M/S Radico Khaitan Limited And Another vs. State Of U P And 3 Others

Held

The Court held that the State legislature lost its legislative competence to impose excise duty on Grain Extra Neutral Alcohol (ENA) after the 101st Constitutional Amendment. The reasoning in the previously decided case of M/s Jain Distillery Private Limited Vs. State of U.P. & 5 Ors. was applied. The Court found that ENA, having an alcoholic content in excess of 95%, is not liquor for human consumption, and therefore, no duty of excise could be imposed thereon by the State. Consequently, the Government Order dated March 18, 2016, which authorized the State authorities to levy excise duty/penalty on transit loss of ENA, was quashed. Any demand of excise duty/penalty imposed on ENA was also quashed. The Court directed that, subject to the rule against unjust enrichment, any amount paid by the petitioner as excise duty/penalty on ENA after July 1, 2017, should be refunded within one month. The Court also referred to the precedent in Upper Ganges Sugar and Industries Ltd. Vs State of U.P. & Others (2005), which held that if the State lacks the power to levy excise duty on rectified spirit as it is not potable liquor, it cannot claim legislative competence by giving it another name. The Court also noted that private law between parties cannot override constitutional or statutory law.

Facts

The petitioners, M/s Radico Khaitan Limited and another, challenged the imposition of excise duty on the manufacture and transit loss of Grain Extra Neutral Alcohol (ENA) after July 1, 2017, following the enforcement of the UPGST Act 2017 and the Central GST Act 2017. The State of U.P. and three others were the respondents. The petitioners sought amendments to their pleadings, which were allowed. The core of the challenge was that the State lacked legislative competence to levy excise duty on ENA after the 101st Constitutional Amendment, as ENA is not liquor for human consumption. The court referred to a previous decision in Writ Tax No. 378 of 2021 (M/s Jain Distillery Private Limited Vs. State of U.P. & 5 Ors.) which dealt with a similar controversy regarding VAT on ENA and Special Denatured Spirit (SDS) after July 1, 2017.

Key Issues

1. Whether the State legislature retained legislative competence to impose excise duty on Grain Extra Neutral Alcohol (ENA) after the 101st Constitutional Amendment, specifically concerning the period after July 1, 2017? (Question of law turning on the 101st Constitutional Amendment and the definition of 'liquor for human consumption'). Petitioner's Argument: The petitioners contended that following the 101st Constitutional Amendment, the State legislature lost its competence to impose any tax or duties of excise on commodities other than liquor for human consumption. Since Grain Extra Neutral Alcohol, with an alcoholic content exceeding 95%, is not considered liquor for human consumption, the State could not impose excise duty on it. They relied on the reasoning in the case of M/s Jain Distillery Private Limited Vs. State of U.P. & 5 Ors. Respondent's Argument: The judgment records no specific arguments from the respondent State.