M/S.Sagarkanya Gudakhu And Tobacco Products vs. State Of Odisha

Held

The Court upheld the constitutional validity of the amended provision of the Bihar and Orissa Excise Act, 1915, regarding molasses. However, it clarified that the State Government's power to levy excise duty on molasses is limited. The Court held that for molasses used for purposes other than distillery, such as cattle feed or preparation of 'gudakhu', the State Government would not have the power to levy excise duty, in view of Entry-84 of the Union List. The Court directed that petitioners would be entitled to a refund of excise duty paid on molasses used for non-distillery purposes from the date of filing the petition. The Court also noted that the issue of the amended provision's applicability after July 1, 2017, would not arise due to the inclusion of molasses under GST. Applications for refund were to be considered within three months, with interest payable for delays, to be recovered from the responsible officer.

Facts

The petitioner challenged the amended provision of Section 2 of the Bihar and Orissa Excise Act, 1915, which included 'molasses' in the definition of excisable goods. The petitioner argued that this amendment violated constitutional provisions, specifically Union List Entry-84 and State List Entries-8 and 51. The petitioner relied on the Supreme Court judgment in Synthetics & Chemicals Ltd. Vs. State of U.P. The High Court, in a previous batch of writ petitions (W.P.(C) No.2580 of 2019), had considered similar issues. The present writ petition was taken up as a specially mentioned matter. The State's counsel was unable to refute the petitioner's contentions.

Key Issues

1. Whether the inclusion of 'molasses' in Section 2(12-a) of the Bihar and Orissa Excise Act, 1915, by Orissa Act-2 of 1999, is unconstitutional, violating Union List Entry-84 and State List Entries-8 and 51? The petitioner contended that the Parliament has exclusive power to legislate on industrial alcohol under Entry-84 of the Union List, and alcoholic liquor for human consumption is expressly excluded from this entry. Therefore, the State cannot levy excise duty on industrial alcohol or its by-products like molasses, which are not for direct human consumption. The petitioner relied on the Supreme Court's decision in Synthetics & Chemicals Ltd. to argue that 'alcoholic liquor for human consumption' means liquor directly consumable as a beverage. The revenue or State did not record any specific arguments in this judgment, but their position would likely be that the State has the power to regulate and tax molasses under the relevant State List entries.