Case Law Details
Punjab Expo Breweries Pvt Ltd Vs Excise Commissioner And Anr (Delhi High Court)
Delhi High Court held that the petitioner is liable to pay excise duty on leftover stock of liquor transferred by two erstwhile licensees, both the erstwhile licensees and the Petitioner are one and the same. The manufacturer and seller of the liquor was only one i.e. the Petitioner and hence excise duty payable.
Facts- Petitioner applied for permission to transfer to itself the leftover stock from two erstwhile licensees, namely, M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited.
Post enquiry, Excise Commissioner held that the Petitioner was selling liquor via different companies which have been incorporated by them for the purpose of sale of liquor, which was being manufactured in the distillery of M/s Patiala Distilleries & Manufacturers Private Limited.
It was concluded that the manufacturer and the seller of the liquor in the present case was only one and the entire attempt on the part of the Petitioner is only to avoid payment of excise duty by hiding behind the cloak of different legal entities. The Excise Commissioner was, therefore, of the opinion that the leftover stock of the companies, i.e., M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited belongs to one entity and, therefore, the Petitioner was liable to pay the excise duty.
Conclusion- The modus operandi of the Petitioner was to sell liquor belonging to one group under different names and avail benefit of the excise duty under the garb of stock transfer. The approach by the Excise Commissioner and the Financial Commissioner by rejecting the application seeking transfer of leftover stock and the conclusion that the Petitioner and the two licensees were in fact the same and that the Petitioner was in fact only a subsidiary of M/s Tilak Nagar Industries Private Limited does not warrant any interference.
The purpose of Rule 56 is removal of unsold stock by erstwhile licensees to persons having valid license on payment of duty. The purpose of destruction of stock is only for ensuring that unsold liquor should not be left in bonded warehouse. The conclusion by the authorities below that the liquor that has been sold by the Petitioner by different companies which have been incorporated over the years and the Petitioner was both the manufacturer and seller cannot be found fault with. The Petitioner is in possession of the stock as a purchaser and, therefore, is liable to pay the excise duty.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The Petitioner seeks to challenge the Order dated 26.04.2022 passed by the Financial Commissioner upholding the Order dated 08.03.2019 passed by the Commissioner (Excise).
2. The Commissioner (Excise) vide Order dated 08.03.2019 dismissed an appeal against the Order dated 07.03.2014 passed by the Deputy Commissioner (Excise)/Licensing Authority levying a duty of Rs.39,02,845.91/- on the Petitioner.
3. The facts in brief leading to the instant writ petition are as under:-
i. The Petitioner is a private limited company , which was granted L-1 license by the Govt. of NCT of Delhi for the year 2013-14 for wholesale vend for sale of brands of liquor, i.e., Courier Napoleon Brandy and Savoy Club Gin & Fresh Lime. The said licence was valid till 15.06.2013.
ii. Material on record reveals that the Petitioner vide letter dated 12.03.2023 to the Assistant Commissioner (Excise) applied for permission to transfer to itself the leftover stock from two erstwhile licensees, namely, M/s Tilak Nagar Industries Private Limited (Licensee for the year 2010-11) and M/s Patiala Distilleries & Manufacturers Private Limited (Licensee for the year 2011-12).
iii. The Assistant Commissioner vide letter dated 26.04.2013 partly allowed the request and granted permission to the Petitioner to transfer the leftover stock of only “Courier Napoleon Brandy” lying with M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited.
iv. Material on record discloses that even after the approval of the competent authority, the Petitioner did not transfer the leftover stock of ‘Courier Napoleon Brandy’ of the said two licensees. It is also stated the Petitioner did not take any steps to declare its own leftover stock to the Deputy Commissioner (Excise) on expiry of its license on 15.06.2013 as is required under Rule 56 of the Delhi Excise Rules, 2010.
v. The Petitioner vide a letter dated 07.02.2014 once again applied to the Assistant Commissioner for permission to transfer to itself the leftover stock of the two erstwhile licensees, i.e., M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited, concealing the fact that it had got permission on 26.04.2013 to transfer itself the leftover stock of “Courier Napoleon Brandy” of the said two licensees.
vi. The second request dated 07.02.2014 was rejected by the Assistant Commissioner (Excise) and the Petitioner was asked to destroy the leftover stock after depositing a sum of Rs.39,02,845.91/- on account of applicable excise duty on the leftover stock. The order rejecting the application was communicated to the Petitioner on 07.03.2014. The said Order dated 07.03.2014 levying a duty of Rs.39,02,845.91/- and rejecting the application made by the Petitioner was challenged in the appeal before the Excise Commissioner.
vii. The Excise Commissioner vide its Order dated 23.12.2014 rejected the appeal holding that the Petitioner did not follow the procedure laid down under Rule 56 of the Delhi Excise Rules, despite the fact that the Petitioner was not a licensee himself, after 15.06.2013 and he had also not taken over the leftover stock despite grant of permission.
viii. The Order dated 23.12.2014 passed by the Excise Commissioner was challenged before the Financial Commissioner which was dismissed vide Order dated 21.01.2016 and the Financial Commissioner held that the Petitioner could not justify why penalty should not be levied on him due to failure to act under Rule 56 of the Delhi Excise Rules.
ix. The Order dated 21.01.2016 passed by the Financial Commissioner was challenged before this Court by filing W.P.(C) 4666/2016. This Court vide Order dated 25.08.2017 held that Rule 56 of the Delhi Excise Rules would be applicable. This Court, however, held that the issue as to whether the Petitioner could be held liable to pay excise duty when the Petitioner is not the owner of the stock since the stock belonged to the M/s Tilak Nagar Industries Private Limited requires reconsideration. This Court, therefore, held that at best the Petitioner’s transfer of stocks could be denied and the Petitioner could not be mulcted with the liability to pay the excise duty.
x. Since the issue as to whether the liability could be put on the Petitioner when the Petitioner was not the owner of the stock had not been considered by the Financial Commissioner, Order dated 21.01.2016 passed by the Financial Commissioner was set aside and the matter was remanded back to the Financial Commissioner to examine whether any liability could be imposed on the Petitioner for payment of excise duty.
xi. On remand, the Financial Commissioner vide Order dated 15.11.2018 sent the matter back to the Excise Commissioner to reconsider the issue whether the liability to pay excise duty should be imposed on the Petitioner.
xii. The Excise Commissioner considered the matter on remand from the Financial Commissioner and vide Order dated 08.03.2019, the Excise Commissioner rejected the appeal of the Petitioner.
xiii. The Excise Commissioner held that the source of liquor for the Petitioner and the other two licensees, i.e., M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited, is the same. It was held that the address of the Petitioner and the M/s Patiala Distilleries & Manufacturers Private Limited is same, which is, 356, Patparganj Industrial Estate, New Delhi-110092. Further, the Directors of the Petitioner and the other licensee, which is, M/s Tilak Nagar Industries Private Limited are common.
xiv. The learned Excise Commissioner, therefore, held that the Petitioner was selling liquor via different companies which have been incorporated by them for the purpose of sale of liquor, which was being manufactured in the distillery of M/s Patiala Distilleries & Manufacturers Private Limited.
xv. The learned Excise Commissioner came to the conclusion that the manufacturer and the seller of the liquor in the present case was only one and the entire attempt on the part of the Petitioner is only to avoid payment of excise duty by hiding behind the cloak of different legal entities. The Excise Commissioner was, therefore, of the opinion that the leftover stock of the companies, i.e., M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited belongs to one entity and, therefore, the Petitioner was liable to pay the excise duty.
xvi. The Excise Commissioner held that Rule 56 of the Delhi Excise Rules does not give any right to an erstwhile licensee to demand destruction of the leftover stock and, therefore, the Petitioner is liable to pay excise duty before the leftover stock is destroyed.
xvii. The Excise Commissioner also rejected the argument of the Petitioner that the leftover stock was not fit for human consumption. The Excise Commissioner held that the very act of the Petitioner seeking permission to transfer the leftover stock demonstrates that the leftover stock was fit for human consumption otherwise there is no reason why the Petitioner would bother to acquire the leftover stock if it is not fit for human consumption.
xviii. The Excise Commissioner also held that the Petitioner has not been able to demonstrate the inability to transfer the leftover stock brand of ‘Courier Napoleon Brandy’ and ‘Savoy Club Gin & Fresh Lime’ from the erstwhile two licensees, especially, in view of the fact that the warehouse address of the Petitioner and erstwhile two licensees, i.e., M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited is the same and the Directors of the M/s Tilak Nagar Industries Private Limited and the Petitioner are common and M/s Tilak Nagar Industries Private Limited is located in Delhi itself.
xix. The Order dated 08.03.2019 passed by the Excise Commissioner was challenged before the Financial Commissioner. The Financial Commissioner vide Order dated 26.04.2022 dismissed the appeal holding as under:-
(1) The Petitioner had initially approached the authorities on 13.03.2013 innocuously claiming that this is only shifting of stock from the parent company whereas in reality it was the leftover stock and permission to transfer the stock from M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited which was partly permitted only for “Courier Napoleon Brandy”.
(2) Without mentioning the earlier application and the orders passed thereon, the Appellant again on 07.02.2014 approached the Excise Department for transfer of unsold stock. The application also did not disclose that the nature of the stock had also changed since the Petitioner itself ceased to hold the license to hold the stock after the expiry of the license on 15.06.2013.
(3) The Appellant was liable to pay the excise duty from the date of its application on 12/13.03.2013 seeking transfer of leftover stock as the Excise Department allowed transfer of the leftover stock for which excise duty was not paid.
(4) Even if the Petitioner had the Bonded Warehouse license from 20.02.2014 to 31.03.2014 for holding „Courier Napoleon Brandy‟ and „Savoy Club Gin & Fresh Lime‟, the same does not have any impact on the orders passed by the Assistant Commissioner (Excise) on 07.03.2014 because the Petitioner was not holding a valid license to hold the stock after expiry of its license on 15.06.2013.
xx. The Order dated 26.04.2022 passed by the Financial Commissioner is under challenge in the instant writ petition.
4. Learned Counsel for the Petitioner contends that the Petitioner herein was not the owner of the stocks. She contends that the Petitioner had a bonded warehouse and was only keeping the stock in the bonded warehouse and, therefore, is not liable to pay any excise duty.
5. Per contra, learned Counsel for the Respondent contends that the Petitioner has not approached this Court with the clean hands. He states that all the three entities are closely related to each other. He contends that as per Rule 56 of the Delhi Excise Rules when the permission was granted to the Petitioner to transfer the stocks of ‘Courier Napoleon Brandy’ on 26.04.2013, the Petitioner was liable to pay excise duty on such stock and the permission which had been granted to the Petitioner was in the capacity of a purchaser.
6. He states that the second application for transfer of the leftover stock which was already permitted by the Assistant Commissioner (Excise) on 26.04.2013 along with leftover stock of other brand ‘Savoy Club Gin & Fresh Lime’ was made without disclosing that the Petitioner was sourcing both the brands in all the licensing years and the Petitioner was transferor and the transferee of the brand and had not complied with Rule 56 of the Delhi Excise Rules.
7. Rule 56 of the Delhi Excise Rule reads as under:-
“56. Procedure dealing with left over stock
If any person, who has held a licence under these rules, has in his possession, on the expiry, or determination of his licence, any intoxicant, he shall take action for its disposal in the following manner:—
(a) he shall submit to the Deputy Commissioner the list of such intoxicants within fifteen days from the expiry of the licence indicating therein the sale price of each brand. The Deputy Commissioner may allow him time, not exceeding 15 days for the disposal of such stocks to the existing licensees:
Provided that if duty has not been paid on such stocks and the purchaser does not hold a licence permitting him to possess them in bond, the duty on such stocks at the rates in force on the date of sale shall be recovered from the purchaser before the possession thereof is taken;
(b) in case the licensee is unable to dispose of such stocks, in part or in full, within the stipulated time, he shall immediately surrender the same to the Deputy Commissioner along-with a list mentioning the quantity and brand of undisposed stock on the following day. It shall be open to the licensee to reduce subsequently the sale price earlier intimated by him. If no sale price is intimated to the Deputy Commissioner at the time of surrendering the stocks, it shall be lawful for the Deputy Commissioner to dispose of such stocks to the existing licensees on a price determined by him;
(c) the Deputy Commissioner shall arrange to dispose of the surrendered stock at the price intimated by the outgoing licensee or determined by him. Whenever such price is reduced by the outgoing licensee, the Deputy Commissioner shall dispose of the remaining stocks at such reduced price, as may be intimated to him by the former licensee from time to time or as determined by him. In case the stocks remain unsold for a period of two months from the date of the determination of the licence, it shall be lawful for the Deputy Commissioner to destroy the stocks, after obtaining the approval of the Excise Commissioner. No compensation shall be payable for such destruction to the outgoing licensee. No refund of duty, if paid, shall be allowed on stocks of liquor which ultimately remained unsold and are destroyed:
Provided that if duty has not been paid on such stock, the Deputy Commissioner shall not order its destruction but may require in writing any person holding a licence to acquire the stock, or any part thereof, by purchase from the former licensee within six weeks of service of the requisition after payment of duty at the rates in force on the date of the requisition, at such price as may have been indicated by the former licensee or such price as the Excise Commissioner may fix after hearing the parties;
(d) in case the out-going licensee fails to surrender the stock of liquor as provided in clause (b) to the Deputy Commissioner it shall be lawful for the Deputy Commissioner to destroy the same.”
8. A perusal of Rule 56 of the Delhi Excise Rules, 2010 states that if any person held a license and has in his possession on expiry or determination of licence any intoxicant, he has to submit a list of such intoxicants to the Deputy Commissioner within 15 days from the expiry of the license indicating therein the sale value of each brand and the Deputy Commissioner can either permit him in not exceeding 15 days for disposal of such stocks to existing licensees. If duty has not been paid on such stocks and the purchaser does not hold a licence permitting him to possess them in bonds, the duty on such stocks at the rates in force on the date of sale shall be recovered from the purchaser before the possession is taken.
9. A perusal of Section 56(a) provides that any person who has a license shall on the expiry of the license submit to the Deputy Commissioner a list of intoxicants to the Deputy Commissioner, who shall permit such person to destroy the existing stocks. The proviso to sub-Section 56(a) provides that duty is not payable on such stock and the possession in bond by the ex-licensee and the duty on the list of stocks at the rates in force from the date of the sale shall be recovered from the purchaser.
10. Section 56(b) of the Delhi Excise Rules provides if a licensee is unable to dispose of the stocks within a period of stipulated period of time, the stock has to be surrendered to the Deputy Commissioner along with the list of quantity and brand of undisposed stocks and either the licensee can sell the stocks on rates of sale price as given by him, or, if no sale price is intimated, it shall be for the Deputy Commissioner to dispose of such stocks to the existing licensee on the price determined by him.
11. Rule 56(c) provides that the Deputy Commissioner shall arrange to dispose of the surrendered stock at the price intimated by the erstwhile licensee or at a price determined by the Deputy Commissioner himself and if the price is reduced by the erstwhile licensee, the Deputy Commissioner shall dispose of the stocks at such price as may be indicated to him by the former licensee from time to time or as determined by him. If the stocks remains unsold for two months from the date of the determination of the license, the Deputy Commissioner can destroy the stocks after getting approval of the Excise Commissioner.
12. The proviso to Section 56(c) states that if duty has not been paid on the stock then the Deputy Commissioner shall not order destruction of the stock but would require in writing an undertaking any person holding a license to acquire the stock or any part thereof by purchase from the former licensee within six weeks after payment of duty at rates in force on the date of requisition.
13. The Petitioner had approached the authorities for permission to transfer the unsold stock of M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited. By an Order dated 26.04.2013, permission was granted to the Petitioner to transfer the leftover stock of „Courier Napoleon Brandy‟ from the erstwhile two licensees. The Petitioner was, therefore, liable to pay excise duty on the ‘Courier Napoleon Brandy’ on the date when the permission had been granted.
14. The Petitioner did not pay the excise duty nor did he take the product. The Petitioner was, therefore, liable to pay duty as contemplated under Section 56(a) of the Delhi Excise Rules as it stood then. On 15.06.2013, the license of the Petitioner expired and the Petitioner did not take any steps as contemplated under Section 56 of the Delhi Excise Rules to declare his own leftover stock and without disclosing that earlier permission has been granted to the Petitioner and he has once again applied for permission to transfer itself the leftover stock from the erstwhile licensees on 07.02.2014. The said application was rejected vide Order dated 07.03.2014 ordering the Petitioner to destroy the stock after payment of the excise duty. The Petitioner is, therefore, in possession of the stock as a purchaser under Rule 56(a) of the Delhi Excise Rules, 2010 and is liable to pay the excise duty.
15. The contention of the Petitioner is that since the stock belonged to M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited and the Petitioner is not the owner, the Petitioner is not required pay the excise duty. The contention that it is on this point that the matter had been remanded back to the Financial Commissioner by this Court vide Order dated 25.08.2017 in W.P.(C) 4666/2016 is not tenable.
16. The material on record shows that the M/s Tilak Nagar Industries Private Limited is the parent holding company of the Petitioner. Further, the Petitioner and M/s Patiala Distilleries & Manufacturers Private Limited operates from the same premises. The Director of M/s Tilak Nagar Industries Private Limited and the Petitioner herein are one and the same person. The modus operandi of the Petitioner was to sell liquor belonging to one group under different names and avail benefit of the excise duty under the garb of stock transfer. The approach by the Excise Commissioner and the Financial Commissioner by rejecting the application seeking transfer of leftover stock and the conclusion that the Petitioner and the two licensees were in fact the same and that the Petitioner was in fact only a subsidiary of M/s Tilak Nagar Industries Private Limited does not warrant any interference.
17. Section 22 of the Delhi Excise Act provides that no liquor shall be removed from any manufacturing warehouse or place of storage without any duty fee payable has been paid.
18. The purpose of Rule 56 is removal of unsold stock by erstwhile licensees to persons having valid license on payment of duty. The purpose of destruction of stock is only for ensuring that unsold liquor should not be left in bonded warehouse. The conclusion by the authorities below that the liquor that has been sold by the Petitioner by different companies which have been incorporated over the years and the Petitioner was both the manufacturer and seller cannot be found fault with. The Petitioner is in possession of the stock as a purchaser and, therefore, is liable to pay the excise duty.
19. The entire modus operandi was only to avoid payment of excise duty. The attempt by the Petitioner is only to show that stock belonged to other company and did not belong to the Petitioner and the same cannot be accepted.
20. The petition is dismissed along with pending application(s), if any.
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