# M/s Simbhaoli Sugar Mills Ltd., Ghaziabad v. State Of U.P. & Ors

- **Citation:** (2016) 8 ILRA 793
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2016-08-11
- **Bench:** Sudhir Agarwal, Kaushal Jayendra Thaker
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-simbhaoli-sugar-mills-ltd-ghaziabad-v-state-of-u-p-ors-44270
- **Pages:** 7

## Headnote

Writ petition under Article 226 of the Constitution challenging the demand notice/order dated 05.10.2001
issued by the Assistant Excise Commissioner, Simbhaoli Distillery, Ghaziabad demanding penal interest of Rs.
9,25,508.81/- on alleged delayed payment of excise duty relating to transit wastage for the period 1979-80 to
1998-99.

Citation:
M/s Simbhaoli Sugar Mills Ltd. v. State of U.P. & Others, Writ Tax No. 1089 of 2001, decided on
11.08.2016 (All.)

Case Law Discussed:

New Delhi Municipal Committee v. Kalu Ram & Another, (1976) 3 SCC 401
M/s Mohan Meakin Limited v. State of U.P. & Others, Writ (Tax) No. 809 of 2012

Headnote:
Excise Act, 1910 (U.P.) - Section 38-A - Interest on arrears of excise revenue - Liability arises only after
determination and demand.

Excise duty on excess transit wastage becomes "excise revenue" only when it is determined and imposed
by the competent authority in accordance with the relevant rules. The expression "becomes payable" in
Section 38-A means "legally recoverable", i.e., after determination of liability.

Where the Excise Authorities for the first time determined and demanded excise duty on 30.08.2001 for
alleged excess transit wastage relating to the period 1979-80 to 1998-99, and the petitioner deposited the
demanded duty within one month, the amount cannot be treated as arrears attracting interest under Section
38-A.
794 INDIAN LAW REPORTS ALLAHABAD SERIES

In the absence of any earlier determination or demand showing that excise revenue had become payable
before 30.08.2001, levy of penal interest for the prior period was illegal and unsustainable.

The impugned demand notice dated 05.10.2001 charging penal interest was liable to be quashed.

Result:

Writ petition allowed.

Demand notice/order dated 05.10.2001 imposing penal interest set aside.

## Text

8 All. M/s Simbhaoli Sugar Mills Ltd., Ghaziabad Vs State Of U.P. & Ors.
793
(2016) 8 ILRA 793
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 11.08.2016

BEFORE

THE HON'BLE SUDHIR AGARWAL, J.
THE HON'BLE KAUSHAL JAYENDRA THAKER, J.

Writ Tax No.- 1089 Of 2001

M/s Simbhaoli Sugar Mills Ltd., Ghaziabad ...Petitioner
Versus
State Of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Neeraj Sharma, B.J. Agarwal, Nikhil Agarwal

Counsel for the Respondents:
C.S.C., Avinash Tripathi, U.S. Awasthi

Procedure:
Writ petition under Article 226 of the Constitution challenging the demand notice/order dated 05.10.2001
issued by the Assistant Excise Commissioner, Simbhaoli Distillery, Ghaziabad demanding penal interest of Rs.
9,25,508.81/- on alleged delayed payment of excise duty relating to transit wastage for the period 1979-80 to
1998-99.

Citation:
M/s Simbhaoli Sugar Mills Ltd. v. State of U.P. & Others, Writ Tax No. 1089 of 2001, decided on
11.08.2016 (All.)

Case Law Discussed:

New Delhi Municipal Committee v. Kalu Ram & Another, (1976) 3 SCC 401
M/s Mohan Meakin Limited v. State of U.P. & Others, Writ (Tax) No. 809 of 2012

Headnote:
Excise Act, 1910 (U.P.) - Section 38-A - Interest on arrears of excise revenue - Liability arises only after
determination and demand.

Excise duty on excess transit wastage becomes "excise revenue" only when it is determined and imposed
by the competent authority in accordance with the relevant rules. The expression "becomes payable" in
Section 38-A means "legally recoverable", i.e., after determination of liability.

Where the Excise Authorities for the first time determined and demanded excise duty on 30.08.2001 for
alleged excess transit wastage relating to the period 1979-80 to 1998-99, and the petitioner deposited the
demanded duty within one month, the amount cannot be treated as arrears attracting interest under Section
38-A.
794 INDIAN LAW REPORTS ALLAHABAD SERIES

In the absence of any earlier determination or demand showing that excise revenue had become payable
before 30.08.2001, levy of penal interest for the prior period was illegal and unsustainable.

The impugned demand notice dated 05.10.2001 charging penal interest was liable to be quashed.

Result:

Writ petition allowed.

Demand notice/order dated 05.10.2001 imposing penal interest set aside.

(Delivered by Hon'ble Sudhir Agarwal, J.)

(Delivered by Hon'ble Sudhir Agarwal, J.
&
Hon'ble Kaushal Jayendra Thaker, J.)

1. Heard Sri Nikhil Agarwal, learned counsel for petitioner and Sri A.C. Tripathi, counsel
for respondents.

2. Writ petition is directed against demand notice/order dated 05.10.2001 (annexure 3 to the
writ petition) whereby Assistant Excise Commissioner, Simbhaoli Distillery, Ghaziabad has
required petitioner to deposit penal interest of Rs. 9,25,508.81/- on account of transit fee for the
Year 1979-80 to 1998-99 for the loss of excise duty of Rs. 8,65,557.50/-.

3. Brief facts giving rise to present dispute are as under:-

4. Petitioner M/s Simbhaoli Sugar Mills Ltd., a Company engaged in manufacture and sale
of excisable goods, filed writ petition challenging cost of transit wastage duty on rectified spirit and
IMFL. It was dismissed by Court and appeal preferred was also dismissed by Supreme Court on
29.03.1995. Assistant Excise Commissioner, Simbhaoli Distillery, respondent 3, for the first time
issued a demand notice dated 30.08.2001 demanding export duty on transit wastage to the tune of
Rs. 8,87,648.50/- for the period 1979-80 to 1998-99. On 12.12.2001, respondent 3 rectified the
amount to Rs. 8,65,557.50/-. The aforesaid amount was deposited on 12.09.2001. Thereafter
impugned demand notice dated 05.10.2001 has been raised charging penal interest on the alleged
delayed payment of excise duty.

5. It is contended before us is that liability to pay excise duty would arise only when a
demand is raised and if it is not paid within three months from the date of demand, penal interest is
payable. In the present case, for the first time, demand was raised on 30.08.2001 and within one
month thereof petitioner deposited the amount, hence no penal interest would be paid. In this regard
Section 38-A inserted by Section (2) of U.P. Act no. 7 of 1985 in U.P. Excise Act, 1910
(hereinafter referred to as 'Act 1910') is relied.
8 All. M/s Simbhaoli Sugar Mills Ltd., Ghaziabad Vs State Of U.P. & Ors.
795
6. The facts are not in dispute. The dispute revolves around interpretation of Section 38-A
of Act 1910, which reads as under:-

"38-A. Interest on arrears of excise revenue-(1) Where any excise revenue has not
been paid within three months from the date on which it becomes payable, interest at such rate
not exceeding twenty-four percent per annum, as may be prescribed, shall be payable from the date
such excise revenue becomes payable till the date of actual payment:

Provided that until a higher rate is prescribed, the rate of interest will be eighteen
percent per annum;

Provided further that in respect of an excise revenue which became payable before
the commencement of the Uttar Pradesh Excise (Amendment) Act, 1985 interest at the said rate
shall be payable from the date of such commencement if the excise revenue is not paid within 3
months of the said date."

Explanation- Nothing in this sub-section shall be construed to affect the payment
of interest under an agreement, the terms of an auction or, a decree of the Court, passed before the
date of commencement of the Uttar Pradesh Excise (Amendment) Act, 1985 or which may be
passed after the date of such commencement, in suits or proceedings filed before the said date.

(2) Provisions of Section 39 shall mutatis mutandis apply to realisation of such
interest as they apply to realisation of excise revenue.

(emphasis added)

7. 'Excise Revenue' under Section 3(1) has been defined as under:-

"excise revenue" means revenue derived or derivable from any duty, fee, tax, fine
(other than a fine imposed by a Court of law), or confiscation imposed or ordered under the
provisions of this Act, or of any other law for the time being in force relating to liquor or
intoxicating drugs;"

(emphasis added)

8. It shows that a duty, fee, tax, fine or confiscation imposed or ordered under the
provisions of Act 1910 shall constitute "excise revenue" if it relates to liquor or intoxicating drugs.
An excise duty will partake nature of "excise revenue" only when it is imposed or ordered under the
provisions of Act 1910 or any other law for the time being in force. If it is not paid within three
months from the date of imposition or order then interest is payable.
796 INDIAN LAW REPORTS ALLAHABAD SERIES

9. Further Section 38-A is attracted when excise revenue becomes payable. Vide
Explanation; Section 38-A, term ''payable' has been defined as "Interest is payable where any excise
revenue has not been paid within three months from the date on which it becomes payable."

10. The term ''becomes payable' used under Section 38-A has been considered in M/s
Mohan Meakin Limited Vs State of U.P. and others, Writ (Tax) 809 of 2012 and it is held that
"becomes payable" means "legally recoverable". Court said "excise revenue becomes payable when
it is determined". Court relied on an earlier decision of Supreme Court in New Delhi Municipal
Committee Vs. Kalu Ram and another, 1976 (3) SCC 401 wherein Court construed the word
''payable' and held that it means "legally recoverable".

11. Further Rule 814 of Excise Manual dealing with allowances for loss of personal reads
as under:-

"Rule 814. Allowance for loss in transit- An allowance up to 0.5 percent will be
made for the actual loss in transit, by leakage, evaporation or other unavoidable cause, of spirit
transported or exported under bond in wooden casks or metal vessels.

The allowance to be made under this rule will be determined by deducting from
the quantity of spirit despatched from the distillery, the quantity received at the place of
destination, both quantities being stated in terms of alcohol. The allowance will be calculated on
the quantity contained in each wooden cask metal vessels comprised in a consignment. If the
report of the officer by whom the consignment of spirit has been gauged and proved at its
destination shows that the wastage has occurred above the limit allowable the person executing the
bond shall be liable to pay duty on so much of the deficiency as in excess of the allowance. The
rate of duty leviable shall be the highest rate of duty leviable on such spirit in this State.

When the wastage does not exceed the prescribed limit, no action need be taken by
the Officer-in-charge of the Distillery or bonded warehouse, as the case may be, but when the
wastage exceeds the allowable limit, the Officer-in-charge of the Distillery shall obtain the
explanation of the Distillers or the person executing the bond and forward the same together
with a full report of the circumstances to the Assistant Excise Commissioner or the Deputy
Excise Commissioner of the charge in which the Distillery is situated. The Assistant Excise
Commissioner or the Deputy Excise Commissioner shall charge duty on excess wastage provided
that when the total wastage in a consignment is within the allowable limit. Deputy/Assistant
Excise Commissioner of the charge may write off the excess wastage in any particular wooden cask
or metal vessel"

(emphasis added)

12. Reading of the aforesaid provision makes it clear that permissible allowance for loss in
transit has to be determined and calculated by competent authority so as to arrive at inference
8 All. M/s Simbhaoli Sugar Mills Ltd., Ghaziabad Vs State Of U.P. & Ors.
797
whether the transit wastage is within permissible limit. Further Excise Officials are supposed to
charge duty which obviously can be done by giving a notice of demand.

13. It is not the case of respondents that any determination was made for the period 197980 to 1998-99 at any earlier point of time. On the contrary it has been said in counter affidavit, in
para 3(iii) that after decision of Supreme Court in dismissing appeal on 28.03.95, Excise
Authorities determined amount of excise duty payable on the excess transit wastage and raised
demand by letter dated 30.08.2001.

14. In the written argument submitted by learned Standing Counsel, also it is not the case
that excise duty on account of excess transit loss was ever earlier determined by competent
authority. It is also not the case that it is such a computed item that on its own petitioner was liable
to pay excise duty at a particular point of time, without demand or order.

15. On the contrary, it is explained that Rule 633 of U.P. Excise Rules, provides for export
of foreign liquor manufactured at a distillery in Uttar Pradesh to any other place in India. Collector
of exporting District grants pass to such export in Form PD-25. Consignment is checked and
verified at the place of destination. Importer produces certificate to Collector of exporting District
regarding quantity certified by the officer which reached destination. Thereafter wastage is
determined consignment wise, duly certified and thereafter only Exporter is liable to pay excise
duty on consignment wise which is summed and totaled year wise. It is said that determination of
excise duty on wastage is done consignment- wise which on reaching destination is certified by
Excise Officer posted in the distillery as well as the place where consignment is delivered. Rules
813 and 814 which require determination of wastage and payment of excise duty are also referred.

16. Liability to pay excise duty on excess transit wastage has not been disputed before us
but the question is, whether there is any determination at any point of time earlier to 30.08.2001
making "excise revenue" payable by petitioner on any date prior to 30.08.2001. No such
determination was made by Excise Authorities and communicated to petitioner nor has been placed
before us nor pleaded in the counter affidavit nor even referred to in the written arguments.

17. In order to hold that "excise revenue" was payable by petitioner at any earlier point of
time than 30.08.2001, it was incumbent upon respondents to show that as per U.P. Excise Rules,
determination of excess transit wastage was made by competent authority and communicated to
petitioner, so as to make him liable to pay prescribed excise duty thereon.

18. In the present case, counter affidavit is conspicuously silent on this aspect and the only
letter by which such determination has been shown for the first time is dated 30.08.2001 and
admittedly, within one month thereafter the demanded duty has been paid.

19. The extent of excess transit loss may result in creating a liability upon petitioner to pay
excise duty but unless such duty is imposed or ordered by competent authority, after determination
as required under Rules, it cannot be said that it is an "excise revenue" payable and, hence, liability
798 INDIAN LAW REPORTS ALLAHABAD SERIES

of interest will not arise from a date prior thereto. It is for this reason, that respondents have not
disclosed in the entire counter affidavit any date on which such "excise revenue" was payable for
the period of almost ten years, for which cumulative interest has been charged for the entire period
from 1979-80 to 1998-99.

20. For the first time, excise duty was ordered by order dated 30.08.2001 and since it has
been paid within one month thereof, we do not find that the petitioner is liable to pay interest under
Section 38-A of Act 1910. No such interest is attracted in the case in hand.

21. Writ petition is allowed. Impugned demand notice/order dated 05.10.2001 is hereby set
aside.

22. However, before parting, we may observe that though Supreme Court dismissed appeal
admittedly on 28.03.1995, still concerned excise authority took more than six years time in raising
demand of excise duty. Had it been ordered earlier, State would not have lost benefit of amount of
"excise revenue" which would have become payable earlier by petitioner.

23. Apparently here is a case of clear lack of negligence on the part of respondent 3
keeping the matter in hibernation for more than six years and thereafter determining excise duty
only by order dated 30.08.2001. Therefore, we direct Principal Secretary, Excise, U.P. Government,
to make appropriate inquiry in the matter and recover loss, if any, suffered by State from concerned
officer responsible for such wrong, after holding inquiry in accordance with law.
----------
8 All. Jagdish Kumar & Ors. Vs State Of U.P. & Ors.
799
(2016) 8 ILRA 799
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: ALLAHABAD 09.08.2016

BEFORE

THE HON'BLE MRS. VIJAY LAKSHMI, J.

Application U/S 482 No.- 2028 Of 2001

Jagdish Kumar & Ors. ...Applicants
Versus
State Of U.P. & Ors. ...Opposite Parties

Counsel for the Applicants:
D.D. Gupta, Ajatshatru Pandey, G.S. Chaturvedi

Counsel for the Opposite Parties:
A.G.A., Sameer Jain

Section 482 Cr.P.C. - Quashing of cognizance in dowry death case - Applicants sought quashing of
the cognizance order dated 20.1.2001 passed by the C.J.M., Varanasi in Case No. 255 of 2001 (State v. Ravi
Kumar & Others), arising out of Case Crime No. 113 of 2000, under Sections 498A, 304B I.P.C. and 3/4 Dowry
Prohibition Act, P.S. Cantt., district Varanasi. FIR alleged cruelty and dowry demand, whereas the defence
relied on a dying declaration recorded by the Settlement Officer (Consolidation), Varanasi, after medical
certification of the declarant's consciousness, in which the deceased stated that she accidentally caught fire
while boiling milk for her child and no family member was present at that time, and her mother-in-law
extinguished the fire. Applicants emphasized three weeks' delay in lodging the FIR and prior intimation sent by
the husband through speed post to the police about an accidental burn, contending that there was no
possibility of conviction and that continuation of proceedings would be an abuse of process and sheer wastage
of court time. Held, while exercising inherent jurisdiction under Section 482 Cr.P.C., the High Court cannot
assess the veracity, reliability or truthfulness of evidence such as a dying declaration or conduct a pre-trial
evaluation of defence materials; at this stage only prima facie case is to be seen in light of settled Supreme
Court precedents, and disputed defence must be tested by the trial court, where the accused have the remedy
of moving an application for discharge. In view of the law laid down in R.P. Kapur v. State of Punjab, State of
Haryana v. Bhajan Lal, State of Bihar v. P.P. Sharma, Zandu Pharmaceutical Works Ltd. v. Mohd. Saraful Haq
and others and other authorities, the prayer for quashing the cognizance order was refused, though applicants
were given liberty to appear before the trial court and seek bail, with a direction that bail be considered in
light of Amrawati v. State of U.P. and Lal Kamlendra Pratap Singh v. State of U.P., and that no coercive action
be taken for 30 days.
Application Dismissed

Case Law discussed:
State of Orissa v. Bansidhar Singh, (1996) 2 SCC 194
R.P. Kapur v. State of Punjab, A.I.R. 1960 S.C. 866
State of Haryana v. Bhajan Lal, 1992 SCC (Cr.) 426
State of Bihar v. P.P. Sharma, 1992 SCC (Cr.) 192
Zandu Pharmaceutical Works Ltd. v. Mohd. Saraful Haq and another, 2005 SCC (Cr.) 283 (Para 10)
Amrawati and another v. State of U.P., 2004 (57) ALR 290 (FB)