JUDGMENT: NASIR ASLAM ZAHID, J.- The point of law involved in this constitutional petition filed by the petitioner, Hyesons Sugar Mills Limited, is whether excise duty under the Sind Abkari Act (V of 1878) can be levied and recovered on what has been described by the respondents as "excessive waste". A notice dated 4-2-1979 was received by the petitioner company from the Excise & Taxation Inspector (Respondent No. 4) that the Inspector had been ordered by the Excise & Taxation Officer (Excise), Harbour Division, Karachi, to raise a demand on the petitioner on account of net excessive wastage of 1415.82 bulk gallons of rectified spirit and effect its recovery immediately, a demand of Rs. 2,65,360.50 on account of excise duty was raised on this account against the petitioner. The petitioner by their letter dated 11th February, 1979, requested the Excise & Taxation Inspector to quote the specific excise rules under which the aforesaid demand had been raised. By his letter, dated 13-2-1979, the Excise & Taxation Inspector informed the petitioner that the copies of the Sind Excise Manual were kept in the office of the Excise & Taxation Officer, Harbour Division, who had raised the demand vide his letter dated 1-1-1979, and as such the information asked for by the petitioner may be obtained from the office of the Excise & Taxation Officer (respondent No. 31 Thereafter a notice, dated 12-7-1979 of the Excise & Taxation Officer was received by the petitioner in which it was mentioned that the ?Rector Excise & Taxation (Excise) Karachi respondent No. 2 herein) had ordered that the case be re-examined. The petitioner was further informed that the Commissioner of Excise had accorded permission to the petitioner to denature 12,000 bulk gallons of rectified spirit and convert it into methylated^ spirit at the private bonded warehouse of Messrs Molasses Export Co. Ltd., Karachi, and export the same to Kuwait as a special case aid for this purpose 12,472-bulk gallons of rectified spirit was taken out from the tanks and only 8710.50 bulk gallons was denatured and there was a loss of 3,761.50 bulk gallons of rectified spirit equivalent to 6,266.66 proof gallons. A demand of Rs. 7,27,262.14 was raised against the petitioner on account of excise duty on shortage of rectified spirit and vend fee/permit fee on denaturation of rectified spirit.
An appeal was filed by the petitioner against this demand which appeal was disposed of by order 30-1-1980 of the Director Excise & Taxation (Excise), Karachi. It was held by the Director that there was a loss of rectified spirit to the extent of 2,671 bulk gallons over and above permissible limits on which quantity the petitioner was liable to pay excise duty at the prescribed rate of 112.50 per proof gallon. Apart from this, it was also ordered that vend fee and permit fee on 4,900.50 bulk gallons of denatured spirit should also be recovered. Pursuant to the order dated 30-1-1980 the department raised demand of Rs. 5,30,015.17, towards excise duty on excess wastage on rectified spirit and vend fee on 4,900.50 bulk gallons of denatured spirt. The petitioner went in revision before the Director- General/Commissioner Excise & Taxation, Sind, Karachi but the revision application was dismissed by order dated 22-11-1982. Being aggrieved, the petitioner has filed this constitutional petition. We have heard Mr. A. A. Zari, learned counsel for the petitioner, and Mr. Abbas Hussain Farooqi, learned counsel, who has appeared on behalf of the respondents.
2. Learned counsel for the petitioner has not pressed this petition regarding the demand of vend fee and permit fee. Accordingly the only question that requires consideration is whether excise duty can be levied on excess wastage. We had asked Mr. Abbas Hussain Farooqi, learned counsel for the department, to point out the provision of the Sind Abkari Act of 1878 under which excise duty on excess wastage could be raised. We were informed by the learned counsel for the respondents that the levy had been made under sub-para. (13) of para. 71 of the Sind Excise Manual which reads as follows:- "Any wastage which in the opinion of the Deputy Commissioner E)cise [now Director Excise & Taxation (Excise)] is excessive or not properly accounted for shall be charged duty on full tariff rate."
It was further pointed out by the learned counsel for the department that the above rule is contained in the rules framed by the Commissioner exercising power under section .35-A of the Sind Abkari Act, 1878. Apart from the aforesaid rule in the Sind Excise Manual, it was conceded by the learned counsel for the department that there is no other provision of the Sind Abkari Act, 1878 under which excise duty can be levied on excess wastage.
3. From a perusal of the orders passed by the Director and the Director General it is apparent that there is no allegation against the petitioner company that any of the goods in question were surreptitiously or fraudulently removed from the bonded warehouse without payment of duty. The entire case of the department has been that there was excess wastage which was not due to unavoidable circumstances. According to the Director-General the petitioner company had been allowed to sell the rectified spirit in the local market to the licensed manufacturers but this was not done and that they started shifting the rectified spirit from drums to drums over and over again and the process was prolonged and again when denaturation permission was accorded the entire quantity should have been denatured at a time instead of doing it intervals. According to the Director-General the circumstances under which the wastage was caused in excess of the admissible limit could not be said to be unavoidable as all the requests of the petitioner company were entertained by the Government. The stand of the department therefore is that there has been excess wastage than what it should have been which was permissible under the rules framed by the Commissioner. We find that there is no provision in the Sind Abkari Act, 1878 which permits the Government to impose excise duty on excess wastage. In the instant case the goods in question were lying in a bonded warehouse and the wastage took place while the goods were lying in such warehouse. Section 19 of the Sind Abkari Act, 1878, permits the imposition of excise duty on import, export, transport and manufacture of exciseable articles and section -19-A lays down the manner of levying the duty. Learned counsel for the department has conceded that under section 19 excise duty could not imposed on excess wastage. We are also of the view that under section 19 of the Sind Abkari Act, 1878, excise duty cannot be imposed on excess wastage. Sub-para 1 ' of para. 71 of the Sind Excise Manual-I made by the Commissioner whereunder excise duty could be imposed on any wastage which in the opinion of the Director Excise & Taxation is excessive or not properly accounted for, is in our opinion ultra wires of the powers of this> Commissioner. No doubt section 35-A of the Sind Abkari Act, 1878 give; powers to the Commissioner to frame rules but by such delegated Legislation a new levy could not be imposed which was not permissible by the provisions of the Act itself.
As a result, Constitutional Petition No. D-9 of 1983 is allowed to the extent that a declaration is granted that the demands of the respondents claiming excise duty on excess wastage against the petitioner and the order, dated 30-1-1980 of respondent No. 2 and the order, dated 22-1 1-1982 of respondent No. 1 are without lawful authority and of no legal effect. There will be no order as to costs.