KHODAY INDIA LIMITED Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) WRIT petitioner, a limited company, is a holder of licence to run, establish and function a distillery in terms of the Rule 3 of the Karnataka Excise (Distillery and Warehouse) Rules, 1967. Under the licence, the petitioner is permitted to manufacture potable alcohol using rectified spirit or alcohol. Petitioner pays duty on the alcohol beverages that the petitioner manufactures from out of the rectified spirit that is used for such purpose. The duty is levied and paid in terms of the provisions of the Karnataka Excise Act, 1965 [for short, the Act] read with the Karnataka Excise (Excise Duties and Fees) Rules, 1968.

(2.) FOR the purpose of producing the potable liquor which the petitioner manufactures under different brand names and which is produced directly from the rectified spirit by such spirit is fed into wooden casks for maturation, thereafter by giving such treatment as individual manufacturers have developed and depending upon the nature of such treatment, liquor is assigned different names like whisky, brandy, gin etc. The process of maturing in the wooden cask is over a period of time and as it is normally the claim of such manufacturers that some part of the rectified spirit that is filled into the wooden casks is wasted, in the sense it may evaporate during the period of storage and the entire quantity of rectified spirit fed into such wooden casks may not be available for producing the end product, it is accepted as normal process of maturing.

(3.) THIS phenomena of wastage of some rectified sprite in the process of storing it for maturity, is regulated by another rule known as the Karnataka Excise (Regulation of Yield, Production and Wastage of Spirit, Beer, Wine or Liquor) Rules, 1998 [for short, the Wastage Rules]. Rules 4 and 6 provide for the percentage of wastage that is allowed in respect of different processes of loss attributable during the maturation, which is provided for in table-3 of Schedule-B to these Rules in terms of Rule 4 of the Rules. The percentage of loss of wastage increases with the duration, starting with 3% loss allowed for six months, 6% for 12 months, 12% for 18 months, 15% for 24 months and a maximum of 22% for 36 months and above in respect of the spirit used for manufacture of Indian made liquor.