Rational classification and estoppel by conduct upheld in distillery pricing dispute over rectified spirit payments.
A classification of distilleries into captive and non-captive units was upheld because the price structure reflected real differences in production cost, including transport and tax burdens, and had a rational nexus with the object of fixing a uniform price for arrack. Distilleries that supplied rectified spirit on the basis of the Government-fixed price, without protest or demur, could not later demand a higher price; estoppel by conduct and the rule against approbation and reprobation applied. The broader question whether the State's price-fixing power extended to rectified spirit was left open, although later Supreme Court authority on excise power was noted.
Issues: (i) whether the classification of distilleries into captive and non-captive units was based on an intelligible differentia; (ii) whether the distilleries could challenge the price payable for rectified spirit after supplying it without protest; (iii) whether the State's power to fix price extended to rectified spirit in the circumstances of the case.
Issue (i): whether the classification of distilleries into captive and non-captive units was based on an intelligible differentia.
Analysis: The price structure was linked to the differing cost of production. Captive units had the advantage of obtaining molasses without transportation expense and without the additional tax burden associated with purchase from other sugar mills, while non-captive units incurred those costs. The classification therefore had a direct nexus with the object of fixing a uniform price for arrack while reflecting the actual production cost of rectified spirit.
Conclusion: The classification was valid and was not arbitrary.
Issue (ii): whether the distilleries could challenge the price payable for rectified spirit after supplying it without protest.
Analysis: The supplies were made on the footing of the price fixed in the Government order, without any prior protest or demur. The sale was treated as complete on delivery at the stipulated price, and the sellers could not later demand a higher consideration. The conduct of the distilleries also amounted to an implied representation of acceptance, attracting estoppel by conduct and the principle that a party cannot approbate and reprobate.
Conclusion: The distilleries were not entitled to claim a higher price after making the supplies.
Issue (iii): whether the State's power to fix price extended to rectified spirit in the circumstances of the case.
Analysis: In view of the answers on classification and waiver by conduct, it was unnecessary to decide the wider question. The Court noted the later Supreme Court position that State excise power is confined to potable liquor, but left the broader issue open for decision in an appropriate case.
Conclusion: The broader question was not finally decided in this case.
Final Conclusion: The challenge to the price fixation and recovery failed, but one appellant obtained limited relief requiring the authority to examine its claim for treatment as a non-captive unit within the stipulated time.
Ratio Decidendi: A classification based on real differences in production cost and having a rational nexus with the regulatory object is valid, and a seller who supplies goods without protest on stipulated terms cannot later claim a higher price.
TaxTMI 
AI Drafter ✕
TaxTMI 
