Rajpura distillery challenges excise duty in Punjab and Haryana High Court

The Punjab and Haryana High Court has issued notice of motion to the State of Punjab on a petition filed by Rajpura-based NV Distilleries Pvt Ltd, challenging the jurisdiction and legality of a demand for excise duty running into several crores imposed on 22,936 cases of Indian Made Foreign Liquor (IMFL) allegedly found unaccounted during an inspection in 2020.

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Appearing for the distillery, Senior Advocate Mohan Jain argued before the division Bench of Justice Lisa Gill and Justice Sudeepti Sharma that the demand was based on an arbitrary invocation of Order 1-AAA of the Punjab Excise Fiscal Orders, 1932, and Rule 37 of the Liquor Licence Rules, which, he submitted, were not applicable to distilleries and ran contrary to the Punjab Distillery Rules.

Jain relied on Rule 122-D of the Punjab Distillery Rules, 1932, to contend that a distillery is permitted to manufacture up to 10 per cent of its previous year’s production or up to 10,000 cases, whichever is higher, in anticipation of permit approval.

Given that NV Distilleries had manufactured 10,97,565 cases in 2019-2020, it was entitled to manufacture 1,09,756 cases in advance, a figure far exceeding the 22,936 cases at issue.

Jain further contended that the authorities compelled the distillery to pay an additional 10 per cent duty as directed by the Excise and Taxation Commissioner and another 15 per cent duty imposed by the Additional Chief Secretary-cum-Financial Commissioner, Taxation.

Such demands, he argued, were in violation of Rule 122-D and amounted to coercion since the distillery was threatened with suspension of its licence, a position he said was contrary to settled Supreme Court law.

He submitted that the 22,936 cases of IMFL remain sealed within the distillery premises since 2020-2021, and sought the court’s permission to sell the seized stock with an undertaking to pay the requisite excise duty upon sale.

Jain also highlighted the operational scale of NV Distilleries, which produces nearly 20 alcoholic beverages, some exported to markets like the USA and UAE, and pointed to financial losses, stock depreciation, and hardship faced by over 500 families employed at the facility due to its partial sealing since 2020.

The matter is listed for further hearing on August 27.