1975 (8) TMI 123 - SC - Central Excise

Court interprets excise licenses as contractual obligations for selling country liquor under Rajasthan Excise Act, 1950.

PANNA LAL Versus STATE OF RAJASTHAN

The court held that the excise licenses obligated the appellants to pay the stipulated lump sum for the exclusive privilege of selling country liquor, ... Whether the excise license granted to the appellants rendered them lube to pay the stipulated lump sum mentioned in the licence? Held that:- The scheme or remission in the present case is that if the liquor contractor purchased liquor of the value, the excise duty whereof equalled the price of the exclusive privilege, the; liquor con tractor is to be given credit therefor. The agreements give the liquor contractors an exclusive privilege to sell country liquor in a specified area for the period fixed for a stipulated sum of money for enjoying the privilege. If the contractors do not sell any liquor they arc yet bound to pay the stipulated sum. IF they sell liquor they are given the benefit of remission in the price of the exclusive privilege. The measure for this remission is the excise duty leviable to the extent that the liquor contractors can neutralise the entire amount of exclusive privilege in the excise duty payable by them. If the contractors fail to lift adequate quantity of liquor and thereby fail in neutralising the entire price of exclusive privilege the contractors are not called upon to pay excise duty. For these reasons the contentions of the appellants fail Issues Involved:1. Whether the excise license granted to the appellants rendered them liable to pay the stipulated lump sum mentioned in the license.2. Whether the demand for shortfall amounts to the levy of excise duty.3. The nature of the payment under the exclusive privilege system and guarantee system.4. The contractual obligations of the licensees under the Rajasthan Excise Act, 1950.Issue-wise Detailed Analysis:1. Liability to Pay the Stipulated Lump Sum:The appeals centered on whether the excise licenses granted to the appellants rendered them liable to pay the stipulated lump sum mentioned in the license. The court noted that the licenses for the years 1962-63 and 1963-64 were given under a guaranteed system, while for the years 1967-68, 1968-69, and 1969-70, the licenses were granted under the exclusive privilege system. The court observed that the appellants, who were liquor contractors, had voluntarily accepted the contracts and were thus bound to pay the guaranteed sums or stipulated lump sums for the exclusive privilege of selling country liquor.2. Demand for Shortfall as Levy of Excise Duty:The appellants contended that the demand for shortfall amounted to the levy of excise duty. They argued that the issue prices in the licenses were inclusive of excise duty and that the enforcement of the guaranteed amount meant the realization of excise duty. However, the court held that the stipulated payments were not related to the production or manufacture of country liquor but were payments for the exclusive privilege of selling country liquor. The court emphasized that the rental or lump sum payment for the exclusive privilege was not an excise duty but a consideration for the privilege granted by the government.3. Nature of Payment under Exclusive Privilege and Guarantee Systems:The court examined the nature of the payments under both the exclusive privilege system and the guarantee system. It was highlighted that the payments agreed upon by the appellants were in the nature of lease money or rental for the exclusive privilege of retail sales granted by the state. The court referred to previous decisions, such as Nashirwar v. State of Madhya Pradesh and Guruswamy & Co. v. State of Mysore, to support its conclusion that the payments were not excise duties but contractual obligations for the exclusive privilege of selling liquor.4. Contractual Obligations under the Rajasthan Excise Act, 1950:The court analyzed the relevant provisions of the Rajasthan Excise Act, 1950, including Sections 24, 28, 29, and 30, which outline the powers of the Excise Commissioner and the imposition of excise duty. It was noted that the licenses were granted under Section 24 of the Act, which allowed for the granting of exclusive privileges. The court clarified that the stipulated lump sum payments were not excise duties but were instead payments for the exclusive privilege of selling country liquor. The court also examined the Rajasthan Excise Rules, 1956, which provided the procedures for granting exclusive privileges and the conditions attached to the licenses.Conclusion:The court concluded that the lump sum amounts agreed to by the appellants were not levies of excise duty but were payments for the exclusive privilege of selling country liquor. The court dismissed the appeals, except for two specific cases (Civil Appeal No. 1433 of 1974 and Civil Appeal No. 1871 of 1974) where there were issues of short supply of liquor for the years 1963-64 and 1967-68, respectively. The court ordered that any interim stay in these matters would stand vacated. The appeals were dismissed, and each party was to bear its own costs.