POISON DISTILLERY Vs. STATE OF KERALA

JUDGEMENT

(1.) The petitioner, a holder of a distillery licence under the Kerala Abkari Act and a licenced warehouse keeper for arrack, manufactured rectified spirit from molasses by distillation in his distillery, converted a major portion of the same into arrack, a country liquor, fit for human consumption and transported it to his warehouses as authorised by the Government. It was this arrack that was supplied to the independent retail arrack shops which, in turn sold it to the general public. The petitioner's right to manufacture and transport arrack is controlled by the Abkari Act and the rules made thereunder. The petitioner was thus bound to arrange for the transport of arrack from the distillery to the warehouse at his own cost and he had to adopt all safeguards against any loss of arrack in transit or in storage. There are excise officers stationed in the distillery and in the licenced warehouse who keep a close watch of the manufacture, storage, transport, etc. of rectified spirit and arrack. The supply of arrack from the distillery to the warehouse is covered by a permit issued by the officer-in-charge of the distillery and another officer in the warehouse has to verify the consignment on arrival at the destination and report the result of his verification of the consignment to the distillery officer. Wastage noticed in each consignment is also noted in the advice copy of the permit. The petitioner had been the supply contractor of arrack under licences and permits issued by the authorities under the Act from time to time, up to the period 31st March 1978.

(2.) The petitioner's case is that he was liable to pay duty on arrack manufactured in his distillery at the rate of Rs.2.50 per bulk litre and that he was also entitled to deduction on account of the loss or wastage in transit. He was allowed to deduct wastage within the permissible limits and was made liable to pay on the balance quantity of arrack manufactured by him at the rate of Rs.2.50. He has paid the amount as demanded by the excise authorities. However, the audit party of the Accountant General's. Office raised objections that wastage of arrack in transit exceeding the permitted limits of 0.5 per cent and 1 per cent attracted a higher duty of excise duty at the rate of Rs. 15.50 per proof litre. The objection of the Accountant General's Office was communicated to the petitioner by the Excise Inspector who was stationed in the petitioner's distillery, who also sent the petitioner a chalan on 31st December 1974 for payment of the deficit amount. This notice, Ext. P1, is extracted below as this forms the basis of the subsequent demands as well:-

(3.) The petitioner objected to this levy, contending that there is no justification to levy duty on excess wastage of arrack at the rate of Rs. 15.50 per proof litre. He did not receive any reply to these objections but demands, continued to be made on the basis that the petitioner was liable to pay excise duty at the rate of 15.50 for the excess wastage in transit. The petitioner has a complaint that the demands under Ext. P1 and Ext. P2 were made without giving him any prior hearing and without considering his objections. Nevertheless demands continued to be made on the same basis for the excess wastage of arrack in transit; and apart from the other representations made, he submitted a representation to the Government as per Ext. P6 detailing his objections. The petitioner did not receive any reply to that representation also. Even thereafter demands continued to be made and the objections by the petitioner also continued. When it was noticed that coercive steps were about to be taken against the petitioner for enforcing the demand, made by the excise authorities, the petitioner filed this writ petition claiming the following reliefs:-