The Supreme Court said that States Cannot Levy Excise Duty On Alcohol Which Is Not Fit For Human Consumption. States have the power to levy excise duty just on alcoholic liquor for human consumption. The Bench containing Justices L. Nageswara Rao and BR Gavai noticed that alcoholic liquors rather than those for human consumption have been passed on to the Central Legislature for levy of duty of excise. The Orissa High Court, for this situation, had set aside demand notice given to the writ petitioner Company, calling upon it to pay excise duty on the weak spirit, which was over 2% allowable wastage. In appeal, the Apex Court bench said that the Constitution bench in Synthetics and Chemicals Ltd. and others versus Territory of U.P. and others had held that the State Legislature had no authority to levy duty or tax on industrial alcohol, which isn’t good for human consumption as that must be required by the Centre.

“It could thus be seen that the Constitution Bench has held that the Constitution makers distributed the term ‘lcohol Liquor’ into two heads, viz.,

(a) for human consumption; and

(b) other than for human consumption.

It has been held that the alcoholic liquors, which are for human consumption, are placed in Entry 51 List II approving the State Legislature to levy a charge on them, while alcoholic liquors other than for human consumption have been passed on to the Central Legislature under Entry 84 for levy of duty of excise. It has been held that what has been prohibited in Entry 84 has explicitly been put inside the power of the State for motivations behind tax assessment. The Constitution Bench plainly held that the State Legislature had no power to levy duty or assessment on alcohol, which isn’t for human consumption as that could be levied exclusively by the Centre.”, the bench noticed.

The court also alluded to Section 27(1) read with Section 2(6) of the past Bihar and Orissa Excise Act, 1915, which represented the field at the applicable time.

“Perusal of Section 27(1) of the said Act would reveal that the State’s power to impose Duty on import, export, transport, and manufacture is only in respect of any excisable articles imported, exported, transported, and manufactured. ‘Excisable Article’ has been defined to be any alcoholic liquor for human consumption or any intoxicating drug. It is thus clear that even under the relevant statute, the State has 18 power to levy excise duty only in respect of the alcoholic liquor for human consumption”, the bench observed while dismissing the appeal.

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