- (1.) M/s. Central Distillery and Chemicals Works Ltd. is a public limited company, which carries on the business of distillery in the city of Meerut and is engaged in the manufacture of alcohol, commercial spirits, country liquors and Indian made foreign liquors. It manufactures absolute alcohol that is to say, alcohol which consists of 99.5 per cent. of ethynol content. It is then denatured by adding one per cent. kerosene oil. This variety of alcohol is alleged to be known as power alcohol, and is normally used for mixing with petrol so that it could be used as motor spirit. The petitioner-company also denatures the absolute alcohol with some other denaturants, like hydrochloric acid, methyl alcohol, ethyl acetate, caustic soda, ether crotonal dehyde. The petitioner's case is that the absolute alcohol denatured with these denaturants is not suitable for being used as fuel for internal combustion engines and as such it is not liable to excise duty under the Central Excises and Salt Act, 1944. But on 17th January, 1964, the Inspector of Central Excise sent a notice to the petitioner demanding payment of Rs. 68,195.26P, as duty on absolute alcohol denatured with special denaturants under entry 6 (ii) of the tariff mentioned in the First Schedule to that Act. It was demanded on 151.209 Kilo litres of that commodity cleared from 1-4-1963 to 6-7-1963. Feeling aggrieved, the petitioner lodged an appeal on 8-2-1964 before the Assistant Collector, Central Excise (respondent No. 2). The principal ground taken in the memorandum of appeal was that the absolute alcohol denatured with special denaturants was not power alcohol as popularly known or within the meaning of the Indian Power Alcohol Act, 1948, and hence it was not motor spirit liable to duty under the Central Excises and Salt Act. The appeal remained pending for over two years and was ultimately rejected on 22nd December, 1966. It was held that so long as the criteria of suitability for use as fuel in internal combustion engines was fulfilled, absolute alcohol, denatured with one per cent. kerosene or any other special denaturants prescribed by the Government, is excisable as power alcohol and is liable for duty.
(2.) The question centres round the interpretation of entry 6 of the First Schedule. This entry runs as follows : "6 MOTOR SPIRIT Motor Spirit, that is to say : (i) Any mineral oil (excluding curde mineral oil) which has its flashing point below seventy-six degrees of Fahrenheit's thermometer and which, either by itself or in admixture with any other substance, is suitable for use as fuel for internal combustion engines, and (ii Power alcohol, that is to say, ethyl alcohol of any grade (including such alcohol when denatured or otherwise treated), which, either by itself or in admixture with any other substance, is suitable for being used as aforesaid."
(3.) For the petitioner, it was urged that the absolute alcohol denatured with special denaturants was not power alcohol as defined by the Indian Power Alcohol Act, 1948, and consequently it would not be power alcohol within the meaning of entry 6 (ii). The Indian Power Alcohol Act deifnes power alcohol to mean ethyl alcohol containing not less than 99.4 per cent. by volume of ethanol measured at sixty degrees Fahrenheit corresponding to 74.4 over proof strength. The petitioner does produce ethyl alcohol of that grade strength. Reliance was placed on Rule 12 of the Rules framed under that Act, which required every distillery to denature power alcohol with one volume of kerosene for 100 volumes of power alcohol or with such other denaturants as may be notified by the Central Government, before it is issued from the distillery. The denaturants are to be of the specification approved by the Central Government. On the basis of this rule, it was urged that the denaturants used by the petitiner had not been prescribed by the Central Government and hence the ultimate product manufactured by the petitioner was not power alcohol. The fallacy underlying this submission is that Rule 12 merely lays down a condition before power alcohol can be issued out from the distillery. It does not prescribe any qualification before the product can be known as power alcohol. Rule 12 assumes that the distillery has manufactured power alcohol as defined earlier in the Act, but it imposes a condition for the clearance of that product from the distillery. The denaturing has not been prescribed by the Rules for making power alcohol out of something else; but as was suggested by the learned counsel, to make power alcohol already manufactured, unfit for human consumption. Rule 11 clarifies the point further. It lays down that the power alcohol manufactured for the purpose of admixture with petrol or for sale as power alcohol for affording motive power to motor vehicles shall confirm to the following specification, i.e. it must be perfectly clear and transparent, it must contain not less that 99.5 per cent. by volume of ethanol measured at 60 F. corresponding to 74.4 overproof strength, and the acidity per 100 c.c. should not be more than 0.006 gramme calculated as acetic acid. Sub-rule (2) of Rule 11 further provides that when 200 c.c. of petrol (free from moisture) is shaken up with 10 c.c. of power alcohol there should be neither opalescene nor separation of liquid minute glou bulb at the bottom. These are the further conditions which power alcohol must satisfy before it can be fit for sale or admixture with petrol, etc. These also are not conditions prescribed for determining whether the manufactured product is power alcohol or not. The petitioner manufactures alcohol containing 99.5 per cent of ethanol. That is power alcohol within the meaning of the Indian Power Alcohol Act, 1948.;