STATE OF U.P. versus M/S MODI DISTILLERY ETC. ETC.

Citation: [1995] SUPP. 3 S.C.R. 119 · Decided: 29-08-1995 · Supreme Court of India · Bench: S.P. BHARUCHA, FAIZAN UDDIN, S.B. MAJMUDAR · Disposal: Dismissed

Judgment (excerpt)

> 
STATE OF U.P. 
A 
v. 
MIS MODI DISTILLERY ETC. ETC. 
AUGUST 29, 1995 
[S.P. BHARUCHA, FAIZAN UDDIN AND S.B. MAJMUDAR, JJ.} 
B 
U.P. Excise Act, 1910,-Sections 3(22a) and 28-Excise Duty-Power 
of the State to levy excise duty with refere11ce to its power to regulate manufac-
ture of Indian Made Foreign Liquo1~1he State is not empowered to levy 
excise duty on the raw material or input that is in the process of bei11g made C 
into alcoholic liquor for huma11 consumptio11. 
U.P. Excise Rules 1910 Rule 775-0bscuration Process- E:>..plained. 
Constitution of Indi~Seventh schedule entry 51 of List II-Power of 
the State to levy excise duty is limited by the Constitutio1r-Statute and Rules D 
cannot expand the power. 
Words And Phrase:.-'Alcoholic liquors for human consumption' and 
'Rectified spirit'-Meaning of 
The respondents are manufactures of Indian made foreign liquor. E 
The appellant State sought to levy excise duty on the wastage of Indian 
Made Foreign Liquor (IMFL) contended that the state was competent to 
levy excise duty on liquor for human consumption. It was the content of 
liquor in the IMFL which was exciseble. So wastage of liquor from the time 
the process of manufacture of IMFL began, was exigible to excise duty in 
exercise of its power under section 3(22-a) of U.P. Excise Act, 1910 and 
procedure under U.P. Excise Rules, 1910. 
Respondents challenged the impugned demand before the High 
Court of Allahabad by way of writ petition. 
The High Court categorised the demands into four groups. In Group 
F 
G 
- 'A' the demands for excise duty were on the wastage of Indian Made 
Foreign Liquor (IMFL) which was exported outside the State of Uttar 
Pradesh. Group 'B' related to demands made for excise duty on wastage, 
during transportation in containers, of high strength spirit of 80 to 85% 
from distillery to warehouse, Group 'C' related to the demand of Excise H 
119 
120 
SUPREME COURT REPORTS (1995) SUPP. 3 S.C.R. 
A 
duty on obscuration and Group 'D' related to excise duty sought to be 
levied on pipeline wastage. 
B 
c 
D 
E 
F 
G 
In regard to Groups B, C and D the High Court took the view that 
the stage at which the State could levy excise duty had not been reached. 
The High Court allowed the writ petitions, and quashed the impugned 
orders demanding excise duty from them. 
Hence these appeals by the state. 
HELD : 1. The power of the State to levy excise duty was limited to 
that conferred upon it by Entry 51 of List-II of the constitution. However 
wide the rules may be, the rules cannot extend the power of the State to 
levy excise duty. The power of the State is limited by the Constitution and 
the statute. [129-D-E] 
2. The power of the State to levy excise duty cannot be expanded with 
reference to its power to regulate manufacture. [129-G] 
3. The expression 'alcoholic liquor for human consumption', means 
that liquor which, as it is, is consumable in the sense that is capable of 
being taking by human beings as such as a beverage or drink. Alcoholic 
or intoxicating liquors had to be understood as they were, not what they 
were capable of or able to become. [127-F-G] 
Synthetics and Chemicals Ltd. and Ors. v. State of U.P. and Ors., 
[1990] 1 sec 109, applied. 
4. Rectified spirit for industrial purposes was defined as spirit 
purified by distillation having a strength not less than 95 per cent by 
volume of ethyl alcohol which by itself was not only non-potable but was 
highly toxic. In other words, ethyl alcohol (95 per cent) was not alcoholic 
liquor for human consumption but could be used as a raw material or 
input, afler processing and substantial dilution,in the production of whis-
ky, gin, country liquor etc. In the light of experience and development, it 
was necessary to state that 'intoxicating liquor' meant only that liquor 
which was consumable by human beings as it was. [128-8-D] 
5. The State is not empowered to levy excise duty on the raw material 
or input that is in the process of being made into alcoholic' liquor for 
H human consumption. [128-F] 
STATE v. MODI DISTILIERY[BHARUCHA,J.] 
121 
6. The process of obscuration takes place in the manufacture of rum, A 
other than white rum. Therein caramd is added to plain spirit. This 
results in obscuration or an apparent but not actual loss of proof gallons, 
that is, of alcoholic strength. [128-H; 129-A] 
7. The issue relating to Group 'A' regarding the demand for excise 
duty on the wastage of Indian Made Foreign Liquor st

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