KESAR ENTERPRISES LTD. versus STATE OF U.P. & ORS.

Citation: [2011] 9 S.C.R. 19 · Decided: 06-07-2011 · Supreme Court of India · Bench: D.K. JAIN · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2011] 9 S.C.R. 19 
' 
KESAR ENTERPRISES LTD. 
A 
v. 
STATE OF U.P. & ORS. 
(Civil Appeal No. 6896 of 2002) 
JULY 06, 2011 
B 
[D.K. JAIN AND H.L. DATIU, JJ.] 
U.P. Excise Manual - rule 633 - Imposition of penalty-
Company consigned rake of tank wagons, loaded with 
rectified spirit under PD-25 pass for export - However, out of c 
15 tank wagons only 14 tank wagons reached the Port -
Export consignment routed through appellant (handling agent 
'( 
as also owner of the bonded warehouse at the Port), who · 
executed an indemnity bond in favour of the Governor of Uttar 
Pradesh in relation to permission for removal of rectified spirit D 
- Issuance of notice to the appellant to deposit excise duty 
on the rectified spirit along with interest since the appellant 
failed to furnish PD-25 pass, certified by the Collector -
Explanation furnished by appellant not found satisfactory -
Excise Commissioner directed the Excise Officer to issue 
E 
recovery certificate and take appropriate steps against the 
appellant for the recovery of excise duty and interest - Writ 
petition -
High Court holding that although the State 
Government had no authority to levy excise duty u/s. 28 on 
1 
rectified spirit (industrial alcohol) but it could impose penalty 
F 
on the appellant ulr. 633(7) - On appeal, held: Show-cause 
notice should be issued and an opportunity of hearing should 
be afforded to the person concerned before an order ulr. 
633(7) is made, notwithstanding the fact that the said Rule 
· does not contain any express provision in this regard - Before 
G 
• 
raising any demand and initiating any step to recover from 
the executant of the bond any amount by way of penalty, there 
has to be an adjudication as regards the breach of condition 
of the bond or the failure to produce the discharge certificate 
19 
H 
20 
SUPREME COURT REPORTS 
[2011] 9 S.C.R. 
A within the stipulated time as also quantification of the penalty 
amount but there was absolutely no adjudication by any 
authority, except the a/legation that the appellant had failed 
to furnish the PD-25 pass certified by the Collector - Thus, 
the action of the State for the recovery of penalty and interest, 
B being violative of principles of natural justice, is null and void 
- Matter remitted to the jurisdictional Excise Commissioner 
- U.P. Excise Act, 1910- s. 28- Principles of natural justice. 
U.P. Excise Act, 1910 - S. 28 - High strength rectified 
spirit (industrial alcohol) - Levy of excise duty - Power of 
C State - Held: High strength rectified spirit (industrial alcohol) 
is a Central subject, thus, the State is not empowered to levy 
excise duty- Under s. 28, 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 
D consumption. 
E 
Administrative law - Natural 1ustice - Principle of - Held: 
Is to check arbitrary exercise of power by the State or its 
functionaries - Thus, the principle implies a duty to act fairly. 
'D' Company consigned a rake of 15 tank wagons, 
loaded of rectified spirit under PD-25 pass for export 
against an order of the Excise Commissioner. The export 
consignment was to be routed through the appellant, as 
handling agent as also the owner of the bonded 
F warehouse at 'K' Port, where the spirit was to be stored 
before export. The appellant executed an indemnity bond 
in favour of the Governor of Uttar Pradesh in relation to 
permission for removal of rectified spirit. The said 
consignment was dispatched through Railway to 'K' Port. 
G However, out of 15 tank wagons only 14 tank wagons 
reached the 'K' Port and tiie 15th tank wagon was lying 
empty at the Railway Station. The Excise Commissioner 
issued notice to the appellant that they were liable to 
deposit excise duty amounting to Rs. 8,71,744/- on the 
H 
• 
KESAR ENTERPRISES LTD. v. STATE OF U.P. & 
21 
_, 
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

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