As required under the license, the respondent had installed one ENA column to purify the rectified spirit to be used in the manufacturing of IMFL.
It was the case of the respondent-company that the manufacturing process resulted in generation of certain weak spirit, which was not potable.
The State had also allowed for 2 per cent wastage.
The sample of wastage generated in the manufacturing process was sent for examination to the State Drugs Testing and Research Laboratory, Odisha, which found it unfit for human consumption.
However, the State government sent multiple demand notices to the respondent company calling upon it to pay excise duty on the weak spirit, which was more than the two per cent allowable wastage.
The company approached the Orissa High Court and contended that the State government has no authority to impose excise duty on the weak spirit. The High Cour stayed the demand notices of the State government, leading to the present appeal before the Supreme Court.