1. The petitioner in the above special civil application under Article 226 of the Constitution, carries on business, inter alia, in denatured spirit in the name and style of Messrs. Rajpal Industries, at 23/24, Industrial Estate, Silvassa, Dadra and Nagar Haveli, Union Territory. In 1969, the Dadra and Nagar Haveli Excise Duty Regulation 1969, was promulgated. The charging section of that regulation was Section 12, which reads as follows:
12. There shall be levied and collected, at such rates and in such manner as may be prescribed by or under this Regulation, not exceeding the rates set forth in Parts A and B of the Schedule, a duty of excise on all liquor manufactured in, or brought into, the territory:Provided that no such duty shall be levied on toddy when used for the manufacture of jaggery, vinegar, yeast or neera or when drunk as such.
The Schedule is important for the purpose of determining the questions involved in this case. The said Schedule is as follows:
(See Sections 12, 14 and 15)
Rates of duty on liquor manufactured in or passed out of any place of manufacture or storage including a distillery, brewery or warehouse licensed or established under this Regulation:
Rs. Ps.(1) Foreign liquor other than milk punch, wines and beer 9.00 per proof litre.(2) Milk punch and wines 4.00 per bulk litre(3) Beer 0.75 per bulk litre.(4) Country liquor 1.00 per proof litre.(5) Rectified spirit or absolute alcohol except when used for manufacture of liquor or for medical purposes 0.50 per proof litre.(6) For blending of country liquor. 0.50 per bulk litrein addition tothe duty onmanufacture.PART B
Rates of countervailing duty on liquor imported into the territory: Such amounts as represents the difference, if any, between the duty leviable under this Regulation on the quantity of liquor' imported, had it been manufactured in the territory and the duty actually levied on the same quantity of similar goods produced at the place of manufacture.
Rates of fees on licences per year:
(1) For manufacturing foreign liquor other than beer Rs. 500/-.(2) For manufacturing beer Rs. 250/-. (3) For manufacturing rectified spirit or absolute alcohol or both Rs. 200/-.(4) For manufacturing country liquor Rs. 13/-. per still.(5) For blending of country liquor Rs. 150/-.(6) For bottling of foreign liquor Rs. 100/-.(7) For bottling of country liquor Rs. 50/-.II. Sale:--
(1) For wholesale vendors of liquor Rs. 500/-.(2) For retail vendors of liquor Rs. 200/-.(3) For wholesale vendors of rectified spirit or absolute alcohol or denatured spirit Rs. 200/-.(4) For retail vendors of rectified spirit or absolute alcohol or denatured spirit Rs. 50/-.III. Import and export:--(1) For wholesale vendors of liquor Rs. 10/-.
(1) For retail vendors of liquor for keeping the shops open up to two hours after the prescribed time of closing:, a surcharge of 50% of the licence fee.
(2) For an occasional licence for retail vendors of liquor: First day Rs. 10/-, next 4 days Rs. 6/- per day, next 15 days Rs. 4/- per day, next 40 days Rs. 2.50 per day and next 60 days Rs. 1.50 per day.
Tree tax -per tree per year;Coconut tree and palm tree Rs. 10/-.Khajure tree and date tree Rs. 7/-.
2. The question which arises in this petition is as to whether the petitioner is entitled to the refund of excise duty paid by him in respect of denatured spirit.
3. The petitioner started manufacturing denatured spirit in 1971. Thereafter he wrote a letter to respondent No. 1, Excise Officer, Dadra and Nagar Haveli, Silvassa, on May 7, 1971 and May 10, 1971,' enquiring whether denatured spirit was excisable to excise duty under the above regulation. In reply, respondent No. 1 asked the petitioner to furnish a bond agreeing to pay duty, if it is payable, under the Regulation and told the petitioner that on receipt of the bond duly executed by the petitioner he shall release alcohol without pre-payment of duty. He further informed the petitioner that the matter of payment of duty will be referred to the higher authority and the petitioner would be required to pay the duty if the higher legal authority held that duty was payable on denatured spirit. On May 14, 1971, the petitioner informed respondent No. 1 that having regard to the provisions of the Regulation, and Sr, No. 5 of Schedule A in particular, no excise duty was payable on rectified spirit or alcohol when used for manufacture of liquor or for medical purposes, and that the definition of liquor included denatured spirit and, therefore, no excise duty was payable on denatured spirit.
4. We are not concerned with the other objections which were raised by the petitioner with, regard to licence fees etc. because they were given up by the petitioner. It seems that the department then took up the matter with the Excise Commissioner and in due course it was referred to the Ministry of Law, Government of India. Ultimately, on August 16, 1971, the petitioner was informed by respondent No. 1 that excise duty will be charged on denatured spirit as per Part A (St. No. 5) of the Schedule. Thereafter the petitioner paid the following amounts as excise duty between July 1971 and March 1972, under protest:
Date Challan No. AmountRs. Ps.17th July 1971 557 800.0026th August 1971 674 2,400.009th February 1972 1731 4,190.0013th March 1972 1630 4,190.0028th March 1972 1765 6,692.00____________Total .. Rs.18,272.00____________
5. On June 4, 1972, the petitioner called upon respondent No. 1 to refund to him the amount of excise duty paid by him under protest as no excise duty was payable on the denatured spirit. The request of the petitioner was rejected by respondent No. 1 on June 13, 1972. The present petition was, therefore, filed on July 10, 1972, challenging1 the action of respondents Nos. 1 and 2 in recovering1 excise duty on denatured spirit without any authority of law and praying for a writ directing the respondents to refund to the petitioner the sum of Rs. 18,272 paid by him as excise duty under protest.
6. In support of the petition, Mr. Sorabjee, the learned Counsel appearing for the petitioner, took us through the provisions of the regulation, the material parts of which have already been quoted above, and contended that the action of the respondents in levying excise duty on denatured spirit is ultra vires, as they considered it as rectified spirit, though the regulation made a clear distinction between rectified spirit and denatured spirit. He referred to the definition of 'denatured' contained in Section 2(/) of the Regulation where denatured spirit is defined to mean spirit effectually and permanently rendered unfit for human consumption. He also referred to the definition of the word '' rectification'' contained in Section 2(r), which definition includes every process whereby spirits are purified or are coloured or flavoured by mixing any material therewith. He also referred to Part 'C of the Schedule, which clearly makes a distinction between rectified spirit and denatured spirit and mentions them separately in Part C(I)(3), C(II)(3) and (4), and contended that since the regulation has made a clear distinction between denatured spirit and rectified spirit, the respondents have acted without jurisdiction in treating the denatured spirit as rectified spirit in Part A, Sr. No. 5, and levying excise duty on denatured spirit. After carefully considering the various provisions of the Regulation, we find that this submission is well founded and must be upheld.
7. It is well-settled that a taxing1 statute must be strictly construed. It is a well-settled rule of law that all charges upon the subject must be imposed by clear and unambiguous language, because in some degree they operate as penalties: the subject is not to be taxed unless the language of the statute clearly imposes the obligation, and language must not be strained in order to tax a transaction which, had the Legislature thought of it, would have been covered by appropriate words. 'In a taxing Act', said Rowlatt J., 'one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.' But this strictness of interpretation may not always ensure to the subject's benefit, for 'if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be.' (See Maxwell on the Interpretation of Statutes, 12th edn., p. 256). Relying on these principles Mr. Sorabjee rightly contended that although there was clear distinction maintained in the Schedule between rectified spirit and denatured spirit, it cannot be inferred that by mentioning only rectified spirit in Part A (Sr. No. 5) the draftsman of the Regulation intended to levy excise duty on denatured spirit.
8. To repel this argument, which, in our opinion, is not assailable, Mr. Lokur, the learned Counsel appearing for the respondents, drew our attention to the definition of liquor contained in Section 2(0, which is as follows:
2.(1) 'Liquor' includes spirits of wine, ethylated or denatured spirits, spirits, wines, toddy, beer, feni and all liquids consisting of or containing alcohol other than medicinal and toilet preparations;
It is difficult to appreciate how this definition, which is an inclusive definition, will help the respondents, because Part A (Sr. No. 5) itself shows that excise duty is leviable on rectified spirit or absolute alcohol except when used for manufacture of liquor or for medical purpose. It is the rectified spirit which is used for preparing denatured spirit and in that case the plain and manifest meaning1 of Part A (Sr. No. 5) is that so far as rectified spirit is used for preparing denatured spirit no excise duty will be payable thereon. It may also be noted that the word 'spirit' is defined in Section 2(t) and means any liquor containing alcohol and obtained by distillation, whether it is denatured or not. Therefore, unless there was a specific item relating to denatured spirit contained in Part C, the respondents had no legal authority to recover excise duty on denatured spirit. As stated already, Part C makes a clear distinction between denatured spirit and rectified spirit. It is difficult to argue that the draftsman who made the distinction while drafting Part O, forgot it while drafting Part A.
9. The only other argument which was advanced by Mr. Lokur was that the definition of country liquor contained in Section 2(e) makes denatured spirit liable to excise duty under Sr. No. 4 of Part A. The definition of country liquor contained in Section 2(e) is that, it means liquor manufactured in any part of India other than foreign liquor. The word liquor is defined in Section 2(1) as stated above and it includes denatured spirit as well as all liquids containing alcohol other than medicinal and toilet preparations. It would, therefore, include even rectified spirit. The draftsman of Part A has excluded rectified spirit from item 4 and has included a separate item at Sr. No. 5, A distinction is made between country liquor, denatured spirit and rectified spirit throughout Part C. Under the circumstances, although the word country liquor is wide enough to include even denatured spirit, the context in which rectified spirit and country liquor are used in Part A of the Schedule shows that the wide meaning of 'country liquor' as defined in Section 2(e) was not intended when drafting Sr. No. 4 of Part A of the Schedule.
10. Mr. Sorabjee has drawn our attention to the Schedule annexed to the Goa, Daman and Diu Excise Duty Act, 1964, which also seems to have been drafted by the Ministry of Law, Government of India, in which denatured spirit is mentioned as Sr. No. 6 of Part A to the Schedule while country liquor and rectified spirit are mentioned as Sr. Nos. 4 and 5. Having regard to this legislative drafting practice making a distinction between denatured spirit, country liquor and rectified spirit with respect to Union territories and also in the context of the Dadra and Nagar Haveli Excise Duty Regulations in which the distinction is made between denatured spirit and rectified spirit and country liquor, the respondents cannot rely on the definition of country. liquor in interpreting Part A of the Schedule of the Regulation. Besides we have grave doubt as to whether having throughout purported to have levied excise duty as on rectified spirit under Part A(Sr. No. 5) it is now open to the respondent to contend that they could levy it as country liquor under Part A(Sr. No. 4). We are not prepared to probe deeper into the matter because it is patent that neither Part A(Sr. No. 4) nor Part A(Sr. No. 5) will apply to the denatured spirit.
11. It was contended by Mr. Lokur that although the word 'liquor' is defined as including' 'denatured spirit', that definition must not be read along1 with the word 'liquor' in Part A(Sr. No. 5). This argument is only stated to be rejected. The draftsman of this legislation ought to have known that rectified spirit is used for the manufacture of denatured spirit which they had already included in the word liquor. It is difficult to imagine or accept what Mr. Lokur submits, namely, that the interpretation of the word liquor in Part A (Sr. No. 5) was adopted by the draftsman ignoring the well known fact that rectified spirit is used for the manufacture of denatured spirit. Such ignorance cannot be attributed to the draftsman of the law.
12. In the result, the petition is allowed, the rule is made absolute with costs. The amount deposited by the petitioner in Court along with interest accrued thereon shall be allowed to be withdrawn by the petitioner.