1. Petitioner-Lokopkarak Pharmaceutical Works Alwar which is a registered Firm and manufacturer of Indian Ayurvedic & Unani medicines having licence from the Excise Department under the Medicinal & Toilet Preparations (Excise Duties) Act, 1955 (for short Medicinal Act) has challenged imposition of excise duty under the orders dt. 26.4.84 & 15.11.84 (Ann. 15 & 16) passed by the Assistant Excise Officer Alwar & Excise Commissioner Udaipur (respondent Nos. 2 & 3), in respect of rectified spirit measuring 382 bulk litres.
2. The facts giving rise to this petition are that admittedly the petitioner Firm received rectified spirit measuring 500 bulk litres with a strength of liquor as 64.05 O.P. from Ganganagar Sugar Mills under Permit No. 986/11 dt. 24.11.1978 and which was transported to Alwar in the bonded warehouse, with a view to manufacture Unani & Ayurvedic Medicines and out of which, 118 bulk litres thereof were used in the manufacture of ayurvedic medicines, for which admittedly excise duty was paid by the petitioner Firm, and rest thereof viz. 382 litres rectified spirit continued to be storedin its godown (bond warehouse) under double lock-one key with excise department & another with the petitioner Firm.
3. It is the case of petitioner Firm that by virtue of imposition of prohibition to the manufacture & sale of certain ayurvedic medicines containing more alcohol which could have been used as liquor, w.e.f. April 1979 in Alwar which remained in force upto September 1981, it (Firm) stopped consumption of aforesaid spirit and thereby wrote a letter dt. 26.9.81 (Ann. 1) requesting respondent No.3 to transfer unused 382 bulk litres of rectified spirit to M/s. Ganganagar Sugar Mills Alwar depot, which was sanctioned by letter dt. 20.4.82 (Ann. 2) but M/s. Ganganagar Sugar Mills refused to take back its sold & unused rectified spirit (382 bulk litres), which constrained the petitioner Firm to persistently request the Excise Commissioner so as to put pressure on M/s. Ganganagar Sugar Mills to take back the disputed spirit and the position remained that admittedly M/s. Ganganagar Sugar Mills did not turn to take back the spirit in question. Therefore, it is further case of the petitioner that ultimately when samples of the spirit in question were taken on or about 3.7.82 its strength was 66.83 but the Public Analyst opined that this spirit was unfit for human consumption; and that the respondent No.3 sent a letter dt. 22.4.83 (Ann. 8) directing it (Firm) to arrange the supply of the spirit in question on its behalf to a permit holder so that sanction be issued to do so and in case of destruction thereof, the duty be got paid under intimation. Even admittedly a sanction was issued by order dt. 18.6.83 (Ann. 9) permitting transport of the spirit in question from the petitioner firm to M/s. Jai Chemical & Pharmaceuticals, Jaipur in a bond warehouse but M/s. Jai Chemical through its letter dt. 14.9.83 (Ann. 10) declined to accept transport of the spirit in question because of its being unfit for medical purposes. Laying much stress on aforesaid circumstances, it is the case of the petitioner that despite the spirit in question having been declared unfit for medicinal purposes the excise duty was being persistently demanded by the respondents even for issuing sanction for its destruction, rather notice was issued on 26.4.84 (Ann. 15), demanding excise duty for a sum of Rs. 29,952 =65P. for the spirit in question (382 bulk litres), against which an appeal was filed before the Excise Commissioner who, by his order dt. 5.11.85 (Ann. 16) upheld the imposition or demand of excise duty under order dt. 26.4.84 (Ann. 15) which are sought to be quashed in this petition.
4. In reply to the writ petition, the respondents contended that the petitioner Firm failed to give details as to which of medicines it intended to manufacture, did contain alcohol attracting the Rajasthan Prohibition Act 1969, whereas this Prohibition Act was made enforced in Alwar w.e.f. 1.4.1979, but it did not put a blanket prohibition on medicinal preparations because during which also, the petitioner Firm could have used the rectified spirit in question for unrestricted medicinal preparation, for which this Court was drawn attention to the Prohibition Act, 1969 as per which 'liquor' means intoxicating liquor excluding spiritually medicinal preparations which contain small percentage of alcohol & which have been declared as unrestricted under the Medicinal Act. It is further case of the respondent's that once admittedly the spirit in question was transported to Alwar in November 1978, but for the first time on 26.9.1981, the petitioner Firm desired to return the unused rectified spirit in question after having used 118 bulk litres thereof & paid excise duty thereon, and thus it had sufficient time to use transported rectified spirit in question.
5. As regards spoiling of spirit in question as found by the Public Analyst opining it to be unfit for consumption of medicinal purpose, it is the case of respondents that rectified spirit in question had been stored in iron oil drums resulting in its spoiling due to improper storage, therefore, the respondents cannot be blamed, inasmuch as . M/s Ganganagar Sugar Mills was not bound to take back such rectified spirit as it was a mere contract of sale & purchase in between them, for which it could neither be bound down nor blamed the respondents if the spirit in question having not been taken back by Sugar Mills, nor duty can be waived on that count. As per respondents' case, the petitioner Firm has engineered an afterthought story in order to some how or the other to avoid excise duty payable on the rectified spirit, whereas even in case of it being destroyed, excise duty is also payable on it as the petitioner was under a bond to pay the excise duty. An objection was also raised by the respondents that since revision petition is only the remedy against the impugned orders (Anns. 15 & 16) under Rule 128 of the Medicinal Rules to the Central Government, which having been failed to avail of, this writ petition is not maintainable, because of the reason that the duty is payable on the rectified spirit transported by the petitioner firm under a bond as it had undertaken to pay duty later on.
6. Having heard both the parties & considered their rival contentions so also material on record it is crystal that a very short controversy raised is as to whether under the medicinal Act the excise duty can be charged in the facts & circumstance of the present case?
7. Excise duty is levied & collected on certain goods as provided in Section 3 of the Medicinal Act which reads as under :-
3. Duties of excise to be levied & collected on certain goods- (1) There shall be levied duties of excise, at the rate specified in the Schedule, on all dutiable goods manufactured in India.
(2) The duties aforesaid shall be leviable-
(a) where the dutiable goods are manufactured in bond, in the State in which such goods are released from a bounded warehouse for home consumption, whether such State is the State of manufacture or not;
(b) where the dutiable goods are not manufactured in bond, in the State in which such goods are manufactured.
(3) Subject to the other provisions contained in this Act, the duties aforesaid shall be collected in such manner as may be prescribed.
Explanation- Dutiable goods are said to be manufactured in bond within the meaning of this section if they are allowed to be manufactured without payment of any duty of excise leviable under any law for the time being in force in respect of alcohol, (narcotic drug or narcotic) which is to be used as an ingredient in the manufacture of such goods.
8. In the present case, rectified spirit in question was admittedly manufactured in bond in the State of Rajasthan and was released from a bonded warehouse for home consumption, Clause (a) to Sub-section (2) of Section 3 is relevant. A bare reading of afore quoted Section 3 makes it explicit that as per Section 3(2) duties of excise at the rates specified in the Schedule shall be leviable (a) where the dutiable gods are manufactured in bond in the State in which such goods are released from a bonded warehouse for home consumption, whether such State is the State of manufacture or not. As per Section 2(c), 'dutiable goods' means the medicinal and toilet preparations specified in the Schedule as being subject to the duties of excise levied under the Act. Further, the petitioner Firm is manufacturer of Ayurvedic & Unani medicines, Item No. 2 of the Schedule (Under Section 3) is relevant besides Explanation III & IV, which read as under:-
Item No. Description ofdutiable goods
Rate of duty
Medicinal preparations inAyurvedic, Unani or other indigenous systems of medicine-
Medicinal preparationscontaining self generated alcohol which are not capable of being consumed asordinary alcoholic beverages.
Medicinal preparationscontaining self generated alcohol which are capable of being consumed asordinary alcoholic beverages
Thirty eight naye paiseper litre of strength of London proof spirit
All other containingalcohol which are prepared by distillation or to which alcohol has been added
Rupees fifty &fifteen; naye paise per litre of the strength of London proof spirit
Medicinal preparationsnot containing alcohol but containing oprum, Indian hemp, or other narcoticdrug or narcotic
Ten per cent ad valorem
Explanation 111. - 'London proof spirit' means that mixture of ethyl alcohol and distilled water which at the temperature of 51 degrees Fahrenheit weighs exactly 12/13th parts of an equal measure of distilled water at the same temperature.
Explanation IV. - Where in respect of any dutiable goods the unit of assessment for the purpose of any duty under this Act is a litre of the strength of London proof spirit, the duty shall be increased or reduced in such proportion as the strength of the dutiable goods is greater or less than that of the London proof spirit.
9. As per Section 2(g), 'medicinal preparation' includes all drugs which are a remedy or prescription prepared for internal or external use of human beings or animals and all substances intended to be used for or in the treatment, mitigation or prevention of disease in human being or animals.
10. Once it is admitted case of the petitioner Firm that it is a manufacturer of Indian Ayurvedic & Unani medicines, besides licence holders under the Medicinal Act & the Rules thereunder, inasmuch as with a view to manufacture Unani & Ayurvedic medicines the petitioner Firm got a permit of rectified spirit measuring 500 bulk litres from M/s. Ganganagar Sugar Mills and further more, out of aforesaid 500 bulk litres, 118 bulk litres had already been consumed for medicinal preparation and paid excise duties thereon and moreover, the rectified spirit did contain strength of alcohol at 64.5 O.P. and it was not only manufactured in bond in State of Rajasthan but also released from a bounded warehouse for medicinal preparation, in my considered opinion, merely because out of 500 bulk litres of rectified spirit, 382 bulks litres thereof remained unconsumed for medicinal preparation or could not have been used by the petitioner Firm for one pretext or the other, it cannot be said that duties of excise would not be leviable or payable. Rectified spirit transported by the petitioner on a permit under the Medicinal Act from M/s Ganga Nagar Sugar Mills is undoubtedly a dutiable goods being manufactured in bond in the State of Rajasthan and that being so, for 118 bulk litres out of 500 bulk litres of that spirit, duties of excise have been paid by the petitioner, obviously because while issuing permit for transporting such spirit, an undertaking in the form of a Bond was given by the petitioner to pay leviable duties of excise on such permitted spirit due to the same having been manufactured in bond in Rajasthan and transported for medicinal preparations. As per Explanation HI to the Schedule Under Section 3, spirit means mixture of ethyl alcohol and distilled water, while as defined in Section 2(a), 'alcohol' means ethyl alcohol of any strength and purity having chemical composition. Thus rectified spirit is covered by ethyl alcohol manufactured in bond in Rajasthan and for being used in medicinal preparations, notwithstanding it has been consumed in medicinal preparations or not. Hence I find to merit in the contention of the petitioner that the duty is not chargeable on spirit but on the manufactured medicine only.
11. The petitioner Firm was at fault in not consuming rectified spirit in question within time for medicinal preparation soon after its was transported from manufacturer M/s.Ganganagar Sugar Mills, because even if the same is spoiled in custody due to their fault, it cannot be said that the petitioner is not liable to pay the excise duty thereon, rather the duties of excise is payable especially when he had undertaken to pay it later on and it had been retained under a bond warehouse. Non-user of rest of unused rectified spirit on the part of the petitioner cannot entitle it to claim waiver of duties of excise. Thus once the petitioner had undertaken before transporting the rectified spirit manufactured in a bond and stored in a bond warehouse at Alwar, to pay duties of excise, it excise in any manner avoid payment of duties of excise which is chargeable under the law, on any of excuses which are being taken by the petitioner firm.
12. Further, even if there was prohibition upon the Rajasthan Prohibition Act, 1969 having been made effective & enforced in Alwar w.e.f. 1.4.1979, though as per respondent's case, it did not put a blanket prohibition as has been taken samersault by the petitioner firm by pleading illusory and sham excuses with a view to avoid payment of duties of excise, at the worst, the petitioner firm ought to have resorted to immediate return of unused spirit in question which it had done after three years for the first time on 26.9.1981 which depicts that it went on spoiling the spirit in question, for which in my considered view, it cannot addle the responsibility with the respondents in order to get rid of levy of duties of excise and it cannot take samersault. It is only because of the inaction and latitude on the part of the petitioner firm that the spirit in question could not have been used by the petitioner for three years rather it went on spoiling the same resulting in unfit for medicinal purposes. The petitioner firm failed to show that it wanted to use spirit in question (382 bulk litres) for a particular medicinal preparations but it could not do so by virtue of the Prohibition Act. On the contrary, the petitioner firm could not have controverted the respondent's case that it could have used the spirit in question for unrestricted medicinal preparations notwithstanding the aforesaid Prohibition Act was made applicable in Alwar even after 1.4.1979, inasmuch as according to definition of 'liquor' as provided in the aforesaid Prohibition Act, it means intoxicating liquor but excluding spiritually medicinal preparations containing small percentage of alcohol which was declared as unrestricted under the Medicinal Act. Thus viewed, it cannot be said that by virtue of aforesaid Prohibition Act, medicinal preparations stood withheld resulting in non-user of rectified spirit (382 bulk litres) in question. That apart, on that count, duties of excise can neither be waived nor the petitioner firm can be absolved of liability of such duties of excise for want of non-user of the spirit in question, for medicinal preparations, may be in the circumstances or on lame excuses pleaded herein by the petitioner firm, which are preposterous false being based on no foundation under the relevant law. The petitioner failed to show any relevant law which absolve of levy of duties of excise or payment thereof by the purchaser of dutiable goods manufactured in bond in Rajasthan & released from a bonded warehouse for home consumption, like rectified spirit in question in case of it having not been consumed for medicinal preparations before the same resulted in unfit for human consumption.
13. In this view of the matter, the duties of excise are not only leviable but also chargeable in the facts and circumstances of the present case, referred to above, and the petitioner firm cannot be allowed to take somersault or blow hot and cold in the same breath. The impugned orders imposing duties of excise worth Rs. 29,952=65 P. are not open to challenge on the grounds urged before this Court and the respondents have not acted arbitrarily or illegally in having passed the impugned orders (Anns. 15 & 16) which do not call for interference by this Court so as to invoke writ jurisdiction because of the reason also that there is no violation of either the Medicinal Act or the rules made thereunder or any other taxation law for imposition of duties of excise on the spirit in question.
14. As a result of the above discussion, this writ petition being devoid of merit is dismissed with no order as to costs.