State not empowered to levy excise duty on wastage of alcohol after distillation: Supreme Court

State not empowered to levy excise duty on wastage of alcohol after distillation: Supreme Court

The Supreme Court ruled that the state is not empowered to levy excise duty on wastage of alcohol after distillation.

Background 

The appellant No. 2–Commissioner of Excise, Orissa, vide order dated 12th  September, 1990,  granted licence in favour   of   the   respondent­Company   for   manufacturing, bottling,   blending   and   reduction   of   Indian   Made   Foreign Liquor (hereinafter referred to as ‘IMFL’) from rectified spirit. The   license   was   granted   with   the   condition   that   the respondent­Company shall install one rectification column to rectify/purify the rectified spirit to be used in manufacturing of IMFL.

Arguments 

Advocate M.N. Rao, appearing on behalf of the appellants, contended that the Committee was constituted on the basis of the representation of the respondent ­Company. He submitted that once the Committee had recommended allowing of wastage only to the extent of 2%, it was not permissible for the respondent Company to submit that the demand of excise duty on weak spirit, which was more than 2%, is not tenable. 

Advocate Soumyajit Pani, appearing on behalf of the respondent, argued that the issue is no more res integra. The Constitution Bench of the Court, consisting of seven Judges, in the case of Synthetics and Chemicals Ltd. and others v/s State of U.P. and others has held that the State Legislature had no authority to levy duty or tax on industrial alcohol, which is not fit for human consumption as that could only be levied by the Centre.

Decision 

The division bench of Justice L. Nageswara Rao and Justice B.R. Gavai noted that the Constitution Bench has held that the Constitution makers distributed the term ‘alcohol liquor’ into two heads, viz., (a) for human consumption; and (b) other than for human consumption. 

The court stated that the Constitution Bench clearly held that the State Legislature had no authority to levy duty or tax on alcohol, which is not for human consumption as that could be levied only by the Centre. 

The court dismissed the appeals and held that in view of the legal position as settled by the Constitution Bench of the Court in the case of  Synthetics and Chemicals Ltd. and the three Judge Bench in the case of  Modi Distillery and the statutory provisions contained in the said Act, there is no reason to interfere with the impugned judgment and order. 

Case title: State of Orissa & Ors. v/s M/S Utkal Distilleries Ltd. 

Citation: CIVIL APPEAL NOS.5666­5668 OF 2009

Click here to read the Order/Judgment

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