Excise duty on manufacturing wastage is limited to potable liquor; losses before final consumption-ready product cannot be taxed.

State excise duty under Entry 51 of List II extends only to alcoholic liquor for human consumption, so it cannot be levied on raw material, intermediate products, or manufacturing losses before the final potable product emerges. On that basis, wastage after distillation but before dilution, obscuration losses, and pipeline loss during manufacture of IMFL fall outside the charging power. Excise rules may regulate levy only within the Constitution and the parent statute, and cannot enlarge the taxable base. The levy was therefore invalid to that extent, while the challenge failed on the issue governed by the earlier binding decision on wastage of IMFL exported outside the State.

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Issues: Whether the State could levy excise duty on wastage of liquor occurring during manufacture before the final potable product came into existence, including wastage after distillation but before dilution, obscuration, and pipeline loss, and whether the power of levy could be enlarged by the excise rules.

Analysis: Entry 51 of List II empowers the State to levy excise duty only on alcoholic liquors for human consumption. The constitutional expression refers to liquor that is itself fit for human consumption, and not to industrial alcohol, rectified spirit, or other raw material and intermediate products that are still in the course of being rendered potable. The statutory scheme under the U.P. Excise Act, 1910, as amended, was read in the same constitutional sense. The process losses in Groups B and D were losses occurring before dilution and before the final beverage became fit for consumption. Likewise, the obscuration involved in Group C related to an apparent loss of alcoholic strength during manufacture and did not amount to levy on alcoholic liquor for human consumption. The excise rules could regulate the manner of levy only within the limits of the Constitution and the statute, and could not expand the charging power.

Conclusion: The State had no power to levy excise duty on wastage after distillation but before dilution, on obscuration, or on pipeline loss during the manufacture of IMFL. The levy was invalid to that extent. The appeals succeeded only with respect to the category covered by the earlier binding decision on wastage of IMFL exported outside the State; for the remaining issues, the challenge failed.

Ratio Decidendi: The State's excise power under Entry 51 extends only to liquor that is alcoholic liquor for human consumption as such, and does not authorise duty on raw material, intermediate products, or manufacturing losses occurring before the final potable product emerges.

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