MADAN, J. - (1.) PETITIONER-Lokopkarak Pharmaceutical Works Alwar which is a registered Firm and manufacturer of Indian Ayurvedic & Unani medicines having licence from the Excise Department under the Medicinal & Toilet Preparations (Excise Duties) Act, 1955 (for short Medicinal Act) has challenged imposition of excise duty under the orders dt. 26. 4. 84 & 15. 11. 84 (Ann. 15 & 16) passed by the Assistant Excise Officer Alwar & Excise Commissioner Udaipur (respondent Nos. 2 & 3), in respect of rectified spirit measuring 382 bulk litres.
(2.) THE facts giving rise to this petition are that admittedly the petitioner Firm received rectified spirit measuring 500 bulk litres with a strength of liquor as 64. 05 O. P. from Ganganagar Sugar Mills under Permit No. 986/11 dt. 24. 11. 1978 and which was transported to Alwar in the bonded warehouse, with a view to manufacture Unani & Ayurvedic Medicines and out of which, 118 bulk litres thereof were used in the manufacture of ayurvedic medicines, for which admittedly excise duty was paid by the petitioner Firm, and rest thereof viz. 382 litres rectified spirit continued to be stored in its godown (bond warehouse) under double lock-one key with excise department & another with the petitioner Firm. It is the case of petitioner Firm that by virtue of imposition of prohibition to the manufacture & sale of certain ayurvedic medicines containing more alcohol which could have been used as liquor, w. e. f. April 1979 in Alwar which remained in force upto September 1981, it (Firm) stopped consumption of aforesaid spirit and thereby wrote a letter dt. 26. 9. 81 (Ann. 1) requesting respondent No. 3 to transfer unused 382 bulk litres of rectified spirit to M/s. Ganganagar Sugar Mills Alwar depot, which was sanctioned by letter dt. 20. 4. 82 (Ann. 2) but M/s. Ganganagar Sugar Mills refused to take back its sold & unused rectified spirit (382 bulk litres), which constrained the petitioner Firm to persistently request the Excise Commissioner so as to put pressure on M/s. Ganganagar Sugar Mills to take back the disputed spirit and the position remained that admittedly M/s. Ganganagar Sugar Mills did not turn to take back the spirit in question. Therefore, it is further case of the petitioner that ultimately when samples of the spirit in question were taken on or about 3. 7. 82 its strength was 66. 83 but the Public Analyst opined that this spirit was unfit for human consumption; and that the respondent No. 3 sent a letter dt. 22. 4. 83 (Ann. 8) directing it (Firm) to arrange the supply of the spirit in question on its behalf to a permit holder so that sanction be issued to do so and in case of destruction thereof, the duty be got paid under intimation. Even admittedly a sanction was issued by order dt. 18. 6. 83 (Ann. 9) permitting transport of the spirit in question from the petitioner firm to M/s. Jai Chemical & Pharmaceuticals, Jaipur in a bond warehouse but M/s. Jai Chemical through its letter dt. 14. 9. 83 (Ann. 10) declined to accept transport of the spirit in question because of its being unfit for medical purposes. Laying much stress on aforesaid circumstances, it is the case of the petitioner that despite the spirit in question having been declared unfit for medicinal purposes the excise duty was being persistently demanded by the respondents even for issuing sanction for its destruction, rather notice was issued on 26. 4. 84 (Ann. 15), demanding excise duty for a sum of Rs. 29,952=65p. for the spirit in question (382 bulk litres), against which an appeal was filed before the Excise Commissioner who, by his order dt. 5. 11. 85 (Ann. 16) upheld the imposition or demand of excise duty under order dt. 26. 4. 84 (Ann. 15) which are sought to be quashed in this petition. In reply to the writ petition, the respondents contended that the petitioner Firm failed to give details as to which of medicines it intended to manufacture, did contain alcohol attracting the Rajasthan Prohibition Act 1969, whereas this Prohibition Act was made enforced in Alwar w. e. f. 1. 4. 1979, but it did not put a blanket prohibition on medicinal preparations because during which also, the petitioner Firm could have used the rectified spirit in question for unrestricted medicinal preparation, for which this Court was drawn attention to the Prohibition Act, 1969 as per which "liquor" means intoxicating liquor excluding spiritually medicinal preparations which contain small percentage of alcohol & which have been declared as unrestricted under the Medicinal Act. It is further case of the respondent's that once admittedly the spirit in question was transported to Alwar in November 1978, but for the first time on 26. 9. 1981, the petitioner Firm desired to return the unused rectified spirit in question after having used 118 bulk litres thereof & paid excise duty thereon, and thus it had sufficient time to use transported rectified spirit in question. As regards spoiling of spirit in question as found by the Public Analyst opining it to be unfit for consumption of medicinal purpose, it is the case of respondents that rectified spirit in question had been stored in iron oil drums resulting in its spoiling due to improper storage, therefore, the respondents cannot be blamed, inasmuch as M/s Ganganagar Sugar Mills was not bound to take back such rectified spirit as it was a mere contract of sale & purchase in between them, for which it could neither be bound down nor blamed the respondents if the spirit in question having not been taken back by Sugar Mills, nor duty can be waived on that count. As per respondents' case, the petitioner Firm has engineered an afterthought story in order to some how or the other to avoid excise duty payable on the rectified spirit, whereas even in case of it being destroyed, excise duty is also payable on it as the petitioner was under a bond to pay the excise duty. An objection was also raised by the respondents that since revision petition is only the remedy against the impugned orders (Anns. 15 & 16) under Rule 128 of the Medicinal Rules to the Central Government, which having been failed to avail of, this writ petition is not maintainable, because of the reason that the duty is payable on the rectified spirit transported by the petitioner firm under a bond as it had undertaken to pay duty later on. Having heard both the parties & considered their rival contentions so also material on record it is crystal that a very short controversy raised is as to whether under the medicinal Act the excise duty can be charged in the facts & circumstance of the present case?
(3.) EXCISE duty is levied & collected on certain goods as provided in Section 3 of the Medicinal Act which reads as under :- 3. Duties of excise to be levied & collected on certain goods- (1) There shall be levied duties of excise, at the rate specified in the Schedule, on all dutiable goods manufactured in India. (2) The duties aforesaid shall be leviable- (a) where the dutiable goods are manufactured in bond, in the State in which such goods are released from a bounded warehouse for home consumption, whether such State is the State of manufacture or not; (b) where the dutiable goods are not manufactured in bond, in the State in which such goods are manufactured. (3) Subject to the other provisions contained in this Act, the duties aforesaid shall be collected in such manner as may be prescribed. Explanation- Dutiable goods are said to be manufactured in bond within the meaning of this section if they are allowed to be manufactured without payment of any duty of excise leviable under any law for the time being in force in respect of alcohol, (narcotic drug or narcotic) which is to be used as an ingredient in the manufacture of such goods. In the present case, rectified spirit in question was admittedly manufactured in bond in the State of Rajasthan and was released from a bonded warehouse for home consumption, clause (a) to sub-section (2) of Sec. 3 is relevant. A bare reading of afore quoted Sec. 3 makes it explicit that as per Sec. 3 (2) duties of excise at the rates specified in the Schedule shall be leviable (a) where the dutiable gods are manufactured in bond in the State in which such goods are released from a bonded warehouse for home consumption, whether such State is the State of manufacture or not. As per Sec. 2 (c), `dutiable goods' means the medicinal and toilet preparations specified in the Schedule as being subject to the duties of excise levied under the Act. Further, the petitioner Firm is manufacturer of Ayurvedic & Unani medicines, Item No. 2 of the Schedule (u/sec. 3) is relevant besides Explanation III & IV, which read as under:- Item No. Description of dutiable goods Rate of duty 2. Medicinal preparations in Ayurvedic, Unani or other indigenous systems of medicine- Nil (i) Medicinal preparations containing self generated alcohol which are not capable of being consumed as ordinary alcoholic beverages. (ii) Medicinal preparations containing self generated alcohol which are capable of being consumed as ordinary alcoholic beverages Thirty eight naye paise per litre of strength of London proof spirit (iii) All other containing alcohol which are prepared by distillation or to which alcohol has been added Rupees fifty & fifteen naye paise per litre of the strength of London proof spirit (iv) Medicinal preparations not containing alcohol but containing opium, Indian hemp, or other narcotic drug or narcotic Ten per cent ad valorem Explanation III.- `london proof spirit' means that mixture of ethyl alcohol and distilled water which at the temperature of 51 degrees Fahrenheit weighs exactly 12/13th parts of an equal measure of distilled water at the same temperature. Explanation IV.- Where in respect of any dutiable goods the unit of assessment for the purpose of any duty under this Act is a litre of the strength of London proof spirit, the duty shall be increased or reduced in such proportion as the strength of the dutiable goods is greater or less than that of the London proof spirit. As per Sec. 2 (g), `medicinal preparation' includes all drugs which are a remedy or prescription prepared for internal or external use of human beings or animals and all substances intended to be used for or in the treatment, mitigation or prevention of disease in human being or animals. ;