K.S.SIDHU, J. - (1.)THE petitioner M/s Sona Distilleries Ltd. is a public limited company incorporated under the Companies Act, 1956. It is engaged in the business of manufacture and distillation of liquor, its distillery is situate at Alwar in the State of Rajasthan. Rectified spirit from which liquor is manufactured by the petitioner is obtained by it from other distilleries and is stored in storage vats kept in the bonded ware house of the premises of the petitioner's distillery. The receipt, storage and issue of the rectified spirit is conducted under the direct control and supervision of the Excise Department of the State. Wastage of the rectified spirit occurs due to evaporation in the process of storage, distillation, redistillation, blending and bottling of the potable liquor. The unfinished spirit which is good enough for redistillation remains stored in the distillery premises under the control and supervision of the excise officers of the State Government.
(2.)SECTION 16, Rajasthan Excise Act, 1950 (for short, the Act) which deals with manufacture of excisable articles including liquor enjoins inter alia that no distillery shall be worked except under the authority and subject to the terms and conditions of a licence granted in that behalf by the Excise Commissioner. Section 17 of the Act confers power on the Excise Commissioner to licence the construction and working of a distillery or pot -still on such conditions as the State Government may impose. One of the conditions imposed by the State Government (See notification No. F. 1(197)FD/RI/64, dated 16th May, 1967) Lays down that the distiller shall make adequate arrangements and be responsible for the safe custody of the stocks of spirit etc. as directed by the Excise Commissioner in the distillery and shall be liable to make good any loss of revenue caused to the Government by his mistake, fraud, or negligence or that of his employees and agents. In exercise of his powers under Section 42 read with Section 16 and 17 of the Act, the Excise Commissioner has made rules, called the Rajasthan Distillery Rules, 1977 (for short, the Distillery Rules). Rule 4 of the Distillery Rules provides that licence for the construction and working of a private distiller, like the petitioners in the present case, for the manufacture of Indian Made Foreign Liquor (IMFL) shall be granted in form RDI A reference to form R.D. 1 as given in the Distillery Rules would show that one of the contention of the grant is that the licence shall comply with all rules as may be made from time to time by the Excise Commissioner and the State Government for the security of Excise revenue and for regulating the manufacture of IMFL Another condition in the licence is to the effect that any infraction by the licensee of the terms and conditions of the licensee shall involve forfeiture of the licence. Rules 10 and 11 of the Distillery Rules are also imported in that they make it further clear that the Government shall not be liable for the loss of any spirit started in the distillery by fire or theft or by gauging or proof or by any other cause whatever, and that the distiller shall be liable to make good any loss of revenue thereby caused to the Government.
Having regard to the feet that some loss or wastage of spirit is unavoidable in storage in the ware house, manufacturing in the distillery and in the process of blending, reducing and bottling operations, the Excise Commissioner has made rules under Section 42 of the Act, called the Rajasthan Stock taking and Wastage of Liquor Rules, 1959 (for short, the Wastage Rules) providing for free allowance for the wastage of different kinds of spirits. Sub -rules (1) and (5) of rule 4 of the wastage Rules prescribe limits for free allowance for wastage in the different process of manufacture of potable liquor as mentioned above. Sub -rule (2) of rule 4 provides that in the event of wastage being found in excess of the prescribed limit the officer -incharge of the distillery shall obtain written explanation from the distiller and forward the same together with a full report of the circumstances to the District Excise Officer and the letter will investigate into the matter and in turn report to the Excise Commissioner. Sub -rule (3)&(4) of Rule 4 lays dawn that wastage for the purpose of collection of duty shall be calculated annually at the end of each financial year, and if the total excess wastage of any kind of spirit does not exceed 2.5%, duty will be charged by the Excise Commissioner on the net wastage in excess of the free allowance, but if the total excess wastage exceeds 3% duty shall be liable to be charged on the whole or wastage without allowing for the free allowance at the rate of duty leviable on the spirit.

(3.)ON January 31, 1983, the District Excise Officer, Alwar addressed a letter to the petitioner apprising the letter that a sum of Rs. 486437.50 on excess wastage of 19487.50 LP litres and a sum of Rs. 64699.00 on excess wastage of 2587.96 LP litres of spirit in all Rs. 5,51136.50 at the rate of Rs. 23/ - per LP litres were payable by the petitioner for the financial year 1980 -81, and that the petitioner should deposit the said amount in the State treasury under intimation to the Excise Department, failing which necessary proceedings will be taken at the risk and responsibility of the petitioner himself.