Excise duty on industrial alcohol cannot be imposed without a valid charging provision; transit-loss penalty also fails.

Excise duty under the Bihar Excise Act, 1915 could not be levied on extra neutral alcohol unfit for human consumption, because the charging provision applied only to liquor fit for human consumption. Rule 33, which regulated permissible wastage during bonded transit, could not independently authorise a duty levy where the substantive charging provision did not apply. On that basis, the alleged excess transit loss did not support a penalty either. The levy of duty and the consequential penalty were therefore unsustainable, and refund was directed in favour of the assessee.

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Issues: Whether excise duty or penalty could be levied on extra neutral alcohol, which was unfit for human consumption, on account of loss in transit beyond the permissible wastage limit.

Analysis: Section 27 of the Bihar Excise Act, 1915 was treated as the charging provision, and the settled position applied by earlier decisions was that excise duty under the Act could be imposed only on liquor fit for human consumption. Extra neutral alcohol, being industrial alcohol and not fit for human consumption, did not fall within the class of goods on which duty could be levied at the relevant stage. Rule 33 under the rules framed pursuant to section 90 only regulated permissible wastage in bonded transit and could not create an independent power to levy duty where the substantive charging provision did not apply. Since the foundation for assessment itself was absent, no penalty could be sustained on the alleged excess transit loss.

Conclusion: The levy of excise duty and the consequential penalty were unsustainable and were rightly set aside, with refund directed in favour of the assessee.

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