IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.SIRI JAGAN FRIDAY, THE 2ND SEPTEMBER 2011 / 11TH BHADRA 1933 WP(C).No. 9221 of 2006(W) --------------------------------- PETITIONER(S): ------------------- M/S.SDF INDUSTRIES LTD., SDF HOUSE, 7/352, N.H.BYE PASS ROAD, CHANDRA NAGAR, PALAKKAD DISTRICT, REPRESENTED BY ITS LIAISON OFFICER, SUNNY MATHEW. BY ADVS. SMT.PRABHA R.MENON SRI.M.KRISHNAKUMAR RESPONDENT(S): --------------------- 1. CIRCLE INSPECTOR OF EXCISE, SDF INDUSTRIES LTD., PAMPADY, THIRUVILWAMALA, THRISSUR DISTRICT. 2. THE DEPUTY COMMISSIONER OF EXCISE, CENTRAL ZONE, ERNAKULAM. 3. STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES (G) DEPARTMENT, THIRUVANANTHAPURAM. R1 TO R3 BY GOVT. PLEADER SRI.ANTONY MUKKATH THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02/09/2011, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: svs W.P.(C). NO. 9221/2006 APPENDIX PETITIONER'S EXHIBITS: P1: COPY OF THE APPLICATION DATED 05/10/2005. P2: COPY OF THE ORDER NO.CZ7-6887/04 DATED 19/11/2005 ISSUED BY THE 2ND RESPONDENT. P3: COPY OF THE DEMAND NOTICE DATED 21/01/2006. RESPONDENT'S EXHIBITS: NIL /TRUE COPY/ P.A. TO JUDGE. svs S. Siri Jagan, J. =-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-=-= W.P(C) No. 9221 of 2006 =-=-=-=-=-=-=-=-=--=-=-=-=-=-=-=-=-= Dated this, the 2nd day of September, 2011. J U D G M E N T The petitioner is a distillery manufacturing Indian made foreign liquor (IMFL). They had a stock of IMFL, which the Kerala State Beverages Corporation did not take delivery of at a time when the KSBC had absolute monopoly of selling IMFL. On the said unused liquor manufactured during the period from 1999 to 31.3.2002, which became unusable because of passage of time, Ext.P3 notice dated 21.1.2006 was issued to the petitioner demanding Excise duty of Rs.17,99,137/-. The petitioner is challenging Ext.P3 on the ground that as per section 17 of the Abkari Act in force at the relevant time which was prior to its amendment on 1.4.2003, which is the one applicable in the petitioner's case, the petitioner is not liable to pay any excise duty on IMFL manufactured by the petitioner. The petitioner submits that this issue was considered by the Supreme Court of India in State of Kerala v. Maharashtra Distilleries Ltd., (2005) 11 SCC 1 and the Supreme Court has held that as per the unamended Section 17, no excise duty was payable by the manufacturer insofar as the levy was only on the goods and not on the manufacture. The Supreme Court held that the said levy was only a privilege price payable by the Kerala State Beverages Corporation in consideration of the State parting with its exclusive privilege of wholesale trade in IMFL and it is payable when IMFL is issued from the bonded warehouse of KSBC to the ultimate consumer. The petitioner W.P(C) No. 9221 of 2006 -: 2 :- therefore seeks the following relief: “Issue a writ or certiorari or any other appropriate writ, order or direction to quash Ext.P3 demand.” 2. A counter affidavit has been filed by respondents 1 and 2 taking the stand that even under the unamended Section 17 of the Kerala Distilleries Warehouse Rules, 1968, the petitioner is liable to pay excise duty on the IMFL manufactured by the petitioner even if the same became not usable on account of passage of time. 3. I have considered the rival contentions in detail. 4. I am satisfied that the issue is squarely covered by the decision of the Supreme Court in Maharashtra Distilleries case (supra). In paragraphs 84 and 85 of the said decision, the Supreme Court held thus: “From the above discussions the following conclusions emerge: 1. S.17 of the Kerala Abkari Act deals with imposition of duty not necessarily connected with manufacture of liquor and, therefore, the duty levied must in each case be examined before coming to a conclusion as to whether it is in reality a duty of excise. 2. The use of the words "duty of excise" in S.17 of the Act is not conclusive and it is for the courts to examine in each case as to whether it is in fact a "duty of excise". 3. In order that a duty may be characterised as "duty of excise" it must be shown that it is a duty on manufacture of goods. If it is unrelated to the manufacture of goods, it may be any other impost permitted by law, but would not qualify as a duty of excise. 4. S.18A of the Act permits the State of Kerala to grant exclusive or other privilege of manufacture, etc. on W.P(C) No. 9221 of 2006 -: 3 :- payment of rentals which includes the privilege of supplying liquor by wholesale or by retail. The annual rental payable under S.18A may be collected to the exclusion of or in addition to duty or tax leviable under S.17 and 18 of the Act. 5. That the State of Kerala by amendment of the Act and the relevant Rules created a monopoly in favour of the Kerala State Beverages Corporation. Licences in Form FL9 and BW1 have been given exclusively to the aforesaid Corporation which has also executed an agreement in Form A undertaking to pay the duty. A monopoly has been created in favour of the aforesaid Corporation in the wholesale trade of IMFL. In view of R.11 of the (Storage in Bond) Rules, duty is payable on the movement of IMFL from the bonded warehouse of the Beverages Corporation to the FL9 licensed premises. It is payable when IMFL is issued from the bonded warehouse of the Corporation. 6. The levy of duty on IMFL issued from a bonded warehouse licensed or established under S.12 or S.14 of the Act is referable to the duty levied under S.17(f) of the Kerala Abkari Act. 7. The notifications issued by the Government relate both to goods manufactured in the area or imported into the area. 8. The duty levied is on goods and not on manufacture. 85. Taking all these factors into account and having regard to the scheme of monopoly introduced by the State of Kerala in the year 1984 we must hold that the levy of duty is not a levy in the nature of "duty of excise" but is the privilege price payable by KSBC in consideration of the State parting with its exclusive privilege of wholesale trade in IMFL in favour of the aforesaid Corporation. (Underlining supplied) Going by the ratio of that decision, it is abundantly clear that as per the unamended Section 17 of the Abkari Act, no excise duty was payable on the manufacture of IMFL in the State of Kerala and what was payable was only a privilege W.P(C) No. 9221 of 2006 -: 4 :- price, that too, payable by the Kerala State Beverages Corporation in consideration of the State parting with its exclusive privilege of wholesale trade in IMFL, which is payable when IMFL is issued from the bonded warehouse of KSBC to the ultimate purchaser. As such, prior to the amendment of Section 17 with effect from 1.4.2003, there was no liability on the petitioner to pay excise duty on the manufacture of IMFL. Therefore, I am satisfied that the petitioner is entitled to succeed on the basis of the Supreme Court decision. Accordingly, Ext.P3 is quashed. The writ petition is allowed as above. Sd/- S. Siri Jagan, Judge.