M/S Radico Khaitan Limited And Another vs. State Of U.P. And 4 Others

Held

The Court held that following the 101st Constitution Amendment, the State legislature lost its legislative competence to impose any tax or duties of excise on commodities other than liquor for human consumption. Grain Extra Neutral Alcohol (GNEA), having an alcoholic content in excess of 95%, is not liquor for human consumption, and therefore, no excise duty could be imposed thereon by the State. The reasoning applied in the case of M/s Jain Distillery Private Limited Vs. State of U.P. & 5 Ors. (decided on 28.09.2021) was found to govern the present controversy. Consequently, the impugned Government Order dated March 18, 2016, insofar as it authorized the State authorities to levy excise duty/penalty over transit loss of GNEA, was quashed. The demands of excise duty/penalty imposed on GNEA were also quashed. The Court directed that any amount paid by the petitioner against demands for excise duty/penalty on GNEA after July 1, 2017, be refunded within one month, subject to the rule against unjust enrichment. The ratio decidendi is that the State lacks legislative competence to levy excise duty on non-potable alcohol post-101st Constitutional Amendment.

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 (GNEA) after July 1, 2017, following the enforcement of the UPGST Act 2017 and the Central GST Act 2017. The State of U.P. and other respondents were the authorities levying this duty. The dispute concerns excise duty and penalties imposed on GNEA, specifically relating to transit losses. The petitioners sought amendments to their pleadings and relief, which were allowed. The court referred to a previous judgment in Writ Tax No.378 of 2021 (M/s Jain Distillery Private Limited Vs. State of U.P. & 5 Ors.) decided on September 28, 2021, which dealt with a similar controversy regarding VAT on Extra Neutral Alcohol (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 (GNEA) after the 101st Constitution Amendment, specifically concerning the period after July 1, 2017, and the UPGST Act 2017. 2. Whether the Government Order dated March 18, 2016, authorizing the State authorities to levy excise duty/penalty on transit loss of GNEA, is valid and enforceable post-July 1, 2017. Petitioner's Arguments: The petitioners contended that after the 101st Constitution Amendment, the State legislature lost its competence to impose excise duty on commodities other than liquor for human consumption. GNEA, with an alcoholic content exceeding 95%, is not considered liquor for human consumption, thus, no excise duty could be levied by the State. They relied on the principle that a private law contract cannot override constitutional provisions or statutory law. Revenue's Arguments: The judgment does not explicitly record arguments made by the revenue or State. However, their action of imposing excise duty and penalties on GNEA and transit losses indicates their stance that such levies were permissible.