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2003 DIGILAW 545 (SC)

State Of Orissa v. NIRANJAN SENS

2003-04-09

B.N.SRIKRISHNA, RUMA PAL

body2003
ORDER 1. LEAVE GRANTED IN SPECIAL LEAVE PETITIONS. 2. THE RESPONDENTS IN ALL THESE CASES WERE, AT THE MATERIAL TIME, CARRYING ON THE BUSINESS OF IMPORTING LIQUOR INTO THE STATE OF ORISSA. IN ALL THESE MATTERS THE LIQUOR SO IMPORTED WAS MANUFACTURED IN OTHER STATES OF THE COUNTRY. THE ISSUE WHICH HAD ARISEN FOR DECISION BEFORE THE HIGH COURT, NAMELY, WHETHER THE RESPONDENTS WERE LIABLE TO PAY COUNTERVAILING DUTY UNDER THE BIHAR AND ORISSA EXCISE ACT, 1915 (REFERRED TO HEREAFTER AS "THE ACT") IN RESPECT OF THE LIQUOR WHICH WAS LOST IN TRANSIT, WAS ANSWERED IN FAVOUR OF THE RESPONDENTS BY THE HIGH COURT. 3. THE FIRST JUDGMENT WAS RENDERED IN THE CASE OF CHAITAN KAKANI V. STATE OF ORISSA1. FOLLOWING THAT DECISION THE HIGH COURT ALLOWED THE WRIT PETITIONS D FILED BY THE RESPONDENTS BY A SERIES OF ORDERS. THE DECISION IN CHAITAN KAKANI EASEL AS WELL AS THE SUBSEQUENT ORDERS PASSED BY THE HIGH COURT HAVE BEEN SEPARATELY CHALLENGED BEFORE US BY THE STATE OF ORISSA. 4. ACCORDING TO THE APPELLANTS THE HIGH COURT HAD FAILED TO DRAW A DISTINCTION BETWEEN THE IMPOSITION OF COUNTERVAILING DUTY UNDER THE ACT AND THE PROCEDURAL SECTIONS FOR ITS RECOVERY. LEARNED COUNSEL APPEARING FOR THE E APPELLANTS HAS DRAWN OUR ATTENTION TO THE PROVISIONS OF THE ACT AND THE EXCISE RULES, WHICH ARE REFERRED TO IN SOME DETAIL HEREAFTER, TO CONTEND THAT THE PROVISIONS WHEREBY THE RATE OF DUTY WAS TO BE DETERMINED AT THE TIME OF REMOVAL OF THE LIQUOR FROM THE WAREHOUSE OF THE RESPONDENTS DID NOT MEAN THAT THE TAXABLE EVENT WAS THE REMOVAL OF THE GOODS FROM THE WAREHOUSE. RELIANCE WAS PLACED ON THE DECISION OF THIS COURT IN MOHAN MEAKIN BREWERIES LTD. V. EXCISE AND TAXATION COMMR., CHANDIGARH2 AND SHROFF & CO. V. MUNICIPAL CORPN. OF GREATER BOMBAY3 IN SUPPORT OF THE APPELLANTS SUBMISSION. 5. LEARNED COUNSEL APPEARING ON BEHALF OF THE RESPONDENTS SUBMITTED THAT THE TRANSACTIONS IN QUESTION HAD FOUR STAGES, NAMELY: (A) THE MANUFACTURE OF THE LIQUOR AT A DISTILLERY IN ANOTHER STATE; (B) THE IMPORTATION OF THE MANUFACTURED LIQUOR INTO THE STATE OF ORISSA; (C) THE RECEIPT BY THE RESPONDENTS OF THE MANUFACTURED GOODS AT THE AUTHORISED OR SANCTIONED WAREHOUSE; AND (D) THE REMOVAL OF THE GOODS FROM SUCH WAREHOUSE. IT IS STATED THAT BETWEEN THE FIRST AND THE SECOND STAGES, EVENTS TAKE PLACE OUTSIDE THE STATE. IT IS STATED THAT BETWEEN THE FIRST AND THE SECOND STAGES, EVENTS TAKE PLACE OUTSIDE THE STATE. LEARNED COUNSEL HAS SUBMITTED THAT "COUNTERVAILING DUTY" HAS BEEN DEFINED JUDICIALLY AND IS LEVIABLE ONLY ON THE ACTUAL IMPORT OF THE GOODS ACROSS THE TERRITORIAL BORDERS OF THE STATE. IT WAS CONCEDED BY LEARNED COUNSEL FOR THE RESPONDENTS THAT THE TAXABLE EVENT BEING THE IMPORTATION, ANY LOSS SUBSEQUENT THERETO WOULD NOT AFFECT THE ASSESSEES LIABILITY TO PAY COUNTERVAILING DUTY EXCEPT TO THE EXTENT THAT RELIEF WAS EXPRESSLY GRANTABLE UNDER THE PROVISIONS OF THE ACT AND THE RULES FRAMED THEREUNDER IN RESPECT OF WASTAGE, LOSS IN TRANSIT, ETC. ACCORDING TO THE LEARNED COUNSEL FOR THE RESPONDENTS, THE DECISION OF THIS COURT, RELIED UPON BY THE APPELLANTS HAD TAKEN THE VIEW THAT THE ASSESSEES WERE LIABLE TO DUTY ON THE ACTUAL IMPORT OF THE GOODS. IT IS FURTHER SUBMITTED THAT ANYTHING WHICH TAKES PLACE PRIOR TO THE ACTUAL ACTION OF IMPORT COULD NOT BE THE SUBJECT-MATTER OF LEVY UNDER THE ACT. THEREFORE, EVEN THOUGH THE RESPONDENTS MAY ARRANGE FOR IMPORTATION OF A PARTICULAR QUANTITY OF LIQUOR FROM THE DISTILLERY SITUATE OUTSIDE THE STATE INTO THE STATE OF ORISSA, COUNTERVAILING DUTY WOULD BE LEVIABLE ONLY IN RESPECT OF THE ACTUAL GOODS WHICH PHYSICALLY CROSS THE BORDER OF THE STATE. IF, BY VIRTUE OF AN ACCIDENT OR ANY OTHER CAUSE, THE LIQUOR IS LOST BETWEEN THE DISTILLERY AND THE POINT OF IMPORTATION, THE APPELLANT COULD NOT IMPOSE ANY COUNTERVAILING DUTY ON THE LOSS, WASTED OR LEAKED MATERIAL. THE RESPONDENTS HAVE RELIED ON THE DECISION IN S.K. PATTANAIK V. STATE OF ORISSA4 IN SUPPORT OF THE SUBMISSION. IT IS SUBMITTED THAT UNLESS THIS VIEW WAS TAKEN, THE PROVISIONS OF THE ACT WOULD HAVE EXTRATERRITORIAL OPERATION AND WOULD BE BEYOND THE LEGISLATIVE COMPETENCE OF THE STATE LEGISLATURE UNDER ENTRY 51 LIST II OF THE SEVENTH SCHEDULE TO THE CONSTITUTION. 6. ARTICLE 245 OF THE CONSTITUTION PROVIDES THAT SUBJECT TO THE PROVISIONS OF THE CONSTITUTION THE LEGISLATURE OF THE STATE MAY MAKE LAWS FOR THE WHOLE OR ANY PART OF THE STATE. WITH THIS TERRITORIAL LIMITATION THE STATE MAY LEGISLATE ON THE ENTRIES MENTIONED IN LIST II, WHICH INCLUDES ENTRY 51. ENTRY 51 READS: "51. 6. ARTICLE 245 OF THE CONSTITUTION PROVIDES THAT SUBJECT TO THE PROVISIONS OF THE CONSTITUTION THE LEGISLATURE OF THE STATE MAY MAKE LAWS FOR THE WHOLE OR ANY PART OF THE STATE. WITH THIS TERRITORIAL LIMITATION THE STATE MAY LEGISLATE ON THE ENTRIES MENTIONED IN LIST II, WHICH INCLUDES ENTRY 51. ENTRY 51 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." 7. THE PHRASE "COUNTERVAILING DUTIES" OCCURRING IN ENTRY 51 HAS BEEN CONSTRUED BY THIS COURT IN KALYANI STORES V. STATE OF ORISSA5: "[COUNTERVAILING DUTIES ARE MEANT TO EQUALISE THE BURDEN ON ALCOHOLIC LIQUORS IMPORTED FROM OUTSIDE THE STATE AND THE BURDEN PLACED BY EXCISE DUTIES ON ALCOHOLIC LIQUORS MANUFACTURED OR PRODUCED IN THE STATE. IF NO ALCOHOLIC LIQUORS SIMILAR TO THOSE IMPORTED INTO THE STATE ARE PRODUCED OR MANUFACTURED, THE RIGHT TO IMPOSE COUNTERBALANCING DUTIES OF EXCISE LEVIED ON THE GOODS MANUFACTURED IN THE STATE WILL NOT ARISE. IT MAY, THEREFORE, BE ACCEPTED THAT COUNTERVAILING DUTIES CAN ONLY BE LEVIED IF SIMILAR GOODS ARE ACTUALLY PRODUCED OR MANUFACTURED IN THE STATE ON WHICH EXCISE DUTIES ARE BEING LEVIED." 8. UNDER THE ACT COUNTERVAILING DUTY IS IMPOSABLE AT SUCH RATE OR RATES AS THE STATE GOVERNMENT MAY DIRECT UNDER SECTION 27 OF THE ACT ON, INTER ALIA, ANY EXCISABLE ARTICLE IMPORTED. THE WORD "IMPORT" HAS BEEN DEFINED UNDER SUB-SECTION (12) OF SECTION 2 OF THE ACT AS MEANING TO "BRING INTO THE STATE OTHERWISE THAN ACROSS A CUSTOMS FRONTIER AS DEFINED BY THE CENTRAL GOVERNMENT". IT IS THIS BRINGING INTO THE STATE WHICH ATTRACTS THE INCIDENCE OF COUNTERVAILING DUTY UNDER THE ACT. IN SHROFF & CO. V. MUNICIPAL CORPN. THE WORD "IMPORT" HAS BEEN DEFINED UNDER SUB-SECTION (12) OF SECTION 2 OF THE ACT AS MEANING TO "BRING INTO THE STATE OTHERWISE THAN ACROSS A CUSTOMS FRONTIER AS DEFINED BY THE CENTRAL GOVERNMENT". IT IS THIS BRINGING INTO THE STATE WHICH ATTRACTS THE INCIDENCE OF COUNTERVAILING DUTY UNDER THE ACT. IN SHROFF & CO. V. MUNICIPAL CORPN. OF GREATER BOMBAY3 WHILE CONSTRUING SECTIONS 105 AND 106 OF THE MAHARASHTRA FOREIGN LIQUOR (IMPORT AND EXPORT) RULES, 1963, WHICH ARE SUBSTANTIALLY IDENTICAL WITH THE PROVISIONS OF THE ACT UNDER CONSIDERATION BY US, RANGANATHAN, J. SAID: (SCC P. 367, PARA 41) "THE LANGUAGE OF SECTION 105 WHICH IMPOSES THE CHARGE OF SECTION 106 WHICH TALKS OF PAYMENT AND OF THE RULES LEAVES NO DOUBT THAT THE DUTY IS ATTRACTED AT THE POINT OF IMPORT (I.E. PHYSICAL ENTRY OF THE GOODS INTO THE TAXING TERRITORY) AND THAT ONLY THE PAYMENT OF DUTY IS DEFERRED IN CASE THE GOODS IMPORTED ARE REMOVED TO A BONDED WAREHOUSE, TO A LATER POINT OF D TIME, FOR PURPOSES OF CONVENIENCE OF COLLECTION." (EMPHASIS IN ORIGINAL) 9. LIKE SECTION 106 OF THE MAHARASHTRA ACT, SECTION 28 OF THE PRESENT ACT ALSO PROVIDES THAT THE DUTY UNDER SECTION 27 MAY BE LEVIED ON ANY EXCISABLE ARTICLE IMPORTED EITHER BY PAYMENT BEFORE IMPORTATION IN THE STATE OR IN THE STATE TERRITORY FROM WHICH THE ARTICLE IS BROUGHT OR BY PAYMENT UPON ISSUE FOR SALE FROM A WAREHOUSE ESTABLISHED, AUTHORISED OR CONTINUED UNDER THE ACT. 10. RULE 63 OF THE EXCISE RULES, 1985T WHICH PROVIDES FOR THE ESTABLISHMENT, GRANT OF LICENCE AND SUPPLY OF SPIRIT TO AUTHORISED WAREHOUSES, MANDATES UNDER SUB-RULE (6) THAT: "6. A CONSIGNMENT OF SPIRIT TO A WAREHOUSE SHALL BE IMPORTED OR TRANSPORTED, AS THE CASE MAY BE, UNDER BOND AND AT THE SOLE RISK AND RESPONSIBILITY OF THE DISTILLER OR THE WHOLESALE LICENSEE CONCERNED, AND THE F BOND SHALL BE RELEASED ONLY AFTER THE SPIRIT IS TAKEN INTO STOCK IN THE WAREHOUSE AFTER BEING DULY GAUGED AND PROVED BY THE OFFICER IN CHARGE OF THE WAREHOUSE AND AFTER THE DUTY ON THE EXCESS DEFICIENCY, IF ANY, OCCURRING DURING TRANSIT IN THE QUANTITY OF THE SPIRIT, SO IMPORTED OR TRANSPORTED HAS BEEN REALISED." 11. BASED UPON THIS METHOD OF LEVY OF COUNTERVAILING DUTY, THE CONTENTION 9 OF THE RESPONDENTS BEFORE THE HIGH COURT, WHICH THE HIGH COURT ALSO ACCEPTED, WAS THAT THE COUNTERVAILING DUTY WAS NOT PAYABLE IF THE GOODS WERE LOST BEFORE THEY REACHED THE WAREHOUSE OR FROM THE WAREHOUSE. WE HAVE ALREADY NOTED THE SUBMISSIONS OF LEARNED COUNSEL FOR THE RESPONDENTS THAT HE DOES NOT WISH TO CONTEND FOR SUCH AN EXTREME PROPOSITION, PARTICULARLY IN VIEW OF THE AUTHORITATIVE PRONOUNCEMENT BY THIS COURT IN S.K. PATTANAIK V. STATE OF ORISSA4. IN THAT DECISION, WHILE CONSTRUING THE VERY PROVISIONS OF THE ACT WITH WHICH WE ARE CONCERNED, THIS COURT HAD COME TO THE CONCLUSION THAT THE TAXABLE EVENT FOR ATTRACTING COUNTERVAILING DUTY IS THE IMPORT OF THE EXCISABLE GOODS INTO THE STATE AND THAT THE INCIDENCE OF DUTY STOOD ATTRACTED AS SOON AS THE TAXABLE EVENT TOOK PLACE AND THE FACILITY OF POSTPONEMENT OF LEVY OF THE DUTY UNDER THE ACT OR THE RULES FRAMED THEREUNDER CAN IN NO WAY AFFECT THE INCIDENCE OF DUTY ON THE IMPORTED GOODS. 12. THEREFORE, TO THE EXTENT THAT THE HIGH COURT HAS HELD THAT THE GOODS ARE SUBJECT TO COUNTERVAILING DUTY ONLY AT THE TIME THE GOODS ARE RECEIVED AT THE WAREHOUSE AND THAT IF NO GOODS ARE RECEIVED AT THE WAREHOUSE THERE IS NO QUESTION OF LEVY OF COUNTERVAILING DUTY, THE HIGH COURT WAS INCORRECT. 13. THERE IS, HOWEVER, A FURTHER QUESTION: IS DUTY LEVIABLE IF THE GOODS ARE LOST IN TRANSIT BETWEEN THE DISTILLERY AND THE POINT OF IMPORTATION? HAVING REGARD TO THE PRESCRIBED AMBIT OF THE LEGISLATIVE POWER OF THE STATE AS PROVIDED UNDER ARTICLE 245 READ WITH ENTRY 51 OF LIST II OF THE SEVENTH SCHEDULE, THERE CAN BE NO DOUBT THAT THE INCIDENCE OF COUNTERVAILING DUTY CANNOT BE ATTACHED TO ANY STAGE PRIOR TO THE ACTUAL PHYSICAL IMPORTATION OF THE GOODS. THE SUBMISSION OF THE STATE, HOWEVER, WHICH HAS BEEN ARGUED WITH EMPHASIS, IS THAT THE COUNTERVAILING DUTY IS PAYABLE IRRESPECTIVE OF THE FACT WHETHER THE GOODS HAVE PHYSICALLY CROSSED THE TERRITORIAL BORDERS OF THE STATE OF ORISSA OR NOT. ACCORDING TO THE APPELLANTS, UNDER SECTION 9 READ WITH SECTION 28 OF THE ACT AND RULE 63(6), THE IMPORTER IS REQUIRED TO EXECUTE A BOND FOR PAYMENT OF THE DUTY IN RESPECT OF THE IMPORTED GOODS. THE BOND IS REQUIRED TO BE EXECUTED PRIOR TO THE IMPORTATION. ACCORDING TO THE APPELLANTS, UNDER SECTION 9 READ WITH SECTION 28 OF THE ACT AND RULE 63(6), THE IMPORTER IS REQUIRED TO EXECUTE A BOND FOR PAYMENT OF THE DUTY IN RESPECT OF THE IMPORTED GOODS. THE BOND IS REQUIRED TO BE EXECUTED PRIOR TO THE IMPORTATION. BY EXECUTING THE BOND THE IMPORTER UNDERTAKES TO PAY DUTY NOT ONLY ON THE GOODS AS RECEIVED BUT ALSO IN RESPECT OF THE DIFFERENCE BETWEEN THE QUANTITY MENTIONED IN THE BOND AND THE QUANTITY FOUND BY THE CERTIFIED OFFICER AT THE WAREHOUSE OF THE IMPORTER. 14. WE ARE UNABLE TO ACCEPT THIS SUBMISSION OF THE APPELLANTS. THE SECTIONS AND THE RULE RELIED UPON BY THE APPELLANT MERELY PROVIDE FOR THE PROCEDURE FOR LEVY OF COUNTERVAILING DUTY AND DO NOT IN ANY WAY CHANGE THE NATURE OF THE IMPOST ON EXCISABLE GOODS INTO THE STATE. MERELY BECAUSE AN IMPORTER MAY BE REQUIRED TO EXECUTE A BOND IN RESPECT OF THE GOODS WHICH MAY BE DESTINED FOR THE STATE DOES NOT MEAN THAT THE IMPORTER IS LIABLE TO PAY DUTY ON THE AMOUNT MENTIONED IN THE BOND IF FOR ANY REASON THE EXCISABLE GOODS ARE LOST OR DAMAGED OR IN FACT NOT IMPORTED INTO THE STATE OF ORISSA AT ALL. AT THE MOST THE EXECUTION OF THE BOND AND THE GRANT OF PERMISSION UNDER THE PROVISIONS OF SECTION 9 MAY RAISE A PRESUMPTION AGAINST THE IMPORTER THAT THE GOODS DECLARED AS DESTINED FOR THE STATE HAVE ACTUALLY ENTERED THE STATE. THIS PRESUMPTION MAY BE REBUTTED BY THE IMPORTER BY ADDUCING EVIDENCE TO THE SATISFACTION OF THE AUTHORITIES UNDER THE ACT THAT THE GOODS WERE NOT IN FACT IMPORTED. THE SECTIONS AND THE RULES DO NOT SERVE TO AUTHORISE THE AUTHORITIES UNDER THE ACT TO LEVY COUNTERVAILING DUTY ON ANYTHING OTHER THAN ACTUAL IMPORT. THE DECISIONS RELIED UPON DO NOT IN ANY WAY RUN CONTRARY TO THIS VIEW. THIS IS ALSO A VIEW WHICH IS IN KEEPING WITH THE NATURE OF COUNTERVAILING DUTY AND THE PROVISIONS OF THE ACT, PARTICULARLY THE DEFINITION OF THE WORD "IMPORT". THE TAXABLE EVENT BEGINS WITH THE IMPORT AND ANY GOODS WHICH MAY HAVE BEEN LOST PRIOR TO THE IMPORT CANNOT BE SUBJECT TO COUNTERVAILING DUTY (SEE IN THIS CONNECTION THE DECISION OF THIS COURT IN STATE OF U.P. V. MODI A DISTILLERY6). 15. THE TAXABLE EVENT BEGINS WITH THE IMPORT AND ANY GOODS WHICH MAY HAVE BEEN LOST PRIOR TO THE IMPORT CANNOT BE SUBJECT TO COUNTERVAILING DUTY (SEE IN THIS CONNECTION THE DECISION OF THIS COURT IN STATE OF U.P. V. MODI A DISTILLERY6). 15. TO SUM UP, WE HOLD THAT THE IMPORTER IS LIABLE TO PAY COUNTERVAILING DUTY ONLY IN RESPECT OF THE EXCISABLE GOODS WHICH ARE PHYSICALLY IMPORTED AND BROUGHT INTO THE STATE ACROSS THE STATES TERRITORIAL BORDERS. ANY BOND OR PERMISSION OR OTHER DECLARATION WHICH MAY HAVE BEEN MADE BY THE IMPORTER IN KEEPING WITH THE PROVISIONS OF THE ACT OR THE RULES FRAMED THEREUNDER MAY B RAISE A PRESUMPTION AS TO THE QUANTITY OF GOODS SO IMPORTED. THE PRESUMPTION WOULD BE A REBUTTABLE ONE AND THE ONUS FOR REBUTTING THE PRESUMPTION WOULD LIE ON THE IMPORTER WITH WHOM THE SPECIAL KNOWLEDGE OF THE FACTS PERTAINING TO THE NON-IMPORTATION WOULD BE AVAILABLE. IF ANY LOSS OF THE EXCISABLE GOODS HAS TAKEN PLACE BEFORE THE ACTUAL IMPORTATION AND THE SAME IS SATISFACTORILY PROVED TO THE AUTHORITIES, THE AUTHORITIES CANNOT LEVY ANY COUNTERVAILING DUTY C UNDER THE ACT IN RESPECT OF SUCH LOST GOODS OR QUANTITIES. 16. THE ORDERS OF THE HIGH COURT, INSOFAR AS THEY HOLD TO THE CONTRARY, ARE SET ASIDE. IT WILL BE OPEN TO THE APPELLATE AUTHORITIES TO NOW DECIDE THE INDIVIDUAL CASES OF THE RESPONDENTS CONCERNED AFTER GIVING THEM AN OPPORTUNITY OF BEING HEARD. THE AMOUNTS WHICH MAY HAVE BEEN PAID BY THE D RESPONDENTS TO THE APPELLATE AUTHORITIES OR THE BONDS WHICH HAVE BEEN EXECUTED BY THE RESPONDENTS IN LIEU THEREOF WILL BE SUBJECT TO SUCH DECISION OF THE AUTHORITY CONCERNED. 17. THE APPEALS ARE DISPOSED OF. THERE WILL BE NO ORDER AS TO COSTS.