KESAR ENTERPRISES LTD v. STATE OF U.P & Ors.

rectified spirit -along with interest since the appellant A failed to furnish PD-25 pass, certified by the Collector for due delivery. The appellant failed to deposit the amount and another notice was issued. The appellant furnished an explanation but the Excise Commissioner not being satisfied with the same, directed the Excise Officer to B issue recovery certificate and take appropriate steps against the appellant for the recovery of the excise duty. The appellant filed a writ petition seeking quashing of the demand notice. The High Court holding that although the State Government had no authority to levy Excise duty C under Section 28 of the Act on rectified spirit (industrial alcohol) but could impose penalty on the appellant under Rule 633(7) of the Excise Manual, quashed the demand notice. Therefore, the appellant filed the instant appeal. All.owing the appeal and remitting the matter to the D Excise Commissioner, the Court HELD: 1.1 The State was not empowered to levy Excise duty on the high strength rectified spirit in 15 tank wagons. Under Section 28 of the U.P. Excise Act, 1910 the E charging Section, an Excise duty or a Countervailing duty, as the case may be, can be imposed by the State on alcoholic liquor only when it reaches the stage of human consumption and not on high strength rectified . spirit (industrial alcohol), a Central subject. Therefore, the F High Court is correct in law in holding that the State did not have the jurisdiction to levy Excise duty on rectified spirit, loaded in 15 tank wagons.[Para 13] [30-E-H; 31-A] Synthetics and Chemicals Ltd. and Ors. vs. State of U.P. and Ors. (1990) 1 SCC 109: 1989 (1) Suppl. SCR 623 - G Relied on.

1.2 It is manifest that Rule 633. of the Uttar Pradesh Excise Manual made in exercise of the rule-making power H • 22 SUPREME COURT REPORTS [2011] 9 S.C.R. A of the State under the Act, would apply only in relation to manufacture, import, export and transport of potable liquor, i.e. the liquor which is caRable of being consumed by human beings. Precisely for the said reason in order to bring appellant's case within the scope of Rule 633, the B High Court went on to observe that it could be presumed that rectified spirit in the missing tank wagon was diverted for conversion into potable alcohol. Rule 633 is of regulatory character meant to ensure that the liquor being exported under a bond reaches its destination and c is not misused or misutilized in transit. It contemplates that if the bond along with certificate signed by the Collector or other named officers of the importing district, certifying due arrival or otherwise of the liquor at its destination, is not furnished to the Collector of the exporting district, he would be entitled to presume that the liquor has been disposed of otherwise than by export and can proceed to take necessary steps as postulated in sub-rule (7) of Rule 633 of the Excise Manual. The said Rule provides for imposition of penalty, which may be E equivalent to the Excise duty, leviable under the charging Section 28 of the Act on potable liquor. [Para 15] (33-G H; 34-A-D] 0

2.1 Rules of 'natural justice' are not embodied rules. The phrase 'natural justice' is also not capable of a F precise definition. The underlying principle of natural justice, evolved under the common law, is to check arbitrary exercise of power by the State or its functionaries. Therefore, the principle implies a duty to act fairly i.e. fair play in action. [Para 17] [34-E-F] G H