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S.B. Sinha, J.—This application raises a question as to whether the State is entitled to impose penal duty on the alleged wastage of rectified spirit during transit which was unfit for human consumption. The Petitioner has a distillery at Mirganj where rectified spirit i.e. spirit of 65.5 to 68.00 overproof strength containing 95% alcohol is m inufactured which is unfit for human consumption. The Petitioner has been granted exclusive privilege u/s 22 of the Bihar and Orissa Excise Act (hereinafter referred to as ''the Act'') for wholesale supply of rectified spirit to the Government warehouses situated in Bhojpur District.
Allegedly one tanker of spirit was despatched for three country spirit warehouses situated in Bhojpur district namely, Behea, Koransarai and Garhani in 3 different chambers of the tanker meant for tho three aforesaid warehouses. According to the Petitioner a leakage in the said tanker took place resulting in late arrival of the aforementioned tanker in the warehouses. According to the Petitioner as there had been a purported transit wastage of 268.7 L.P. litres, the Commissioner of Excise passed the impugned order dated 21.7.81, as contained in Annexure-1 to the writ application. The Petitioner moved the Member of the Board of Revenue against the said order, who by reason of his order dated 9.2.1983 as contained in Annexure-2 dismissed the Petitioner''s application.
In this case a counter affidavit has been filed stating inter alia therein that as the tanker took long time to reach its destination from Muzaffarpur where the same was loaded, suspicion arose and the matter was inquired into. It has been contended that in terms of Sub-rule (4) of Rule 33 of the Rules framed under the said Act, the Collector of the district was the competent authority to realise penal duty and in this case the Superintendent of Excise, Bhojpur has taken action to realise the said duty on behalf of the Collector. The order of the Superintendent of Excise, Bhojpur, was affirmed by the Commissioner of Excise. It has been accepted in the said counter affidavit that the strength of the rectified spirit manufactured by the Petitioner varied between 65.0 to 68.0 O.P. but according to the Respondents, the same was being transported for the purpose of sale as potable spirit and the spirit manufactured by the Petitioner was meant for human consumption.
Mr. G.P. Bimal, learned Counsel for the Petitioner has raised a short question ia support of this application. The learned Counsel submitted that as the licence was granted in favour of the Petitioner in Form-28 A in terms of Section 13 of the said Act, the same should be used for Chemical, Industrial, scientific and other purposes; the State had no jurisdiction to levy any duty in view of the fact that rectified spirit would come within tho purview of Entry-84 of Schedule-1 of the Constitution of India, and not real Entry No. 51 of List-II thereto.
The learned Counsel in suport of his contention had strongly relied upon a Division Bench decision of this Court in New Swadeshi Sugar Mills Ltd. Vs. State of Bihar and Others, and a decision of the Supreme Court reported in Synthetics and Chemicals Ltd. and Ors. v. State of U.P. and Ors. ( 1990 I S.C.C. 109).
In New Swadeshi Sugar Mills Ltd. a Division Bench of this Court has held as follows:
Licence in Form Nos. 27 and 28 are granted under Sections 20 and 22 of the Act respectively for the whole sale of country spirit which is undoubtedly for human consumption. In both these forms prevision has been made for payment of duty of execution of bonds. From the conditions of the licence, Form 28 A, therefore, it cannot be said that the Petitioner''s company was required to execute bond and pay any duty. "Section 12 of the Act provides that no intoxicant can be imported or transported except under a pass and Section 13 provides for licence for manufacture of intoxicant under the authority and subject to the terms and conditions of the licence granted in that behalf by the Collector.
I have already set out condition No. 1 and 7 of the Form of licence granted to the Petitioner u/s 13 of the'' Act. Under Condition No. 7(2) of the Licence, it is provided that cancellation or suspension of the licence can be made for breach nonperformance or non-observance of the conditions of the licecce, but, no where it has been stated specifically therein that any duty is to be paid or any bond is to be executed or that the licence is for manufacture of spirit for human consumption, except, of course, that the words ''other purposes'' have been used.
It has been held by various High Courts in India that the spirit not meant lor human consumption is not subject to duty. It will be useful to notice the decision in M/s Sunita Laboratories v. State of M.P. (1972 TLR 2058), wherein it has been held that the State Legislature has no right to impose any excise duty on Alcohal which could not be directly used by human beings as a beverage, notwithstanding the fact that by some process alcohol can be turned into an alcoholic liquor. It was further held that it may be that at the stage it is turned into alcoholic liquor, the State Legislature may get an authority to impose excise duty but till that stage is reached it is only the Parliament that can impose the Excise duty. In the above view Of thematter.it cannot be disputed that pure alcohol or rectified spirit cannot be used by human beings as beverage. This finding has been arrived at after eloborate discussion and I am inclined to accept it as a entirely relevant in this case. Similar is the decision in M/s. Ajodhia Distillery Rajaka Sahaspur v. State of U.P. (1980 TLR 2262). It has also been held in the The Sirsilk Limited Vs. The Distillery Officer and Others, by A. Varadarajan, I (as he then was) that rectified spirit is not alcoholic liquor for human consumption falling within Entry-51 of List-II in Schedule VII of the Constitution of India. It falls within Entry-84 of List- I of that Schedule and the State Legislature has no power to legislate on it by way of Rule 42 of the Madras Distillery Rules, 1960. I have no hesitation in accepting the ratio of this decision also.
It has further been held that Rule 33 of the Rules have no application in the said case. The Division Bench held that:
Rule 33 of the Rules has only to be read to repel the interpretation given to it by the counsel for the State. Rule 33, in order to protect the interest of the State, lays down the quantity of permissible wastage by way of leakage or evaporation of spirit that may be deducted from the total quantity of spirit that is transported or exported under bond for calculation of the quantity on which duty may be levied. It merely lays down that no transporter can claim evaporation or leakage beyond the quantity specified under Rule 33. The rule precludes the transporter from raising a plea of unlimited losses due to uncontrolled leakage or evaporation. Even if the leakage is total and evaporation is 100%, the reduction will be only that which is provided in rule.
In other words, it is merely a protection assumed by the State to itself, against unscrupulous transporters. This rule means nothing beyond that. It does not create a right in any authority to levy any duty. Secondly, this rule applies only to such transportation or export that is done under the bond. If transportation or export is not done under bond, Rule 33 of the Rules has no application whatsoever, as is the case with rectified spirit despatched from the premises of the Petitioner without bond.
The learned Judges held that, it is well settled that if an article becomes dutiable at a later stage by becoming fit for human consumption, duty cannot be levied at the prior stage where it was not fit for consumption.
5A. The Supreme Court recently in M/s. Synthetics and Chemicals Ltd. v. State of U.P. and Ors. 1990 Vol. 1, 109, has clearly held that the State has no legislative competence to make any enactment with regard to Industrial Alcohol. It has also clearly been stated in the said decision the State Legislature''s competence in this regard is confined to potable alcohol.
In view of the aforementioned authoritative pronouncement of this Court as also Supreme Court of India, I have no option but to hold that Respondents had no authority or jurisdiction to issue the impugned order as contained in Annexures-1 and 2 to the writ application.
In the result, this application is allowed and impugned order, as contained in Annexures 1 and 2 are quashed. Let a writ of certiorary issue accordingly. However, in the facts and circumstances of the case, there shall be no order as to costs.