Excise rule upheld as valid, but establishment costs cannot be levied on distilleries also licensed for potable liquor.

Rule 9 of the Bihar & Orissa Excise Rules, 1919 was upheld as within the Bihar Excise Act, 1915 because the Act authorised regulatory conditions on licensees and rule-making for manufacture, supply and storage of intoxicants. The Supreme Court also held that the second part of Rule 9 applies only to distilleries licensed solely for denatured spirit or other commercial spirit, not to units also licensed to manufacture potable liquor. As the appellants held mixed licences, the establishment cost demand could not be imposed on them, and the amounts collected were ordered to be refunded with interest.

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Issues: (i) Whether Rule 9 of the Bihar & Orissa Excise Rules, 1919 was ultra vires the Bihar Excise Act, 1915. (ii) Whether the second part of Rule 9, imposing establishment costs on distilleries licensed solely for denatured spirit or any other commercial spirit, applied to distilleries holding composite licences to manufacture denatured spirit and potable liquor.

Issue (i): Whether Rule 9 of the Bihar & Orissa Excise Rules, 1919 was ultra vires the Bihar Excise Act, 1915.

Analysis: The statutory scheme under Sections 13, 15, 38 and 90 of the Bihar Excise Act, 1915 authorised the Board to regulate manufacture and impose restrictions and conditions on licences for distilleries. Rule 9, including provision for supervision of distilleries and recovery of establishment costs from appropriate licensees, was treated as a measure to prevent misuse of denatured spirit and to secure effective supervision under the Act. The rule was held to be supported by the rule-making power and not inconsistent with the Act.

Conclusion: Rule 9 was intra vires the Bihar Excise Act, 1915, and this challenge failed.

Issue (ii): Whether the second part of Rule 9, imposing establishment costs on distilleries licensed solely for denatured spirit or any other commercial spirit, applied to distilleries holding composite licences to manufacture denatured spirit and potable liquor.

Analysis: The second part of Rule 9 was construed narrowly. Its text required a distillery to be licensed solely for denatured spirit or any other commercial spirit. A distillery holding multiple or composite licences, including licences for potable liquor fit for human consumption, did not satisfy that condition. The phrase "any other commercial spirit" was read in the context of denatured spirit and confined to spirits not fit for human consumption. Therefore, the burden of establishment cost could not be foisted on composite-license distilleries.

Conclusion: The second part of Rule 9 did not apply to the appellants' distilleries, and this contention succeeded.

Final Conclusion: The appeals succeeded only to the extent that the establishment-cost demand under the second part of Rule 9 was quashed against the appellants, while the validity of Rule 9 and the State's power to supervise the distilleries under the first part of the rule were upheld.

Ratio Decidendi: A delegated rule imposing supervisory establishment costs on distilleries is valid if authorised by the parent statute, but a charging provision limited to distilleries licensed solely for specified non-potable spirits cannot be extended to composite-license distilleries manufacturing potable liquor.

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