Sumit Kumar Agarwal vs. State Of Orissa

Held

The Court held that while upholding the constitutional validity of the amended entries in the Act concerning molasses, the State Government's power to levy excise duty is limited. Specifically, for molasses used for purposes other than distillery, the State Government cannot levy excise duty, in view of Entry-84 of the Union List. The Court clarified that if molasses is used for cattle feed, poultry, or for the preparation of 'gudakhu', it would be exempted from excise duty. The Court noted that the issue of the amended provision remaining in force after July 1, 2017, in view of molasses being included under GST, would not arise. The Court directed that petitioners are entitled to a refund of excise duty paid on molasses used for purposes other than distillery, from the date of filing the petition, provided they apply with supporting documents within four weeks. The State Government was directed to consider such applications within three months, and if refund is delayed, interest at 8% would be payable, with the responsible officer facing salary deductions for the delay.

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 a Supreme Court judgment in Synthetics & Chemicals Ltd. Vs. State of U.P., which distinguished between industrial alcohol and alcoholic liquor for human consumption. The High Court, in a previous order dated 16.07.2019, had considered similar issues. The present writ petition was taken up as a specially mentioned matter. The State's counsel could not 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 the Orissa Act-2 of 1999, is ultra vires the constitutional scheme of legislative powers, particularly in light of Union List Entry-84 and State List Entries-8 and 51? Petitioner's arguments: The petitioner contended that the State Legislature lacked the legislative competence to levy excise duty on molasses. They argued that Entry-84 of the Union List exclusively empowers the Union to levy excise duty on goods manufactured or produced in India, except for alcoholic liquors for human consumption. They asserted that molasses, while a by-product of sugar, is not alcoholic liquor for human consumption and therefore falls under the Union's taxing power. Reliance was placed on the Supreme Court's decision in Synthetics & Chemicals Ltd. Vs. State of U.P., which emphasized the distinction between industrial alcohol and liquor for human consumption. Revenue/State's arguments: The judgment records that the learned Additional Government Advocate was not in a position to refute the petitioner's submissions.