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PETITIONER: MOHAN MEAKIN BREWERIES LTD.

       Vs.

RESPONDENT: COMMISSIONER OF EXCISE, BIHAR & ORS.

DATE OF JUDGMENT: 17/10/1968

BENCH: BACHAWAT, R.S. BENCH: BACHAWAT, R.S. HIDAYATULLAH, M. (CJ) SIKRI, S.M. MITTER, G.K. HEGDE, K.S.

CITATION:  1970 AIR 1171            1969 SCR  (2) 457

ACT: Bihar  &  Orissa Excise Act (2 of 1915), ss. 27, 28  and  r. 147--Increase  in  duty on liquor--Increased  rate   whether leviable on goods imported after payment of duty before date from which increased duty payable--Rule 147, proviso whether justifies  realisation  of enhanced levy in such case.

HEADNOTE: The  petitioner  was  a company  manufacturing  Indian  made foreign liquor in Himachal Pradesh and Uttar Pradesh.It  had depots for sale of its products at Patna and Ranchi  in  the State  of   Bihar.   Before October 13,  1967  it  .imported foreign liquor into the State of Bihar from Himachal Pradesh and  Uttar  Pradesh for purposes of sale at  its  Patna  and Ranchi  depots on payment of duty at the then current  rate. Duty on liquor from Himachal Pradesh was paid upon or before importation by making deposits in the State Bank of India at Patna and Ranchi. Duty on liquor from Uttar Pradesh was paid on  importation by making deposits with the   government  of that  State.  By  notification  dated October 13, 1967  duty on foreign liquor was enhanced with. effect from November 1, 1967.   The  Superintendent of Excise,  Patna  directed  the company  to  pay  the, difference in  duty  on  the  opening balance  of  Indian  made foreign liquor  in  its  stock  on November  1, 1967.  The company challenged the demand  in  a writ petition under Art. 32 of the Constitution.  Apart from ss. 27 and 28 of the Act the respondent State relied on  the proviso to r. 147 of the Rules made under s. 90 of the Act. HELD i  (i) The foreign liquor was imported before  November 1, 1967 on payment of duty at the current rate in the manner indicated  in s. 28(a)(i).  Duty on imported foreign  liquor was enhanced with effect from November 1, 1967.  Sections 27 and  28 did not authorize the levy of the enhanced  duty  on the  liquor imported before November 1, 1967 but lying  with the importer on that date. (ii)  A close scrutiny of r. 147 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

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which  duty  is  payable. before  removal  from  the  excise warehouse 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  licensee  to  whom  the article  has  been  issued  from  the  excise  warehouse  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  s. 28(a)(ii) by payment upon issue, for sale from  an excise  warehouse.  It does not apply to foreign liquor  not imported under bond upon which duty has  been levied   under s.  28(a)(i).   The  petitioner’s  foreign  liquor  was  not imported   under  bond.  The petitioner  was  therefore  not liable to pay under the proviso 3 Sup.C.I./69--12 458 to r. 147 the difference of duty in respect of its stock  of foreign liquor on November 1, 1967.  The demand for  payment of  the  difference of duty in respect of this stock was not authorized by the Act or the proviso to r. 147. [460 C--F]

JUDGMENT: ORIGINAL JURISDICTION: Writ Petition, No. 14 of 1968. Petition  under  Art. 32 of the Constitution  of  India  for enforcement of the fundamental rights. M.C. Chagla, S.K. Mehta, K.L. Mehta and S.K. Khanna, for the petitioners. C.K.  Daphtary,  Attorney-General and D.P.  Singh,  for  the respondents. The Judgment of the Court was delivered by     Bachawat,J.   The  petitioner  company,   Mohan   Meakin Brewenes  Ltd., manufactures and soils Indian  made  foreign liquor.  Its distilleries are situated at Solan in  Himachal Pradesh and at Lucknow and Mohan Nagar in Uttar Pradesh.  It has  depots for sale of its products at Patna and Ranchi  in the  State  of Bihar. Before October 13,  1967  it  imported foreign  liquor into the State of Bihar from Solan,  Lucknow and Mohan Nagar for purposes of sale at its Patna and Ranchi depots  on payment of duty at the then current rate  of  Rs. 14.40  L.P. litres.  Duty on the liquor from Solan was  paid upon  or before importation by making deposits in the  State Bank  of India at Patna and Ranchi. Duty on the liquor  from Lucknow and Mohan Nagar was paid upon importation by  making deposits with the Uttar Pradesh Government.’     By  a  notification,  dated October  13,  1967  duty  on foreign liquor was enhanced from Rs. 14.40 to Rs. 26.20  per L.P. litres with effect from November 1, 1967.  By an order, dated  January 3, 1968 the Superintendent of Excise,  Patna, directed  the  Company  to  pay  by  January  31,  1968  the difference  in  duty on the opening balance  of  India  made foreign  liquor in its stock on November 1, 1967.   In  this writ petition under Art. 32 of the Constitution the  Company challenges the legality of the levy.     Duty on foreign liquor imported into the State of "Bihar is  chargeable  under s. 27(1)(a) of the  Bihar  and  Orissa Excise Act, 1915 (Bihar and Orissa Act H of 1915).   Subject to  any rules made under s. 90 clause (12), the duty may  be levied   under s. 28 (a) in two ways.  The first  method  as indicated  in  s. 28 (a) (i) is by payment  upon  or  before importation either in the State of Bihar or in the State  or territory from which the article is brought.  This method is followed  when the liquor is not imported under  bond.   The

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second  method as indicated in s. 28 (a)(ii) is  by  payment upon issue for sale from a warehouse established, authorized or continued under the Act.  In view of the first pro- 459 viso  to  s. 28 the payment is made at the rate of  duty  in force  on  the  date  of  issue  of  the  article  from  the warehouse.   This  method  is followed when  the  liquor  is imported under bond.  The form  the bond at page 215 of  the Bihar  and Orissa Excise Manual, Vol. II, Part I, issued  in 1957  shows that foreign liquor imported under bond is  kept without  payment of duty  in  a  warehouse established  with the approval of the Excise Commssioner under s. 15. In  view of s. 17 no article can be removed from the warehouse unless duty  has  been  paid or a bond has been  executed  for  the payment thereof.     In  the  present case, the foreign liquor  was  imported before  November 1, 1967 on payment of duty at  the  current rate  in  the  manner indicated  ins.   28(a)(i).   Duty  on imported  foreign  liquor  was  enhanced  with  effect  from November  1, 1967.  Sections 27 and 28 do not authorize  the levy  of  the enhanced duty on the  liquor  imported  before November 1, 1967 but lying with the importer on that date.     Section 28, however, is subject to any rules that may be made  by  the Board of Revenue, Bihar, under  s.  90  clause (12).   The State of Bihar seeks to justify the levy of  the enhanced duty on the stock of imported foreign liquor  lying with the petitioner on November 1, 1967 under the proviso to Rule  147 ,framed by the Board of Revenue.  That Rule is  as follows :--                 "147. The duty imposed on               (i)  foreign liquor and country  spirit--               (a)  imported under bond, or               (b)  manufactured in a distillery, and  stored               in a distillery or excise warehouse;               (ii) Ganja and Bhang--               (a)  imported under bond, or               (b) stored in ’an excise warehouse, shall  be  paid  before  removal from  the   distillery   or excise  warehouse unless a bond has been executed  for  such payment.     Provided  that  in case of any revision in the  rate  of duty on an excisable article, the difference  of  duty shall be realised from or credited to the  licensee,  to whom such article  has  been issued on payment of duty prior  to  such revision, according as the revised rate of duty is higher or lower  than  the  old  rate  and  the  ’calculation  of  the difference  of duty shall be made  on  the quantity of  such article that may remain in possession of such licensee  when the revised rate of duty comes into force." 460     The  main  part of Rule 147 applies  to  foreign  liquor imported under bond which, as already stated, is kept in  an excise  warehouse established under. the Act.   It  provides that’  duty  imposed on foreign liquor imported  under  bond shall  be   paid  before removal from the  excise  warehouse unless  a 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 license 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

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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 warehouse 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  licensee  to  whom  the article  has  been  issued  from  the  excise  warehouse  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 s.  28(a)(ii) by payment upon issue for sale from an  excise warehouse.  It does not apply w foreign liquor not  imported under  bond upon which duty has been levied under s. 28  (a) (i).   The petitioner’s foreign  liquor  was   not  imported under bond.  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 petitioner also challenged the constitutionality of s. 27 and the rites of the proviso to Rule 147.  In view  of our   conclusions aforesaid, it is not necessary  to  decide these questions.   In  the  result,  there  will be  an  order  in  terms  of (a)  (iii)  and  (b)  of the petition.   The  order  of  the Superintendent of Excise, Bihar, dated January 3, 1968, copy whereof  is  Annexure B,to the petition is quashed  and  set aside and the respondents are prohibited from enforcing  the aforesaid   order.   The  respondents  shall  pay   to   the petitioner the costs of the petition. G.C.                                      Petition allowed. 461