2002 (2) TMI 1350 - SC - Central Excise

State Prohibited from Imposing Excise Duty on Unfit Spirits

The Supreme Court held that the State cannot impose excise duty on rectified spirit unsuitable for human consumption. The demand notice for excise duty ... Levy of excise duty on rectified spirit - distinction between rectified spirit and potable liquor - State Legislature's competency to impose excise on non-potable liquor - precedential application of Synthetics and Chemicals Ltd. and Modi DistilleryLevy of excise duty on rectified spirit - distinction between rectified spirit and potable liquor - Whether the State could lawfully levy excise duty on the loss of rectified spirit. - HELD THAT: - The Court applied the settled principle in Synthetics and Chemicals Ltd. v. State of U.P., followed in State of U.P. v. Modi Distillery, that the State Legislature has no jurisdiction to levy excise duty on rectified spirit because excise under the State's competence is confined to potable liquor fit for human consumption. The Excise Commissioner's order expressly sought to demand duty on loss of rectified spirit; applying the cited precedents, the Court held that such a levy is impermissible. Consequently, the impugned demand was not sustainable and was set aside. The same reasoning was applied to the related appeals, resulting in the decisions of the Excise Commissioner being set aside in those matters as well. [Paras 2, 4, 6]The Excise Commissioner's demand for duty on rectified spirit is invalid; the impugned orders are set aside and the appeals are allowed.Final Conclusion: The appeals are allowed; the demand for excise duty on rectified spirit is held impermissible under settled precedent and the orders of the Excise Commissioner are set aside. No order as to costs. The Supreme Court ruled that the State cannot levy excise duty on rectified spirit, as it is not fit for human consumption. The demand notice issued to the Appellant for excise duty on rectified spirit was set aside. The decision was based on previous cases like Synthetics and Chemicals Ltd. v. State of U.P. and State of U.P. v. Modi Distillery. The appeal was allowed, and no costs were awarded. Similar decisions were made in other related appeals.