Full Judgment Text
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CASE NO.:
Appeal (civil) 6323 of 1999
Appeal (civil) 6329 of 1999
PETITIONER:
T.J.BABY & OHERS
Vs.
RESPONDENT:
SAE OD KERALA & OTHERS
DATE OF JUDGMENT: 10/08/2000
BENCH:
B.N.Kirpal, S.N.Phukan, Ruma Pal
JUDGMENT:
Judgment
Kiral J.
The only question which arises for consideration in
these appeals is whether the appellants who are F.L. 1 and
F.L. 3 licence-holders under the Abkari Act of Kerala can
be made liable to pay any difference in excise duty due to
subsequent increase on the unsold stock of liquor which
remained with them at the close of the financial year having
purchased the same from the state-owned kerala State
Beverages (Manufacturing and
Marketing) Corporation Limited on which duty has
already been paid by the State Corporation when it was
issued out of the bonded warehouse.
Under the provisions of the Abkari Act different types
of licences are’ issued. As far as the appellants are
concerned F.L. 1 licence is issued to stoekists and
retailers and F.L. 3 licences are issued to bars and
restaurants. The holders of F.L. 1 licences can purchase
liquor for sale from the aforesaid Beverage Corporation to
whom F.L. 9 licence is issued. These stockists and
retailers then sell liquor to other dealers or to consumers
while the holders of F.L. 3 licences sell liquor in the
bars and restaurants run by them.
It appears that prior to 1st April, 1996 the duty of
excise on Indian- made foreign liquor was Rs. 20/- per
proof litre. With effect from 1^ April, 1996, Section 18 of
the said Act was amended and now the maximum rate of excise
duty could be Rs. 200/- per proof litre.
The respondents herein while invoking the provisions
of proviso to Section 18(3) sought to realise the
difference in the excise from the F.L. 1 and F.L. 3
licensees in respect of the stocks which were held by them
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as on 1.4.1996. It is not in dispute that the appellants
herein are licence-
hoiders whose licences have been extended for the
period from 1.4.1996 to 31.3.1997 and they were existing
Sicence-hoiders in the previous year as well.
The appellants chaiienged this imposition by filing
writ petitions in the Kerala High Court. Single Judge of
the said Court came to the conclusion, while allowing the
writ petitions, that such a demand could not be raised under
proviso to Section 18(3) from the F.L. 1 and F.L. 3
licensees. The State of Kerala went up in appeal. The
Division Bench while reversing the decision of the Single
Judge, and thereby dismissing the writ petitions, came to
the conclusion that the said proviso to Section 18(3)
enabled the State Government to realize from the licensees
who ho!d stocks the additional excise duty which had come
into effect from 1^ April, 1996.
Seeking to challenge the aforesaid decision, it has
been contended by the learned senior counsel for the
appellants that Section 18(3) can have no application to
F.L. 1 and F.L. 3 licensees who are not liable to pay
excise duty under Section 17 of the Act. Mr. Bhat, on the
other hand, submits that the plain reading of the said
proviso clearly indicates that all licensees including F.L.
1 and F.L. 3 licence-holders would be liable to pay
the difference-in the excise duty in the event of
there being an increase of ’the same.
In order to examine the proviso it is appropriate to
refer to the relevant provisions of the Act. Section 1 /
provides for levy of duty on liquor or intoxicating drugs.
The said Section reads as follows:
Duty on liquor or mtoxicatmg drugs:- ^[A duty of
excise or luxury tax or both shall, if the Government so
direct, be levied on all liquor and intoxicating drugs}
(a) permitted to be imported under ^[ x xx] Section 6;
or (b) permitted to be exported under [ x xx] Section 7; or
(c) permitted under Section 11 to be transported ; or (d)
manufactured under any licence granted under Section 12; or
(c) manufactured at any ’’[distillery, brewery, winery
or other manufactory] estabisihed under Section 14; or
(f) issued from a ^[distillery, brewery, winery or
other manufactory or warehouse] licensed or established
under Section 12 or Section 14; or
(g) sold in any part of the "[ x xx] State:]
’ Substituted for the opening paragraph "A duty of
such amount as the Diwan may prescribe shall if he so
direct, be levied on all liquor and intoxicating drugs" by
Section 5(1) of President’s Act I of 1964,
" The words "the proviso to" omitted by Section 18(a)
ofAct 10 of 1967. ^ Substituted for the word "distillery"
by Section 18(b) ofAct 10 of 1967. " Substituted for the
words "Distiller or warehouse" by Section 18© ibid. ’ The
word "Cochin omitted by Section 18(d) ibid.
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^Provided that no duty or gallonsgs fee or vend lee or
other taxes shall be levied under this Act on rectified
spuit inchlding absolute aichohol which is not intended to
be used for the manufacture of potable liquor meant for
human consuniption.]
^[Expianation:- For the purpose of;this section and
Section 18, the expression "duty of excise", with reference
to liquor or intoxicating drugs, include countervailing duty
on such goods manufactured or produced elsewhere in India
and brought into the State.]
Section 18 provides for the manner in which the duty
may be imposed and reads as follows: ’ . How duty may be
imposed:- 8(1) 9Such duty of excise may be levied:) .
(a) ^ xxx] in the case of spirits or been cither on
the quanta produced in or passed out of^[a distillery,
brewery or warehouse licensed or established under Section
12 or Section 143 as th^ case may be or in accordance with
such scale of equivalents, calculated on the quantity of
materials used or by the degree of attenuation of the wash
^[or wort or on the value of the liquor] as the case may be,
as the Government may prescribe;
(b) in the case of intoxicating drugs ^ x x x] on t^
quantity produced or manufactured ^[or issued from a
warehouse licensed or established under Section 14;]
^c).xxx (d) xxx]
^Substituted by Section 7 of Act 4 of 1990. ^
inserted by Section 5(ii) of President’s Act I ofl^64. *
Renumerated by Section 6 ofPresidenVs Act I of 19t>4
" Substituted for ths words "such duly may 1>e levied
in one oi more of the following ways" by Section 6(l)(l)
ibid. ^ The ;words "by duty of excise to he chased" omitted
by Section 6(i)(ii) ibid. "
Siibstttiitedfoithewords"thadistilieryoTbrew«a-y"by Section
10(l)ofActV of 1091. ^ Substituted by Section 8 of Act 4 of
1996.
" The words "by a duty to be rateably chaiged" omitted
by Section 6(l)(m) of President’s Act I of 1964.
^AddedbySection 10(ii)ofActVofl091. ^ Clauses © & (d)
omitted by Section 6(l)(iv) ofPi^sidenVs Act I of 1964.
(e) in the case of toddy, or spirits manufactured from
toddy, ^[in the form of a tax on each tree from which toddy
is drawn), to be paid in such instalments and for such
period as the Government may direct; or
({) by ^import, export orj transport duties assessed
in such manner as the Government may direct;
- ^xxxJ ’
^[(2) The luxuly’ tax on hquor or intoxicating drugs
shall be fevied:-
f(i) in the case of any liquor in the form of a fee
for licence for the sale of the liquor and in tlie form of a
gallonage tee or vending fee, or in any one of such forms;
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and;j
(ii) in .the case of an intoxicating drug. in the
form a fee for
licence for the sale ofthe intoxicating drug.} ’
f^f . ’ ^ ’ _
’ [(3) The duty of excise under sub-section (1) and
the luxury tax
under sub-section (2) shall be levied at such rates as
may be fixed by the Government, from time to time, by
notification in the Gazette, not exceeding the rates
specified below:-
.’ .^ (1) Duty’ of Maximum rates
Excise
(i) Duly of excise on liquors (Indian made)
(ii) Duty of
^[Rs.200 per proof litre or an amount equal to 200 per
cent ofthe value of the hquor. Rs. I per gram or
’* Substituted for the words "by a tax on each tree
fi-om which toddy is drawn" by Section 6(1) (v)
offtesjdenf’s Act ; of 1964.
" Inserted by Section i 0(ni) of Act V of 1091.
" The proviso omitted by Section 6(l)(vi)
ofPrasideiit’s Act 3 of 1964. ’ Inserted by Section 6(2) of
President’s Act of 1964. Substituted by Act 16 of 1969 with
affect from 26.1.1’.950. Inserted by Section 6(2) ibid.
Substituted by Section 8(2/0) of Act 4 of 1996. .
excise on mtoxicating drugs.
(iii) Duty of excise in the form of tax on trees
tapped for toddy
(2) Luxury tax:
(a) when levied in the form of a fee for licence for
sale of foreign liquor- .
(i) for licence for sale of foreign liquor in
wholesale
(ii) for licence for sale of foreign liquor in hotels
or restaurants (iii) for licence for sale of medicated wines
(iv) for licence for sale of foreign liquor in non-
proprietory clubs to members ^ (v) xxx] (b) when levied in
the form of gallonage fee ^(c) xxxj
Rs.933.10 per seer.
Rs. ^50J per tree per half-year or part thereof
Rs. [15000] for a year or part thereof.
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Rs. [12000] for a year or part thereof.
Rs. 1.000 for a year or part thereof. Rs. [1500]
for a year or part thereof. Rs. 10 per bulk litre or
Rs-45.46 per bulk gallon.
" Substituted by Act 16 of 1969.
^ Item "(v) for special licence for sals of foreien
liquor RJS. 500 for a year or part thereof’ omitted by
Section 8(b)(l) of.\ct 4 of 1996.
^ Subclause "© when lsvied iii the form of vending fee
on denatured spirit including methylated spirit Rs. I per
bulk litre or Rs. 4.54 per bulk gallon" omitted by Section
8(3)(ii) of Act 4 of 1996.
Provided that where there is a difference of duty of
excise or luxury tax as between two licence periods, such
difference may be collected in respect of all stocks of
^Indian made foreign liquor] or intoxicating drugs held by
licensees at the close of the former period.j
^[Explanation:’ Where any liquor is chargeable with
duty at a rate depending on the value of the liquor, such
value shall be the value at which the Kerala State Beverages
(Manutacturing and Marketing) Corporation Limited purchases
such liquor from the supplies and incase any such liquor is
not purchased by Kerala State Beverages (Manufacturing and
Marketing) Corporation Limited such value shall be the value
fixed by the Commissioner.}
Reading of Section 17 shows that the said Section
deals with two types of imposts - one is the duty of excise
and tlie other is the luxury tax. Both the duty of excise
and the luxury’ tax can be levied on liquor and intoxicating
drugs. As we read the said Section it clearly indicates
that Section 17 spells out the taxable events. Under Clause
(a) the taxable event is the import under Section 6, export
is the taxable event under Clause (b) and transportation
permitted under Section 11 is
another taxable event. Manufacture under licence
granted under Section 12 or by ^
an entitv mentioned therein established under Section
14 are the other taxable events. Clause (f) postulates the
taxable event when there is an issuance from the distillery,
brewery, winery or other manufactory or warehouse licenced
are established under Section 12 or Section 14, while under
Clause (g) liquor or
^ Substituted for the words "comtiy iiquol-" by
Section 8© of Act 4 of 1996. ^ Explanation added by Section
8(d) ofAct4 of i 990.
Provided that where there is a difference of duty of
excise or luxury tax as between two licence periods, such
difference may be collected inrespect of all stocks of
^[Indian made foreign liquor] or intoxicating drugs held by
licensees at the close of the former period.]
" [Explanation:- Where any liquor is chargeable with
duty at a rate depending on the value of the liquor, such
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value shall be the value at which the Kerala Stole Beverages
(Manufacturing and Marketing) Corporation Limited purchases
such liquor from the supplies and incase any such liquor is
not purchased by Kerala State Beverages (Manufacturing and
Marketing) Corporation Limited such value shall be the value
fixed by the Commissioner.]
Reading ofSeetion 17 shows that the said Section deals
with two types ot imposts - one is the duty of excise and
the other is the luxury tax. Both the duty of excise and
the luxury tax can be levied on liquor and intoxicating
drugs. As we read the said Section it clearly indicates
that Section 17 spells out the taxable events. Under Clause
(a) the taxable event is the import under Section 6, export
is the taxable event under Clause (b) and transportation
permitted under Section 11 is another taxable event.
Manufacture under licence granted under Section 12 or by an
entity mentioned therein established under Section 14 are
the other taxable events. Clause (f) postulates the taxable
event when there is an issuance from the distillery,
brewery, winery or other manufactory or warehouse licenced
are established under Section 12 or Section 14, while under
Clause (g) liquor or
^ Substituted for the words "comtiy liquor" by Section
$© of Act 4 of 1996. ’" Explanation added by Section »(d)
ofAct 4 of 1996.
-intoxicating -drug-sold in-any part ofthe State is a
taxable event. It will be seen that the Section does not by
itseif indicate as with regard to which clause there is a
reference to the levy of excise duty and with reference to
which other Clauses there is reference to the luxury tax..
The contention of Sliri Bhat is that duty of excise and the
luxury tax can be levied in cases ofChuscs (a) to (g).
Section 18, however, gives an answer to the problem in
hand. Sub-section (1^ of Section 18 provides as to bow duty
of excise can be imposed. The said sub- section does not
deal with the levy of luxury tax. As made clear by
sub-section (3) of Section 18, luxury fax is dealt with in
sub-section (2) of Section 18. The said sub-section
provides that luxury tax on liquor or intoxicating drug will
be in the form of a fee for licences for the sale of liquor
or intoxicating drug. When we read Section 17 along with
Section IS and keep in mind that duty of excise is levied on
the manutacture, though its collection may be postponed, it
is clear that when Section 17 talks of levy of luxury tax it
cannot be in relation to clauses (a) to (f) to the "said
Section. No luxury tax is contemplated by Section 18(2) to
be imposed on manufacture or issuance of liquor referred to
in Clauses (d), (e) and (f) of Section 17.. Similarly,
Section 18(2) does not contemplate levy of luxury tax with
reference to clauses (a), (b) and (c) of Section 17. What
is relevant with regard to these clauses is the levy of
excise duty. The method in which excise duty is levied is
provided under Section 18(1). This leaves out clause (g) of
Section 17. Luxury
tax -Feferred.to-in.Section 17 is with reference to
the sale of intoxicating drugs or liquor in any part of the
State. Clause (g) of Section 17 is relatable to the levy of
luxury tax.
The proviso to Section 18(3) obliges the existing
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stock-holders who are licensees to pay the difference of
duty of excise or luxury’ tax in case there is an increase
in respect thereof. The importers, exporters, manufacturers
and warehouse owners would be concerned with the levy of
excise duty whereas luxury tax would be payable by the
licensees relatable to Section 17(g) whicli would be like
the appellants in the present case. What the proviso means
is that those licensees who are liable to pay excise duty
can be called upon to pay the increase thereof while those
licensees who are liable to pay luxury tax can likewise be
required to pay tlie increase in tlie luxury tax. Section
17 (a) to (f) which deals with the imposition of excise duty
refers to licensees under Section 6, Section 7, Section II.
Section 12 and Section 14. The appellants are licensees
under Section 15 of the Act. It is not in dispute that
excise ^uty is not levied or realised in the first instance
from the F.L. I or F.L. 3 licensees. Excise duty of
liquor which is manufactured within the State or is imported
from outside the State, is paid either by the manufacturer
or by tlie F.L. 9 licensee, namely, the aforesaid
Corporation. The proviso to Section 1.8(3) would not enable
the respondents to realise the increase in excise duty from
the licensee who was not under an obligation to pay
the-original excise duty-which lias increased. The
luxiry tax on the sale of intoxicating liquor can be imposed
only on the persons holding licence for sale simplicitor but
not excise duty.
The undisputed tact being, as noticed both by the
Single Judge and the Division Bench, that the Govsmmcnt has
chosen to levy the excise duty in the manner, prescribed by
Section .17 (f) read with Section 18(1), namely, excise duty
on liquor is levied only at the time when It is issued from
an establishment licensee under Section 12 or Section 34.
the licensees under F.LJ and F.L 3 were under no obligation
to pay the excise duty. No excise duty could be levied on
the F.L. I and F.L. 3 licensees. If this be so. then.
under proviso to Section 18(3) the increase in the excise
duty can only be levied in terms of Section 17(f) read with
Section 18(1) which means if the distillery., brewery,
winery or other manufactory or warehouse which is licenced
or established under Section 12 or Section 14 had with it
duty paid stock and there was an increase in the duty from
Rs.20A to Rs.200/- per proof litre, then it is only from
those licensees referred to in Section 17 (f) from whom the
increase could be realised. The Act does not contemplate or
permit imposition of excise dutv on the stockists, retailers
or F.L.3 licensees.
In our opinion, the learned Singlo Judge was; right
In corning to the conclusion that proviso to Section 18(3)
di.d not eiiabl.e me Goveninjeat to realise the increase in
excise duty from the appellants who are F.L. I and F.L. 3
Sicencees.
For the aforesaid reasons; we allow these appeals,
set aside the decision of the Division Bench, and restore
lhejudgment of the Single Judge who had allowed the writ
petitions. In the circumstances of the case parties to bear
their own costs.