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2001 DIGILAW 276 (HP)

MOHAN MEAKIN LTD. v. STATE OF HIMACHAL PRADESH

2001-10-05

K.C.SOOD, KAMLESH SHARMA

body2001
JUDGMENT Kuldip Chand Sood, J.:- We propose to dispose of these three writ petitions (CWP No.960 of 1994 titled: Mohan Meakin Ltd. v. State of H.P. & Ors. CWP No. 182 of 2000 Mohan Meakin Ltd. v. State of H.P. & Ors. and CWP No.3 of 2001 Mohan Meakin Ltd v. State of H.P. & Ors, by this common judgment as the points raised in all the writ petitions are identical. 2. Petitioner, Mohan Meakin Ltd., Solan Brewery, is a Company, registered under the provisions of the Companies Act, 1956 and is engaged in the business of manufacture and sale of Indian Made Foreign Liquor and Beer. The petitioner Company has a distillery at Kasauli, in the District of Solan, with a license under Section 21 of the Punjab Excise Act as applicable to Himachal Pradesh ("the Act" for short). The petitioner Company distils the malt spirit, for the manufacture and bottling of Indian Made Foreign Spirit at Kasauli (IMFS for short). IMFS so manufactured and distilled at Kasauli Distillery is sent for bottling at Solan Brewery. The Bottling Plant at Solan Brewery is covered by the license granted to the petitioner company under Section 21 of the Act in Form D2 (Annexure PI). The petitioner Company has wholesales depots located in various places in India. The malt spirit distilled at Kasauli distillery is transported by the Petitioner Company, under Bond, to the bottling plant at Solan Brewery where IMFS is bottled from the malt spirit received from Kasauli Distillery. The IMFS bottled at Solan Brewery, in turn, is transported and exported the Petitioners depots, Canteen Stores, Department Depots and other licensees in the Country against the duty paid under bond permits issued by the Excise Authorities of the importing States. On receipt of the bond permit, the petitioner Company obtains "export in bond" sanction from the Collector Excise after executing bond in Form L-37. On receipt of the export in bond sanction from the concerned Competent Authority, IMFS is issued against these permits through- a pass without payment of duty. The duty is paid at the importing place at the time of issue of liquor from the Bonded Warehouse at that place. 3. It is the case of the petitioner Company that during the transportation of the IMFS, some losses of liquor takes place due to breakage of glass bottles. 4. The duty is paid at the importing place at the time of issue of liquor from the Bonded Warehouse at that place. 3. It is the case of the petitioner Company that during the transportation of the IMFS, some losses of liquor takes place due to breakage of glass bottles. 4. The concerned Excise and Taxation Authorities of the respondents, i.e. the Additional/Deputy Excise and Taxation Commissioner, H.P. (South zone) issued show cause notices to the petitioner company on the various dates calling upon the petitioner Company to show cause as to why the proceedings be not initiated for recovering the excise duty on the quantity of the IMFS which was received deficient at destination, particularly, under Rule 16 (iv) of Punjab Liquor Permit and Pass Rules, 1932 ("Rules" for short) as applicable to Himachal Pradesh. The petitioner Company filed reply(s) to the show cause notice(s) so issued. The submissions and contentions raised by the petitioner Company against the imposition of excise duty on the short-fall of the liquor received at the destinations were rejected by the concerned authorities by various orders (Ann. P31 dated 7.4.1992 in CVVP No.960 of 1994, Annexures PI3, PI4, PI5 and PI6 in CWP No. 182 of 2000 and Annexure P5 in CWP No.33 of 2001). The Petitioner Company carried appeal(s) before the Excise and Taxation Commissioner (exercising the powers of Financial Commissioner, Himachal Pradesh) against the orders passed by the Collector Excise and demands raised by such orders. The appeals of the petitioners too were dismissed in all the cases. The various orders of dismissal are impugned in these writ petitions. 5. It is the case of the petitioner company that all the orders impugned in the writ petitions were made without application of mind, contrary to the provisions of the Act and the Rules and are arbitrary, illegal and therefore, liable to be quashed. 6. It is the further case of the petitioner Company that the demand raised for the excise duty "on the wastage of the bottled spirit in transit, transported under-bond by the petitioner from their bottling plaint at Solan Brewery to various destinations in India" is illegal being opposed to the principle "duty follows consumption" as evolved at the Conference of Finance Members of all the States at New Delhi in November, 1923. The spirit lost in transit cannot be said to have been consumed and, therefore duty is not leviable on such lost spirit. 7. It is also the case of the Petitioner company that rule 16 (ii) and (iv) of the Rules under which the duty is sought to be charged are ultra vires of Section 31 of the Act and the Constitution of India. The charging provision, it is pleaded, is Section 31 of the Act and not rule 16 (ii) and 16 (iv) of the Rules. 8. According to the petitioner Company, the State is competent to levy excise duty, under Entry 51 of List-II of the Seventh Schedule of the Constitution, on the alcoholic distills for human consumption and not on the wastage of the liquor in transit as provided under rule 7.16 of the rules. 9. It is the further case of the Petitioner Company that under clause 8(7) of the H.P. Excise Fiscal Orders, 1965, "Country Spirit and IMFS exported from Licensed Distilleries in Himachal Pradesh to another States in India are exempted from, payment of duty" and, therefore, the respondents cannot demand "duty" of excise on wastage of the IMFS which may occur in transit from Solan Brewery to other States. 10. According to the petitioner Company, excise duty is a single point duty to be charged at one stage and, therefore, once the duty has been charged by the respondent-State on all exports as export duty, it cannot be charged again as duty on the liquor lost in transit. Such a levy would amount to "double duty" which is not permissible in law. The petitioner prays for the following reliefs: CWP No.960 of 1994 (i) Quash and set aside order dated 10.6.94, P-33, passed by respondent No.2 rejecting appeal No.6/92. (ii) Quash and set aside orders dated 7.4.92, P-31, passed by the Joint Excise and Taxation Commissioner, South Zone, Himachal Pradesh cum Collector Excise, Shimla, respondent No.3 creating the demand on account of alleged wastages of bottled spirit in transit. (iii) Strike down the provisions of Rule 7.16 of Punjab Liquor Permit and Pass Rules as applied to the State of Himachal Pradesh being ultra vires of the Provisions of the Punjab Excise Act as applied to the State of Himachal Pradesh and that of the Constitution of India. (iii) Strike down the provisions of Rule 7.16 of Punjab Liquor Permit and Pass Rules as applied to the State of Himachal Pradesh being ultra vires of the Provisions of the Punjab Excise Act as applied to the State of Himachal Pradesh and that of the Constitution of India. (iv) Direct the refund of Excise Duty along with interest at the bank rate in case the same is recovered during the pendency of the writ petition. CWP No. 182 of 2000. (i) Quash and set aside orders dated 9.8.99, P-21 and order dated 3.11.999(7), P-27 passed by respondent No.2 rejecting appeal No.9/99, 11/99, 12/99 and 34/99. (ii) Quash and set aside orders dated 27.1.99, P-13.P-14.P-15, P- 16 and 24.5.99 P-25 passed by the Addl. Excise and Taxation Commissioner, (S.Z.) Himachal Pradesh cum Collector Excise, Shimla, respondent No.3, in case No.52/97, 53/97, 58/97 & 61/97 and 72/89 creating the demands on account of alleged wastages of bottled Spirit in transit; (iii)Strike down the provisions of Rule 7.16 of Punjab Liquor Permit and Pass Rules as applied to the State of Himachal Pradesh being ultra vires of the Provisions of the Punjab Excise Act as applied to the State of Himachal Pradesh and that of the Constitution of India; (iv) Direct the refund of Excise Duty along with interest at the bank rate in case the same is recovered during the pendency the writ petition. CWPNo.33of2001 (i) Quash and set aside order dated 9.11.2000, P-7, passed by respondent No.2 rejecting appeal No. 13/2000. (ii) Quash and set aside orders dated 30.11.99, P-5 passed by the Addl. Excise and Taxation Commissioner, South Zone, Himachal Pradesh cum Collector Excise, Shimla respondent No.3, creating the demand on account of alleged wastages of bottled spirit in transit. (iii)Strike down the provisions of Rule 7.16 of Punjab Liquor Permit and Pass Rules as applied to the State of Himachal Pradesh being ultra vires of the provisions of Punjab Excise Act as applied to the State of Himachal Pradesh and that of the Constitution of India; (iv) Direct the refund of Excise Duty along with interest at the bank rate in case the same is recovered during the pendency of writ petition. 11. The respondents in their return(s), controverter the allegations, Several preliminary objections are raised. It is pleaded that the Petitioner Company is estopped from raising the plea that it is not governed by the Rules. 11. The respondents in their return(s), controverter the allegations, Several preliminary objections are raised. It is pleaded that the Petitioner Company is estopped from raising the plea that it is not governed by the Rules. The petitioner Company is liable to pay the excise duty for the un-explained loss(es) of the liquor during transit in accordance with Bond executed in Form L-37. According to the respondents, the Petitioner Company removed the IMFS in Bond without pre-payment of the duty with the undertaking that the entire quantity of liquor so authorised under the authority of export in Bond Sanction in Form L-36 shall be delivered at the destination. Quantity which was not delivered at the destination, in accordance with the terms of the Body in Form L-37, is liable to be subject of "duty" as un-explained wastage in transit. 12. On merits, it was pleaded that the demands were raised in accordance with law and after hearing the petitioner company. It is further pleaded that the impugned orders "contains the necessary reasons for rejecting the submissions of the petitioner". It is the case of the respondents that the rules have been made under the various provisions of the Act to ensure safe delivery of the liquor exported from the Brewery to various places in the Country and any unexplained loss of the IMFL during transit is liable to be subjected to duty under the conditions of the Bond. It is also the case of the respondents that rules have been made under the Act as regulatory measures. The transport and delivery of the consignment of the liquor "under Bond" is the responsibility of the petitioner Company. 13. It is admitted that under the Fiscal Order of 1965, duty is not levible on the liquor which is exported from the respondent State as the said duty is recoverable by the Importing State as countervailing duty. The demand(s) created against the petitioner, plead respondents, under various orders are legal and within the four corners of law an under contractual obligations as per the terms of the agreement. 14. It is denied that the impugned orders were passed without application of mind or de hors the provisions of the Act and the rules. 15. We have heard Mr. Kapil Dev Sood, learned counsel for the petitioner Company and learned Advocate General assisted by Mr. K.D. Batish, learned Additional Advocate General for the respondents. 16. 14. It is denied that the impugned orders were passed without application of mind or de hors the provisions of the Act and the rules. 15. We have heard Mr. Kapil Dev Sood, learned counsel for the petitioner Company and learned Advocate General assisted by Mr. K.D. Batish, learned Additional Advocate General for the respondents. 16. Several contentions were raised by Mr. Kapil Dev Sood, learned counsel for the for pentioner company. 17. In his first submission, Mr. Sood referred to the proceedings of the Conference of Finance Members of some of the then "Provinces" held in April, 1923. It was suggested in the Conference that matters "of excise should be settled by the adoption of the general principle that duty should follow consumption, except in the case of small quantities". A Sub-Committee was constituted to prepare a report on excise. The Committee recommended that duty on excisable articles should follow consumption except in the case of small quantities not dispatched direct from the distillery or bonded warehouse to the Consumer. It was suggested that Province of manufacture will recover the expenditure involved in the manufacture and export through the cost price. It was also suggested that when a pass is given covering transport across a provincial border, the province of import should be entitled to recover the duty at the rate imposed by it by book transfer from the province of manufacture, or by pre-payment to itself or by requiring the excisable article either to be delivered at a bonded warehouse or to be produced before an excise officer before it is passed into consumption. This recommendation was accepted by the Finance Members of the Provinces present in the meeting. 18. The argument is, when the liquor including IMFS is exported from Himachal Pradesh to another State, then such a liquor is consumed in the importing State and, therefore, the exporting State is not competent to levy and duty on the liquor/spirit which is lost in transit as it cannot be said to be consumed in the exporting State. 19. Entry 51 of List-II of the Seventh Schedule of the Constitution of India empowers the State Legislature to make law providing for levy of excise on alcoholic liquors for human consumption manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced else where in India. 19. Entry 51 of List-II of the Seventh Schedule of the Constitution of India empowers the State Legislature to make law providing for levy of excise on alcoholic liquors for human consumption manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced else where in India. Entry 51 of List-II reads: "51. Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India:- (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and other narcotic drugs and narcotics; but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry." 20. It may be seen that the State Legislature is competent to make law to levy duty on alcoholic liquors for consumption by human beings. It is to be noticed that the incident or levy of duty is related to production or manufacture of the liquor meant for human consumption. Section 31 of the Act is the charging Section for excisable articles, including the excisable articles manufactured in any distillery established or any distillery or brewery licensed under Section 21 of the Act as also on the import, export or transport of the excisable articles under Section 16 of the Act. Explanation to Section 31 provides that duty may be imposed at different rates according to places to which any excisable article is to be removed for consumption or according to the varying strength and quality of such articles. Section 31 may be reproduced for convenience: "31. Duty on excisable articles: An excise duty, or a countervailing duty, as the case may be, at such rate or rates as the State Government shall direct, may be imposed, either generally or for any specified local area, on any excisable article- (a) imported, exported or transported in accordance with the provisions of Section 16; or (b) manufactured or cultivated under any license granted under Section 20; or (c) manufactured in any distillery established, or any distillery or brewery licensed under Section 21: Provided that the duty shall not be so imposed on any article, which has been imported into India and was liable on importation to duty under the Customs Tariff Act, 1975, or the Customs Act, 1962. Explanation - Duty may be imposed under this section at different rates according to the places to which any excisable article is to be removed for consumption, or according to the varying strength and quality of such article." 21. Sub-section (6) of Section 3 defines excisable articles to mean: (a) any alcoholic liquor for human consumption; or (b) any intoxicating drug; 22. Sub-section (19) of this Section defines "spirit" to mean any liquor containing alcohol obtained by distillation whether denatured or not. Sub-section 6 (b) defines "excise duty" and "countervailing duty" to mean any such excise duty or countervailing duty, as the case may be, as is mentioned in entry 51 of List-II in the Seventh Schedule to the Constitution. 23. A bare reading of Section 31 read with sub-section (6) and (19) of Section of Section 3 shows that excise duty is leviable on the IMFS or other liquor for human consumption the moment such liquor is manufactured or produced in a distillery or a brewery licensed under Section 21 of the Act. 24. Admittedly, the petitioner is licensed under Section 21 of the Act. The petitioner company is liable to pay excise duty as may be imposed under Section 31 of the Act by the State Government. Section 59 of the Act empowers the Financial Commissioner to make rules by notification regulating the manufacture, supply, storage or sale of any intoxicant, place, time, duty and fee. Section 32 provides for the manner in which duty is to be lived. It is to be noticed that the duties leviable on excisable articles are not on the consumption of excisable articles or on the sale of excisable article. Such levy of the duties is directly related to the production and manufacture of excisable article. Thus, the taxable event is the production or manufacture of the liquor and not its consumption. The contention of Mr. Sood that duty is leviable or it can only be levied on the consumption of the liquor has no substance. The Apex Court in A.B. Abdulkadir v. State of Kerala, AIR 1962 S.C. 922, held that an excise duty imposed on manufacture and production of excisable articles does not cease to be so merely because the duty is levied at a stage subsequent to the manufacture or production. This ratio was approved in State of U.P. & Ors. v. Delhi Cloth Mills & Anr. This ratio was approved in State of U.P. & Ors. v. Delhi Cloth Mills & Anr. 1991(1) Supreme Court Cases 454. 25. The question which falls for our consideration is whether the respondent-State is competent to levy and collect the duty on the liquor which is lost in transit from the exporting State to importing State. Section 31 of the Act, as noticed earlier, deals with "excise duty" or "countervailing duty" at such rate or rates as the State Government may direct either generally or for any specified local area on any excisable article as defined under Section 3 (vi). A duty of excise, as seen earlier, is leviable on the manufacture or production of the excisable article. In A.B. Abdulkadir and also in State of Mysore v. D. Cawasji & Co. 1970 (3) SCC 710, it was held that excise duty must closely relate to production or manufacture of excisable goods and it does not matter if the levv was made not at the time of production or manufacture but at a later stage and even if it was collected from retailer. Therefore, the demand raised by the authorities on the petitioner Company cannot but be excise duty on the manufacture of liquor though being levied after the declaration of the wastage. The taxable event remains production or manufacture. 26. The next contention of Mr. Kapil Dev Sood, relying upon Bimal Chander v. State of M.P. 1971 (2) SCC 517 was that the respondents cannot levy duty under rule 16 (ii) and (iv) of the Rules as the rule is not a charging provision. Charging provision being Section 31 of the Act, does not provide I for imposition of excise duty on wastages. 27. It is true that no tax can be levied by a State Government unless Statute specifically authorises such levy by a legislation, In Bimal Chander, appellants were successful bidders for some of the liquor vends in Madhya Pradesh. The conditions of auction of the vends specifically provided that a minimum quantity of liquor will have to be sold by the vendors and if they failed to take delivery of the minimum prescribed quantity of the liquor, they will have to pay the excise duty on the quantity of the liquor which may fall short of the minimum quantity. The conditions of auction of the vends specifically provided that a minimum quantity of liquor will have to be sold by the vendors and if they failed to take delivery of the minimum prescribed quantity of the liquor, they will have to pay the excise duty on the quantity of the liquor which may fall short of the minimum quantity. The appellants failed to lift the minimum quantity of liquor in accordance with the conditions which were also imposed in the license. The licensees though paid the prescribed license fee, the price of the liquor purchased by them and also the duty on such liquor. A contention was raised on behalf of the appellants that excise duty is a tax and the same can be levied only under the statute. It was also contended that no law can be imposed on the basis of a contract or by executive orders. It is in this context that the Apex Court ruled that the State Government did not have the authority of the Legislature to levy tax other than that stipulated in the Act. The Legislature, observed learned Judges, has levied excise duty only on those articles which come within the scope of Section 25 (in the present case Section 31). The rule making authority was not conferred with any power to levy duty on any article which did not fall within the scope of Section 25. The ratio of this case is of no assistance to the petitioner Company. The demand raised by the Excise Authorities, in the present writ petitions is the duty on the manufacture or production of the IMFS collection of which was deferred under bond executed by or on behalf of the Petitioner Company in form L.37 under the Rules, to which we shall advert presently. 28. Section 16 of the Act stipulates that no intoxicant, which means any liquor or intoxicating drug under Section 3 (12-a) of the Act, can be imported, exported or transported except after payment of any duty to which it may be liable under the Act or execution of bond for such payment and in compliance with such conditions as the State Government may impose. Section 18 provides that no intoxicant exceeding such quantity as the State Government may prescribe by notification shall be imported, exported or transported except under a pass granted for such import, export and transport of intoxicant by the Collector under Section 19 of the Act. The Punjab Liquor Permit and Pass Rules, 1932, governs the issuance of such passes. Rule 2-C provides for the procedure to be observed for the export of in bond of preparations containing rectified spirit including liquor from the premises of approved manufacturers to other State or Union Territories in India. Proviso to Rule 2, sub-rule (2-C)(b) provides that no authority to export bond liquor shall be granted unless the approved manufacturer has executed and given a bond in form L.37 binding himself in respect of the consignment to be dispatched, to produce a certificate in form L-38 (mutatis mutandis) and binding himself to pay such duty in respect of any consignment dispatched, as may be demanded from him in accordance with the provisions of the rules. Rule 2-C may be reproduced for convenience: 2-C. The following procedure shall be observed for the export in bond of preparations containing rectified spirit from the premises of approved manufacturers to other State or Union territory in India:- (a) Whenever an approved manufacturer in Punjab (Haryana) licensed under the Punjab Excise Act, receives a requisition for export in bond of such preparations to any other state or Union territory in India the person importing such preparations shall obtain and send approved manufacturer an import in bond permit signed by the Collector of the district of destination or by any other Officer authorized in this behalf. (b) Every consignment of such preparations shall be issued under an export in bond authority in form L.36 mutatis mutandis granted by the Collector of the district in which the premises of the approved manufacturer are situated. Provided that no such authority shall be granted for the dispatch of any consignment unless the approved manufacturer has executed and given a bond in form L.37 binding himself in respect of the consignment to be dispatched to produce a certificate in form L.38 (Mutatis mutandis) and binding himself to pay such duty in respect of any consignment dispatched, as may be demanded from him in accordance with the provisions of the rules given below. (c) If such certificate is not produced within such time after the expiry of the period of the currency of the pass in form L-46 as the Collector of the district in which the approved manufacturer is licensed, considers to be responsible, the Collector shall recover from the approved manufacturer duty at the rate for the time being fixed by the Punjab (Haryana) Government under Section 31 of the Punjab Excise Act. (d) If such certificate is produced before or within a reasonable time after the expirty of the period of the currency of any pass then- (i) If the certificate shows delivery of any consignment to have occurred . in full with no greater deficiency then the rate of wastage of half percent per hundred miles, the Collector shall order that the bond in respect of such consignment has been discharged. (ii) but if the certificate shows a deficiency greater than that allowable according to the above- scale, in any vessel in the consignment, then, unless the said deficiency is satisfactorily explained, the Collector shall obtain the Financial Commissioner orders as to the portion of the total deficiency which is tp be charged with duty at a rate not less than that fixed for spirit in such preparations under Section 31 of the Punjab Excise Act (Punjab Amendment-Substitute Words "Excise Commissioner" for Financial Commissioner.(emphasis supplied). 29. Rule 11 provides for procedure to be observed as regards the export-in-bond of country spirit, Indian made foreign spirit or rectified spirit from any licensed distillery in the State of manufacture to any other State in India. Rule 14 provides that no authority or permit or pa can be granted to authorize the dispatch of any consignment under the rules unless the manager of the distillery or approved manufacturer has executed and given a bond in Form L.37 to produce certificate in form L-38 and bind himself to pay much duty in respect of the consignment dispatched as may be demanded from him in accordance with the provision of the rules. Rule 16 (ii) stipulates that if the certificate produced by manufacturer shows deficiency of the liquor which was exported when it reached its destination greater than the allowable, then unless the said deficiency is satisfactorily explained, the Collector shall obtain the Financial Commissioners order as to portion of the total deficiency which is to be changed with duty at a rate not less than that fixed for such spirit under Section 31 of the Act. Rule 16 (iii) provides for the scale of wastage allowance. However, under sub rule (iv), no scale of wastage is prescribed for bottled spirit. Breakages, it is stipulated, shall be satisfactorily explained in the remarks column of form L.38. 30. Section 23 of the Act mandates that no intoxicant shall be removed from any distillery, brewery, warehouse, or other place of storage established or licensed under the Act unless the duty (if any) payable under Chapter V has been paid or bond has been executed for the payment thereof. 31. In all these petitions, IMFS was exported as bottled spirit and therefore, no wastage allowance was allowable under the Rules. Such wastage was to be satisfactorily explained by the Petitioner Company to the concerned authorities to obtain allowance for the payment of duty under Section 16 of the Act read with rules 2-C, 14 and 16 of the Rules. • 32. It is contended by Shri Batish, learned Additional Advocate general that no allowance for the watage is provided for the liquor exported in bottles as the bottles are sealed and there is no scope for evaporation or leakage of the liquor uncle the bottles break in transport. It was therefore, for the petitioner company to satisfactorily explain the wastage in transit. If the petitioner fails to satisfactorily explain the wastage, in transit, the petitioner company would be liable to pay the duty on such wastage as if the liquor was consumed in the manufacturing date. Mr. Batih explained that export duty is much lower as compared to excise duty which is leviable if the liquor is consumed in the home state. He further explained that export duty per proof ltr. of the IMFS is only 0.2 paise, whereas excise duty on the same liquor is Rs.24/- per proof ltr. It is to check the evasion of the excise duty that wastage is required to be satisfactorily explained. He further explained that export duty per proof ltr. of the IMFS is only 0.2 paise, whereas excise duty on the same liquor is Rs.24/- per proof ltr. It is to check the evasion of the excise duty that wastage is required to be satisfactorily explained. In the absence of satisfactory explanation, such wastage is subject to excise duty as payable on home consumable liquor. 33. We have already observed that levy of the duty is connected with the \ manufacture or production of the liquor and such a duty does not cease to be duty on production and manufacture if it is levied at a later stage. Rule 16 does , not, in our view, impose any new tax. It only authorizes the concerned I authorities to charge excise duty, on the wastage of the liquor, in the course of j export, which was charged at a concessional rate in terms of export duty. 34. We draw support for the view we have taken from Delhi Cloth Mills. In Delhi Cloth Mills, the respondent Delhi Cloth Mills were the manufacturers of spirit for human consumption. After the manufacture of spirit, it used to be exported to their warehouses from distillery on passes issued under the Act. They used to manufacture and bottle military run under a license and supply the same to the defence personnel inside and outside the State of U.P. The Officer Commanding Rail Head Depot A..C, Pathankot obtained certain permits from the Estate of Punjab for the import of military rum. Against those permits, the respondent Delhi Cloth Mills exported military rum from their distillery under different passses. At the relevant time, the excise duty on military rum for export was Rs.7/- per L.P. litre while the rate for consumption within the State was Rs.21/- per L.P. litre. Export military rum was under bond and the duty was realized by the importing State from the importer Officer Commanding. The consignments were taken by the consignees under the seal of the railway authorities to their respective destinations. Export military rum was under bond and the duty was realized by the importing State from the importer Officer Commanding. The consignments were taken by the consignees under the seal of the railway authorities to their respective destinations. A notification was issued that with effect from April, 1979 duty shall be imposed on country liquor at the rates specified in schedule and was payable "before the issue from the distillery or bonded warehouse concerned save in the case of issue under bond" A demand was raised against the respondents by notice demanding rupees 4295.55 paise on wastage which was termed as "excess transit wastage" calculated at the maximum rate of rupees 21/- per L.P. litre. The representation of the respondents was rejected. Several writ petitions challenging the similar orders were filed by other manufacturers also before the Allahabad High Court for quashing the similar orders. The respondent- Delhi Cloth Mills prayed for quashing of the impugned orders and a mandamus commanding the State of U.P. not to realize or adjust any amount of duty towards wastage from the respondent distillery. The Allahabad High Court relying upon its earlier Division Bench judgment in Mohan Meakin Breweries Ltd. v. State of U.P. (Writ petition No.2604 of 1973 decided on September 11, 1979 allowed the writ petition and quashed the impugned orders holding that no excise duty could legally be levied on the excess wastage that occurred during the transport of the liquor in the course of export. Aggrieved, the State of U.P. filed an appeal. A contention was raised before the Supreme Court that duty was levied keeping in mind the fact that in U.P. excise duty was levied at different rates, i.e. higher rate when the liquor is sold inside the State and at a lower rate when it is exported outside the State. Countervailing duty was paid by the importer on the quantity actually received in the importing state. If there was excess wastage on transit the result is that the quantity actually received by the destination State is less than the quantity on which the State of U.P. charged the lower rate and, therefore, on the quantity shown as wastage the State is entitled to recoup the differential duty by charging excise duty at the higher rate which was permissible under the Act and the Rules. 35. 35. The Apex Court held that military rum exported was produced in the State of U.P. and the excise duty therefore was closely related to the production or manufacture of excisable goods and it did not matter if the levy was made not at the moment of production or manufacture but at a later stage. Their Lordships observed: "The differential duty in the instant case, therefore did not cease to be an excise duty even if it was levied on the exporter after declaration of the excess wastage. The taxable event was still the production or manufacture." 36. We may notice, in Delhi Cloth Mills, rule 814 of the Rules framed under U.P. Excise Act, comparable to rule 2-C read with rule 16 of the Rules, provided for the allowance for the loss of liquor in transit. The rules stipulated that allowance up to 0.5% would be admissible for the actual loss in transit by leakage, evaporation or other unavoidable cause for the loss of spirit transported or exported under Bond in wooden cask or metal vessels. Admissible allowance is determined by deducting from the quantity of the spirit dispatched from distillery, the quantity received at the place of destination, both quantities being stated in terms of alcohol. It was further stipulated that allowance waste be calculated on the Quantity contained in each wooden cask or metal vessels comprised in a consignment. An Officer of the Excise, who receive such consignment, after gauging the spirit at destination is required to report the wastage occurred above the allowable limits. The person who had executed the bond is made liable to pay duty on the deficiency in excess of the allowance. The rate of duty leviable, in such cases is the highest state of duty leviable on the spirit exported. In case the wastage does not exceed the prescribed limit, no action need to be taken by the Officer-in-charge of the distillery or bonded warehouse, as the case may be. However, if the wastage exceeds the allowable limit, the officer-in-charge of the distillery has to obtain an explanation of the distillers or the person executing the bond and forward the same together with his full report regarding the circumstances of such wastage to the Assistant Excise Commissioner or the Deputy Excise Commissioner incharge of such distillery. Thereafter, the concerned Assistant/Deputy Excise Commissioner will charge duty on excess wastage. Thereafter, the concerned Assistant/Deputy Excise Commissioner will charge duty on excess wastage. However, if the total wastage in a consignment is within the allowable limit, then such Deputy or Assistant Excise Commissioner incharge is empowered to write off the excess wastage in any particular wooden cask or metal vessel. 37. Interpreting the Rules and charging provisions. Their Lordships, relying upon Mohan Meakin Breweries Ltd. v. Excise and Taxation Commissioner, Chandigarh, 1976 (3) SCC 421, held that rules providing for levy of tax on the excess wastage were regulatory in nature and "precautionary against the preparation of fraud on the excise revenue of the exporting State". Their Lordships observed: "If out of the quantity of military rum in a consignment, a part or portion is claimed to have been wastage in transit and to that extent did not result in export, the State would, in the absence of reasonable explanation, have reason to presume that the same have been disposed of otherwise than by export and impose on it the differential excise duty. A statute has to be construed in the light of the mischief it was designed to remedy. There is no dispute that excise duty is a .jingle point duty and may "oe levied at one of the points mentioned in Section 28. 38. Their Lordships further observed: The submission of the respondents that they paid duty on the entire quantity of rum to be exported under excise passes issued to the importer and that after payment of the export duty the rum bottled under the conditions enumerated in the Rules was supplied to the consignee at the distillery premises and the consignments were taken by the consignees under their seals and under the seal of the railway authorities and the consignments reached their destination with seals intact would not go to support the contention that the State Government was not competent to levy any duty on the excess wastage that is shown to have occurred during transit inasmuch as only a concessional rate of duty was levied on the liquor which was supposed to be exported outside the State of U.P. and if the entire quantity on which such concessional duty was paid did not reach its destination, and the shortgage(?) is shown as wastage in transit, it surely meant that the short delivery was not exported. The reason of the wastage would not be material so far as this conclusion is concerned. Had this quantity been not exported but consumed locally the State would have derived higher duty of which it has been deprived. 39. The argument of the respondent-manufacturer that countervailing duty is paid by the importers in the importing State on the quantity actually received was also repelled thus: "The argument that countervailing duty is paid by the importers in the importing State on the quantity actually received, would also be immaterial for this conclusion thus that may be of some importance for the purpose of revenue of the importing State as well as the consignee. In case countervailing duty has been paid on the entire quantity of the consignment in the importing State there may be room for adjustment in accordance with the provisions of Rules 636,637,637- A and 637-B of the Rules. The only material question may be whether the wastage was caused while the bottles were in transit but still within the territory of the exporting State or in transit inside the importing State. If as a matter of fact it is found that the exported liquor actually crossed the territory of the exporting State intact there may not be any justification for demanding differential duty. That will of course be a question of fact in no way affecting the right to demand the differential duty. The decision in Ajudhia Distillery Rajaka, Sahaspur v. State of U.P. quashing such a demand and holding that the exporting State had no jurisdiction to charge duty on the liquor wastage in transit cannot be said to have been correctly decided and the impugned judgment in the instant case suffers from the same infirmity, and has to be set aside. Rule 814 envisages the levy of such differential duty. There is no question of double charging or multiple point charging in this case. It is only a question of recovery of the difference on proof of the purposes for which lower duty was earlier levied having failed to be achieved entailing liability to make good the difference. Rules 636, 637-A and 637 are also relevant to this extent". 40. Referring to McDowell and Co. It is only a question of recovery of the difference on proof of the purposes for which lower duty was earlier levied having failed to be achieved entailing liability to make good the difference. Rules 636, 637-A and 637 are also relevant to this extent". 40. Referring to McDowell and Co. Ltd., v. CTO 1977 (1) SCC 441 and Kalyani Stores v. State of Orissa, 1966 (1) SCR 865, it was observed that countervailing duty is meant "to counter balance; to avail against with equal force or virtue to compensate for something or serve as equivalent or substitute for". A Countervailing duty is "meant to equalize the burden on alcoholic liquors manufactured or produced in the State". Therefore, Their Lordships observed," They may be imposed at the same rate as excise duty or at a lower rate so as to equalize the burden after taking into account the cost of transport from the place of manufacturing to the taxing State". Their Lordships held: "Countervailing duty paid in the importing State does not ipso facto affect the excise revenue of the exporting State." 41. Their Lordships held: "If the excess wastage was actually lost to consumers while in the importing State no justification of such a duty may arise, that, however, would be an entirely different question without in any way affecting the competence of the legislature of the exporting State to impose such a duty. The fact that the exported rum was on payment of export duty or on bond would not again be material inasmuch as when the rum meant for export failed to be exported, there may be a presumption, may be rebuttable one, that what is shown as the excess has merged in mass of rum consumed within the State and was not separated from such a mass" 42.. The ratio in Delhi Cloth Mills was approved by the Apex Court in State of U.P. & Ors. v. Modi Distillery & Ors., 1995(5) SCC 753. In that case, State of U.P. challenged the decision of the Allahabad High Court quashing the orders demanding excise duty from the respondent manufacturer of Indian Made Foreign Liquor. The High Court categorized the demand in four groups. In Group A the demands for excise duty were on the wastage of Indian-made foreign liquor (IMFL) which was exported outside the State of Uttar Pradesh. The High Court categorized the demand in four groups. In Group A the demands for excise duty were on the wastage of Indian-made foreign liquor (IMFL) which was exported outside the State of Uttar Pradesh. Group B related to demands made for excise duty on wastage, during transportation in containers, of high strength spirit, of 80 to 85%, from distillery to warehouse. Group C related to the demand of excise duty on obscuration. Group D related to excise duty sought to be levied on pipeline wastage. Their Lordships held that so far the issue relating to group A, that is, demand for excise duty on wastage of IMFL exported from the State of U.P. was covered by the judgment in State of U.P. v. Delhi Cloth Mills and was not disputed by the manufacturers. It was observed in para 4 of the judgment." "It is convenient to state immediately that the issue relating to Group A that is, the demands for excise duty on the wastage of IMFL exported outside the State, is now covered in its favour by the judgment of this Court in State of U.P. V. Delhi Cloth Mills and this is not disputed by the manufacturers." 43. Mr. Kapil Dev Sood, learned counsel for the petitioner Company then referred to Fiscal Orders 1965 and contended that Indian Made Foreign Liquor or the country spirit exported from licensed distilleries in Himachal Pradesh are exempted from payment of duty and, therefore, the demand raised by the respondents was illegal and violative of the fiscal order. Fiscal Order of 1965 was issued by the Lt. Governor of then U.T. of Himachal Pradesh in exercise of the powers under Sections 31,32 and 56 of the Act. Clause 2 of the Fiscal order provide that excise duty shall be leviable in respect of spirit or liquor imported into Himachal Pradesh per proof liter at the rates which may be notified by the H.P. Government from time to time. Clause 3 provides that manufacture and export duly per proof liter shall be levied on all duty paid or under bond issues of country spirit, rectified spirit and India made foreign spirit, other than denatured spirit, to any State in India from any distillery or brewery or from any wholesale vend in Himachal Pradesh at the rates which may be notified from time to time. Sub-cause (7) of clause 8 provides that the country spirit and IMFS exported from licensed, Distilleries in Himachal Pradesh to another State in India are exempted from payment of excise duty. Relevant clause reads: "8 (7) Country spirit and I.M.F.S., exported from licensed, Distilleries in Himachal Pradesh to another State in India are exempted from payment of excise duty". 44. It is true that sub-clause (7) pf clause 8 provides for the exemption of IMFS exported from the licensed distilleries in the respondent State to other States in India but in our view, the IMFS, as explained earlier, exported from the respondent State which did not reach the importing State and was lost in transit, in the absence of satisfactory explanation, would be presumed to have been consumed within the exporting State and not exported as held in Delhi Cloth Mills which was approved in Modi Distillery. The argument in the circumstances has no force and is rejected. 45. In the end, Mr. Sood contended that rule 16 (iv) of the Rules cannot be interpreted to mean that wastage allowance is not permissible due to the loss of the liquor in transit. He further contended that it was for the Excise Officer concerned, to explain the loss. The argument is fallacious and does not stand scrutiny As noticed earlier, sub-rule (iv) of rule 16 clearly stipulates that loss of liquor due to breakages shall have to be satisfactorily explained. Therefore, it cannot be said that allowance for wastage on account of the loss of the bottled liquor in transit is not permissible. The concerned Excise Officer is competent to give allowance for the wastage provided such wastage is satisfactorily explained. Satisfactory explanation for the wastage has to be given by the manufacturer in terms of Bond and the rules. It is not for the Excise Officer to fish out such explanation. 46. No other point was urged before us. 47. We do not find any merit in the writ petitions. The petitions, in result fail and are dismissed. No order as to costs.