2007 (9) TMI 620 - SC - VAT and Sales Tax

Supreme Court modifies molasses supply order, emphasizes Advisory Committee role

The Supreme Court allowed the appeal partly, setting aside the directive to supply 20% molasses for manufacturing country liquor if there is no balance ... Reservation of molasses from balance stock - mandatory duty to constitute advisory committee - directory versus mandatory interpretation of statutory 'may' - power coupled with duty - alternative remedy and futility doctrineReservation of molasses from balance stock - Scope and applicability of the Government Order clause reserving 20% molasses for manufacture of country liquor. - HELD THAT: - The Court construed Clause (3) of the Government Order of June 9, 2004 as applying only to the excess or 'balance stock' of molasses remaining after a sugar mill has met its captive consumption. The High Court's contrary view that every sugar mill, irrespective of available stock, was bound to reserve 20% was held to be incorrect. Where a mill truthfully has no balance stock (and in fact imports molasses for its own requirements), the clause does not permit authorities to compel supply of 20% molasses. The Court left open the factual question whether excess stock in any particular case exists and made clear that respondent-authorities may, consistent with law and this construction, take appropriate action to verify availability of balance stock before invoking the reservation. [Paras 19, 20, 46, 47]Clause (3) applies only to balance stock; authorities cannot compel supply of 20% where no balance stock exists, and factual determination of availability remains open to lawful action by respondents.Mandatory duty to constitute advisory committee - directory versus mandatory interpretation of statutory 'may' - power coupled with duty - Whether the State Government is required to constitute the Advisory Committee under Section 3 of the Act and Rules framed thereunder. - HELD THAT: - Examining the scheme of the Act and the 1965 Rules (including Rule 3 and Rule 14), the Court rejected the High Court's conclusion that the State's power under Section 3 was merely directory because the statute uses the word 'may'. Relying on established principles that permissive language may be construed as obligatory where the legislative intent, scheme and purpose couple the power with a duty, the Court held that the material role assigned to the Advisory Committee and the procedural machinery in the Rules demonstrate a legislative intention that the State must constitute the Committee. The State was accordingly directed to constitute the Advisory Committee expeditiously. [Paras 25, 28, 29, 44, 45]It is obligatory on the State Government to constitute the Advisory Committee under Section 3 and the 1965 Rules; the State must do so expeditiously.Alternative remedy and futility doctrine - Whether the writ petition was maintainable despite availability of an appeal under Section 9 of the Act. - HELD THAT: - The High Court found, and this Court accepted, that an appeal to the Appellate Authority would be a futile or empty formality in the circumstances where a policy decision had already been taken by the Government. The Court observed that where a policy decision has been taken at the Government level, the remedy of appeal may not be an equally efficacious alternative and therefore the writ petition was properly entertained. The High Court's finding on this point was not challenged and is affirmed. [Paras 6, 8, 16]Writ petition was maintainable because resort to the statutory appeal would have been futile in the circumstances; the preliminary objection based on existence of an alternative remedy was rightly overruled.Final Conclusion: The appeal is allowed in part: the High Court's order is set aside insofar as it held that all sugar mills must supply 20% molasses irrespective of available stock - the reservation applies only to balance stock and authorities cannot compel supply where no balance stock exists. Further, the State is directed to constitute the Advisory Committee under the Act and Rules forthwith. Parties to bear their own costs. Issues Involved:1. Constitution of Advisory Committee under Section 3 of the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964.2. Directive to supply 20% of molasses for manufacturing country liquor.3. Validity of show cause notices issued for non-compliance.4. Alternative remedy and maintainability of writ petition.5. Public policy and Article 47 of the Constitution.Issue-wise Detailed Analysis:1. Constitution of Advisory Committee:The appellant argued that Section 3 of the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 mandates the State Government to constitute an 'Advisory Committee'. The High Court dismissed this argument, stating the provision was directory, not mandatory. However, the Supreme Court disagreed, emphasizing that the legislative intent and the scheme of the Act necessitate the constitution of such a committee. The Court noted that the Committee plays a crucial role in advising on matters related to the control of molasses and directed the State Government to constitute the Advisory Committee expeditiously.2. Directive to Supply 20% of Molasses:The appellant challenged the Government Orders directing the supply of 20% molasses for manufacturing country liquor, arguing that the entire production was required for captive consumption, and it even had to import molasses. The High Court upheld the directive, but the Supreme Court found that the directive applies only to the 'balance stock' of molasses, i.e., the excess stock after captive consumption. The Court held that if the appellant had no excess stock, the directive could not be enforced against it.3. Validity of Show Cause Notices:The appellant contended that the show cause notices issued for non-compliance with the directive were illegal. The Supreme Court clarified that if there is no balance stock of molasses, the authorities cannot compel the supply of 20% molasses for manufacturing country liquor. The Court allowed the appeal to this extent, indicating that the show cause notices would not be valid if there was no excess stock.4. Alternative Remedy and Maintainability of Writ Petition:The respondents argued that the writ petition was not maintainable due to the availability of an alternative remedy under Section 9 of the Act. The High Court rejected this preliminary objection, considering the totality of facts and circumstances, and the Supreme Court upheld this view. The Court noted that once a policy decision is taken by the Government, the remedy of appeal becomes an 'empty formality' or 'futile attempt'.5. Public Policy and Article 47 of the Constitution:The appellant argued that the directive to supply molasses for manufacturing country liquor was against public policy as reflected in Article 47 of the Constitution, which aims at prohibiting intoxicating drinks. The High Court ruled that Article 47 could not be enforced by a Court of Law, and the Supreme Court refrained from expressing any opinion on this issue, considering it unnecessary for the decision.Conclusion:The Supreme Court allowed the appeal partly, setting aside the High Court's order to the extent that the directive to supply 20% molasses would not apply if there is no balance stock. The Court directed the State Government to constitute the Advisory Committee as required by the Act and clarified that the respondents could take appropriate action in accordance with the law if there is evidence of excess molasses. Each party was ordered to bear its own costs.