1975 (1) TMI 89 - SC - Customs

Supreme Court affirms Financial Commissioner's authority on liquor licensing rules & fees, rejects unconstitutionality claim

The Supreme Court upheld the High Court's judgment, affirming the Financial Commissioner's authority to frame rules for granting liquor licences through ... Demands for the payment of Fixed Fees made on vendors of ,Foreign Liquor holding licences in Forms L-3, L-4 and L-5 challenged on the ground that they were contrary to the terms of Rule 12 and therefore illegal. Held that:- Under Rule 11, applications for renewal of licences for the following year have to be made before .the end of October' By Rule 12 the Excise Inspector has to lay before the Collector by the 7th January each year a.list of licences requiring renewal, together with a certificate of sales as provided by rule 30, to facilitate the determination of assessed fee. No order for renewal can be made after January 20 in respect of licences to be valid for the following financial year, except with the special sanction of the Financial Commissioner. The appellants holding licences for sale of Foreign Liquor applied duly for renewal of their licences any orders granting renewals were passed before January 20. Later the Rules were amended on March 22 and March 30, 1968 under which the appellants holding licences in Form Nos. L-3, L-4 and L-5 became liable to pay fixed fees up to ₹ 20,000 per annum in addition to fees assessed under rule 31. The grievance of those appellants is that since their licences were renewed in January 1968, the amendments made in March 1968 cannot apply to them and therefore the ,demand made on the basis of amended rules is illegal. It is true that the amendments under which the appellants have been called upon to pay fixed fees were made after the licences were renewed. But the licences, though renewed in January 1968, were lo be effective from April 1, 1968. The amendments having come into force before April 1 would govern the appellants' licences and they are, therefore, liable to pay the fixed fees under the amended Rules. The payments due from the' appellants holding licences in Form L-14A are also due to the Government on account of any contract relating to the excise revenue' as provided in section 60(1)(c) of the Act. It is therefore open to the Government to recover its dues in the manner authorized by section 60. Appeal dismissed. Issues Involved:1. Jurisdiction of the Excise and Taxation Commissioner.2. Authority of the Financial Commissioner under Section 34 of the Punjab Excise Act, 1914.3. Nature of the levy imposed through auctions.4. Competence of the State Government to impose a tax or excise duty.5. Delegation of power to levy taxes.6. Relationship between the licence fee and services rendered.7. Rule fixing the maximum price of liquor.Detailed Analysis:1. Jurisdiction of the Excise and Taxation Commissioner:The appellants argued that the Excise and Taxation Commissioner lacked jurisdiction to determine the method of disposal of country liquor vends. The High Court, however, held that the Financial Commissioner had the jurisdiction to determine the method of disposal of country liquor vends.2. Authority of the Financial Commissioner under Section 34 of the Punjab Excise Act, 1914:The appellants contended that the power conferred by Section 34 did not extend to disposing of country liquor vends by auction. The High Court rejected this contention, stating that Section 34 empowered the Financial Commissioner to grant licences on payment of fees and subject to conditions as directed.3. Nature of the Levy Imposed Through Auctions:The appellants argued that the levy imposed through auctions was a tax and not a licence fee. The High Court found that the rules under which the impugned auctions were held were substantially different from those under which the auctions challenged in Jage Ram's case were held. The Supreme Court concurred, stating that the amounts charged were not a tax nor an excise duty but the price of a privilege.4. Competence of the State Government to Impose a Tax or Excise Duty:The appellants argued that the State Government alone was competent to impose a tax or excise duty under the Act, and this power could not be delegated. The High Court held that the State Legislature was competent to regulate the business of vending intoxicating liquors, and the Financial Commissioner had the jurisdiction to determine the method of disposal of country liquor vends.5. Delegation of Power to Levy Taxes:The appellants contended that Section 34 did not provide guidelines for the delegation of power to levy taxes, making the delegation excessive. The High Court rejected this, stating that Section 34 was not an instance of delegated legislation.6. Relationship Between the Licence Fee and Services Rendered:The appellants argued that the licence fee did not bear a reasonable relationship to the services rendered to the licensees. The High Court held that the licence fees charged for regulating trade in intoxicating liquors did not have to conform to the requirement of a quid pro quo for services rendered.7. Rule Fixing the Maximum Price of Liquor:The appellants challenged the rule fixing the maximum price at which liquor could be sold as ultra vires of the rule-making powers of the Financial Commissioner. The High Court held that the fixation of the maximum price was part of the power to regulate the trade in liquor.Conclusion:The Supreme Court dismissed the appeals, upholding the High Court's judgment. It was held that the Financial Commissioner had the power to frame rules for granting liquor licences by auction and to collect licence fees. The amounts charged were not a tax nor an excise duty but the price of a privilege. The appellants' contention that the levy was unconstitutional was rejected, and it was affirmed that the State Government had the exclusive right to regulate the business of vending intoxicating liquors. The appellants were also found to be bound by the contractual obligations arising from their bids in the auctions.