Delhi High Court Holds Punjab Expo Breweries Liable for Excise Duty on Leftover Liquor Stock

Delhi High Court Holds Punjab Expo Breweries Liable for Excise Duty on Leftover Liquor Stock

The Delhi High Court has ruled against Punjab Expo Breweries in a tax dispute. The Court found that the company owes excise duty on the remaining liquor stock that it acquired from two former permit holders.

A private limited company in Delhi, Punjab Expo Breweries, was granted an L-1 license for the wholesale trade of liquor brands for the year 2013-14. The license expired on June 15, 2013.

Punjab Expo Breweries sought permission to transfer leftover stock from two former licensees, M/s Tilak Nagar Industries Private Limited and M/s Patiala Distilleries & Manufacturers Private Limited. Permission was partially granted for ‘Courier Napoleon Brandy’.

However, Punjab Expo Breweries later applied again, concealing the prior permission, to transfer the remaining stock of both licensees. This second request was rejected. The Assistant Commissioner (Excise) required Punjab Expo Breweries to destroy the leftover stock and pay ₹39,02,845.91 as applicable excise duty.

The Excise Commissioner's decision was based on the grounds that Punjab Expo Breweries failed to follow the procedures outlined in Rule 56 of the Delhi Excise Rules; Punjab Expo Breweries was no longer a licensee after June 15, 2013; and Punjab Expo Breweries had not taken over the leftover stock despite receiving permission.

Punjab Expo Breweries challenged the Excise Commissioner's decision in an appeal to the Financial Commissioner. The appeal was dismissed.

The petitioner then filed a writ petition in court to challenge the Financial Commissioner's decision. The Financial Commissioner reviewed the case and sent it back to the Excise Commissioner to reconsider whether the petitioner should be liable to pay excise duty.

The Excise Commissioner again rejected the petitioner's appeal. The petitioner appealed to the Financial Commissioner again, who dismissed the appeal on April 26, 2022. The Financial Commissioner affirmed the decision to reject the petitioner's request to transfer leftover stock and maintain the liability to pay excise duty.

Justice Subramonium Prasad, presiding as a single judge on the bench, conducted a review of Rule 56 of the Delhi Excise Rules. Upon examination, it was noted that on April 26, 2013, the petitioner had been granted permission to transfer the remaining stock of 'Courier Napoleon Brandy' from two previous licensees.

The conclusion drawn by the Bench was that the petitioner had an obligation to settle the excise duty for the 'Courier Napoleon Brandy' on the specific date when this permission was granted. However, the petitioner failed to fulfil this obligation, neither paying the excise duty nor taking possession of the product. Consequently, the petitioner became liable to pay the duty in accordance with Section 56(a) of the Delhi Excise Rules.

The Bench also considered that on June 15, 2013, the petitioner's license had expired, and it had not taken the necessary steps, as mandated by Section 56 of the Delhi Excise Rules, to declare its remaining stock. Additionally, the petitioner had not disclosed their prior permission to transfer the surplus stock when reapplying for such permission. Consequently, this subsequent application was rejected, and the petitioner was instructed to dispose of the stock after settling the requisite excise duty. The Bench also determined that the petitioner, in light of Rule 56(a) of the Delhi Excise Rules, had the stock as a purchaser, and therefore, they were accountable for the excise duty applicable to the remaining stock.

The Court also made additional observations regarding the connection between the petitioner and M/s Tilak Nagar Industries Private Limited. It was evident that M/s Tilak Nagar Industries Private Limited served as the parent holding company of the petitioner, and both the petitioner and M/s Patiala Distilleries & Manufacturers Private Limited operated from the same location. Furthermore, it was brought to attention that the Director of M/s Tilak Nagar Industries Private Limited and the petitioner were the same individuals. Based on these findings, the Bench concluded that the petitioner's operational approach seemed to involve selling liquor from a single group under different aliases, all the while attempting to take advantage of favourable excise duty treatment by presenting it as a stock transfer.

As a result, the Bench upheld that the petitioner was effectively in possession of the stock as a purchaser and, consequently, bore the responsibility of settling the relevant excise duty. Consequently, the petition was dismissed.