Case: State Of U.P.  Vs. Saraya Industries Ltd

Meakin Breweries Ltd. v. Excise & Taxation Commissioner, Chandigarh 6 the appellant company carried on the business of manufacture, storage and sale of liquors. Between June 1967 and April 1969, it transported various quantities of liquor from its distilleries in U.P. to its bonded warehouse at Chandigarh. On arrival, the consignments were examined by the officer-in-charge of the warehouse, and a shortage was found, exceeding the wastage allowance permissible under Rule 8 of the Punjab Bonded Warehouse Rules, 1957. The Excise and Taxation Commissioner, exercising the powers of the Financial Commissioner, issued a show cause notice and then ordered the appellant to pay duty on the wastage in excess. The show cause notice required the appellant to pay duty on excess wastage in course of import of liquor from U.P. and the rules governing the appellants licence provided for a wastage allowance not exceeding 1 per cent of the actual loss in transit by leakage or breakage of vessels or bottles containing liquor, and if the wastage exceeded the prescribed limit the licensee should be liable to pay duty at the prescribed rate as if the wastage in excess of the prescribed limit had actually been removed from the warehouse, and it was also provided that the Financial Commissioner could in his discretion on good cause being shown remit the whole or a part of the duty leviable on such wastage, and these provisions were challenged. This Court held that the impugned rules did not impose any new duty or create any liability and that they were in essence and substance of a regulatory character meant to guard against perpetration of fraud or deception on the revenue. "They provide for and regulate the storage and subsequently the removal of liquor from the bonded warehouse, on payment or otherwise of the duty which is chargeable under the Fiscal Rules of 1937." We agree with Mr. Agarwal that the instant Rules 636 and 814 are also of regulatory character and they are precautionary against perpetration of fraud on the excise revenue of the exporting State. If out of the quantity of military rum in a consignment, a part or portion is claimed to have been wastage in transit and to that extent did not result in export, the State would, in the absence of reasonable explanation, have reason to presume that the same have been disposed of otherwise than by export and impose on it the differential excise duty. A statute has to be construed in light of the mischief it was designed to remedy. There is no dispute that excise duty is a single point duty and may be levied at one of the points mentioned in Section 28. 37. In Government of Haryana v. Haryana Brewery Ltd. and Another [(2002) 4 SCC 547] , whereupon Mr. Dwivedi relied upon, this Court emphasized the need of a forum where a reasonable explanation for loss of good could be raised. In this case, such a forum was not available. 38. In State of Bihar and Others v. Industrial Corporation (P) Ltd. and Others [(2003) 11 SCC 465] , this Court clearly held: "In the present case, what we find is that before creating a demand of penal duty or penalty, there was no adjudication by any authority as regards the breach committed by the respondents. We also find that no opportunity of any kind was offered to the respondents before the demand as regards the penal duty was pressed against the respondents. The matter was not even examined as to what was the reason for shortfall in the production of rectified spirit. The Molasses Act does not provide for imposition of such penalty in the event of shortfall of spirit. It must, therefore, necessarily be held that the imposition of the impugned penalty being against the principles of natural justice is illegal and void." 39. The statutory authorities must act within the four corners of a statute. They could take recourse to the proceeding for levy of penalty and the recovery thereof from the respondents only in the event there existed any agreement or statutory provision therefor. Such a power did not vest in the Commissioner of Excise or the Superintendents of Excise who had issued the impugned demand notices. 40. It is, therefore, manifest that the duty has to be levied only in terms of the provisions of the statute and not de hors the same.41. It is accepted by Mr. Dwivedi that legislation relating to excise duty is relatable to Entry 51, List II of the Seventh Schedule of the Constitution of India. If that be so, provision for imposition of such duty or evasion thereof must be provided in terms of the law. By reason of an executive order, a presumption cannot be raised. No penalty can be levied. The matter would have been different, if the same was provided for, as has been sought to be done now, by way of terms and conditions of licence or in terms of the rules. By reason of an executive instruction, the provisions of the law cannot be effaced. A legislative policy, furthermore, must be laid down by the State. The matter relating to an excise policy must be framed by the State. It cannot be done by the Excise Commissioner. A distinction must be borne in mind between the concept of excise duty on production and manufacture of liquor and parting with the exclusive privilege of the State. Imposition of a penalty would not come within the purview of either of the two. When a price is fixed by the State for parting with its exclusive privilege, the same must again be provided in terms of the statute and the rules framed there under or by way of terms of licence. 42. Before parting with the case, however, we may observe that we have not gone into the question as regard the applicability of the rules vis-Ã -vis the new conditions imposed in the licence, in the instant case. 43.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Thus, by reason of the circular letter, the concept of payment of damages measured in terms of the excise duty had not been conceptualized.29. The legislative field in regard to levy of excise duty is covered by Entry 51, List II of the Seventh Schedule of the Constitution of India. It may be true that the resort to regulatory measures can be taken by the State, but the same must be done in the manner laid down under the Act. A provision which confers powers upon a statutory authority in terms whereof a penalty is to be imposed, damages are to be paid for non payment of excise duty, in our opinion, must be done through a valid subordinate legislation and not by way of issuance of a circularstatutory authorities must act within the four corners of a statute. They could take recourse to the proceeding for levy of penalty and the recovery thereof from the respondents only in the event there existed any agreement or statutory provision therefor. Such a power did not vest in the Commissioner of Excise or the Superintendents of Excise who had issued the impugned demand notices.It is, therefore, manifest that the duty has to be levied only in terms of the provisions of the statute and not de hors the same.41. It is accepted by Mr. Dwivedi that legislation relating to excise duty is relatable to Entry 51, List II of the Seventh Schedule of the Constitution of India. If that be so, provision for imposition of such duty or evasion thereof must be provided in terms of the law. By reason of an executive order, a presumption cannot be raised. No penalty can be levied. The matter would have been different, if the same was provided for, as has been sought to be done now, by way of terms and conditions of licence or in terms of the rules. By reason of an executive instruction, the provisions of the law cannot be effaced. A legislative policy, furthermore, must be laid down by the State. The matter relating to an excise policy must be framed by the State. It cannot be done by the Excise Commissioner. A distinction must be borne in mind between the concept of excise duty on production and manufacture of liquor and parting with the exclusive privilege of the State. Imposition of a penalty would not come within the purview of either of the two. When a price is fixed by the State for parting with its exclusive privilege, the same must again be provided in terms of the statute and the rules framed there under or by way of terms of