Judgment : The State of Kerala and the Excise Inspector, Southern Union Pharmaceuticals, Thrissur are the appellants in the above appeal. They challenge the judgment and decree dated 25.6.1999 of the Principal Sub Judge, Thrissur in O.S.No. 334 of 1991. The suit was filed against them by the first respondent - plaintiff for a declaration that no duty on alleged wastage of rectified sprit in the manufacture of medicinal preparations in the bonded manufactury of the plaintiff can be made or realised under the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956, the Kerala Rectified Spirit Rules or the Kerala Abkari Act and for a consequential injunction restraining them from initiating any action under the Revenue Recovery Act for the recovery of any such amounts pursuant to notices issued by them. The appellants are defendants 1 and 2 in the said suit. The suit was partly decreed by the court below finding that the demands made by the appellants - defendants were unenforceable, being out of time as prescribed by Rule 11 of the Rules. Though the relief of declaration has been disallowed by the court below, no appeal has been filed challenging the said finding. The suit was filed in the following facts and circumstances: 2. The respondent - plaintiff is a partnership firm established in the year 1955 and is engaged in the manufacture of a wide range of allopathic drugs and medicines in its pharmaceutical laboratory situate at the Museum Road, Thrissur. The suit was instituted by the Managing Partner who is authorized and competent to file the suit. Rectified spirit is a necessary raw material in the manufacturing process of the plaintiff and is used as a solvent. For the procurement, transport and use of rectified spirit, the plaintiff is possessed of all necessary licences and permissions, as required by law. Necessary licenses have been granted by the Excise Commissioner under the Medicinal and Toilet Preparations (Excise Duties), Act 1955 (hereinafter referred to as 'The Toilet Preparations Act' for short) and the Kerala Rectified Spirit Rules, 1972 (hereinafter referred to as 'the Rectified Spirit Rules' for short). The Excise Commissioner has appointed an officer of the Excise Department to control and supervise the working of the plaintiff's laboratory. No duty is leviable on alcohol used for medicinal preparations under the Rectified Spirit Rules. The Excise Commissioner has appointed an officer of the Excise Department to control and supervise the working of the plaintiff's laboratory. No duty is leviable on alcohol used for medicinal preparations under the Rectified Spirit Rules. It is recognized that there would be wastage of rectified spirit during the manufacturing process and the rules provide for allowances of wastage. Accordingly, the Government in consultation with the Controller and Chemical Examiner fixed the maximum percentage of wastage allowable in the process of manufacture of each medicinal preparation. The Excise Inspector posted in the plaintiff's laboratory arbitrarily calculated the wastage in his manufacturing process and ordered that the plaintiffs shall remit an amount of Rs.28,984/- as duty with interest for such wastage which was not permissible. No notice was issued before fixing the same. On a previous occasion, the Excise Inspector had calculated Rs.14,341.257 as excess wastage and had ordered the plaintiff to remit Rs.2,22,289.48 as duty payable on 30.8.1982. Though an appeal was preferred before the Excise Commissioner, Thiruvananthapuram, the same was dismissed. During the pendency of the appeal, the Excise Inspector issued Revenue Recovery notice and the plaintiff challenged the same in O.S.No.109 of 1983 filed before the Sub Court, Thrissur. The suit was dismissed on 29.1.1988. It is admitted that an appeal and the second appeal filed against the said judgment and decree were dismissed. 3. While the appeal was pending, the second defendant - Excise Inspector issued notices dated 17.1.1991 and 23.1.1991 demanding an amount of Rs.28,984/- as duty on excess wastage of rectified spirit and interest calculated thereon. He informed the plaintiff that if the amount was not paid, Revenue Recovery action would be taken against him. The proceedings of the Excise Inspector are against law, is action is arbitrary and in contravention of the rules and law, it was contended. Regarding wastage in excess of the allowable quantity, the Government has issued a notification in 1960 stipulating the wastage allowance as 5%, 10% and 15%. This was superceded by G.O.(P) No.135/70 dated 30.11.1979 by which the percentage of wastage of alcohol has been fixed as 5%, 10% and 15% and 20%, dividing medicinal preparations into four groups, under Rule 38(1) of the Toilet and Medicinal Preparations (Excise Duty) Rules 1956, (hereinafter referred to as 'Toilet Preparations Rules' for short). The duty fixed by the Excise Inspector was under the above rules. The duty fixed by the Excise Inspector was under the above rules. However, it was contended that, Rule 38 has been held to be ultravires by this Court in the decision reported in Enoch Pharma v State of Kerala and others (1965 KLT 415). According to the Plaintiff, no other Government was levying duty as sought to be done by the Kerala State. Further, the District Collector has no power to initiate Revenue Recovery proceedings against the plaintiff. Since the demand made by the excise officials was against law, the plaintiff claimed that a declaration to the said effect may be granted. Since no duty can be imposed on the wastage of rectified spirit in the manufacture of medicinal preparations, the plaintiff prayed for a permanent injunction restraining the defendants from initiating any action for recovery of the demanded amount invoking the provisions of the Revenue Recovery Act. 4. The defendants filed written statement contending that the suit was not maintainable. Licenses had been granted to the plaintiff, since rectified spirit was needed as a solvent in the manufacturing process of the plaintiff. The Excise Commissioner had appointed an officer of the Excise Department to control and supervise the working of the plaintiff's laboratory. Wastage of rectified spirit during the manufacture of medicinal preparations was inevitable and the Government has allowed permissible wastage of alcohol during the preparation. On the excess wastage, the Government charges a duty, which is intended for preventing misuse of alcohol. The second defendant calculate the actual wastage of alcohol during preparation of medicine from 1.4.1981 to 31.3.1982 and from 30.6.1990 to 23.1.1991 and ordered that an amount of Rs.28,984/- being the duty payable with interest shall be remitted by the plaintiff. The plaintiff was bound to pay the amounts demanded as per demand notices dated 17.11.1991 and 23.1.1992. The plaintiff has no cause of action against the defendants, it was contended. The suit was premature as action under the Revenue Recovery Act had not been initiated against the plaintiff. Therefore, the defendants prayed for dismissal of the suit. 5. The suit was tried by the court below on the above pleadings after framing five issues. The evidence in the case consists of Exts.A1 to A15 documents. No oral evidence was adduced by either side. 6. Therefore, the defendants prayed for dismissal of the suit. 5. The suit was tried by the court below on the above pleadings after framing five issues. The evidence in the case consists of Exts.A1 to A15 documents. No oral evidence was adduced by either side. 6. After an elaborate consideration of the rival contentions of the parties, the court below found that Rule 38(1) of the Toilet Preparations Rules which was relied upon by the defence as the source of power to levy duty on the wastage of rectified spirit beyond permissible limit had been declared ultravires by this Court. Reliance was placed on the decision reported in Enoch Pharma v State of Kerala and others (1965 KLT 415). However, the court found that the State still had the power to levy duty on wastage of rectified spirit under Rule 13(2) of the Rectified Spirit Rules. Therefore, the court found that the demand made by the plaintiff was justified inasmuch as the State had sufficient power to impose the levy. On the question of limitation, the court below found that Rule11 of the Toilet Preparations Rules Prescribed a limitation period of six months for issuing a demand notice. Since the demand notices were not issued within the period of limitation referred to above, the suit was partly decreed and the relief of injunction sought for in the plaint has been granted restraining the defendants from initiating any action under the Revenue Recovery Act to recover the amounts demanded. It is the above findings of the court below that are under challenge in the above appeal. As noticed earlier, the respondent has not challenged the judgment and decree of the court below by filing either an appeal or cross appeal. 7. According to the learned Government Pleader who appears for the appellant, the court below seriously went wrong in decreeing the suit in part. According to him, the decision relied on by the court below has no application to the facts of the case, that what is demanded by the appellants is penalty imposed for wastage in excess of permissible limit. The same is either a duty or a levy to impose penalty for a prohibited act, it is contended. According to him, the decision relied on by the court below has no application to the facts of the case, that what is demanded by the appellants is penalty imposed for wastage in excess of permissible limit. The same is either a duty or a levy to impose penalty for a prohibited act, it is contended. It is further contended that if such penalty is not permitted, it would give a route to the manufacturers to misuse the rectified spirit that is permitted to be used only in the manufacture of medicines and toilet preparations. It is also contended that Section-5 of the Toilet Preparations Act which confers the power for recovery of sums due to the Government does not prescribe any limitation for exercise of the power and therefore, the court below went wrong in decreeing the suit in part. Apart from the above, it is contended that Section 72 of the Revenue Recovery Act contains a prohibition against instituting a suit challenging proceedings initiated under the Revenue Recovery Act and therefore, it is submitted that the suit is not maintainable. 8. The counsel for the respondent on the other hand points out that as per Section 2 of the Rectified Spirit Rules, "Rectified spirit means plain undenatured alcohol of a strength not less than 50' over proof and includes absolute alcohol. 'Proof Spirit' is defined as a mixture of alcohol and water; which at a temperature of 50' F weight twelve thirteenth part of an equal volume of distilled water; has a density of 0.91984 at 60' F and contains 49.76 percent by weight of water or 57.06 percent by volume of alcohol." 9. The above definition clearly shows that rectified spirit is alcohol of 85.59% and above purity. It is pointed out that as per the Constituent Bench decision of the Supreme Court in Synthetics and Chemicals Ltd. and others v State of U.P. and others (1990(1) SCC 109), it has been held that the legislative competence of the State does not extend to absolute alcohol or industrial alcohol as the said product is popularly known. It is pointed out that as per the Constituent Bench decision of the Supreme Court in Synthetics and Chemicals Ltd. and others v State of U.P. and others (1990(1) SCC 109), it has been held that the legislative competence of the State does not extend to absolute alcohol or industrial alcohol as the said product is popularly known. It is pointed out that in Modern Pharmaceuticals Pvt.Ltd. v State of Kerala and others, an unreported decision of the Supreme Court dated 11.3.2004, Rule 13 of the Kerala Rectified Spirit Rules itself was considered and it has been held that the State has no authority to levy duty on wastage of rectified spirit. It is also contended that since no demand notices were issued within the period of limitation stipulated by Rule 11 of the Toilet Preparations Rules also, the court below was justified in decreeing the suit. Therefore, it is prayed that the judgment and decree of the court below are perfectly justified. 10. I have gone through the records of the case as well as the relevant provisions of law applicable. I have also heard the learned Government Pleader at length and Sri. S. Ramesh Babu, the counsel for the respondent. 11. The point that arises for consideration is: "Whether the impugned demands are without the sanction of law and liable to be restrained by an order of injunction from being enforced?" 12. The demand notices issued by the appellants-defendants are stated to be under Rule 38(1) of the Medicinal and Toilet Preparations Rules. It is true that Rule 38(1) confers power on the authorities to levy penalty not exceeding the duty leviable thereon as deemed fit by the Excise Commissioner, on the wastage of rectified spirit that exceeds the permissible limit. However, the above provision was under challenge before this Court. In the decision reported in Enouch Pharma v State of Kerala and others (1965 KLT 415) this Court has after a careful consideration of the various provisions of law applicable, held that the section was ultravires and invalid. This Court has in the said decision held as follows:- "Rules can be made only to carry out the purpose of the Act. R.38 has provided for something in excess of the scope and ambit of the Act and so the framing of such a rule is clearly in excess of the powers of the rule making authority. This Court has in the said decision held as follows:- "Rules can be made only to carry out the purpose of the Act. R.38 has provided for something in excess of the scope and ambit of the Act and so the framing of such a rule is clearly in excess of the powers of the rule making authority. The provision for the imposition of duty contained in R.38 cannot therefore stand. A fortiori the provision for the imposition of penalty must also fail. On the short ground stated above, I hold that the first part of R.38(1) of the Medicinal and Toilet Preparations (Excise Duties) Rules, 1956 is ultra vires the powers of the rule making authority and cannot therefore sustain the levy that has been made on the petitioners." 13. In view of the above pronouncement, Rule 38(1) is no longer available to the appellants to sustain the impugned demands, as rightly found by the court below. 14. However, the court below proceeds further to find that the demands are sustainable under Rule 13(2) of the Rectified Spirit Rules. Rule 13(2) reads as under:- "The assessment of duty under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 (Central Act 16 of 1955) being applicable only to the quantity of spirit existing in the finished product, all spirit wasted during the course of manufacture of any medicinal or toilet preparation shall be assessable to duty under the Abkari Act, 1 of 1077. Provided that the Government may, in consultation with the Drugs Controller and the Chemical Examiner, by notification in the Gazette, permit such allowance as they think fit for such wastages occurring during the manufacture." 15. According to the above provision, the appellants are found to be invested with sufficient power to levy and recover duty on wastage of rectified spirit beyond the permissible limit. It is on the said ground that the relief of declaration has been disallowed by the court below. However, it is to be noted that the question regarding the scope and extent of the legislative competence of the State legislature to levy duties on that category of chemicals commonly referred to as 'industrial alcohol' was considered by the Supreme Court in a line of decisions. However, it is to be noted that the question regarding the scope and extent of the legislative competence of the State legislature to levy duties on that category of chemicals commonly referred to as 'industrial alcohol' was considered by the Supreme Court in a line of decisions. In the Constituent Bench decision that is reported in Synthetics and Chemicals Ltd. (1990(1) SCC 109), it has been held that the legislative competence of the State extends only to potable alcohol and does not extend to legislating upon absolute alcohol or alcohol that is not fit for human consumption. The question as to whether the State had the power to charge duty on wastage of rectified spirit also has been considered by the Supreme Court in Modern Pharmaceuticals Pvt. Ltd. v State of Kerala and others in the judgment dated 11.3.2004 (Civil Appeal No. 2639 of 1999). In the said case, a writ petition that challenged the action of the authorities in imposing a duty on wastage of rectified spirit under Rule-13 was dismissed. The Supreme Court, after referring to the decisions on the point has made the following observations:- "The decision in Deccan Sugar & Abkari Co.Ltd. (Supra) is based on a Constitution Bench decision in Synthetics and Chemicals Ltd. and others v State of U.P. and others (1990(1) SCC 109) as also on State of U.P. and others v Modi Distillery and others (1995(1) SCC 753). In all these decisions, it has been held that the state has power to levy excise duty only on intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. Admittedly, the commodity used by the appellant was not intoxicating liquor and it was rectified spirit" 16. Since the Supreme Court has clearly held that Section 13(2) is not available to the State to levy duty on wastage of rectified spirit, it follows that the finding of the court below sustaining the impugned demand notice is wrong. However, since no appeal has been field by the respondent - plaintiff challenging the said finding, I do not think it proper to set aside the same. Nevertheless, it necessarily follows that the State has no authority to enforce the impugned demand notices by taking recourse to the provisions of the Revenue Recovery Act or by any other means. However, since no appeal has been field by the respondent - plaintiff challenging the said finding, I do not think it proper to set aside the same. Nevertheless, it necessarily follows that the State has no authority to enforce the impugned demand notices by taking recourse to the provisions of the Revenue Recovery Act or by any other means. Therefore, the judgment and decree of the court below granting the decree of injunction against enforcement of the said demand notices are justified. 17. Rule-11 of the Medicinal and Toilet Preparations Rules has been considered by the court below and it has been found that the demand notices are also not issued within the period of limitation stipulated therein. Since the said finding of the court below is unjustified even on a plain reading of the provision, the same is also not sustainable. 18. A further contention has been put forward by the learned Government Pleader on behalf of the appellants that the suit itself was not maintainable in view of Section 72 of the Kerala Revenue Recovery Act, 1968. It is true that Section-72 prohibits the filing of a suit challenging action, taken under the provisions of the Revenue Recovery Act. However, in the present case, the specific contention of the appellants-defendants in their written statement is that the suit itself is premature for the reason that no action has been initiated under the Revenue Recovery Act. In the context of the above pleading by the defendants in their written statement, it has to be found that the above suit is not coming within the scope of the prohibition contained in Section-72 of the Act. The said Provision, therefore, has no application to the facts of the present case and the suit is perfectly maintainable. For the foregoing reasons, the judgment and decree of the court below are confirmed on the terms indicated above. The appeal fails and is hereby dismissed. No costs.