Supreme Court of India
MOHAN MEAKIN BREWERIES LTD.versusCOMMISSIONER OF EXCISE, BIHAR AND ORS.
- Citation
- 1986 INSC 80
- Decided
- 15 April 1986
- Disposal
- Dismissed
- Bench
- R B MISRA
Holding
Sections 27 and 28 together form the scheme of levy and the proviso added to Section 28 validly authorises adjustment of duty on existing stock, rendering the demand for difference of duty unauthorised.
Summary
The petitioner, Mohan Meakin Breweries, challenged a fresh demand for the difference of excise duty on its stock of Indian‑made foreign liquor as on 1 Nov 1967. The demand was based on a proviso added by a 1971 ordinance to Section 28 of the Bihar & Orissa Excise Act, 1915, which allowed the State to realise the difference in duty when rates were revised after import. The petitioner argued that Section 27 alone is the charging provision, that the amendment could not retrospectively raise duty, and that, under Articles 301‑304 of the Constitution, the duty was invalid because no such liquor was manufactured in Bihar. The State countered that manufacturers existed in Bihar and that the amendment was a valid procedural addition to the existing levy scheme. The Court held that Sections 27 and 28 together constitute the levy scheme, that the proviso validly permits adjustment of duty on existing stock, and that the demand was not authorised; consequently the petition was dismissed.
Issues considered
- Whether the amendment adding a proviso to Section 28 of the Bihar & Orissa Excise Act, 1915 validly permits recovery of the difference of duty on stock after duty has already been paid
- Whether the amendment alters the charging provision in Section 27 and thus requires a constitutional amendment
- Whether the State can retrospectively revise excise duty rates by notification
- Whether Articles 301, 303 and 304 of the Constitution preclude the duty because of alleged absence of local manufacture of Indian‑made foreign liquor in Bihar
Legislation cited
Subjects
Excise dutyDifference of dutySection 27Section 28Bihar & Orissa Excise ActRetrospective rate increaseArticles 301-304Countervailing dutyRule 147Art. 32 writ petition
Judgment
547
A
v.
OH«SSilll!R OF EICISI, BDWI. & ORS.
APRIL 15, 1986 B
[R.B. MISRA AND G.L. OZA, JJ,)
Bihar and Orissa Excise Act, 1915 - Sections 27 & 28 -
~Difference of duty resulting from any increase in the rates of
duty subsequent to import - Realisation of from importing or
- •
,
transporting licencees - Whether valid and permissible.
Rate of duty on Indian made foreign liquor was enhanced
by Notification dated October 13, 1967 effective from November
C
1, 1967. Consequently the Superintendent of Excise directed
• the petitioner-company to pay the difference of duty on the
balance of stock as on November 1, 1967. That demand order was D
challenged by the petitioner under Art. 32. This Court in
Hoblln !f.e•Jrfn B~es Ltd. v. Cowt""loner of kcfae, B1bar &
Ora. [1969] 2 s.c.R. 457, held that in view of ss. 27 and 28
of the Bihar & Orissa Excise Act 1915, and also in view of
rule 147 framed by the Board of Revenue, such an order for
recovery of the difference of duty cannot be passed and, E
i- therefore, the demand was quashed, After this decision, an
ordinance amending the Act was issued by the Governor of
Bihar. It added a proviso to s, 28 of the Act, Pursuant to
- this amendment, a fresh notice of demand was issued by the
Assistant Excise Colllllissioner for recovery of difference of
4 duty on the stocks as on 1.11.67 which was earlier demanded F
and quashed by this Court.
The petitioner again filed a petition under Arti-cle 32
challenging the fresh demand contending: (i) that in the
scheme of the Act, s. 27 is the charging section and s, 28
provides for procedure, Under section 27(a) the duty is G
leviable on the import of excisable goods , and duty to be
levied will be according to the rate in force on the date the
goods are imported in the State of Bihar; (ii) that the
incident of duty not having been amended by mere addition of a
proviso to s. 28 the levy of additional duty according to the
revised rate could not be charged; (iii) that the Act does not H
548 SUPREME COURT REPORTS (1986) 2 S.C.R.
A
authorise the Executive under the delegated function by
issuance of a Notification to revise the rates retrospec- \...-·•
tively; (iv) that in the State of Bihar, there was no
manufacture of Indian ude foreign liquor and thus in view of
Articles 301, 303 and 304 of the Constitution, there is no
justification for imposing or enhancing the excise duty on
B import of Indian made liquor in the State of Bihar; and ( v)
that in view of the scheme of the said Articles of the
Constitution, the duty which could be imposed on Indian made
foreign liquor imported in the State of Bibar could only be~
justified as a countervailing duty but as no Indian made
foreign liquor was manufactured in the State of Bibar, such a
c duty was not justified, and in any event, the notification "-
enhancing the rate of duty is bad being unconstitutional.
On behalf of the respondents-State, it was contended
that there are manufacturers of Indian 1111de foreign liquor in•
Bibar itself, that they have been manufacturing and selling
D Indian made foreign liquors and it could not be contended that
there was no local •nufacturer of Indian made foreign liquor
in the State of Bihar during the period to which the present
dispute relates.
Dismissing the petition,
E
llKLD: 1. Sections 27 and 28 of the Bihar & Orissa Excise
Act, 1915 put together provide for the schelll! of levy of
excise duty and it could not be said that the two sections are
in two separate water tight compart1111nts. (557 D)
F 2. Under s. 27 when an excisable article is imported,
this section provides an excise duty or countervailing duty at "(
rate or rates that the State Govt. may direct could be
imposed. By the proviso which has now been added to s. 28, it
bas been provided that when any excisable article is imported
or transported on paYlll!nt of duty according to the provisions
G of sub-el. (1) of cl. (a) or cl. (c) the difference of the
duty resulting from any provision of the rates of duty
subsequent to such import shall be realised or credited to the
importing or transporting licence. lbis provides for a
situation where after import or transport the rates is revised
either enhanced or reduced still that can be adjusted on the
H basis of the stock in existence on the day when the rate is
MOHAN MEAKIN BREWERIES v. COMMR. OF EXCISE [OZA, J. ) 549
A
revised and this is what specifically was held in Mohan Meakia
'~--, JlreRriea Ltd. case (supra). (557 D-G)
3. The Proviso of Rule 147 practically is same as now
has been added to s. 28 and under this Rule the difference of
duty could only be charged if it is imported on a bond. This
rule could not be of any help in case where the excisable B
articles are imported after the payment of duty and it is this
which has now been specifically provided in the Explanation
~dded to s. 28. (558 G-H; 559 A)
- ORIGINAL JURISDICTION : Writ Petition No. 451 of 1971.
Under Article 32 of the Constitution of India. c
G.L. Sanghi, S.K. Mehta and M.K. Dua for the Petitioner •
• D. Goburdhan and R. Goburdhan for the Respondents.
D
The Judgment of the Court was delivered by
O'LA, J. This petition under Art. 32 of the Constitution
has been filed by the petitioner challenging a notice of
demand Annexure 'C' dated 22nd September, 1971 calling upon
~he petitioner to pay the difference of duty on the balance of
stock on 1st November, 1967 of the Indian made foreign liquor E
imported in the State of Bihar. This notice was based on an
, amendment in Section 28 of the Bihar And Orissa Excise Act,
1915 ('Act' for short) brought about by an Ordinance
~ prolll.tl.gated by the Governor of Bihar dated 21st August, 1971.
'r" In fact earlier the rate of duty was enhanced by F
Notification dated October 13, 1967 and it was with effect
from November 1, 1967. The Superintendent of Excise, Patna
directed the petitioner Company to pay the difference of duty
on the pending balance of Indian made foreign liquor in its
stock on November 1, 1967 and that order of the Superintendent
Excise was challenged by the petitioner Company in a petition G
under Art. 32 of the Constitution and by the decision of this
). .J.Court in ~ M!altin Bret11eries Ltd. v. ea.Lssiooer of
J Kircise, Bihar & Ors., [1969] 2 S.C.R. 457 it was held that in
view of the Sections 27 and 28 of the Act and also in view of
Rule 147 framed by the Board of Revenue, such an order for
H
550 SUPREME COURT REPORTS [19861 2 s.c.R.
A
recovery of the difference of duty cannot be passed and
therefore the demand was quashed, After this decision which\-·-+'
was pronounced on October 17, 1968 it appears that the
Governor of State of Bihar issued an ordinance amanding the
Bihar And Orissa Excise Act, 1915 which was published in the
Gazette on 23rd August, 1971. By this Ordinance, a proviso was
B added to Section 28 of the Act, after the first proviso and it
reads :-
"Provided further that in case of excisabl~
articles imported or transported on paymant of duty
according to the provisions of sub clause (1) of
c clause (a) or clause (c) of this section, the
difference of duty resulting from any provision in · /
the rates of duty subsequent to such import shall~
be realised from or credited to the account of the
importing or transporting licences according to the'!'
revised rate of duty which may be higher or lower
D than the previous rate and the calculation thereof
shall be made on the balance stock of excisable
article on the date the revised rate of duty comas
into effect".
And it is in pursuance of this amandmant that a fresh notice
E of demand was issued to the petitioner by the Assistant Excis~
Commissioner, Patna for the recovery of difference of duty on
the stocks on 1.11.67 which was earlier demanded and which was
quashed by the decision in Mohan Meakin Breweries Ltd. case ....
and by the present writ petition this demand has again been
challenged. )._
F
Two contentions have been raised by the learned counsel-r
for the petitioner.
That in the schema of the Act Section 27 is the charging
section and Section 28 is only a section which provides for
G the procedure. Under Section 27(a) the duty is leviable on the
import of excisable articles and, therefore, the incident of
levy is the fact of import of the excisable goods. The duty
which could be levied will be according to the rate in forc':lio .._.(
on the date the goods are imported in the State of Bihar. It
is not disputed that the stocks in hand on l,ll.67 are goods
H which have been imported after the paymant of duty as
MOOAN MF.AKIN BREWERIES v. CCllMR. OF EXCISE [OZA, J.) 551
required in clause (a) of Section 27. It was, therefore, A
contended that as in the scheme of Section 27 the incident of
duty is the import of excisable goods and that not having
been amended by mere addition of a proviso to Section 28 the
levy of additional duty according to the revised rate could
not be charged as the charging event under the scheme of
Section 27 is the import of excisable goods. It was also B
contended that there is no provision in the Act which
authorises the Executive under the delegated function by
~ issuance of a Notification to revise the rates retrospec-
tively. Therefore, the rate if revised could be enforced for
charging of duty on the excisable goods which are imported
after the rate is revised as there is no amendment to Section
27 which is the charging section. c
'nle second contention advanced by the learned counsel for
• the petitioner was that in the State of Bihar there was no
manufacture of Indian made foreign liquor and thus in view of
Articles 301, 303 and 304 of the Constitution of India, there
is no justification for imposing or enhancing the excise duty D
on import of Indian made foreign liquor in the State of Bihar.
As it was contended that in view of the scheme of the above
mentioned articles of the Constitution, the duty which could
f: only be justified as a countervailing duty but as no T-idian
made foreign liquor was manufactured in the State of Bihar
such a duty was not justified and in any event the E
notification enhancing the rate of the duty, therefore, is bad
• being unconstitutional and in support of this contention,
learned counsel placed reliance on the decision in Kalyani
--"' Stores v. 1he State of Oriaaa and Others, [1966) 1 s.c.R. 865.
No other question was raised.
F
Learned counsel appearing for the respondents State of
Bihar, as regards the second contention, contended that in the
counter-affidavit filed by the respondent State it has been
clearly stated that there are manufacturers of Indian made
foreign liquor in Bihar itself. In that counter, the dates of
licences issued to such manufacturers have been stated and it G
has also been stated that they have been manufacturing and
selling Indian liquors like Brandy, Rum Whisky and others and
after this counter, as the petitioner had not filed
any fresh affidavit challenging this statement of fact made by
the State of Bihar, it could not be contended that there was
H
552 SUPREME COURT REPORTS (1986] 2 s.c.R.
A no local manufacture of Indian made foreign liquor in the
State of Bihar during the period about which the present \-
dispute relates. And it was not disputed that this contention
about the validity of duty as a countervailing duty could only
be raised if on facts it is found that there was no local
manufacture of Indian made foreign liquor in the State of
Bihar. As the decision in Kalyani Stores' case (supra) is
B based on a situation where there was no manufacture of Indian
made foreign liquor in the State of Bihar as this case ~
pertains to the State of Bihar itself. It is also not disputed
that when the same demand before the amendment of the Act by
an Ordinance was challenged by the petitioner before this
Court and it was quashed by the decision of this Court in
c Mohan Meakin Breweries IA:d. case (supra). This question of the
validity of the duty in the light of Articles 301, 303 and 304
was not raised before this Court and it was, therefore, •
contended by learned counsel appearing for the State of Bihar
that this contention was not raised probably because it could
not be contended that during the relevant period there was no
D manufacture of Indian made foreign liquor within the State of
Bihar.
It would be, therefore, necessary to find out as to
whether it could be held that during the relevant period there ::!
was no manufacture of Indian made foreign liquor in the State
E of Bihar. In paragraphs 28 and 29 of the petition it has been
specifically alleged by the petitioners that no foreign liquor
similar to those manufactured and produced by the petitioner
were manufactured and produced by the petitioner were
manufactured and produced in the State of Bihar. In Paragraph )
9 of the Counter-affidavit, it has been clearly stated :
F
"That with regard to the statements in paragraphs
28 and 30, I deny that no foreign liquor similar to
those manufactured, produced and imported by the
petitioner are manufactured and produced in the
State of Bihar. The fact is that foreign liquor
G similar to those manufactured produced and imported
by the petitioner company are manufactured and
produced in the State of Bihar by some other ;:.,
licences. Messrs. S. K. Shaw, Patna, which hold
licence since 1942 to manufacture foreign liquor
have been producing or manufacturing foreign liquor
H
MOOAN MEAKIN BREllERIES v. CCllHR. OF EXCISE [OZA, J.] 553
of various varities, namely, Rum, Brandy, Whisky, A
Gin, etc. since then Messrs Iakshminarain and Sons
of Ranchi Distillery also hold licence since
1943-44 to manufacture and produce foreign liquor
and are producing and manufacturing foreign liquor.
Similarly, Messrs S. K. G. Sugar Ltd., Mirganj, have
been granted licence to manufacture foreign liquor B
and they are producing them in the State".
This is clearly shown in the counter-affidavit filed by the
State. This allegation by the petitioner that similar Indian
- made foreign liquor was not manufactured in the State of Bihar
during the relevant time is not only specifically denied but
'"t particulars about such manufacture and sale have been clearly c
stated. An attempt was made by learned counsel for the
~ petitioner to suggest that the documents filed along with this
counter do not fully establish what has been stated in this
counter-affidavit filed on behalf of the State. The
counter-affidavit filed on behalf of the State quoted above in
clear and categorical terms denied the allegation made by the D
petitioner and, therefore, it is not even necessary to look to
the documents in support of it unless this statement made in
the counter-affidavit filed on behalf of the State is
f- challenged by way of a rejoinder affidavit on behalf of the
petitioner. In the counter the names of the licencees who have
-
been given licences for manufacture and the year of licences, E
and all details have been stated and it was open to the
petitioner if there was any need, to challenge this statement
~ made in the counter-affidavit filed on behalf of the State. In
this view of the matter, therefore, on the facts as they
"'- stand, the contention of the learned counsel for the
~ petitioner that during the relevant period similar Indian made F
foreign liquor was not manufactured by any other manufacturer
in the State of Bihar could not be accepted. It was frankly
conceded that the second contention based on the provisions
contained in Articles 301, 303 and 304 of the Constitution of
India is based on a finding that th£:re was no manufacture of
similar excisable goods within the State of Bihar and the G
.;. ~ Judgment on which reliance is placed i.e. Kalyani St:ores' case
-> (supra) also will have no application if on facts it is found
that during the relevant period similar Indian made foreign
liquor was manufactured and sold by manufacturers within th
State of Bihar itself. e
H
554 SUPREME COURT REPORTS (1986) 2 S.C.R,
A
Thus we are left with the only other contention which \---~
pertains to Section 27 and 28 of the Act which reads thus :
"27. Power to impose duty on import, export,
I
transport and manufacture - (1) An excise duty or a
countervailing duty, as the case may be, at such
B rate or rates as the State Government may direct,
may be imposed, either generally or for any
specified local area, on -
a) any excisable article imported, or
b) any excisable article exported, or •
c c) any excisable article transported, or
d) any excisable article (other than tari)
manufactured under any licence granted in respect
of clause (a) of Section 13, or
e) any hemp plant cultivated, or any portion of
D s.uch plant collected, under any licence granted in
respect of clause (b) or clause (c) of Section 13
or
f) any excisable article manufactured in any
distillary or brewery licensed, established, c:t
E authorised, or continued under this Act.
Explanation- Duty may be imposed on any article under this
sub-section at different rates according to the places to
..
which such article is to be removed for consumption, or
according to the varying strengths and quality of such
F article.
(2) A duty, at such rate or rates as the State
Government may direct, may be imposed either
generally or for any specified local area, on any
tari drawn under any licence granted under Section
G 14, sub-section (1) :
(3) Notwithstanding anything contained
sub-section (1) -
(i) duty shall not be imposed hereunder on any
article which has been imported into India and was
MOHAN MEAKIN BREWERIES v, COMMR. OF EXCISE [OZA, J,] 555
liable on such importation, to duty under the A
Indian Tariff Act, 1894 or the Sea Customs Act,
1878, if-
a) the duty as aforesaid has been already paid
b) a bond has been executed for the payment of such
duty. B
x x x x x
-
28. Ways of levying duty- Subject to any rules made
under Section 90, clause (12), any duty imposed
under Section 27 may be levied in any of the
following ways :- C
,. (a) on an exciseable article imported -
i) by payment (upon or before importation) in the
State or in the State or territory from which the
article is brought, or D
ii) by payment upon issue for sale from a
ware-house established, authorised or continued
under this Act;
(b) on an excisable article exported -
-
E
by payment in the State or in the State or
territory to which the article is sent;
(c) on an excisable article transported-
F
i) by payment in the district from which the
article is sent, or
ii) by payment upon issue for sale from a
ware-house established, authorized or continued
under this Act;
G
d) on intoxicating drugs manufactured, cultivated
or collected-
i) by a rate charged upon
manufactured under a licence granted the quantity
in respect of H
556 SUPREME COURT REPORTS [1986] 2 s.c.R.
the provisions of Section 13, clause (a) or issued\- - -
A for sale from a ware-house established, authorized
or continued under this Act, or
ii)by a rate assessed on the area covered by, or on
the quantity or outturn of, the crop cultivated or
collected under a licence granted in respect of the
B
provisions of Section 13, clause (b) or clause (c);
(e) on spirit or beer manufactured in any
.
distillery or brewery licensed, established,
authorised or continued under this Act,-
(i) by a rate charged upon the quantity produced in~
-
c or issued from the distillery or brewery, as the
case may be, or issued for sale from a ware-house•
established, authoized or continued under this Act,
or
(ii) in accordance with such sale, of equivalents,
o calculated on the quantity of materials used, or by
the degree of attenuation of the wash or wort, as
the case may be, as the State Go11ern~nt may
p~cdbe,~ ~
(f) on tari drawn under a licence granted under
E Section 14, sub-section (1)- by a tax on each tree
from which the drawing of tari is permitted;
).
Provided that, where pa~nt is made upon the issue of an
excisable article for sale from a ware-house, it shall be at...,.
the rate of duty in force on the date of issue of such article I"
F from such ware-house;
Provided also that no tax shall be le11ied in respect of
any tree from which tari is drawn only for the manufacture of
gur or molasses and under such special conditions as the Board
may prescribe".
G ~~~
By an ordinance referred to abo11e, a proviso was added to
Section 28, which reads as under
R
MOHAN MEAKIN BREl<ERIES v, CCMMR. OF EXCISE [OZA, J, ] 557
"Provided further that in case of excisable A
articles imported or transported on payment of duty
according to the provisions of sub-clause (1) of
Clause (a) or Clause (c) of this Section, the
difference of duty resulting from any provision in
the rates of duty subsequent to such import shall
be realised from or credited to the account of the B
importing or transporting licencees according to
the revised rate of duty which may be higher or
lower than the previous rate and the calculation
.. thereof shall be made on the balance stock · of
excisable article on the date the revised rate of
duty comes into effect".
c
According to the learned counsel for the petitioner in
Ill.the scheme of these two sections, Sec. 27 is the charging
section and Section 28 provides for procedure. A careful
scrutiny of the two sections indicates that the two sections
put together provide for the scheme of levy of excise duty and
it could not be said that the two sections are in two separate D
water-tight compartments. Under Section 27 when an excisable
article is imported, this section provides an excise duty or
countervailing duty at rate or rates that the State Government
..,may direct could be imposed. By the proviso which has now been
added to Section 28 it has been provided that when any
excisable article is imported or transported on payment of E
duty according to the provisions of sub-clause (i) of Clause
(a) or Clause (c) the difference of the duty resulting from
.. any provision of the rates of duty subsequent to such import
shall be realised or credited to the importing or transporting
-.,.licencee. This, therefore, provides for a situation where
lllJ after import or transport the rate is revised either enhanced F
or reduced still that can be adjusted on the basis of the
stock in existence on the day when the rate is revised and
this is what specifically was held in }bhan Meakin Breweries
IA:d. case (supra) as their Lordships observed:
"The main part of Rule 147 applies to foreign G
liquor imported under bond which, as already
stated, is kept in an excise ware-house established
under the Act. It provides that duty imposed on
foreign liquor imported under bond shall be paid
before removal from the excise ware-house unless a
H
558 SUPREME COURT REPORTS [1986] 2 S,C.R,
A
bond has been executed for such payment. Under the 1-~ ...
proviso to Rule 147 in case of any revision of the
rate of duty on an excisable article, the licencee
to whom the article has been issued on payment of
duty prior to such revision is liable to pay the
difference of duty on the quantity of such article
that may remain in his possession when the revised
B
rate of duty comes into force. The proviso 1111st be
construed with reference to the main part of the•
Rule. A close scrutiny of the Rule reveals that the'
-
main part and the proviso deal with the same
subject-matter. The expression 'an excisable
c
article' tn the proviso means foreign liquor
imported under bond and other articles on which
duty is payable before removal from the excise
-r
ware-house or distillery where they are kept. It is AA
for this reason that under the proviso the
difference of duty is realised from or credited to
the licencee to whom the article has been issued
from the excise ware-house or distillery on payment
D
of duty prior to such revision. The proviso does
not apply to all imported foreign liquor. It
applies only to foreign liquor imported under bond,
that is to say foreign liquor on which duty has ~
been levied under Section 28(a)(ii) by payment upon
E issue for sale from an excise ware-house. It does
not apply to foreign liquor not imported under bond
upon which duty has been levied under Section '
28(a)(i). The petitioner is not, therefore, liable ._
to pay under the proviso to Rule 147 the difference JI""
of duty in respect of its stock of foreign liquor ....ii.
F
on November 1, 1947, The demand for payment of the Ill'
difference of duty in respect of this stock is not
authorised by the Act or the proviso to Rule 147".
The proviso to Rule 147 which was considered by their
Lordships in this case no doubt practically is same as now has
G
been added to Section 28 and thel.r Lordships rejected the
contention of the State on the ground that under this Rule the
difference of duty could only be charged if it is imported on_.•
a bond as provided in the earlier part of the rule on which
duty has not been charged and, therefore, it was held that
this rule could not be of any help in case where the
H
MOOAN MFAKIN BRBIBRIES v. CCH!R. OF EXCISE [OZA, J. ) 559
lllllii.... cisable articles are imported after the payment of duty and A
~ is this which has now been specifically provided in the
explanation added to Section 28.
As discussed earlier, the contention that this amendment
to Section 28 could not be deemed to be an amendment to the
charging section as according to the learned counsel, Section B
27 alone is the charging section. As discussed earlier such a
,+/istinction between these two sections can hardly be drawn.
Apart from it, it is not contended that the Legislature was
not competent to enact such an amendment in the statute. In
this view of the matter this contention also cannot be
accepted. No other ground was urged.
c
t Inthe light of the discussions above, we see no .
-*ubstance in this petition. It is, therefore, dismissed in the
circumstances of the case. Parties are directed to bear their
own costs. If any security is deposited it shall be refunded
to the petitioner.
D
A. P.J. Petition dismissed.
~
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