1999 (12) TMI 60 - SC - Central Excise

Imported Liquor Destroyed in Bonded Warehouse Not Exempt from Countervailing Duty Obligation

The Full Bench of the High Court upheld the demand for countervailing duty on imported liquor that became unfit for consumption and was destroyed in a ... Incidence of countervailing duty on import - distinction between levy and collection of duty - countervailing duty on imported excisable goods stored in bonded warehouse - postponement of collection under bonded warehouse provisions - excise duty versus countervailing dutyIncidence of countervailing duty on import - distinction between levy and collection of duty - postponement of collection under bonded warehouse provisions - Liability to pay countervailing duty on imported excisable goods stored in a licensed bonded warehouse where a portion of the stock was rendered unfit for human consumption and destroyed after import. - HELD THAT: - The Court held that countervailing duty is attracted by the importation of excisable articles into the State and that the taxable event for countervailing duty occurs at the time of entry into the State. While the statute provides for modes of levying and for postponement of actual collection (facility for sale from bonded warehouses), such postponement affects only the collection and not the incidence of the duty. The charging provision (Section 27) creates the liability on import, and Section 28 deals only with the manner or postponement of collection; therefore destruction of the imported stock in the bonded warehouse after import does not extinguish the liability that arose on import. Applying these principles to the facts, the demand for countervailing duty on the imported liquor was justified despite its later being rendered unfit and destroyed in the warehouse. [Paras 5, 6, 7, 8]The challenge to the demand for countervailing duty was rejected and the Full Bench's finding that the demand had no merit was upheld.Final Conclusion: The appeal is dismissed; the demand for countervailing duty on the imported liquor stored in the bonded warehouse (though later destroyed) was held to be valid, and no order as to costs was made. Issues Involved: The appeal challenges the demand of countervailing duty on imported liquor that became unfit for consumption and was destroyed while stored in a bonded warehouse in the State of Orissa. The main issue is whether countervailing duty can be imposed in such circumstances.Summary:Issue 1: Imposition of Countervailing Duty The appellant imported Indian made foreign liquor into Orissa and stored it in a licensed bonded warehouse. A portion of the stock became unfit for human consumption and was destroyed. The appellant was issued a notice for payment of countervailing duty on the stock. The appellant challenged the demand, arguing that since the stock was destroyed, countervailing duty could not be imposed. The Full Bench of the High Court upheld the demand, stating that countervailing duty is imposed on imported excisable articles to counterbalance the excise duty leviable on similar goods if manufactured within the State. The incidence of countervailing duty is at the time of entry into the State, and the destruction of goods does not absolve the importer from the duty liability.Issue 2: Interpretation of Excise and Countervailing Duty The judgment clarifies the distinction between excise duty and countervailing duty. Excise duty is levied on the manufacture of goods, while countervailing duty is imposed on imported excisable articles to offset the excise duty applicable on similar goods manufactured within the State. The Bihar and Orissa Excise Act, 1915 empowers the State to impose duty on import, export, transport, and manufacture, with Section 27 serving as the charging section for both excise and countervailing duty. Section 28 outlines the ways for levying the duty, including provisions for postponement of duty collection in certain cases.Conclusion: The Full Bench of the High Court correctly upheld the demand for countervailing duty on the imported liquor that was rendered unfit for consumption and destroyed while stored in the bonded warehouse. The liability for duty arises upon importation, and the destruction of goods does not negate this obligation. Therefore, the appeal challenging the countervailing duty demand is dismissed with no order as to costs.