Government overreach in imposing excise duty through notifications rather than legislation.

Bimal Chandra Banerjee Versus State Of Madhya Pradesh And Others

Bimal Chandra Banerjee Versus State Of Madhya Pradesh And Others - [1971] 81 ITR 105, 1971 AIR 517, 1971 SCR (1) 844, 1970 SCC (2) 467 Issues:
Validity of notification prescribing minimum quantity of liquor for excise contractors and imposing duty for failure to take delivery.

Analysis:
The judgment by the Supreme Court addressed the validity of a notification issued by the Government of Madhya Pradesh, which prescribed a minimum quantity of liquor for excise contractors and imposed duty for failure to take delivery. The appellants, who were excise contractors, challenged the notification on the grounds that excise duty can only be levied based on a valid law enacted by the legislature and not through contracts or executive orders. The key question was whether the government was entitled to amend its rules and add the disputed clause as part of the license conditions.

The court examined the relevant provisions of the Madhya Pradesh Excise Act, specifically focusing on the definitions of excise duty, countervailing duty, manufacture, transport, and export. It was highlighted that excise duty is imposed on goods manufactured or produced in the state, and the power to levy such duty is limited to specific circumstances outlined in Section 25 of the Act. The court emphasized that the rule-making authority, in this case, the State Government, does not have the power to levy duty on articles that do not fall within the scope of Section 25.

Furthermore, the judgment emphasized that no tax can be imposed through bye-laws, rules, or regulations unless specifically authorized by the statute. The court concluded that the impugned rule and the demand notices issued by the government were not authorized by law. As a result, the appeals and writ petitions challenging the notification and demand notices were allowed, and the impugned notification and demand notices were quashed. The State of Madhya Pradesh was directed to bear the costs of the appellants in both appeals.