- (1.) BY this petition, petitioners seek a writ of mandamus directing that the United Provinces Sales of Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939 (briefly, the Act of 1939) does not authorise the State of U. P. to levy and collect purchase tax on industrial alcohol manufactured and consumed captively by the petitioner in its chemical factory situated in the same premises where the distillery belonging to the petitioner is situated.
(2.) THE facts, as briefly stated, are that the petitioner-company had set up a factory engaged in the manufacture of chemical preparations and afterwards the petitioner-company obtained a licence in form P. D.-2 for setting up a distillery. THE distillery so set up is engaged in the manufacture of industrial alcohol. In para 7 of the writ petition it is clearly averred that the entire plant, that is, the chemical unit as well as the distillery which are situated in the same premises are owned by the petitioner-company. It is averred that the entire industrial alcohol manufactured by the distillery of the petitioner-company is being used in the chemical unit of the petitioner-company. Since the entire industrial alcohol manufactured in the distillery of the petitioner-company, is used in the chemical unit belonging to the petitioner-company, it is averred that there is no sale of alcohol and, therefore, no purchase tax can be levied under the Act of 1939. It is also averred that to avoid penal consequence, the petitioner had paid purchase tax under the Act of 1939 under protest to the extent of Rs. 1,02,034,845. 52 for the years, 1987-88 to March 31, 1992 and, therefore, the petitioner has claimed refund of the said amount together with interest at the rate of 18 per cent per annum. In a counter-affidavit sworn by one Shri Gulab Singh, Assistant Excise Commissioner, Moradabad, it is admitted that the distillery was established by the petitioner-company and that the chemical unit engaged in the production of organic chemical also belongs to the petitioner-company and that they are situated in the same premises, separated by a boundary wall. In para 6 (b) of the counter-affidavit it is also admitted, that the petitioner-company was given licence to manufacture industrial alcohol primarily for its own captive use. In para 6 (b) of the counter-affidavit the respondents further averred as follows : ". . . . . . . . . . . So far the petitioner No. 1 has used the entire industrial alcohol produced by its distillery unit. In fact the needs of the petitioner-company are much more, and therefore, the excise authorities have been allotting extra industrial alcohol to the petitioner-company for being lifted from other distilleries. "
(3.) SO the question for consideration is whether purchase tax under the Act of 1939 can be levied in the facts and circumstances of the case when the entire alcohol produced by the petitioner-company is admittedly consumed captively. Section 3, sub-section (1), clause (c) of the Act of 1939, which is charging section runs as follows : " (c) There shall be levied at the point of first purchase of alcohol in the State a tax at the rate of 40 paise per litre for the first million litres and at the rate of 20 paise per litre for the remainder payable by the purchaser, and such tax shall be collected and paid in the prescribed manner to the State Government. ";