AI Drafter 
TaxTMI 
TaxTMI 
2007 (1) TMI 645
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....etitioner is paying such duty on the quantum of liquor so manufactured and issued in the factory premises at No. 13, Green Fields, Bannerghatta Road, Bangalore - 560 029. 2. The present writ petition is regarding the dispute as to whether the petitioner was liable to pay duty in respect of certain quantum of such liquor which had underwent some process and which according to the respondents had become portable and which had been stored in storage tanks but which were destroyed in fire due to an accident that took place in the factory premises as on 10-6-1997 and if so as to whether the petitioner was still liable to pay the excise duty at the rate applicable to the type of liquor that were stored in such storage tanks at the rate prevailing at the relevant point of time though they had not been issued. 3. It is because of this controversy, the petitioner has approached this Court for relief when the respondent-State sought to enforce the demand based on the liability for payment of duty in respect of the quantity that was stored in the storage tanks but which got destroyed in the fire accident that took place in the factory as on 10-6-1997. Some correspondences/communications....
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....f the demand/order raised or passed by the Commissioner and the appeal having been dismissed in limine, the present writ petition mainly for getting over the liability in terms of the demand notice at Annexure-J. 7. Writ petition was admitted and respondents were put on notice as early as on 9-4-2002 and the matter had been heard on several occasions and in fact had been disposed of once and was restored to file and has come up for final hearing now. 8. Respondents are represented by Sri. M. Keshava Reddy, learned Additional Government Advocate. Respondents have also filed statement of objections. 9. Writ petition is opposed. It is essentially contended that manufacturing process of Indian made liquor was over by the time they were stored in the storage tanks and when they were destroyed in the fire accident; that the liability for excise duty is at the manufacturing point and the manufacturing of Indian made liquor having been complete and the schedule to Rule-2 of the Karnataka Excise [Excise Duties & Fees) Rules, 1968 [for short 'the rules') having indicated that such liquor is to be subjected to tax at the rate of Rs. 45/- for bulk litre, it is inevitable that ....
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...., the charge is not effectuated and therefore no liability arises for payment in terms of the demand notice and it is liable to be quashed. 12. Learned Counsel for the petitioner in this regard has drawn the attention of the court to the charging section - Section 22 of the Act, the manner of collection - Section 23 of the Act and Rule-2 of the rules providing for rate of duty etc.,. 13. Sections 22 and 23 of the Karnataka Excise Act, 1965 read as under 22. Excise duty or countervailing duty on excisable articles - [1] An excise duty at such rate or rates as the State Government may prescribe, shall be levied on any excisable article manufactured or produced in the State under any licence or permit granted under this Act. [2] A countervailing duty at such rate or rates as the State Government may prescribe shall be levied on any excisable article manufactured or produced in India outside the State and imported into the State under a licence or permit granted under this Act. [3] The rates prescribed under Sub-sections (1) and (2) may be different for different kinds of excisable articles and may also be different when levied in the different....
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....t less than those specified in the schedules A and B. 15. Submission is that the charging provision should be strictly construed and should be given effect to only in the manner indicated therein and in no other manner and in terms of the charging section, the rate is to be provided by the State by prescribing the same and that it has been so prescribed in terms of the rules and Rule-2 in turn effectuates the charge only when the manufactured liquor is issued from any distillery or warehouse or other place of storage established or licenced in the State and it is only then the charge is complete at the rate as mentioned in schedule-A to the rules; that the charge is complete only at the issue point in terms of Section 22 of the Act read with Rule-2 of the rules and this event not having occurred, charge levied is incomplete and therefore there is no liability on the petitioner. 16. In support of such submission, learned Counsel would draw the attention of the court to an unreported Judgment of single Bench of this Court in the case of 'United Breweries Ltd. and Anr. v. State of Karnataka and Anr. rendered on 4-2-1992 in W.P. No. 1024/1987 and submits that even in terms of....
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....t otherwise; that assuming that it would have been loss to the State as in the event of liquor being not destroyed before being issued, the State would have collected such duty from the petitioner, that the demand in terms of Annexure-J cannot be enforced on that premise unless the liability had crystallised and the amount of duty had become payable. 20. Per Contra, Sri Keshava Reddy, learned Additional Government Advocate appearing for the respondents has very strongly urged that the demand in terms of Annexures-J & L is one which is sustainable; that the amount has been rightly demanded from the petitioner, that when once the manufacturing stage was over and the quantum of liquor manufactured was well known and the rate of duty at Rs. 45 for bulk litre having been indicated in schedule-A to Rule-2 of the rules, automatically the quantum of duty is determined in terms of Sections 22 and 23 of the Act read with Rule-2 and schedule-A to the rules and the duty amount called upon to be paid being such amount, there is no illegality in demanding such payment; that it is an amount which is to be paid by the petitioner and therefore the writ petition is to be dismissed. 21. Substan....
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.... [a] R.C. Jall Parsi v. Union of India and Anr. reported in AIR1962SC1281 [b] RE, Sea Customs Act [1878], Section 20(2) reported in AIR 1963 SC 1760 [c] The Commissioner of Wealth Tax, Bihar and Orissa, Patna v. Kripashankar Dayashankar Worah' reported in [1971]81ITR763(SC) . 25. It is also contended that the language of Rule-2 of the rules cannot be understood in the manner to either destroy the effect of the charging section or in any manner to reduce the rigor of the charging section; that it is only for furthering the object of the charging section and effectuating the charging section and if so by an understanding or by an interpretation of the rule a person cannot be relieved of the liability which has already been created even in terms of the charging section i,e., at the time of manufacture of the liquor and once the liquor had come into existence, the liability for payment of duty has arisen and crystallised and the rule cannot be understood or interpreted so as to relieve a tax payer from such liability. 26. Let me examine the rival pleadings and rival contentions in the light of the submissions made and decisions relied upon. In any tax....
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....r the purpose of Section 22 or 23, as there was no other rule indicating that to be separately for the purpose of each Section, this rule should be taken to be as one providing the manner of levy for the purposes of both Sections 22 and 23 of the Act. 28. Section 22 by itself does not complete the charge, as the rate of duty is not prescribed in the Section, but is as prescribed by the state government. It is for such prescription, the rule is framed and the rule also in turn links the levy to Clause-(b) of Sub-rule (1) of Rule 2 of the Rules i.e. the article manufactured, article issued from any distillery, warehouse or other place of storage established or licensed in the state under any of the provisions of the Act. Of course the rate is provided in the schedule, which is again a schedule to the Rules and not to the Act. In other words, the charging section will be complete only when it is read with Rule-2 and the schedule thereto and not otherwise. One cannot reach the schedule without going through Rule 2 and if Rule 2 is one supplementing the charging section for effectuating the charge, the manner of levy as prescribed under Rule 2 of the Rules cannot be ignored even for ....
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....ge when it has become potable or identified for other industrial use. 30. Even the decision of the Supreme Court in the case of Deccan Sugar & Abkari Co., Ltd. [supra] may not be of much assistance to the petitioner in the present case, as the question involved in the present case is not one regarding the competence of the legislature to levy excise duty, as it is not in dispute that the article which is sought to be subjected to duty is potable alcohol. 31. While there is force in the submission made by the learned Counsel for the petitioner that the levy in terms of Section 22 and with Rule 2(1)(b) of the Rules is not effectuated and therefore the demand in terms of Annexure-J is without legal support, let me examine the manner in which it is countered on behalf of the respondents by the learned Government Advocate. 32. Submission that in taxing statute, any understanding and interpretation of the provisions should be in the light of the object of the Act i.e. the revenue to the state and should be one for effectuating or achieving the object of raising revenue and not for curtailing this object. While this is the general principle, it should be borne in mind that in int....
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....e is no escape from the language of Rule (2). Though the learned AGA would vehemently urge that the understanding of the Rule should not be to detract from the effect of the charging section in creating the liability, such argument could have been accepted if the charging section could have been effectuated independent of the Rules. Unfortunately, it is not so possibly for the purpose of Section 22 and there is no escape from the link into the provisions of Rule 2 for completing the charge. It is here that the rule of interpretation may come in if there was such a scope of eschewing any part and independently if Section 22 could have brought about the completion of the charge. Learned AGA would submit that that can be achieved by not taking into consideration the stipulation under Clause-(b) of Sub-rule (1) o Rule 2 of the Rules; that it is only the manner of levy and not the very levy itself and though the word 'levy' is used in the Rule, it is not levy under the Rule but the levy is realty under the Section and therefore this part of the Rule can be kept apart and the Section effectuated by only reading that part of Clause-(b) of Sub-rule (1) o Rule 2 of the Rules with th....