KESAR ENTERPRISES LTD. versus STATE OF U.P. & ORS.

KESAR ENTERPRISES LTD. versus STATE OF U.P. & ORS.

The State of U.P. lacks legislative competence to levy excise duty on rectified spirit (industrial alcohol) as it is a Central subject; penalty under Rule 633(7) of the U.P. Excise Manual cannot be imposed without prior adjudication and opportunity of hearing to the affected party; therefore, recovery action taken without these procedural safeguards is violative of principles of natural justice and is void.

Parties
Appellant: Kesar Enterprises Ltd.; Respondents: State of U.P. & Ors.
Jurisdiction
India
Judgment Date
06 July 2011
Procedural Posture
Civil Appeal / Supreme Court Appellate Decision
Outcome
Appeal allowed; impugned demand and High Court judgment set aside; matter remitted to Excise Commissioner.
Legal Topics
Levy of Excise Duty, Principles of Natural Justice, Imposition of Penalty, Scope of State Power, Legislative Competence
Excise Law Administrative Law Constitutional Law Levy of Excise Duty Principles of Natural Justice Imposition of Penalty Scope of State Power Legislative Competence

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Parties

Kesar Enterprises Ltd.

Appellant

State of U.P. & Ors.

Respondents

Procedural Posture

Civil Appeal / Supreme Court Appellate Decision

Legal Issues

  1. 1 Whether the State of U.P. is empowered to levy excise duty on rectified spirit (industrial alcohol) under Section 28 of the U.P. Excise Act, 1910
  2. 2 Whether penalty can be imposed under Rule 633(7) of the U.P. Excise Manual without affording opportunity of hearing
  3. 3 What procedural safeguards are required before imposing penalty or excise duty based on breach of bond conditions

Ratio Decidendi

The State of U.P. lacks legislative competence to levy excise duty on rectified spirit (industrial alcohol) as it is a Central subject; penalty under Rule 633(7) of the U.P. Excise Manual cannot be imposed without prior adjudication and opportunity of hearing to the affected party; therefore, recovery action taken without these procedural safeguards is violative of principles of natural justice and is void.

Court Disposition

Appeal allowed; impugned demand and High Court judgment set aside; matter remitted to Excise Commissioner.

Orders

  • Impugned demand raised by Commissioner of Excise vide notice dated 2nd October 1992 set aside.
  • Judgment of High Court sustaining demand under Rule 633 set aside.