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