THE STATE GOVERNMENT HAS NO AUTHORITY TO LEVY DUTY ON WASTAGE OF LIQUOR - SC

The Top Court reiterated that the State has no power to levy excise duty on wastage of alcohol after distillation. The SC referred to the judgment of the top court in Synthetics and Chemicals Ltd and others vs State of UP and  State of UP and others vs. Modi Distillery and others, wherein it was held that the State is only empowered to levy excise duty on alcoholic liquor that is for consumption.

The State of Odisha granted a license to the respondent to manufacture, bottle and reduction of Indian Made Foreign Liquor (IMFL). As per the license, the respondent installed one ENA column to purify the repaired spirit to be used in the manufacturing of IMFL.

The respondent claimed that the manufacturing process resulted in the generation of a weak spirit that was not drinkable. And the State allowed 2 per cent wastage. The company sent samples of the waste generated for examination and was found unfit for human consumption. However, the State government sent numerous demand notices, calling upon to pay excise duty on the weak spirit, which was more than the 2% wastage.

The company moved to the Orissa HC and argued that the government has no authority to impose excise duty on the weak spirit. The HC stayed the notices of the State, leading to the present appeal before the Top Court.

The Bench of Justices L Nageswara Rao and BR Gavai restated that the Court distributed the term ‘alcohol liquor’ into two, viz., 

(a) for human consumption; and 

(b) other than for human consumption.