Rectified spirit levy outside Entry 51: industrial alcohol charge not treated as excise duty for section 43B.

A levy described as an additional fee on import of rectified spirit was treated as a charge on industrial alcohol, not as excise duty or countervailing duty on alcoholic liquor for human consumption. Entry 51 of List II does not extend to industrial alcohol, so the levy could not be brought within the State's excise taxing power merely by its description. Applying the principles in Synthetics & Chemicals Ltd. and Deccan Sugar & Abkari Co. Ltd., the unpaid amount was not a duty covered by section 43B of the Income-tax Act, 1961, and the disallowance was unsustainable.

---

---

Issues: Whether the levy described as an additional fee on import of rectified spirit was in substance a countervailing duty or excise duty falling within Entry 51 of List II of the Seventh Schedule to the Constitution of India, and, if not, whether the unpaid amount was hit by section 43B of the Income-tax Act, 1961.

Analysis: The levy arose under the West Bengal Excise Rules framed under the Bengal Excise Act, 1909 and was imposed on import of rectified spirit, not on the manufacture of potable liquor. Entry 51 of List II authorises duties of excise and countervailing duties only on alcoholic liquors for human consumption and certain narcotic goods. Rectified spirit is industrial alcohol and does not fall within that entry. The decision of the Supreme Court in Synthetics & Chemicals Ltd. established that States have no authority to impose excise imposts on industrial alcohol, and Deccan Sugar & Abkari Co. Ltd. applied the same principle to rectified spirit. On the facts, the levy could not be treated as countervailing duty or excise duty merely because it was described as a fee by the State. Since it was not a duty within section 43B as applicable to the relevant assessment years, the disallowance was unsustainable.

Conclusion: The levy was not a countervailing duty or excise duty under Entry 51, and the unpaid amount was not disallowable under section 43B; the issue is decided in favour of the assessee.

Ratio Decidendi: A levy on import of rectified spirit, being industrial alcohol and not alcoholic liquor for human consumption, does not fall within Entry 51 of List II and cannot be treated as excise duty or countervailing duty for the purpose of section 43B of the Income-tax Act, 1961.

---