Excise duty liability arises only on issue from storage; liquor destroyed before that stage was not taxable.

Excise duty under the Karnataka Excise Act was held not payable on liquor destroyed in a fire before it was issued from storage, because Section 22, read with Section 23 and Rule 2 of the 1968 Rules, made the levy operative only at the issue stage from the distillery, warehouse, or other place of storage. The court applied strict construction of taxing provisions and declined to ignore the rule's linkage between liability and the statutory stage of issue. As the liquor was destroyed before that stage was reached, the charge had not arisen and the duty demand was quashed.

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Issues: Whether excise duty was payable on liquor manufactured in the distillery but destroyed in fire before it was issued from the storage tanks, under Section 22 and Section 23 of the Karnataka Excise Act, 1965 read with Rule 2 of the Karnataka Excise (Excise Duties and Fees) Rules, 1968.

Analysis: The charging provision under Section 22, when read with Section 23 and Rule 2, made the levy operative only at the stage when the manufactured excisable article was issued from the distillery, warehouse, or other place of storage. The rate prescribed in the schedule to the Rules did not by itself complete the charge, because the condition in Rule 2 linking levy to the issue stage remained part of the statutory scheme. The Court held that a taxing provision must be construed strictly, and the language of the rule could not be ignored merely to protect revenue. Since the liquor was destroyed before the issue stage was reached, the statutory charge had not been effectuated.

Conclusion: The demand for excise duty was unsustainable and was quashed. The writ petition was allowed, and the petitioner was held not liable for the demanded duty on the destroyed liquor.

Ratio Decidendi: Where the charging provision under a taxing statute is made operative only upon a specified statutory stage, the levy cannot be sustained before that stage is reached, and strict construction forbids reading down the condition to create liability by implication.

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