Statutory tax limits and promissory estoppel bar executive expansion of liquor duty and retrospective supervision charges.

Executive circulars under the Bombay Prohibition Act could not enlarge excise duty liability beyond the statutory scheme: the Act and rules distinguished the power to levy duty from the prescribed mode of collection, and they did not authorise charging duty on breakages or transit losses of liquor before storage in bond. Retrospective recovery of differential supervision charges was also impermissible, because the licence scheme required charges to be fixed and paid in advance, and the State could not impose an additional backward-looking burden after the parties had acted on the amounts already communicated. The circulars and related communications were therefore set aside.

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Issues: (i) Whether excise duty could be demanded on breakages and losses of Indian made foreign liquor in transit or in bonded warehouse by executive circulars under the Bombay Prohibition Act; (ii) Whether supervision charges could be recovered retrospectively on account of revised pay scales of Government staff and whether the State was bound by promissory estoppel.

Issue (i): Whether excise duty could be demanded on breakages and losses of Indian made foreign liquor in transit or in bonded warehouse by executive circulars under the Bombay Prohibition Act.

Analysis: Section 105 confers the power to impose excise or countervailing duty, while section 106 prescribes the modes of levy. The statutory language distinguishes the point of imposition from the mode of collection, and the use of the disjunctive between payment at import and payment on issue from warehouse shows that the State must proceed under the chosen statutory mode. The relevant rules did not authorise charging duty on breakages in transit before storage in bond, and executive circulars could not enlarge the field of taxation beyond the statute. The demand on breakages and transit losses was therefore outside the enabling provisions.

Conclusion: The demand for excise duty on breakages and losses raised through the circulars was unlawful and was liable to be quashed, in favour of the petitioners.

Issue (ii): Whether supervision charges could be recovered retrospectively on account of revised pay scales of Government staff and whether the State was bound by promissory estoppel.

Analysis: Section 58-A authorises recovery of the cost of supervisory staff, and the licence conditions required advance payment of the charges as fixed from time to time. Neither the section nor the rules conferred power to impose an additional retrospective burden after the goods had been dealt with in reliance on the charges earlier fixed and communicated. The attempted recovery of differential supervision charges from an earlier date would upset completed commercial arrangements and defeat the legitimate expectation created by the State's own conduct. On these facts, the State was precluded from resiling from its representation and demanding extra amounts retrospectively.

Conclusion: Retrospective recovery of differential supervision charges was impermissible and was quashed, in favour of the petitioners.

Final Conclusion: The impugned circulars and consequential communications, insofar as they authorised recovery of excise duty on breakages and retrospective supervision charges, were set aside, and the petitions succeeded.

Ratio Decidendi: Executive circulars cannot impose or enlarge a tax or duty liability beyond the statutory source of power, and where commercial obligations are fixed and acted upon under a statutory scheme, retrospective enhancement of the burden without legislative authority is impermissible.

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