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PETITIONER: THE STATE OF BOMBAY

       Vs.

RESPONDENT: M/S.  S. S. MIRANDA LIMITED

DATE OF JUDGMENT: 25/03/1960

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B.

CITATION:  1960 AIR  898            1960 SCR  (3) 397

ACT: Excise    Duty--Imposition   at   successive    stages    of transportation  of  excisable  article--Validity  of--Bombay Abkari Act, 1878 (Bom.  V of 1878), ss. 10, 19 & 19A.

HEADNOTE: The  respondent held a trade and import licence for  foreign liquor as well as a vendor’s licence under the Bombay Abkari 51 398 Act.   It  kept liquor in a bonded warehouse.  On  April  2, 1948,  the  appellant  asked the respondent  to  remove  the liquor from the bonded warehouse after paying the  necessary excise  duty.   The  respondent  paid  the  duty,  got   the transport permits and took over the liquor, some of which it sold.   On  December  16,  1948,  the  appellant  issued   a notification doubling the duty on foreign liquor and  called upon the respondent to pay the additional duty on the liquor which  was  still  lying  in  its  godown.   The  respondent contended  that  the imposition of additional  duty  on  the stock on which duty had already been paid at the time of its issue from the bonded warehouse was illegal.  The appellants case  was  that  the respondent was bound to  pay  the  duty prevailing  on  the  transport  of liquor  at  the  time  of transporting  the  same from its premises to  another  place within the State of Bombay: Held, that the imposition of the additional excise duty  was illegal.   Once the duty had been paid the liquor  could  be transported  free from any further imposition, except  where it was transported to a region where the duty was  different from the region where the duty was paid.  There was no power in  the  State Government to impose duty at  every  movement during  the course of the trade.  Though there was power  in the legislature to levy duty at every movement of liquor, it had  not  exercised that power; nor had  it  delegated  such power to the State Government.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 21 of 1956. Appeal from the judgment and decree dated August 12,1954, of

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the Bombay High Court in Appeal No. 45 of 1954, arising  out of  the judgment and decree dated February 17, 1954, of  the said High Court in Suit No. 246 of 1956. H.   J.  Umrigar,  N. N. Keswani and R. H. Dhebar,  for  the appellant. M.   C.  Setalvad, Attorney-General of India, S.  M.  Dubash and G. Gopalakrishnan, for the respondents. 1960.  March 25.  The Judgment of the Court was delivered by WANCHOO,  J.--This is an appeal on a certificate granted  by the  Bombay High Court.  The brief facts necessary  for  its disposal are these.  Messrs.  S. S. Miranda Ltd (hereinafter called the respondent) is a company and was holding a  trade and  import licence of foreign liquor as well as a  vendor’s licence  under  the  Bombay Abkari Act  (Bom.   V  of  1878) (hereinafter 399 called  the  Act), upto the end of March 1949.  It  used  to keep  the liquor in a bonded warehouse.  On April  2,  1948, the   respondent  was  informed  by  the  State  of   Bombay (hereinafter  called the appellant) to remove S, the  liquor from the bonded warehouse after paying the necessary  excise duty.  In pursuance of this letter, the respondent paid  the duty  and got transport permits from the appellant.  It  may be  mentioned that the bonded warehouse was in the  premises of  the  respondent itself and all that happened  after  the payment  of the duty was that the liquor no longer  remained in  bond  but came into possession of the  respondent.   The transport  permits  were  issued  on  April  5,  1948,   and thereafter  the respondent took over the liquor and some  of it  was  sold.   On December 16, 1948,  a  notification  was issued  by  the appellant (hereinafter referred  to  as  the Notification)  whereby  the  duty  on  foreign  liquor   was doubled.    Thereupon  the  respondent  was  asked  by   the appellant  to pay the additional duty upon the liquor  which was  still  lying in its godown and was also  told  that  it would  not be permitted to deal with that liquor  until  the additional  duty was paid.  The respondent objected to  this demand  but  paid the duty, which came to over two  lacs  of rupees, under protest.  Thereafter a notice was given by the respondent under s. 80 of the Code of Civil Procedure to the appellant and was followed by a suit on the original side of the Bombay High Court. The   main  contention  of  the  respondent  was  that   the Notification  in so far as it imposed and levied  additional duty  on the stock of foreign liquor on which the  duty  had already been paid at the time of its issue’ from the  bonded warehouse  was illegal, invalid and ultra vires the Act  and in  particular  beyond the scope of s. 19 of the  Act.   The respondent therefore claimed refund of the duty which it had paid  under  protest and also interest at 6  per  cent.  per annum from the date of payment till the date of recovery. The  suit  was resisted by the appellant, and its  case  was that the Notification was valid and that the respondent  was bound  to  pay the duty prevailing on 400 the  transport  of  the excisable articles at  the  time  of transporting  the  same from its premises to  another  place within the State of Bombay. Thus  the  only  question that fell  for  consideration  was whether  the  additional duty imposed and levied  under  the Notification  was  legally levied.  The learned  judge,  who tried the suit, was of the opinion that it was competent for the legislature to impose tax on excisable articles whenever they  were  transported from one place to another  and  that that  power was delegated-to the State Government which  was

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thus  competent to impose a duty on excisable  articles  not only  once when they were transported in the  beginning  but also  thereafter  whenever they were  transported  from  one place  to another within the State before the  goods  passed into the hands of the consumer, and dismissed the suit. The  respondent went in appeal against the  dismissal.   The appeal was heard by a Division Bench and was allowed and the suit  was  decreed  with interest  at  certain  rates.   The Division Bench was of the opinion that reading ss. 10 and 19 together it was clear that when the duty mentioned in s.  19 had  been  paid,  the prohibition contained in  s.  10  must disappear subject to the Explanation to s. 19.  It also held that  the  first proviso to s. 19A of the Act was  really  a proviso  to s. 19 and determined the rate at which the  duty was to be paid and that there could be no further imposition of   duty  against  the  terms  of  that  proviso   by   the Notification. The main contention on behalf of the appellant before us  is that it is open to the legislature to impose excise duty  at more points than one and that that was what has been done by the legislature in this case and the Government when it made the  Notification  in  December 1948 was  carrying  out  the provisions  of  the Act.  Reliance in  this  connection  was placed  on ss. 3(10), 10 and 19 of the Act, and it is  urged that reading these three sections, together it will be clear that the Notification was valid and within the powers of the State Government. The relevant portion of the Notification is in these terms:- 401 "  In exercise of the powers conferred by section 19 of  the Bombay  Abkari Act, 1878 (Bombay V of 1878), and in  partial supersession of all previous orders and notifications issued thereunder, that is to say, in so far as they relate to  the imposition  of excise and countervailing duties  charged  on the excisable articles specified in column 1 of Schedules  A and B hereto annexed, the Government of Bombay is pleased to direct that- (a)  excise  or  countervailing duty, as the  case  may  be, shall  be  imposed on the excisable  articles  specified  in column  1 of Schedule A at the rate specified in  columns  2 and 3 thereof, when such excisable articles are (i)  imported  into  the  Province in  accordance  with  the provision of sub-section (1) of section 9 of the said Act; or (ii) issued  from  any brewery, distillery ’or  a  warehouse established under the said Act in the Province; or (iii)     transported from the premises of persons holding a Trade  and  Import license under the said Act to  any  place within the Province: Provided that no such duty shall be imposed on the excisable articles  which  have been imported into British  India  and were  liable  on such importation to duty under  the  Indian Tariff Act, 1934, or the Sea Customs Act, 1878: Provided  further that if excise or countervailing duty  has already  been  paid  on such excisable  articles  for  their import,  issue  or transport for consumption  into,  to-  or within  any place in the Province, the amount of duty to  be imposed  shall be the difference between the amount of  duty leviable  at  the rates specified in the said  Schedule  and that already paid on such articles; and (b).......................................". Then  follow  the Schedules Which it is unnecessary  to  set out.  By the notification excise duty at the rates specified in the Schedules is imposed on excisable articles when  they

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are transported from the premises of persons holding a trade and  import licence under the said Act to any  place  within the State.  The second 402 proviso,  however, provides that where some excise duty  has already  been paid in connection with transport, the  amount of  duty to be imposed under the Notification would  be  the difference between the duty leviable under the  Notification and the duty already Paid. The  narrow  question therefore is whether  this  additional duty  can be legally levied by the State of Bombay  and  the answer to it will depend on the three provisions of the  Act relied  upon  by  the appellant.   Sec.  3(10)  defines  "to transport" to mean "to move to one place from another  place within  the State ". This definition is very wide and  would cover  any movement of excisable article at any  stage  from one place to another within the State. Then comes s. 10, the relevant portion of which is in  these terms- " No intoxicant and no hemp shall be exported or transported unless- (a)  the  duty,  if any, payable under Chapter VI  has  been paid or a bond has been executed for the payment thereof." This  section  thus forbids the transport of  any  excisable article  unless  the duty payable under  Chapter  VI  (which deals with the subject of duties) has been paid. Lastly,  we come to s. 19 which is the charging section  and is in these terms- " An excise duty or countervailing duty, as the case may be, at  such rate or rates as the State Government shall  direct may  be imposed either generally or for any specified  local area, on any excisable article- (a)  imported  in  accordance  with the  provision  of  sub- section (1) of s. 9; or (b)  exported   or  transported  in  accordance   with   the provisions of s. 10; or (c)  manufactured under a license granted in accordance with the provisions of section 14 or section 15; Provided that- (i)  duty  shall not be so imposed on any article which  has been imported into India and was liable on such  importation to duty under the Indian Tariff Act, 1894 or the Sea Customs Act, 1878: 403 Explanation-Duty  may  be  imposed  under  this  section  at different  rates  according  to  the  places  to  which  any excisable  article  is  to be removed  for  consumption,  or according  to  the  varying strengths and  quality  of  such article." This section gives power to the State Government to fix  the rate or rates on which the duty will be levied on  transport of excisable articles.  The Explanation to the section gives powers to the State Government to impose duties at different rates according to the places to which any excisable article is to be removed for consumption or according to the varying strengths and quality of such article. The  argument on behalf of the appellant is that in view  of the  very wide definition of the word " transport " and  the prohibition of transport contained in s. 10 without  payment of  duty it is clear that every time there is transport  the duty  becomes  payable  at  the  rate  fixed  by  the  State Government  under s. 19 and that there is nothing  in  these sections  which in any way limitsthe power to levy  duty  at every  stage of transport. If this argument is  accepted  it will logically mean that every time there is transport of an excisable  article  duty  will  have to  be  paid  till  the

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excisable  article  has been actually  consumed.   In  other words when for example, the excisable article is transported from  the bonded warehouse by a wholesaler he will  have  to pay duty on it; when a wholesaler sells to a retailer  there is  bound to be transport from the wholesaler’s premises  to the  retailer’s premises and the duty will have to  be  paid again.   Finally  when the retailer sells it to  a  consumer there  will again be transport from the retailer’s place  to the  consumer’s place and duty will have to be paid a  third time.   Further if the interpretation as urged on behalf  of the  appellant  is accepted, the duty will have to  be  paid again  and again in the cases mentioned above,  even  though the rate remains the same.  The fact that in this particular case the rate was changed and that the State Government only demanded  the  extra duty will not affect  the  question  of interpretation of the three provisions of the Act with which we  are  concerned.   Was  it  then  the  intention  of  the legislature when it 404 made these provisions to levy duty irrespective of the  fact whether  the rate was changed or not, again and again as  an excisable  article passed from the bonded warehouse  to  the wholesaler, from the wholesaler to the retailer and from the retailer to the consumer ?  It is true that it was competent for  the  legislature  to make such  a  provision;  but  the question  is whether the three provisions which we have  set out  above, amount to making such a provision.  Sri  Umrigar for the appellant fairly admits that if the rate of duty had not  been changed there would not have been any  -demand  of any  further duty on any sale by the respondent which  might have resulted in transport and that the practice was not  to charge the same duty over again on sale by the wholesaler to the retailer or by the retailer to the consumer even  though these   sales  resulted  in  transport  except   where   the Explanation  to  s.  19 applies.  If  this  practice  is  in accordance  with  law  when there is no change  in  duty  we cannot  see  how  the  excisable  article  which  had   been subjected to duty once will be liable to further duty  equal to  the  difference  when there is  increase  in  the  rate, (except  of course where the Explanation to s. 19  applies). We  see  nothing in s. 10 which lays down  that  every  time there  is transport, duty must be paid even though the  duty has  already  been  paid  when the  first  transport  of  an excisable article takes place.  What s. 10 prohibits is  the transport of excisable article unless the duty has been paid thereon.  Once the duty has been paid the prohibition  under s.  10 no longer applies, unless the case is covered by  the Expla. nation to s. 19.  However wide may be the  definition of  "  transport  "  what has to  be  seen  is  whether  the prohibition under s. 10 is to apply even to those  excisable articles on which duty has been paid.  On a plain reading of s.  10, the prohibition under that section cannot  apply  to transport of excisable articles on which duty has been paid. Section  19,  which is the charging  section,  provides  for levying  of  duty  on  transport  in  accordance  with   the provisions  of s. 10.  This brings us back to s. 10 and  the question  again  is  whether  the  prohibition  having  been removed by payment of duty once, there is anything in s.  10 which 405 requires that the duty should be paid again for transporting the goods on which duty has been paid.  As we read s. 10  we find  nothing in it which requires that duty should be  paid again  for  transport once the duty has been  paid  and  the prohibition removed subject always to the Explanation to  s.

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19.  Under that Explanation if there are different duties in different  regions and the excisable article which has  paid duty  of one region is removed to another region  where  the duty  is different the excess will have to be paid in  order that prohibition of transport in that region may be removed. But  apart from the cases covered by the Explanation we  can see  no justification for reading S. 10 as giving  power  to impose duty on the same excisable article again and again as it  moves  in  the course of trade  from,  say,  the  bonded warehouse  to the wholesaler and from the wholesaler to  the retailer  and from the retailer to the  consumer.   Plainly, therefore,  once the duty has been paid and the  prohibition under  s.  10  is removed the  transport  of  the  duty-paid excisable  article  can  take place free  from  any  further imposition, except where it is transported to a region where the  duty  is different from the region where  the  duty  is paid. Nor do we find any power in the State Government to impose a duty  at  every movement during the course of trade  in  the words  of  s.  19.   All  that  s.  19  empowers  the  State Government to do is to fix the rate of duty on transport  in accordance with s. 10.  There is no delegation to the  State Government  anywhere in the Act of the power to impose  duty from  stage  to  stage  during  the  movement  of  excisable articles  in  the  course of trade.  It  is  true  that  the legislature has the power if it so chooses, to levy duty  on every movement; but as we read the three provisions on which reliance has been placed we do not find any exercise of that power by the legislature.  Nor do we find any delegation  by the  legislature of any such power to the State  Government. The view therefore taken by the Division Bench that once the duty  mentioned in s. 19 has been paid the prohibition  con- tained  in  s.  10 must disappear, (subject  always  to  the Explanation to s, 19), and that there is nothing in 52 406 s.19 delegating any power to the State Government of levying excise duty more than once and at more than one point during the progress of the excisable goods from the time they leave the  bonded warehouse till the time they reach the  consumer is  in  our opinion correct.  It is not in dispute  in  this case that the Explanation to s. 19 does not apply. Turning  now  to the first proviso’.to s. 19-A,  it  may  be noticed  that that section deals with the manner of  levying duty.  But the first proviso goes further and lays down that where the duty is levied on issue from a bonded warehouse it will be at the rate in force on the date of issue.  We agree with  the  Division Bench that this proviso has  no  logical connection with s. 19-A and would more properly be a proviso to  s. 19.  It has nothing to do with the manner of  payment but  is  concerned  with the liability to pay  at  the  rate prevalent  on the date of issue from the  bonded  warehouse. If that is so, the quantum of tax is once for all determined by  this proviso subject always to the Explanation to s.  19 and  cannot  be  increased thereafter.   Reference  in  this connection was made to s. 15-A also.  But that section seems to  have been inserted as a measure of abundant caution  and does  not  appear  to go further than s. 10.   It  seems  to determine  the  time and manner of payment  in  cases  where excisable  articles are kept in a distillery or  brewery  or warehouse or other place of storage established or  licensed under the Act where duty may-not have been paid before  such storage.  It is not the charging section and cannot be  read to  go beyond s. 19 which is the charging section.   We  are therefore of opinion that on this ground also no  additional

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duty  could be charged from the respondent in this  case  as the Explanation to s. 19 has admittedly no application here. The  appeal  therefore fails and is  hereby  dismissed  with costs. Appeal dismissed. 407