Excise duty on excess transit wastage during liquor export was upheld as a revenue-protective differential levy.

Excise duty under the United Provinces Excise Act, 1910 remained a duty on manufacture or production even if collected at a later stage, and the rules on export, refund and wastage allowance supported levy on transit loss beyond the prescribed allowance. The excess wastage in liquor transit during export was therefore subject to differential duty, because the levy operated as a revenue-protective measure and not as a new tax or impermissible double charge. Payment of countervailing duty in the importing State did not by itself defeat the exporting State's power to recover the differential duty.

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Issues: Whether excise duty could be levied on excess wastage of liquor in transit during export under the United Provinces Excise Act, 1910 and the relevant Rules.

Analysis: Excise duty under Section 28 is a duty on manufacture or production of excisable goods, and its character does not change merely because it is collected at a later stage such as issue from the distillery or assessment of excess wastage. The Rules governing export, refund and wastage allowance, including Rule 636 and Rule 814, contemplated a fixed allowance for transit loss and supported levy of duty on wastage in excess of the prescribed limit. The levy was treated as a regulatory measure to safeguard excise revenue and to prevent misuse of concessional export duty, not as a new tax or impermissible double charge. The fact that countervailing duty may have been paid in the importing State did not by itself defeat the exporting State's competence to recover the differential duty.

Conclusion: The differential duty on excess wastage in transit was leviable and the challenge to the demand failed.

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