENCH: OZA, G.L. (J) MISRA, R.B. (J)

CITATION:  1986 AIR 1522            1986 SCR  (2) 547  1986 SCC  (3) 430        1986 SCALE  (1)613

ACT:      Bihar and  Orissa Excise  Act, 1915  - Sections 27 & 28 Difference of  duty resulting from any increase in the rates of duty subsequent to import - Realisation of from importing or transporting licencees - Whether valid and permissible. C

HEADNOTE:      Rate of duty on Indian mate foreign liquor was enhanced by  Notification  dated  October  13,  1967  effective  from November 1,  1967. Consequently the Superintendent of Excise directed the  petitioner-company to  pay the  difference  of duty on  the balance  of stock  as on November 1, 1967. That demand order was challenged by the petitioner under Art. 32. This Court in Mohan Meakin Breweries Ltd. v. Commissioner of rise, Bihar  Ors. [1969]  2 S.C.R. 457, held that in view of 88. 27  and 28  of the  Bihar &  Orissa Excise Act 1915, and also in  view of  rule 147  framed by  the Board of Revenue, such an  order for recovery of the difference of duty cannot be passed and, therefore, the demand was quashed. After this decision, an  ordinance amending  the Act  was issued by the Governor of  Bihar. It  added a proviso to 8. 28 of the Act. Pursuant to  this amendment,  a fresh  notice of  demand was issued by  the Assistant Excise Commissioner for recovery of difference of  duty on  the stocks  as on  1.11.67 which was earlier demanded and quashed by this Court.      The petitioner  again filed a petition under Article 32 challenging the  fresh demand  contending: (i)  that in  the scheme of  the Act,  8. 27 is the charging section ant 8. 28 provides for  procedure. Under  section 27(a)  the  duty  is leviable on  the import  of excisable  goods, and duty to be levied will  be according  to the  rate in force on the date the goods  are imported in the State of Bihar; (ii) that the incident of duty not having been amended by mere addition of a proviso  to s. 28 the levy of additional duty according to the revised  rate could  not be  charged; (iii) that the Act does not H 548 authorise the  Executive under  the  delegated  function  by issuance   of   a   Notification   to   revise   the   rates retrospectively; (iv)  that in the State of Bihar, there was no manufacture  of Indian  made foreign  liquor ant  thus in view of Articles 301, 303 and 304 of the Constitution, there

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is no  justification for  imposing or  enhancing the  excise duty on  i port of Indian made liquor in the State of Bihar; and (v)  that in  view of the scheme of the said Articles of the Constitution,  the duty which could be imposed on Indian made foreign  liquor imported  in the  State of  Bihar could only be  justified as a countervailing duty but as no Indian made foreign  liquor was manufactured in the State of Bihar, such a  duty was  not  justified,  ant  in  any  event,  the notification  enhancing  the  rate  of  duty  is  bad  being unconstitutional.      On behalf  of the  respondents-State, it  was contended that there  are manufacturers  of Indian made foreign liquor in Bihar  itself, that  they  have  been  manufacturing  ant selling Indian  made foreign  liquors ant  it could  not  be contended that  there was  no local  manufacturer of  Indian made foreign  liquor in the State of Bihar during the period to which the present dispute relates.      Dismissing the petition, ^      HELD: 1.  Sections 27  and 28  of the  Bihar  &  Orissa Excise Act, 1915 put together provide for the scheme of levy of excise  duty and  it could  not  be  said  that  the  two sections are  in two separate water tight compartments. [557 D]      2. Under  s. 27  when an excisable article is ioported, this section  provides an excise duty or countervailing duty at rate  or rates  that the  State Govt. may direct could be imposed. By  the proviso  which has now been added to 8. 28, it has  been provided  that when  any excisable  article  is imported or  transported on payment of duty according to the provisions of  sub-cl.  (1)  of  cl.  (a)  or  cl.  (c)  the difference of  the duty  resulting from any provision of the rates of duty subsequent to such import shall be realised or credited to  the importing  or  transporting  licence.  This provides for a situation where after import or transport the rates is  revised either  enhanced or reduced still that can be adjusted  on the  basis of  the stock in existence on the day when the rate is 549 revised and  this is  what specifically  was held  in  Mohan Meakin Breweries Ltd. case (supra). [557 D-G]      3. The  Proviso of  Rule 147 practically is same as now has been  added to  8. 28 and under this Rule the difference of duty  could only  be charged if it is imported on a bond. This rule  could not  be of  any  help  in  case  where  the excisable articles  are imported  after the  payment of duty and it  is this  which has now been specifically provided in the Explanation added to 8. 28. [558 G-H; 559 A]

JUDGMENT:      ORIGINAL JURISDICTION : Writ Petition No. 451 of 1971.      Under Article 32 of the Constitution of India. C      G.L.  Sanghi,   S.K.  Mehta   and  M.K.   Dua  for  the      Petitioner.      D. Goburdhan and R. Goburdhan for the Respondents.      The Judgment of the Court was delivered by D      OZA, J. This petition under Art. 32 of the Constitution has been  filed by  the petitioner  challenging a  notice of demand Annexure  ’C’ dated 22nd September, 1971 calling upon the petitioner  to pay the difference of duty on the balance of stock  on 1st  November, 1967  of the Indian made foreign liquor imported in the State of Bihar. This notice was based on an amendment in Section 28 of the Bihar And Orissa Excise

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Act, 1915  (’Act’ for  short) brought  about by an Ordinance promulgated by  the Governor  of Bihar  dated  21st  August, 1971.      In fact  earlier the  rate  of  duty  was  enhanced  by Notification dated  October 13,  1967 and it was with effect from November  1, 1967.  The Superintendent of Excise, Patna directed the  petitioner Company  to pay  the difference  of duty on the pending balance of Indian made foreign liquor in its stock  on  November  1,  1967  and  that  order  of  the Superintendent  Excise  was  challenged  by  the  petitioner Company in  a petition under Art. 32 of the Constitution and by the decision of this Court in Moban Meakin Breweries Ltd. v. Commissioner of Excise, Bihar & Ors., [1969] 2 S.C.R. 457 it was  held that  in view  of the Sections 27 and 28 of the Act and  also in  view of  Rule 147  framed by  the Board of Revenue, such an order for H 550 recovery of  the difference  of duty  cannot be  passed  and therefore the  demand was quashed. After this decision which was pronounced  on October  17, 1968  it  appears  that  the Governor of  State of Bihar issued an ordinance amending the Bihar And Orissa Excise Act, 1915 which was published in the Gazette on  23rd August,  1971. By this Ordinance, a proviso was added  to Section 28 of the Act, after the first proviso and it reads :           "Provided  further   that  in  case  of  excisable           articles imported  or transported  on  payment  of           duty according to the provisions of sub clause (1)           of clause  (a) or  clause (c) of this section, the           difference of duty resulting from any provision in           the rates  of duty subsequent to such import shall           be realised from or credited to the account of the           importing or  transporting licences  according  to           the revised  rate of  duty which  may be higher or           lower than  the previous  rate and the calculation           thereof shall  be made  on the  balance  stock  of           excisable article  on the date the revised rate of           duty comes into effect". And it is in pursuance of this amendment that a fresh notice of demand  was issued  to the  petitioner by  the  Assistant Excise Commissioner, Patna for the recovery of difference of duty on the stocks on 1.11.67 which was earlier demanded and which was  quashed by the decision in Mohan Mbakin Breweries Ltd. case  and by  the present writ petition this demand has again been challenged.      Two contentions have been raised by the learned counsel for the petitioner.      That in  the scheme  of  the  Act  Section  27  is  the charging section  and Section  28 is  only a  section  which provides for  the procedure. Under Section 27(a) the duty is leviable on the import of excisable articles and, therefore, the incident  of levy is the fact of import of the excisable goods. The  duty which  could be levied will be according to the rate  in force on the date the goods are imported in the State of  Bihar. It  is not disputed that the stocks in hand on 1.11.67  are goods  which have  been imported  after  the payment of duty as 551 required in  clause (a)  of section 27. It was, therefore, A contended that  as in  the scheme of Section 27 the incident of duty is the import of excisable goods and that not having been amended by mere addition of a proviso to Section 28 the levy of  additional duty according to the revised rate could not be  charged as  the charging  event under  the scheme of Section 27  is the  import of  excisable goods.  It was also

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contended that  there is  no  provision  in  the  Act  which authorises the  Executive under  the delegated  function  by issuance   of   a   Notification   to   revise   the   rates retrospectively. Therefore,  the rate  if revised  could  be enforced for  charging of  duty on the excisable goods which are imported  after the  rate is  revised  as  there  is  no amendment to Section 27 which is the charging section. C      me second  contention advanced  by the  learned counsel for the  petitioner was that in the State of Bihar there was no manufacture  of Indian  made foreign  liquor and  thus in view of  Articles 301,  303 and  304 of  the Constitution of India, there  is no  justification for imposing or enhancing the excise  duty on  import of Indian made foreign liquor in the State  of Bihar. As it was contended that in view of the scheme of  the above mentioned articles of the Constitution, the duty  which could  only be justified as a countervailing duty but  as no  indian made foreign liquor was manufactured in the  State of  Bihar such a duty was not justified and in any event  the notification  enhancing the rate of the duty, therefore, is  bad being  unconstitutional and in support of this contention,  learned counsel  placed  reliance  on  the decision in  Kalyani Stores  v. The  &  ate  of  Orissa  and others, [1966] 1 S.C.R. 865.No other question was raised.      Learned counsel  appearing for the respondents State of Bihar, as  regards the  second contention, contended that in the counter-affidavit  filed by  the respondent State it has been clearly  stated that  there are manufacturers of Indian made foreign  liquor in  Bihar itself.  In that counter, the dates of  licences issued  to such  manufacturers have  been stated and  it has  also been  stated that  they  have  been manufacturing and  selling Indian  liquors like Brandy, Rum, Whisky and  others and after this counter, as the petitioner had not filed any fresh affidavit challenging this statement of fact  made by  the  State  of  Bihar,  it  could  not  be contended that there was 552 no local  manufacture of  Indian made  foreign liquor in the State of  Bihar during  the period  about which  the present dispute  relates.   And  it   was  not  disputed  that  this contention about  the validity  of duty  as a countervailing duty could only be raised if on facts it is found that there was no  local manufacture  of Indian  made foreign liquor in the State  of Bihar. As the decision in Kalyani Stores’ case (supra)  is   based  on  a  situation  where  there  was  no manufacture of  Indian made  foreign liquor  in the State of Bihar as this case pertains to the State of Bihar itself. It is also  not disputed  that when  the same demand before the amendment of  the Act  by an Ordinance was challenged by the petitioner before  this Court  and it  was  quashed  by  the decision of  this Court  in Mohan Meakin Breweries Ltd. case (supra). mis  question of  the validity  of the  duty in the light of  Articles 301,  303 and  304 was  not raised before this Court  and it  was,  therefore,  contended  by  learned counsel  appearing   for  the   State  of  Bihar  that  this contention was  not raised  probably because it could not be contended that  during the  relevant  period  there  was  no manufacture of  Indian made  foreign liquor within the State of Bihar.      It would  be, therefore,  necessary to  find out  as to whether it  could be  held that  during the  relevant period there was  no manufacture  of Indian  made foreign liquor in the State  of Bihar. In paragraphs 28 and 29 of the petition it has  been specifically alleged by the petitioners that no foreign liquor similar to those manufactured and produced by the  petitioner   were  manufactured  and  produced  by  the

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petitioner were  manufactured and  produced in  the State of Bihar. In  Paragraph 9 of the Counter-affidavit, it has been clearly stated :           "mat with  regard to  the statements in paragraphs           28 and  30, I  deny that no foreign liquor similar           to those  manufactured, produced  and imported  by           the petitioner  are manufactured  and produced  in           the State of Bihar. me fact is that foreign liquor           similar  to   those  manufactured   produced   and           imported   by    the   petitioner    company   are           manufactured and produced in the State of Bihar by           some other  licences. Messers.  S. K. Shaw, Patna,           which  hold  licence  since  1942  to  manufacture           foreign   liquor    have   been    producing    or           manufacturing foreign liquor 553           Of various  varities, namely, Rum, Brandy, Whisky,           A Gin,  etc. since  then Messers Lakshminarain and           Sons of  Ranchi Distillery also hold licence since           1943-44 to  manufacture and produce foreign liquor           and  are   producing  and   manufacturing  foreign           liquor.  Similarly,  Messers  S.K.G.  Sugar  Ltd.,           Mirganj, have  been granted licence to manufacture           foreign liquor  and they are producing them in the           State". This is  clearly shown in the counter-affidavit filed by the i State.  This allegation  by the  petitioner  that  similar Indian made foreign liquor was not manufactured in the State of Bihar  during the  relevant time is not only specifically denied but  particulars about such manufacture and sale have been clearly  stated. An attempt was made by learned counsel for the petitioner to suggest that the documents filed along with this  counter do  not fully  establish  what  has  been stated in  this counter-affidavit  filed on  behalf  of  the State. me  counter-affidavit filed  on behalf  of the  State quoted above  in clear  and  categorical  terms  denied  the allegation made  by the petitioner and, therefore, it is not even necessary  to look  to the  documents in  support of it unless this statement made in the counter-affidavit filed on behalf of  the State  is challenged  by way  of a  rejoinder affidavit on  behalf of  the petitioner.  In the counter the names of  the licencees  who have  been given  licences  for manufacture and  the year  of licences, and all details have been stated  and it  was open to the petitioner if there was any need,  to challenge  this statement made in the counter- affidavit filed  on behalf of the State. In this view of the matter,  therefore,   on  the   facts  as  they  stand,  the contention of  the learned  counsel for  the petitioner that during the  relevant  period  similar  Indian  made  foreign liquor was not manufactured by any other manufacturer in the State of  Bihar  could  not  be  accepted.  It  was  frankly conceded that  the second contention based on the provisions contained in  Articles 301,  303 and 304 of the Constitution of India is based on a finding that there was no manufacture of similar excisable goods within the State of Bihar and the Judgment on  which reliance  is placed  i.e. Kalyani Stores’ case !  (supra) also will have no application if on facts it is found that during the relevant period similar Indian made foreign liquor  was manufactured  and sold  by manufacturers within the State of Bihar itself. 554      Thus we  are left  with the only other contention which pertains to Section 27 and 28 of the Act which reads thus :           "27. Power  to  impose  duty  on  import,  export,           transport and  manufacture - (1) An excise duty or

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         a countervailing duty, as the case may be, at such           rate or  rates as the State Government may direct,           may  be  imposed,  either  generally  or  for  any           specified local area, on -           a) any excisable article imported, or           b) any excisable article exported, or           c) any excisable article transported, or           d)  any   excisable  article   (other  than  tari)           manufactured under  any licence granted in respect           of clause (a) of Section 13, or           e) any  hemp plant  cultivated, or  any portion of           such plant collected, under any licence granted in           respect of  clause (b) or clause (c) of Section 13           or           f)  any  excisable  article  manufactured  in  any           distillary  or   brewery  licensed,   established,           authorised, or continued under this Act. Explanation- Duty  may be  imposed on any article under this sub-section at  different rates  according to  the places to which such  article is  to be  removed for  consumption,  or according to  the varying  strengths  and  quality  of  such article.           (2) A  duty, at  such rate  or rates  as the State           Government  may  direct,  may  be  imposed  either           generally or  for any specified local area, on any           tari drawn under any licence granted under Section           14, sub-section (1) :           (3) Notwithstanding  anything  contained  in  sub-           section (1) -           (i) duty  shall not  be imposed  hereunder on  any           article which has been imported into India and was 555      liable on  such importation,  to duty  under the Indian      Tariff Act, 1894 or the Sea Customs Act, 1878, if-      a) the duty as aforesaid has been already paid      b) a  bond has  been executed  for the  payment of such      duty. B      x x x x x      28. Ways  of levying  duty- Subject  to any  rules made      under Section  90, clause  (12), any duty imposed under      Section 27 may be levied in any of the following ways      (a) on an exciseable article imported -      i) by payment (upon or before importation) in the State      or in  the State or territory from which the article is      brought, or D      ii) by  payment upon  issue for  sale from a ware-house      established, authorised or continued under this Act;      (b) on an excisable article exported - E      by payment in the State or in the State or territory to      which the article is sent;      (c) on an excisable article transported-      i) by payment in the district from which the article is      sent, or      ii) by  payment upon  issue for  sale from a ware-house      established, authorized or continued under this Act: G      d) on  intoxicating drugs  manufactured, cultivated  or      collected-      i) by  a rate  charged upon  the quantity  manufactured      under a licence granted in respect of H 556           the provisions of Section 13, clause (a) or issued           A  for   sale  from   a  ware-house   established,           authorized or continued under this Act, or           ii)by a  rate assessed  on the area covered by, or           on the quantity or outturn of, the crop cultivated

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         or collected under a licence granted in respect of           the provisions of Section 13, clause (b) or clause           (c);           (e)  on   spirit  or   beer  manufactured  in  any           distillery  or   brewery  licensed,   established,           authorised or continued under this Act,-           (i) by  a rate  charged upon the quantity produced           in or  issued from  the distillery  or brewery, as           the case  may be,  or issued for sale from a ware-           house established,  authoized or  continued  under           this Act, or           (ii) in accordance with such sale, of equivalents,           calculated on  the quantity  of materials used, or           by the  degree of attenuation of the wash or wort,           as the  case may  be, as  the State Government may           prescribe, and           (f) on  tari drawn  under a  licence granted under           Section 14, sub-section (1)- by a tax on each tree           from which the drawing of tari is permitted;      Provided that,  where payment is made upon the issue of an excisable article for sale from a ware-house, it shall be at the  rate of  duty in  force on the date of issue of such article from such ware-house;      Provided also that no tax shall be levied in respect of any tree  from which  tari is drawn only for the manufacture of gur  or molasses and under such special conditions as the Board may prescribe".      By an  ordinance referred to above, a proviso was added to Section 28, which reads as under : 557           "Provided further  that in  case  of  excisable  A           articles imported  or transported  on  payment  of           duty according to the provisions of sub-clause (1)           of Clause  (a) or  Clause (c) of this Section, the           difference of duty resulting from any provision in           the rates  of duty subsequent to such import shall           be realised from or credited to the account of the           importing or  transporting licencees  according to           the revised  rate of  duty which  may be higher or           lower than  the previous  rate and the calculation           thereof shall  be made  on the  balance  stock  of           excisable article  on the date the revised rate of           duty comes into effect".      According to  the learned counsel for the petitioner in the scheme  of these  two sections,  Sec. 27 is the charging section and  Section 28  provides for  procedure. A  careful scrutiny of the two sections indicates that the two sections put together  provide for  the scheme of levy of excise duty and it  could not  be said  that the two sections are in two separate water-tight  compartments. Under Section 27 when an excisable article  is imported,  this  section  provides  an excise duty or countervailing duty at rate or rates that the State Government may direct could be imposed. By the proviso which has  now been added to Section 28 it has been provided that when  any excisable  article is imported or transported on payment of duty according to the provisions of sub-clause (i) of  Clause (a)  or Clause (c) the difference of the duty resulting from any provision of the rates of duty subsequent to  such  import  shall  be  realised  or  credited  to  the importing  or   transporting  licencee.   This,   therefore, provides for a situation where after import or transport the rate is revised either enhanced or reduced still that can be adjusted on  the basis  of the stock in existence on the day when the  rate is  revised and this is what specifically was held in  Mohan Meakin  Breweries Ltd.  case (supra) as their

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Lordships observed:           "The main  part of  Rule 147  applies  to  foreign           liquor  imported  under  bond  which,  as  already           stated,  is   kept   in   an   excise   ware-house           established under  the Act.  It provides that duty           imposed on  foreign  liquor  imported  under  bond           shall be paid before removal from the excise ware-           house unless a 558           bond has been executed for such payment. Under the           proviso to Rule 147 in case of any revision of the           rate of duty on an excisable article, the licencee           to whom  the article has been issued on payment of           duty prior  to such  revision is liable to pay the           difference of duty on the quantity of such article           that may remain in his possession when the revised           rate of duty comes into force. The proviso must be           construed with  reference to  the main part of the           Rule. A  close scrutiny  of the  Rule reveals that           the main  part and  the proviso deal with the same           subject-matter.  The   expression  ’an   excisable           article’  in  the  proviso  means  foreign  liquor           imported under  bond and  other articles  on which           duty is  payable before  removal from  the  excise           ware-house or  distillery where  they are kept. It           is for  this reason  that under  the  proviso  the           difference of duty is realised from or credited to           the licencee  to whom  the article has been issued           from  the   excise  ware-house  or  distillery  on           payment  of  duty  prior  to  such  revision.  The           proviso does  not apply  to all  imported  foreign           liquor. It applies only to foreign liquor imported           under bond, that is to say foreign liquor on which           duty has  been levied  under Section  28(a)(ii) by           payment upon  issue for  sale from an excise ware-           house. It  does not  apply to  foreign liquor  not           imported under  bond  upon  which  duty  has  been           levied under  Section 28(a)(i).  The petitioner is           not, therefore, liable to pay under the proviso to           Rule 147  the difference of duty in respect of its           stock of  foreign liquor  on November 1, 1947. The           demand for  payment of  the difference  of duty in           respect of this stock is not authorised by the Act           or the proviso to Rule 147". The proviso  to Rule  147  which  was  considered  by  their Lordships in  this case  no doubt practically is same as now has been  added to  Section 28  and their Lordships rejected the contention  of the  State on  the ground that under this Rule the  difference of  duty could only be charged if it is imported on  a bond  as provided  in the earlier part of the rule on  which duty  has not been charged and, therefore, it was held  that this rule could not be of any help in case re the 559 excisable articles  are imported  after the  payment of duty and A it is this which has now been specifically provided in the explanation added to Section 28.      As  discussed   earlier,  the   contention  that   this amendment to  Section 28  could  not  be  deemed  to  be  an amendment to  the  charging  section  as  according  to  the learned counsel,  Section 27  alone is the charging section. As discussed  earlier such  a distinction  between these two sections can  hardly be  drawn. Apart  from it,  it  is  not contended that  the Legislature  was not  competent to enact such an amendment in the statute. In this view of the matter

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this contention also cannot be accepted. No other ground was urged.      In the  light of  the  discussions  above,  we  see  no substance in  this petition.  It is, therefore, dismissed in the circumstances  of the case. Parties are directed to bear their own  costs. If  any security  is deposited it shall be refunded to the petitioner. A.P.J.                                   Petition dismissed. 560