STATE OF KARNATAKA Vs. THIRUMALA DISTILLERIES

JUDGEMENT

(1.) HEARD the arguments of the learned Government Advocate for the appellants and the learned counsels for the respondent, at a considerable length and carefully perused the relevant case papers, including the impugned judgment and order of the learned Single Judge, in the light of the relevant provisions of the Karnataka Excise Act, 1965 and the Rules framed thereunder and also the precedents.

(2.) THIS is a writ appeal filed by the appellant-State and its authorities against an order of the learned Single Judge of this Court in Thirumala Distilleries, Tumkur v. State of Karnataka and ors. , 2002 (3) Kar. L. J. 629 : 2002 (52) Kar. L. J. 294 (HC) : ILR 2002 Kar. 2889, whereby the writ petition filed by the respondent-distillery has been allowed and the orders made by the appellants 2 and 3 at Annexures-J and G to the writ petition, have been set aside or quashed and an amount of Rs. 11,00,000/- deposited, if any by the respondent-distillery with the appellant 3 in compliance with the interim order dated 7-6-2000 has been ordered to be refunded to the respondent distillery within a specified date, failing which the said amount becomes payable to the respondent-distillery with simple interest at 12% per annum thereon calculated from the date of its deposit till the full payment thereof to the respondent and that he shall be entitled to refund of the same with interest accordingly. Aggrieved by such order of the learned Single Judge of this Court, the appellants herein are in appeal before us.

(3.) THE respondent herein is a distillery, manufacturing India made liquor under a licence granted by the appellants under the provisions of Karnataka Excise (Distillery and Warehouse) Rules, 1967. The respondent-distillery as per the terms and conditions of the licence issued to it, is bound by the conditions of the licence as well as the provisions of the Karnataka Excise Act and the Rules framed thereunder particularly the Kamataka Excise (Distilleries and Warehouse)Rules. The respondent for the purpose of manufacture, purchases rectified spirit from the primary distilleries and transports it to the distilleries under the permit issued by the competent authority and utilizes the rectified spirit so purchased for the purpose of manufacture of India made liquor, on which the respondent is liable to pay the excise duty. The provisions of the rules and the conditions of the licence regulate the storage, manufacture, transport, use and sale of rectified spirit brought to the distillery for the purpose of manufacture of the India made liquor. It is stated that the distillery officer attached to the respondent distillery detected a shortage of 11,624 litres of rectified spirit in the storage tank No. 1 of the respondent and on satisfying himself that there was shortage of the above mentioned quantity of rectified spirit, registered a case in No. 1/94-95 and intimated the factum of registering the FIR to the authorities concerned. After investigation, it was found that the respondent herein could not account for the shortage of 11,624 litres of rectified spirit. During the pendency of the investigation of the above offence committed by the respondent herein, the respondent filed a representation/application before the second appellant under Section 45 of the Karnataka Excise Act, 1965, seeking for compounding of the offence by admitting the shortage and agreed to compound the offence and offered to pay the compounding fee and the value and such other duty on 11,624 litres of rectified spirit. On receipt of the said application of the respondent herein, the 3rd appellant passed the impugned order dated 3-6-1995 compounding the offence by levying the composition fee and directed the respondent to pay the composition fee along with the excise duty, sales tax, surcharge etc. , on the india made liquor that would have been manufactured by the respondent from out of the 11,624 litres of the rectified spirit which was found deficit and not accounted for by the respondent. After the receipt of such order, the respondent herein had paid only the composition fee of Rs. 5,000/- and did not pay the excise duty and the other fees levied by the 3rd appellant and challenged the impugned order of the 3rd appellant before the second appellant under Section 61 (2) of the Karnataka Excise Act. The 2nd appellant after hearing the matter confirmed the order passed by the 3rd appellant and dismissed the A KLJ PUBLICATION appeal of the respondent by its impugned order dated 19-8-1999. Aggrieved by the orders passed by the 2nd and 3rd appellants, the respondent herein filed the writ petition contending inter alia that the appellate authorities have no authority to levy excise duty on the rectified spirit and that further the levy of excise duty on the India made liquor is on the basis of a presumption and that no tax or duty could be levied on the basis of presumptions. The appellants resisted the writ petition and filed their detailed statement of objections contending that the appellants are well-within their powers to levy excise duty on the India made liquor as the respondent is duty-bound to a account for the shortage of the rectified spirit brought to the distillery for the purpose of manufacturing of india made liquor and that thereby he has contravened the provisions of the distillery rules as well as the Karnataka Excise Act. The appellants further contended that when once the respondent invited the order of compounding, he cannot retract from the compounding order and comply with only a portion of the order and challenge the other portion of the order wherein he is legally liable to pay the excise duty, which was calculated on the basis of the shortage of the rectified spirit. The learned Single Judge heard the parties apart from receiving the written arguments and the replies filed by the parties, and by his impugned order dated 15-3-2002 allowed the writ petition, holding that the appellants have no authority to levy the excise duty on the rectified spirit and further directed the appellants to refund Rs. 11,00,000/- that was deposited by the respondent with the 3rd appellant in compliance with the interim order dated 7-6-2000 on or before the date 30-4-2002, failing which the said amount becomes payable to the respondent with simple interest at 12% per annum thereon calculated from the date of its deposit till the full payment thereof to the respondent. Calling in question the legality of the order passed by the learned Single Judge, the instant writ appeal has been filed by the appellants.