Case: Mohan Meakln Breweries Ltd Vs. Excise &amp; Taxation Commer. Chandigarh &amp; Ors

other narcotic drugs and narcotics;but not including medicinal and toilet preparations containing alcohol or any substance included in sub-para graph (b) of this Entry."The expression countervailing duty is not defined in the Act but its meaning has been made clear in the Judgment the this Court in Kalyani Stores v. The State of Orissa and or.([1966] 1 S.C.R. 865.) where it was ob served :"This bring the consideration of the meaning of the expression "countervailing duties" used in Entry 51. List II of the Seventh Schedule to the Constitution. The "expression "countervailing duties" has not been defined in . the Constitution or the Bihar &Orissa Act 2 of 1915. We have, therefore, to depend upon its etymological sense and the context in which it has been used in Entry 51. In its etymological sense, it means t o counterbalance; to avail against with equal force or virtue; to compensate for some thing or serve as an equivalent of or substitute for: sec Blacks live Dictionary, 4th Edn. 421. This would suggest that a countervailing duty is imposed for the purpose of countervailing or to avail against something with equal force or to compensate for something as an equivalent. Entry in List II of the Seventh Schedule to the Constitution gives power to the State Legislature to impose duties of excise on alcoholic liquors for human consumption where the goods are manufactured of produced in the State. It also gives power to levy countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India. The fact that countervailing duties may be imposed at the same or lower rates suggests that they are meant for counterbalance the duties of excise imposed on goods manufactured in the State. They may be imposed at the same rate as excise duties or at a lower rate, presumably to equalise the burden after taking into account the cost of transport from the place of manufacture of the taxing State. It seems, therefore, that countervailing duties are ment to equalise the burden on alcoholic liquors manufactured or produced in the State. If no alcoholic liquors similar to t hose imported into the state are produced or manufactured, the right to impose counterbalancing duties of excise levied on the goods manufactured in the state will not arise. It may, therefore, be accepted that countervailing duties can only be levied is similar goods are actually produced or manufactured in the state on which excise duties are being levied."It will be seen that section 31 of the Act read with Entry 51 of` List II of the Seventh Schedule to the Constitution permits imposition of (i) excise duty by the state Government on any exisable article imported into or exported from or transported ill accordance with the provisions of section 16 of the Act which means after payment of any duty to which it may be liable under the Act or after execution of a bond for such payment and (ii) countervailing duty inter alia on Alcoholic liquors for human consumption manufactured or produced elsewhere in India.5. The contention advanced on behalf of appellant which seems to proceed on the assumption that the Chandigarh Administration cant impose duty only if liquor is consumed in its territory is erroneous as, according to section 31 of the Act read with the aforesaid Entry 51 of List of the Seventh Schedule to the Constitution, countervailing duty can be imposed on liquor meant for consumption which is manufactured or produced elsewhere in India. It is immaterial whether the liquor for which permits were obtained was consumed within the Union Territory of Chandigarh or was in existence in that territory or not. What is material is whether permits were obtained for import from Uttar Pradesh of alcoholic Liquor meant for human consumption and the quantity showing in the permits left Uttar Pradesh. In the present case, the liquor for which permits were obtained by the appellant was admittedly in existence and was meant for human consumption and did leave the appellants distilleries in Uttar Pradesh for being transported to his Warehouse in Chandigarh at his own risk and responsibility. It is also not denied on behalf of the appellant that Portion of the liquor which exceeded the permissible limit of wastage did not reach the appellants Warehouse and was not found therein and the shortage remained unaccounted for. It is thus evident that duty is not sought to be charged on an excisable article which w as not in existence, as contended on behalf of the appellant but is sought to be charged on liquor which was actually manufactured and left Uttar Pradesh but was found short beyond the permissible limit and no reasonable explanation was tendered by the appellant in respect thereof. There is accordingly no merit or substance in the second contention advanced on behalf of the appellant as well. The decision of this Court in Bimal Chandra Banerjee v. State of Madhya Pradesh ([1971] 1 S.C.R. 844.) which is strongly relied upon on behalf of the appellant is not applicable to the present case. In that case, the condition introduced by the state Government in the purported exercise of its power under clause (d) and (h) of section 62(2) of the Madhya Pradesh Excise Act, 1915, in the appellants licenses prescribing the minimum quantity of liquor to be purchased by them from the Government and enjoining them to make compulsory payment of excise duty on the quantity of liquor which they failed to take delivery of was held to be invalid as it went beyond. The provisions of sections 25, 26 27, 62(1) and clauses (d) and (h) of section 62(2) of the aforesaid Act. In the present case, however, the liquor was lifted by the appellant from its distilleries in Uttar Pradesh and a portion thereof remained unaccounted for, as already stated, on arrival of the consignments at their destination.6. For the foregoing reasons, the respondents were right in demanding the duty on the shortages.7.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]The first contention raised on behalf of appellant is, therefore,the present case, the liquor for which permits were obtained by the appellant was admittedly in existence and was meant for human consumption and did leave the appellants distilleries in Uttar Pradesh for being transported to his Warehouse in Chandigarh at his own risk and responsibility. It is also not denied on behalf of the appellant that Portion of the liquor which exceeded the permissible limit of wastage did not reach the appellants Warehouse and was not found therein and the shortage remained unaccounted for. It is thus evident that duty is not sought to be charged on an excisable article which w as not in existence, as contended on behalf of the appellant but is sought to be charged on liquor which was actually manufactured and left Uttar Pradesh but was found short beyond the permissible limit and no reasonable explanation was tendered by the appellant in respect thereof. There is accordingly no merit or substance in the second contention advanced on behalf of the appellant as well. The decision of this Court in Bimal Chandra Banerjee v. State of Madhya Pradesh ([1971] 1 S.C.R. 844.) which is strongly relied upon on behalf of the appellant is not applicable to the present case. In that case, the condition introduced by the state Government in the purported exercise of its power under clause (d) and (h) of section 62(2) ofthe Madhya Pradesh Excise Act, 1915, in the appellants licenses prescribing the minimum quantity of liquor to be purchased by them from the Government and enjoining them to make compulsory payment of excise duty on the quantity of liquor which they failed to take delivery of was held to be invalid as it went beyond. The provisions of sections 25, 26 27, 62(1) and clauses (d) and (h) of section 62(2) of the aforesaid Act. In the present case, however, the liquor was lifted by the appellant from its distilleries in Uttar Pradesh and a portion thereof remained unaccounted for, as already stated, on arrival of the consignments at theirthe foregoing reasons, the respondents were right in demanding the duty on the shortages.