STATE OF U.P. AND ORS. versus SARAYA INDUSTRIES LTD.

Citation: [2006] SUPP. 2 S.C.R. 741 · Decided: 12-05-2006 · Supreme Court of India · Bench: S.B. SINHA · Disposal: Dismissed

Judgment (excerpt)

STATE OF U.P. AND ORS. 
v. 
SARA YA INDUSTRIES LTD. 
MAY 12, 2006 
[S.B. SINHA AND P.P. NAOLEKAR, JJ.] 
Excise Laws: 
Manufacture of potable liquor-State Government framed policy 
requiring distilleries to ajfrx security holograms on liquor bottles, pouches 
and cans-Excise duty demanded on basis of circulars issued by Excise 
Commissioner on wasted holograms not produced by the distilleries for 
verification-Challenge to-Held: By reason of an executive instruction, 
provisions of lmv cannot be effaced-Matter relating to excise policy must 
be framed by the State-It cannot be done by the Excise Commissioner 
A 
B 
c 
D 
by issuance of circulars-In absence of requisite statutory backing, 
impugned demand is not .sustainable-Uttar Pradesh Excise Act, 1910-
Section 29-Constitution of India, 1950-Vllth Schedule, List II Entry 51. 
jf 
. In 2001, in order to prevent evasion of duty and smuggling of 
liquor, the State of Uttar Pradesh took a policy decision requiring the 
distilleries to obtain and affix security holograms issued by the 
Department. Subsequently the Excise Commissioner issued various 
circulars relating to the holograms. It was inter alia provided that 
wasted holograms not produced by the distilleries for verification before 
the Authorised Committee appointed by the Excise Commissioner 
would be pi:esumed to have been misused and the distilleries would_ be 
liable to compensate the State for loss of alleged duty on the quantity 
of liquor, which could have been issued under such wasted holograms. 
Respondents-distilleries filed writ petition questioning the legality of 
the circulars issued by the Excise Commissioner. High Court allowing 
the writ petitions held that the duty cannot charged on the basis of loss 
of holograms as excise duty was payable in terms of the notification 
issued under Section 29 of the Uttar Pradesh Excise Act, 1910 and that 
. no such notification having been issued, excise duty demanded only on 
. the basis of the circulars issued by the Excise Commissioner on account 
of holograms, is bad in law. Hence the present appeals. 
741 
E 
F 
G 
H 
742 
SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R. 
A 
Dismissing the appeals, the Court 
B 
c 
D 
E 
F 
G 
H 
HELD : 1.1. Resort to regulatory measures can be taken by the 
State, but the same must be done in the manner laid down under the 
Act. Although by way of regulatory measures directions may be issued 
in regard to the maintenance of register in such a manner in which 
the wasted holograms were to be maintained; but by reason of a 
executive fiat, a unit cannot be made responsible to compensate any 
loss to the revenue as a consequence of such wastage of such holograms. 
(752-E, 751-E) 
1.2. A provision which confers powers upon a statutory authority 
in terms whereof a penalty is to be imposed, damages are to be paid 
for non-payment of excise duty, must be done through a valid 
subordinate legislation and not by way of issuance of a circular letter. 
It is manifest that the duty has to be levied only in terms of the 
provisions of the statute anc! not de'hors the same. (752-E, 756-H) 
, 
Government of Haryana v. Haryana Brewery Ltd and Another, 
(2002). 4 sec 547, distinguished. 
Bimal Chandra Banerjee v. State of Madhya Pradesh Etc., [1970) 2 
SCC 467; Excise Commissioner, U.P., Allahabad and Ors. v. Ram Kumar 
and Ors., (19761 3 SCC 540; State of U.P. and Ors. v. Modi Distillery and 
Ors., [1995] 5 SCC 753; State of U.P. and Ors. v. Varn Organic Chemicals 
Ltd and Ors., [2004) 1 SCC 225; State of U.P. and Ors. v. Delhi Cloth 
Mills and Anr., [ 1991 I 1 SCC 454 and State of Bihar and Ors. v. Industrial 
Corporation (P) Ltd. and Ors., [2003] II SCC 465, relied on. 
2. Legislation relating to excise duty is relatable to Entry 51, List 
II of the Seventh Schedule of the Constitution of India. If that be so, 
provision for imposition of such duty or evasion thereof must be 
provided in terms of the law. By reason of an executive order, a 
presumption cannot be raised. No penalty can be levied. The matter 
would have been different, if the same was provided for, as has been 
sought to be done now, by way of terms and conditions of licence or 
in terms of the rules. By reason of an executive instruction, the 
provisions of the law cannot be effaced. A legislative policy, furthermore, 
must be laid down by the State. The matter relating to an excise policy 
must be framed by the State. It cannot be done by the Excise 
STATEv. SARA YA IND

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