R.K.AGRAWAL, J. - (1.) THE present writ petition had earlier been allowed by the Division Bench of which one of us (R.K. Agrawal, J.) was a member, vide judgment and order dated 24 -3 -1999 which order has been set aside by the Hon'ble Supreme Court in the Civil Appeal No. 6369 of 2000 filed by State of U.P. and others, vide order 13 -11 -2000, on the ground that the contentions raised by the appellant herein have neither been considered nor dealt with by the High Court. Pursuant to the direction given by the Apex Court, the present writ petition is being heard again.
(2.) BY means of the present writ petition filed under Article 226 of the Constitution of India, the petitioner, M/s. Upper Ganges Sugar and Industries Ltd., seek the following relief: (a) to issue an appropriate order or direction to declare Sections 4 and 24 of the U.P. Excise Act, 1910 as ultra vires the Constitution so far as they provide that rectified spirit is foreign liquor. (b) to issue an appropriate order or direction to declare the Rule 12 of U.P. Excise Rules beyond the rule making power of the State Government under the provisions of U.P. Excise Act, 1910. (c) to issue an appropriate order or direction to declare that Notification No. 6121 -The assessee -XIII -275 -5 -58 dated December 3, 1960 and Notification No. 1275 -The assessee - XIII -508 -62 dated March 30, 1962 issued by the State Government under sub -section (2) of Section 4 and Sections 28 and 29 of the U.P. Excise Act, 1920 as unconstitutional illegal and beyond the power and jurisdiction of the State Government. (d) to issue an appropriate writ, order or direction in the nature of certiorari to quash the order No. 860 Nau -94 - 95/Aa.Ni.Kerala 20th May, 1995 issued by the Excise Commissioner, opposite party No. 2, U.P. and the order No. 32 - Su.Aa/95.96 dated 30 -5 -1995 issued by the opposite party No. 6 as contained in Annexure Nos. 21 and 22 respectively. (e) to issue an appropriate writ, order or direction in the nature of mandamus directing the State Government and its functionaries not to proceed to recover any duty on rectified spirit from the petitioner as per the orders dated 20 - 5 -1995 and 30 -5 -1995 as contained in Annexures 21 and 22 respectively. (f) to issue any other appropriate writ order or direction as the nature and merit of the case may admit of, may kindly also be passed in favour of the petitioner. (g) to issue an and, therefore, interim order in favour of petitioner. (h) to allow the writ petition with cost. Briefly stated, the facts giving rise to the present petition are as follows: The petitioner is a public limited company incorporated under the provisions of the Companies Act, 1956 and has its registered office at 9/1, R.N. Mukherjee Road, Calcutta. It is engaged in manufacture and sale of white crystal sugar, industrial alcohol and rectified spirit. It has its sugar factory and distillery unit in Seohara, in the District of Bijnor within the State of U.P. For running the sugar factory as also the distillery and for carrying on the manufacturing process therein, the petitioner has been granted requisite licence by the Central Government under the provisions of the industries (Regulation and Development) Act, 1951 (hereinafter referred to as “the Act”). In the distillery, the petitioner manufactures industrial alcohol and rectified spirit. According to the petitioner, it does not produce any potable liquor or country liquor or Indian made foreign liquor. The State of U.P. or its Department of Excise has not granted any licence to the petitioner for manufacture of potable liquor in its distillery. The rectified spirit produced in the petitioner's distillery is unfit for human consumption. The percentage of ethanol alcohol contents of rectified spirit by volume is not less than 94.68%. It is alleged that even though the State of U.P. is not empowered to legistate in the matter of manufacture of rectified spirit yet it exercises supervisory control over the manufacture and storage etc. of rectified spirit and for this unless a permit is issued by the State Government, the sale of rectified spirit either in the State of U.P. or outside is not permissible. The petitioner not only sells rectified spirit produced by it within the State of U.P. but is also export it to other States in the country. In the case of export to other States in the country, the intending importer obtains import permit from that State to which rectified spirit is to be exported from the State of U.P. and after obtaining the import permit, the intending importer approaches the State Government of issue of permit for exporting the rectified spirit to his State. One M/s. Indian Sugar and General Industries Export, Import Corporation Ltd., respondent No. 7, obtained permits from the Excise Department of the State of Kerala for importing rectified spirit to that State. By means of import permit dated 20 -7 -1993 M/s. T.K. Balon and P.L. James Contractors of A.S. Group No. I/93 -94 were allowed to import 6,720 BL (bulk litres) of rectified spirit. Under the import permits dated 14 - 10 -1993 and 16/18 -10 -1993 issued by the Excise Department of the State of Kerala, M/s. P.B. Suresh Babu and M/s. K.N. Ashokan were allowed to import 6,720 BL and 16,000 BL rectified spirit from the petitioner company through M/s. India Sugar and General Industries Export and Import Corporation Ltd. Against the import permit dated 20 -7 -1993, the Excise Commissioner of U.P. issued two orders No. 7140/Nau -92 -93/Alcohol Niryat/Kerala dated 26 -8 - 1993 permitting the export of 6,720 BL of rectified spirit by the permit holder and anr. order No. 7592/Nau -92 -93/Alcohol Niryat/Kerala dated 30 -8 -1993 were issued by the Excise Commissioner of U.P. permitting export of rectified spirit. Vide order No. 7592 dated 30 -8 -1993, the Excise Commissioner, U.P., granted permission for export of rectified spirit under different export permits in one tanker. Under order No. 7140/Nau -92 - 93/Alcohol Niryat/Kerala dated 26 -8 -1993 permit was granted for export of 6,720 BL of rectified spirit to the State of Kerala. By another order No. 9941/Nau -92 -93/Alcohol Niryat/ Kerala dated 21 - 10 -1993, the Excise Commissioner, U.P., granted permit for export of 6,720 BL of rectified spirit to M/s. P.B. Suresh Babu and 16,000 BL of rectified spirit to M/s. K.N. Ashokan. For export of the rectified spirit from the State of U.P. the exporter has to pay an export pass fee at the rate determined and notified by the State Government under the U.P. Excise import, Export, Transport and possession of Denatured Spirit Rules, 1931, as amended from time to time. On the deposit of export pass fee, the Excise Department of the State issues a permit for export of the rectified spirit from the distillery. In this connection, the Excise Inspector at the petitioner's distillery at Seohara issued two export pass No. 419 dated 3 -9 -1993 in favour of M/s. T.K. Balan and P.L. James and pass Nos. 557 and 558 dated 6 -11 -1993 to M/s. P.B. Suresh Babu and M/s. K.N. Ashokan. Against the export permit No. 7592 dated 30 -8 -1993, 7,280 BL (6,916 A.L. alcoholic leter of rectified spirit was exported to M/s. K.N. Ashokan and 6,720 BL (6,384 A.L.) of rectified spirit was exported to M/s. P.B. Suresh Babu. The entire quantity measuring 14,000 BL (13,300 A.L.) was dispatched by tanker No. HR 26 A 2972. Unfortunately, the said tanker containing rectified spirit to the State of Kerala met an accident at Gurgaon in the State of Haryana at about 7.30 p.m. on 7 -11 -1993. A First Information Report in respect of the accident was lodged with P.S. Bilaspur, District Gurgaon, Haryana. The information regarding the accident was telegraphically sent to the District Magistrate, Bijnor; the District Excise Officer, Bijnor; the Deputy Excise Commissioner, Moradabad and the Excise Commissioner, U.P., Allahabad. Similar telegrams were also sent to the other State authorities. On 9 -11 - 1993 on behalf of the petitioner an application was handed over to the District Excise Officer, Bijnor requesting him to depute the Excise Inspector for inspection of the damaged tanker and the site of the accident for assessing the loss of rectified spirit that had leaked out due to accident. As directed, the Deputy Excise and Taxation Commissioner, Gurgaon, Haryana was contacted on 11 -11 -1993 for extending necessary help and completing necessary formalities in the matter. Alongwith the letter dated 10 -11 -1993 the petitioner company also handed over a letter from the District Excise Officer, Bijnor to the Deputy Excise and Taxation Commissioner, Gurgaon, Haryana stating that he should supervise the transfer of rectified spirit from the accidented tanker to another tanker. He deputed an Excise Inspector of his State to supervise the transfer of rectified spirit from the accidented tanker to another tanker No. HR 26 A 0972. The Excise Inspector of Haryana State got all the five seals opened of the tanker No. HR 26 A 2972 in his presence and after getting the rectified spirit transferred to another tanker No. HR 26 A 0972 and sealed it. As rectified spirit had leaked out from the tanker after the accident, only 6,690 A.L. alcohol was left for transmission. This much quantity of alcohol was delivered to M/s. P.B. Suresh Babu against pass No. 567 dated 6 -11 -1993 for 6,720 BL of rectified spirit. So far quantity of rectified spirit exported by M/s. K.N. Ashokan was concerned, it could not be delivered as there was no rectified spirit left for being delivered to them. For the quantity which was lost due to accident, P.D. Form 25 received from Kerala did not mention the receipt of rectified spirit. After a lapse of about 11 months, the petitioner received a letter dated 20 -10 -1994 from the Excise Inspector posted at Seohara Distillery for recovering the excise duty from the petitioner on rectified spirit which was exported to the State of Kerala in respect of which P.D. Form 25 received from Kerala did not mentioned any receipt of the quantity lost due to accident under permit No. 9541 dated 21 -10 - 1993 in favour of M/s. K.N. Ashokan. Likewise, the excise duty at the same rate was liable to be recovered from the petitioner of the rectified spirit export to the State of Kerala vide export permit No. 7140 dated 26 -8 -1994 as P.D. Form 25 in respect of the same had not been received back from the State of Kerala after verification. With regard to the recovery of the State duty on rectified spirit against excise pass P.D. Permit No. 9541, the Excise Inspector stated that as per his information, rectified spirit measuring 6,519 A.L. transported in the tank met with an accident for which in P.D. Form 25 receipt of rectified spirit was not mentioned, therefore, on that much quantity of 6.913 A.L. of rectified spirit, a sum of Rs. 3,11,220/ - was recoverable from the petitioner towards payment of excise duty @ Rs. 45 per A.L. Another sum of Rs. 2,84,616/ - was required to be recovered from the petitioner's towards excise duty @ Rs. 45/ - per A.L. on 6,324.80 A.L. of rectified spirit as P.D. Form 25 No. 419 in respect of the same had not been received back from the State of Kerala. According to the petitioner, it approached the Excise Commissioner, U.P., Allahabad and also the Excise Inspector at its distillery at Seohara, contesting the demands made by them on the ground that the recovery of duty on rectified spirit was not justified nor permissible under law and the demands to be waived. Reliance was also placed on a circular issued by the Excise Commissioner, U.P. Allahabad, dated 29 -1 -1981 in which it has been stated that the rectified spirit was not an excisable item under the U.P. Excise Act, 1910.
(3.) IN the counter -affidavit filed by Sri Harish Chandra Driwedi, Assistant Excise Commissioner, Allahabad on behalf of the respondents, a case has been set up that the rectified spirit is itself potable liquor and it becomes industrial alcohol only when it is denatured or earmarked for industrial purposes. According to the respondents, this alcohol is potable irrespective of its strength and alcohol liquor of any strength if consumed indiscriminately, it is injurious to health. According to the respondents, due to pungent taste of alcohol it is sold for human consumption on strength not beyond 42.8 V/V but it is absolutely wrong that the spirit of 94.6 V/V cannot be consumed. It has been stated that the State Government has absolute power to legislate in respect of rectified spirit which is per se potable. According to the respondents, apart from charging export pass fee, the State Government allows transportation of spirit under general and special bond by which the exporter undertakes to transport the spirit to its destination in its entire bulk and also binds himself to pay damages to the State Government if any loss of spirit occurs in transit excluding permissible limit. The contractual liability is binding upon the transporter as the contract is legal, for consideration and for lawful purpose and the bond is executed by a person competent to contract with his free consent. Even if the tanker carrying the rectified spirit met with accident, that does not frustrate the contract between the contractor and the Government and the bond does not stand discharged. As in the present case, during the internal audit of the petitioner distillery by the Audit Section of the Excise Office, it was pointed out that the P.D. Form 25 and 26 were not received back from the exporting State,therefore, amount equal to excise duty on the quantity of spirit exported should be realised whereupon the demands have been raised.;