No vend fee after 25 October 1989; deposits retained, but unrecovered dues, even under bank guarantees, unrealisable u/s 39

SC held that, following its earlier prospective declaration of invalidity of the relevant provisions authorising vend fee on industrial alcohol, there was no valid law after 25 October 1989 permitting further collection of such fee. Vend fee, being in substance excise duty on industrial alcohol and beyond Entry 51 List II, could not constitute "excise revenue" recoverable under Section 39 U.P. Excise Act, 1910; consequently, amounts not collected by that date, even where bank guarantees had been furnished, could not be realised. However, sums already deposited with the State pursuant to interim court orders were treated as "realisations" and allowed to be retained by the State, despite directions to keep them in a separate account.

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Issues Involved:
1. Legislative competence of the State to levy excise duty or vend fee on industrial alcohol.
2. Interpretation of the doctrine of prospective overruling and its application.
3. Validity of recovery of vend fee for the period prior to 25th October 1989.
4. The effect of interim orders and bank guarantees on the recovery of vend fee.
5. The principle of unjust enrichment in the context of vend fee recovery.

Detailed Analysis:

1. Legislative Competence of the State:
The primary issue was whether the State Legislature had the authority to levy excise duty or vend fee on industrial alcohol. The appellants argued that under Entries 8 and 51 of List II, the State could only impose excise duty on potable liquor, and that industrial alcohol fell under Entry 52 of List I, making it subject to Parliament's jurisdiction. The court reaffirmed that the State lacked legislative competence to levy such a fee on industrial alcohol, as established in the second Synthetics case.

2. Doctrine of Prospective Overruling:
The court examined the doctrine of prospective overruling, which was applied in the second Synthetics case to declare the impugned provisions illegal prospectively. This meant that while the provisions were unconstitutional, they were not invalidated retrospectively. The court emphasized that prospective overruling is a principle that allows the court to mould relief to meet the justice of the case and is rooted in equity. The court concluded that the declaration of invalidity was to take effect from a future date, thus not affecting past transactions.

3. Validity of Recovery of Vend Fee:
The court held that the State could not recover vend fee for the period prior to 25th October 1989. This interpretation was consistent with the doctrine of prospective overruling, which aimed to prevent the State from enforcing the levy any further while not obligating the State to refund taxes already collected. The court clarified that the words "levy" and "collect" are not synonymous; while "levy" refers to the imposition of tax, "collect" refers to the actual realization of the tax. Since the levy was invalidated prospectively, any uncollected tax for the period before the judgment could not be collected post-judgment.

4. Effect of Interim Orders and Bank Guarantees:
The court addressed the issue of interim orders and bank guarantees, ruling that deposits made under interim orders should be treated as realizations. It was determined that the State could retain amounts deposited as vend fee, even if kept in a separate account due to interim orders. However, the court held that the State could not encash bank guarantees for the period prior to 25th October 1989, as this would indirectly allow the State to collect an invalidated levy.

5. Principle of Unjust Enrichment:
The respondents argued that allowing the appellants to retain the vend fee would result in unjust enrichment. The court rejected this argument, stating that the principle of unjust enrichment does not apply in this context, as the second Synthetics case explicitly stated that no refund should be given. The court also noted the lack of evidence to support the claim that the appellants had passed on the vend fee to their customers.

Conclusion:
The court allowed Civil Appeal No. 4093 of 1991, declaring that the vend fee realized by the States need not be refunded, and the State could not collect any vend fee for the period prior to 25th October 1989 or thereafter. The court dismissed Civil Appeal No. 2853 of 2001, upholding the principle that what was not collected by the State before the judgment could not be realized later. The court's decision reinforced the principles of legislative competence, prospective overruling, and equitable relief, ensuring that the State could not benefit from an invalidated levy while maintaining the status quo as of the judgment date.

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