Patna High Court clarifies liability on commercial tax for spirit supply pre-1989

The Patna High Court addressed the issue of liability for commercial tax on spirit supplied to Government warehouses before April 1, 1989, which was then distributed to liquor manufacturers. Initially, the petitioners were deemed not liable based on letters from the Excise Department, but a revised order imposed liability. A committee was formed by the State Government to resolve inter-departmental disputes. The court directed the matter to the committee for review, maintaining the interim restraint until a decision within four months. In a related application, the court ordered prompt payment of legitimate dues to an intervenor for spirit supplied to State Government warehouses, with interest ceasing on the date of initial deposit of demand drafts.

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Issues involved: Liability for payment of commercial tax for spirit supplied to Government warehouses prior to April 1, 1989.

The judgment by the Patna High Court addressed the issue of liability for payment of commercial tax by the petitioners for the spirit supplied to Government warehouses before April 1, 1989, which was then further supplied to manufacturers of country-made liquor. Initially, the Commercial Taxes Department accepted the petitioners' contention of no liability based on certain letters from the Excise Department. However, a revised order was issued imposing liability for the period before April 1, 1989. The dispute stemmed from conflicting views between the Excise Department and the Commercial Taxes Department, leading to the formation of a committee by the State Government to resolve such inter-departmental controversies. The court directed the issue to be referred to this committee for a thorough review and ordered that the interim restraint granted in 1996 would continue until the committee's decision, emphasizing the need for a timely resolution within four months.

In a related application, it was highlighted that payment for the spirit supplied to the State Government warehouses by an intervenor had not been made, despite the demand drafts being deposited and revalidated as per court directions. The court noted that interest on the due amount would cease on the date of the initial deposit of demand drafts. This matter was also referred to the State Government's committee chaired by the Chief Secretary for prompt consideration and direction regarding the payment of legitimate dues to the intervenor within the same timeframe. The court disposed of this application accordingly.

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