M/S.Shankar Trading Company vs. State Of Orissa

Held

The Court upheld the constitutional validity of the amended provision of the Bihar and Orissa Excise Act, 1915, concerning the inclusion of 'molasses'. However, it clarified that the State Government's power to levy excise duty on molasses is limited. Specifically, if molasses is used for purposes other than distillery, such as cattle feed, poultry, or preparation of 'gudakhu', the petitioners are exempt from paying local tax (excise duty) on it. This exemption is based on the interpretation that Entry-84 of the Union List reserves the power for excise duty on such goods, and the State's power under Entries-8 and 51 is restricted to specific uses. The Court directed that for molasses used other than for distillery purposes, petitioners are entitled to a refund of excise duty paid from the date of filing the writ petition. The Court also noted that the issue of the amended provision's force after July 1, 2017, would not arise as molasses is now included under GST.

Facts

The petitioner challenged the amended provision of Section 2 of the Bihar and Orissa Excise Act, 1915, which included 'molasses' within the definition of excisable goods. The petitioner argued that this amendment violated constitutional provisions concerning legislative competence, specifically Union List Entry-84 and State List Entries-8 and 51. The core of the dispute revolved around whether the State had the authority to levy excise duty on molasses, particularly when it was not intended for human consumption or distillery purposes. The matter was taken up as a specially mentioned matter after notice to the opposite parties.

Key Issues

1. Whether the amended provision of Section 2 of the Bihar and Orissa Excise Act, 1915, including 'molasses' in Clause (12-a), is in violation of constitutional provisions, specifically Union List Entry-84 and State List Entries-8 and 51? Petitioner's Contention: The petitioner argued that the inclusion of 'molasses' infringes upon the exclusive power of the Union to legislate on duties of excise on goods manufactured or produced in India, as per Entry-84 of the Union List, which excludes alcoholic liquors for human consumption. They contended that industrial alcohol, including molasses, is not for human consumption in its direct sense and that the State's power under Entries-8 and 51 of the State List is limited. Reliance was placed on the Supreme Court judgment in Synthetics & Chemicals Ltd. Vs. State of U.P., which distinguished between industrial alcohol and alcoholic liquor for human consumption. Revenue/State's Contention: The judgment does not explicitly record arguments from the revenue or State side in this specific writ petition, but it refers to a prior Division Bench decision that considered the State's power under Entry 33(a) of the Concurrent List read with Entry 24 of the State List.