State excise levy on alcohol-based inputs upheld where GST and IGST operate in distinct taxing fields

A State excise levy on rectified spirit, alcohol and denatured spirit used in medicinal and toiletry preparations was analysed as a duty imposed under the State Excise Act, not as a GST levy. The court treated the State law as within legislative competence because the enabling provisions authorised duty on liquor and intoxicating substances, and GST/IGST did not displace that field. It also held that the impost was not unconstitutional double taxation, since GST and IGST operate as taxes on supply while the excise levy applies at import for a specified use. The challenge succeeded only for imports used in liquor or other non-medicinal and non-toiletry preparations, which were held outside the impugned clause.

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Issues: (i) Whether the levy of excise duty on rectified spirit, alcohol and denatured spirit used in medicinal and toiletry preparations under the Excise Policy 2019-20 was within legislative competence; (ii) Whether the impugned levy was impermissible as double taxation in view of GST and IGST.

Issue (i): Whether the levy of excise duty on rectified spirit, alcohol and denatured spirit used in medicinal and toiletry preparations under the Excise Policy 2019-20 was within legislative competence.

Analysis: The levy was traced to the State Excise Act, under which liquor includes spirits and related alcoholic substances and the Government is empowered to levy duty on liquor and intoxicating drugs manufactured in, imported into, or exported from the State. The impugned policy provision was framed in exercise of those powers. The challenge did not assail the vires of the State Excise Act or the enabling provisions themselves. The Court held that Entry 84 of List I did not exclude the State's competence in respect of import of such goods for medicinal and toiletry preparations, and the GST regime did not repeal or subsume the State Excise Act.

Conclusion: The levy was held to be within legislative competence and valid as against petitioners using the raw material for medicinal and toiletry preparations.

Issue (ii): Whether the impugned levy was impermissible as double taxation in view of GST and IGST.

Analysis: GST and IGST were treated as taxes on supply, whereas the impugned impost under the State Excise Act was treated as a duty of excise on import for a specified use. The two imposts were held to operate in different fields and at different stages of economic activity. Since the levies were legally distinct, simultaneous imposition was not regarded as unconstitutional double taxation.

Conclusion: The plea of double taxation was rejected.

Final Conclusion: The petitions succeeded only to the extent that units importing the goods for manufacture of liquor or other non-medicinal and non-toiletry preparations were held not liable under the impugned clause, while petitions concerning import for medicinal and toiletry preparations were dismissed.

Ratio Decidendi: A duty of excise imposed under a valid State excise law on import of specified goods for a particular use is not displaced by GST or IGST where the taxing fields are distinct, and such levy is sustainable so long as the enabling statute remains intra vires.

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