In W.P.(C) 7870/2023 -DEL HC- ‘Punjab Expo Breweries modus operandi was to sell liquor under different names to avoid excise duty’: Delhi High Court holds company liable for excise duty on leftover liquor stock
Justice Subramonium Prasad [31-08-2023]

Read Order: Punjab Expo Breweries Pvt. Ltd V. The Excise Commissioner and Anr

Chahat Varma

New Delhi, September 22, 2023: The Delhi High Court has ruled against Punjab Expo Breweries Pvt. Ltd. (petitioner) in an excise duty case, holding that the company was liable to pay excise duty on the leftover stock of liquor transferred from two former licensees.

Briefly stated, the petitioner, a private limited company in Delhi, was granted an L-1 license for the wholesale sale of liquor brands (Courier Napoleon Brandy and Savoy Club Gin & Fresh Lime) for the year 2013-14, valid until 15.06.2013. They initially requested permission to transfer leftover stock from two former licensees, M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited, which was partially granted for ‘Courier Napoleon Brandy’. However, the petitioner later applied again, concealing the prior permission, to transfer the remaining stock of both licensees. This second request, was rejected by the Assistant Commissioner (Excise), who required the petitioner to destroy the leftover stock and pay Rs. 39,02,845.91 as applicable excise duty on the remaining stock. The Excise Commissioner's decision was based on the petitioner's failure to follow the procedures outlined in Rule 56 of the Delhi Excise Rules. It was noted that the petitioner was no longer a licensee after 15.06.2013 and had not taken over the leftover stock despite receiving permission. The petitioner's subsequent appeal to the Financial Commissioner, challenging the Excise Commissioner's decision, was also dismissed.

The petitioner then filed a writ petition in court to challenge the Financial Commissioner's decision. Upon review, the Financial Commissioner sent the case back to the Excise Commissioner to reconsider whether the petitioner should be liable to pay excise duty. Subsequently, the Excise Commissioner once again rejected the petitioner's appeal. The petitioner then appealed to the Financial Commissioner again. On 26.04.2022, the Financial Commissioner dismissed the appeal, affirming the decision to reject the petitioner's request to transfer leftover stock and maintain the liability to pay excise duty.

The single-judge bench of Justice Subramonium Prasad reviewed Rule 56 of the Delhi Excise Rules, and noted that on 26.04.2013, the petitioner had been granted permission to transfer the leftover stock of 'Courier Napoleon Brandy' from the two former licensees. The bench concluded that the petitioner was therefore obligated to pay excise duty on the 'Courier Napoleon Brandy' on the date when this permission was granted. However, the petitioner failed to pay the excise duty and did not take possession of the product. As a result, the petitioner became liable to pay the duty as stipulated under Section 56(a) of the Delhi Excise Rules.

The bench also took note of the fact that on 15.06.2013, the petitioner's license had expired, and the petitioner had not taken any steps as required by Section 56 of the Delhi Excise Rules to declare their own leftover stock. Furthermore, the petitioner had not disclosed that they had previously been granted permission to transfer leftover stock and had reapplied for such permission. This subsequent application was rejected, with an order instructing the petitioner to destroy the stock after paying the applicable excise duty. Therefore, the bench determined that the petitioner was in possession of the stock as a purchaser under Rule 56(a) of the Delhi Excise Rules, and as such, they were liable to pay the excise duty on the remaining stock

The bench made additional observations regarding the relationship between the petitioner and M/s Tilak Nagar Industries Private Limited. It was noted that M/s Tilak Nagar Industries Private Limited was the parent holding company of the petitioner, and both the petitioner and M/s Patiala Distilleries & Manufacturers Private Limited operated from the same premises. Furthermore, it was highlighted that the Director of M/s Tilak Nagar Industries Private Limited and the petitioner were the same individual. The bench concluded that the petitioner's operating strategy appeared to involve selling liquor from one group under different names and attempting to benefit from favourable excise duty treatment by disguising it as stock transfer.

Thus, the bench held that the petitioner was indeed in possession of the stock as a purchaser and, consequently, was liable to pay the applicable excise duty.

Consequently, the petition was dismissed.