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

There two Civil Appeals Nos. 1418 of 1970 and 582 of 1971, the first by certificate of fitness granted under Article 133(1)(a) of the Constitution by the Punjab and Haryana High Court and the second by special leave granted by this Court which are directed against the Judgments and orders of the said High Court dated December 4, 1969, and July 29, 1970, rendered in Civil Writ Petitions No. 342 of 1969 and No. 2376 of 1970 respectively shall be disposed of by this Judgment as they arise out of identical proceedings and raise common questions ofappellant, a public limited company incorporated under the Indian Companies Act, which carried on the business inter alia of manufacture, storage and sale of various kinds of Indian made foreign liquors and had its plants for manufacture and production of beer and distillation and production of the said liquors at Solan (in Himachal Pradesh), at Mohan Nagar (in Uttar Pradesh), at Lucknow (in Uttar Pradesh) and at Kasauli (in Himachal Pradesh) held in the years 1967, 1968 and 1969  licence in From B.W.H. 2 under section 22 of the Punjab Excise Act (1 of 1914) (hereinafter referred to as the Act) read with Rule 2 of the Punjab Bonded Warehouse Rules, 1957 (herein after referred to as the 1957 Rules) which were framed by the Financial Commissioner under section 59 read with section 22 of the Act, permitting it to run on conditions specified therein a Bonded Warehouse at Chandigarh for storage of bottled and bulk liquor and issue thereof under bond or on payment of duty to the licensees of Punjab, Haryana, Himachal Pradesh etc. One of these conditions required the appellant to observe the provisions of the Act as also the Rules framed and instructions issued thereunder from time to time. Rules 7 to 10 of 1957 Rules governing the appellants licence ranNo liquor shall be received in the bonded warehouse unless accompanied by a pass from the officer-in-charge of the distiller- or bonded warehouse from which it has been imported or transported.Immediately on arrival of a consignment at the bonded warehouse the officer-in-charge shall be informed and the consignment shall not be opened until the same has been examined and verified with the pass by the officer-in-charge who shall also note the results in the register maintained for the purpose and also on the pass covering the consignment. One copy of the pass with entries of receipt shall be immediately returned to the officer, who issued the pass ; the other copy with entries thereon. shall he kept in the. Warehouse.A wastage allowance not exceeding 1 per cent shall be made for the actual loss in transit by leakage or breakage of vessels or bottles containing liquor. The allowance shall be determined by deducting from the quantity despatched the quantity received at the destination, both quantities being that in terms of proof liters of spirit contents or in case of beer bulk liters.9. If the report of the officer-in-charge shows that the wastage exceeds the prescribed limit, the licensee shall 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.Provided that each case of excessive wastage shall be re ported to the Financial Commissioner for orders who may in his discretion, on good cause being shown remit it whole or a .. part or the duty leviable on such wastage.10. Liquor shall be imported/transported under bond in accordance with the Punjab Liquor permit and Pass Rules at the sole risk and responsibility of the licensee. The bond in form L. 37 shall be discharged, after liquor been duly checked and proved by the officer-in-charge and deposited in the Ware-house."Between Junc. 1967 and April, 1969, the appellant transported. for the purpose of bottling, various quantities of Indian made foreign liquors from its aforesaid distilleries in Uttar Pradesh and Himachal Pradesh to it Bonded Warehouse at Chandigarh. This was done on the strength of the permits issued by the Excise and Taxation officer, Chandigarh. Pursuant t o Rule 7 of the 1957 Rules, the officer-in-charge of the Warehouse examined the consignments on their arrival at their destination with a view to checking and verifying the quantities thereof with those shown in the permits and discovered th at they suffered from shortage which exceeded the wastage allowance of 1 per cent permissible under Rule 8 of the saida sequel to the detection of the aforesaid shortages. the Excise and Taxation Commissioner exercising the po wers of Financial Com missioner, Chandigarh Administration, who is the first respondent here in, issued notices calling upon the appellant to show Cause why duty at the prescribed rate of Rs. 20/- per proof litre be not levied against it o n the wastage in excess of the prescribed limit "as if the same had been removed from its Bonded Warehouse at Chandigarh." In the written representation submitted on behalf of the appellant in reply to the notices, it was pleaded that the liquor evaporated during transit: that the Bonded Warehouse was in its initial stage and the method of measurement of spirit was crude; that at the time of measurement, the temperature of spirit was not taken and that apart from evaporation, wastage occurred by leakage of drums in transit. By his detailed orders dated January 10, 1969 and February 10, 1970, the said respondent repelled all the pleas raised on behalf of the appellant and made the  notices absolute holding that there was no material on the record to show that anything peculiar had taken place in respect of the consignments in question which entitled the appellant to any remission in the duty leviable on the wastage. The appellant thereupon preferred to the High Court writ petitions Nos. 342 of 1969 and 2376 of 1970 under Articles 226 and 227 of the Constitution challenging the aforesaid orders on various grounds. While the first writ petition was dismissed by the High Court by an elaborate Judgment and order dated December 4, 1969, the second one was dismissed in limine vide order dated July 29, 1970. While the High Court granted, as already indicated, a certificate of fitness for appeal to this Court against its Judgment and order dated December 4, 1969, it refused to so in respect of its order dated July 29, 1970.

Court's reasoning:
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.