DEVICOLAM DISTILLERIES LTD v. THE EXCISE INSPECTOR

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year 2012-13 on 2.3.2012, Ext.P1. Necessary documents were submitted vide Ext.P2 and was hopeful of obtaining the orders for supply with effect from 1.4.2012 but was shocked when served with a notice dated 24.3.2012 intimating that on account of non- finalization of the Abkari Policy for the year, the 4^threspondent would continue to purchase Indian Made Foreign Liquor for the period from 1.4.2012 to 30.4.2013 at the pre-existing contract rates. In the meantime application for renewal of registration of brands for the year 2012-13 was approved by the 2^ndrespondent, Commissioner of Excise, Thiruvananthapuram vide letter dated 29.3.2012, Ext.P4. Similar notices like Ext.P3 were also served upon the petitioner as per the letter dated 27.4.2012, Ext.P5. Both the aforementioned notices were duly replied vide Ext.P6. On 26.6.2012, the 4^threspondent caused another notice to be served on the petitioner stating that purchases would be effected only under the old rates and the rate contract ultimately was finalized as per the agreement dated 28.7.2012, Ext.P8.

4. Pursuant to Ext.P8 agreement, Assistant Excise Commissioner attached to the 4^threspondent issued the permit for transport of the liquor vide Ext.P9 series. Pursuant to Ext.P9 being served, the petitioner approached the 1^strespondent for permission to transport the said consignment but was served with notice dated 4.8.2012 demanding a sum of Rs.25,000/- per brand

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as a condition precedent of movement of goods held as a closing stock of a previous year. The aforementioned notice was issued as per the impugned notification Ext.P10.

5. Learned counsel appearing on behalf of the petitioner submitted that the petitioner distillery had five licences under Part-1 of the Kerala Distillery and Warehouse Rules, 1968. The distillery has been functioning under the supervision and control of the Excise Department from 18.3.1985 onwards. For registration of all the brands increasing or decreasing from time to time charges have been paid as evident from the averments in paragraph 8 and Exts.P18 and P19. Ext.P10 notification is not sustainable in the eyes of law as it compels the petitioner and other similarly situated persons to pay additional amount of Rs.25,000/- for each brand for a period of two months starting from expiry of the previous financial year ie., 1.4.2012. The entire liquor manufactured and kept in the warehouse attached to the distillery is under the direct control and supervision of the distillery officer. Notification is against the provisions of the Kerala Distillery and Warehouse Rules, 1968, the conditions of the licences held by the petitioner distillery and also against the provisions of Section 14(b) of the Abkari Act, 1 of 1077.

6. On the other hand, learned Government Pleader countered the argument and supported the notification on the

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ground that the Government as per the provisions of the State List in 7^thschedule caused an amendment for managing revenue by imposing the taxes. The amendment is based on an intelligible differentia and cannot be twinged with convenience of the distillery like the petitioner's. As per Rule 4 of 1995 Rules, the holder of licence in form FL-9 shall purchase, store and supply only those brands of Foreign Liquor which have been registered with the Commissioner of Excise on payment of the fee prescribed as per the Rules. The validity of the brand registration expired on the 31^stday of March of the relevant financial year. The brand registration of the previous year, stocks were dispatched during April and May 2012 to KSBC Warehouses. It is in that context, demand of Rs.25,000/- for each brand was raised, which was in accordance with the amended Rules.

7. I have heard the learned counsel for the parties and appraised the paper book. Sub Rule 7 of Rule 3 of 1995 Rules before the amendment read as under:

2. The validity of registration of brand shall be for a maximum period of one year, and the same shall expire on the 31^stday of March of the relevant financial year. The Government may extend the said validity period, by a general or special order stating the reasons for such extension, if circumstances arises for the extension of the validity period of the brand registration.

8. By causing the amendment with effect from 14.6.2012, following proviso was inserted.

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Provided that a period of two months from the 31^stday of March of the relevant financial year to the 31st May of the succeeding financial your may he allowed every year by the Deputy Commissioner of Excise of the Division concerned to clear the stock of foreign Tuur with the brand region the previous financial year kept in various Distilleries, Breweries, Wineries and Foreign Liquor Compounding and Blending Units by collecting a few of Rs.25,000 for the said two months:

Provided further that the brand shall be registered as per rules, for the financial year to which the time is extended.

9. On perusal of the same, it is evident that after expiry of every financial year, ie., 31^stof March of the relevant year, the grace time of two months is being granted to the distillery for clearing the stocks subject to payment of Rs.25,000/- for each brand. The explanatory note also provided therein same is extracted hereunder.

(This does not form part of the notification, but is intended in indicate its general purport)

The Government have amended the Foreign Liquor (Registration of Brand) Rules, 1995 as per the notification issued under 0 (P) No 62/2012/TT) dated 4th April, 2012 and published as S. R. O No 231/2012 in the Kerala Gazete Extraordinary No. 691 dated 4th April, 2012, allowing the licensees to clear the stock of liquor kept in Distilleries, Breworica, Winenes and Foreign Liquor Compounding and Blending Units with brand registration of previous year after realizing a fee of Rs.25,000. Clarifications were sought by the Managing Director, Kerala State Beverages (Manufacturing and Marketing) Limited and others regarding the intention of the amendment. The Government have decided to bring more clarity in the said amendment which was intended for clearing the stock of Indian Made Foreign Liquor having brand registration of previous year, which were kept in Distilleries, Breweries, Wineries and Foreign liquor Compounding and Blending units. The rules need to he amended for the purpose. The notification is intended to achieve the above object.

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10. It is discerned that the Government had given a clarification to the amendment intended for clearing the stock of IMFL having a brand registration of previous year kept in distilleries, breweries, wineries and foreign liquor, compounding and blending units. Notification only caused by the Secretary to Government is without having put to the legislative Assembly. Be that as it may, while causing the amendment, it has not been noticed that for the succeeding financial year ie., from 1^stof April of any financial year till 31^stof March of previous financial year every distillery is again required to seek registration of the number of the brands they were holding of and prior to the same, had been supplying the brands or material / stock, even if manufactured on 31^stof March within a span of few months, without payment of extra charges, for, registration charges had already been paid. The said amendment in considerable view of this Court amounts to double taxation. Thus there is no rationale or intelligible differentia in imposing additional liability of Rs.25,000/- for a period of two months. The entire liquor manufactured and kept in warehouses attached to the distilleries is also under the direct control and supervision of the distillery officer. Thus for all intents and purposes, any distiller is legally entitled to keep the same in the distillery, till it is sold, without payment of excise duty. It is not in dispute that the petitioner

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distillery had not deposited the registration charges of the brands for the next financial year. Thus in, the demand as per the notification Ext.P10 is not sustainable in the eyes of law, which is wholly irrational and arbitrary. Impugned notification Ext.P10 and consequential demand are hereby quashed.

Writ petition is allowed.

SD/-

sab AMIT RAWAL

JUDGE

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EXHIBIT P15 TRUE COPY OF THE LICENCE FORM IV FOR

DEPOSIT AND KEEPING OF SPIRITS WITHOUT

PAYMENT OF DUTY

EXHIBITP16 TRUE COPY OF THE LICENCE IN FORM IVA FOR

THE POSSESSION AND USE FO NON-DUTY PAID IMPORTED/TRANSPORTED EXTRA NEUTRAL

ALOCHOL (NEUTRAL SPIRIT FOR ALCOHOLIC

DRINKS), GRAPE SPIRIT, MALT SPIRT IN A

BONDED WAREHOUSE

EXHIBIT P17 TRUE COPY OF THE CONSOLIDATED STATEMENT

SHOWING THE COST OF ESTABLISHMENT PAID BY

THE PETITIONER FROM 2012 TO 2018

EXHIBITP18 TRUE COPY OF THE CONSOLIDATED STATEMENT

SHOWING THE BRAND REGISTRATION FEE PAID

FROM 2012 TO 2018

EXHIBITP19 TRUE COPY OF THE STATEMENT SHOWING THE

DETAILS OF BRANDS REGISTERED FOR THE YEAR

2018