TaxTMI 
TaxTMI 
2011 (9) TMI 769
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.... 23rd August, 2004 by which the respondent imposed an amount of Rs. 1,74,63,538/- towards payment on unutilized cut spirit. Since the writ-petitioners challenged the aforesaid provision of the Rules as ultra vires the Act, a notice was given to the learned Advocate-General and consequently, Mr. Dutt, the learned Advocate, has appeared on behalf of the State to oppose the prayer for the writ-petitioner. The case made out by the writ-petitioner No.1 in the writ-application may be summed up thus:- a) The writ-petitioner carries on business in manufacture, production and sale of India Made Foreign Liquor ("IMFL") at Bengal Distillery, P.S. Bhadrakali in the District-Hooghly. b) At the material point of time and prior to the year 1995, the said Bengal Distillery used to import Rectified Spirit imported from outside the West Bengal and also used to purchase spirit already distilled once from other primary distillers for the purpose of manufacture of potable alcoholic drinks. c) The Bengal Distillery at Bhadrakali was holding large stock of about 79887.50 bulk litre of cut spirit in their storage vats since 1995, 1996 and 1997, from which ....
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....-petitioner and for nearly two years did not embark on the purported demand. k) According to the writ-petitioner, due to long lapse of time, it had reasonably inferred that the Excise Authorities on realizing that the demand was purported to have been made on a wrong and unfair premise had permanently withdrawn the same and absolved the writ- petitioner of all the allegations raised in the demand notice dated 31st July, 2001. l) Thereafter on 10th April, 2003, an enquiry report was furnished to the Excise Commissioner with regard to an enquiry caused by the District Magistrate and Collector, Hooghly with respect to the alleged demand on unutilized cut spirit wherein the chargeable duty was modified to an amount of Rs. 84,78,852/- from the earlier demand of Rs. 1,25,38,799/-. m) On 7th February, 2003, the Super Spirit Warehouse had sent a letter to the writ-petitioner expressing their intentions to purchase the cut spirit and to meet such request, the petitioner had prayed for necessary approval from the Excise Commissioner by a letter dated 11th May, 2004. In the said letter, the writ-petitioner stated that they were holding a stock of 76894 bulk litre....
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....ay direct on the excisable articles manufactured. The manner of levy of such duty is in Section 28 and according to Section 28(e) (ii), the levy of duty is to be as per the scale of equivalents prescribed by the Rules. Such equivalence is prescribed in Rule 14A (3) (i) (ii) and (iii). By the amendment of 1992, Clause (ia) was inserted after Rule 14A(1)(i), according to which, the second re- distillation is required to be made in such a way that no further faint spirit or cut spirit is left as residue. By the amendment, Clause (iii) was inserted in Rule 14A (2) and since the insertion of Clause (iii), the minimum limit of wastage allowance in the case of Clause (ia) of Rule 14(1) was prescribed. b) Thus, the requirement of Rule 14A as per authorization of Section 28 is that after re-distillation no wastage should be left where such statutory requirement is violated and the wastage is shown, such wastage is contrary to the statutory prescription based on prescription and such statutory prescription is required to be given in its full effect. c) The State has exclusive power in regard to intoxicating liquor by reason of List-II Entry 8 of the Seventh Schedule. The ....
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....exercise of power under Section 86 of the Act giving authority to the state to impose duty on the ground of alleged wastage was illegal and without jurisdiction. According to Mr. Khaitan, the State, at the most, can impose a penalty not exceeding Rs. 5000/- for the alleged violation of the Rule 14A in terms of Section 54A of the Act. In support of his contention, Mr. Khaitan relies upon the following decisions:- 1. Sona Chandi Oal Committee and Ors. vs. State of Maharashtra, reported in (2005) 2 SCC 345; 2. Secunderabad Hyderabad Hotel Owners' Association and Ors. vs. Hyderabad Municipal Corporation, Hyberabad and Anr., reported in (1999) 2 SCC 274; 3. Jindal Stainless Ltd. and Anr. vs. State of Haryana and Ors., reported in (2006) 7 SCC 241; 4. Hardev Motor Transport vs. State of M.P. and Ors., reported in (2006) 8 SCC 613; 5. Vijayalashmi Rice Mill and Ors. vs. Commercial Tax Officers, Palakol and Ors., reported in (2006) 6 SCC 763; 6. Ahmedabad Urban Development Authority vs. Sharadkumar Jayantikumar Pasawalla and Ors., reported in AIR 1992 SC 2038; 7. State of U.P. and Ors. vs. Lalta Prasad Vaish, reporte....
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....slative competence of the State legislature and if the answer is in the affirmative, the next question is whether the imposition of such fees by way of delegated legislation is authorized under the Bengal Excise Act, 1909. In order to appreciate the said question, the following provisions of the Constitution of India, the Bengal Excise Act and the Consolidated Rules framed under Section 86 of the Act are relevant and those are quoted below: "Seventh Schedule [Article 246] List I-Union List 84. Duties of excise of tobacco and other goods manufactured or produced in India except:- (a) alcoholic liquors for human consumption, (b) opium, Indian hemp and other narcotic drugs and narcotics, but including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry. List II-State List 8. Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. 51. Duties of excise on the following goods manufactured or produced by Parliament by law countervailing duties at the sam....
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.... any portion of such plant collected, under any license granted in respect of clause (b) or clause (c) of section 13, or (f) ay excisable article manufactured in any distillery or brewery licensed, established, authorized or continued under this Act. Explanation:- Duty may be imposed on any article under this sub- section at different rates according to the purposes for which such article is intended to be used according to the place to which such article is to be removed for consumption, or according to the varying strengths and quality of such article. (2) An excise duty *** at such rate or rates as the State Government may direct, may be imposed, either generally or for any specified local area, on any tari. (3) **** "38. Fees for terms, conditions and form of, and duration of, licenses, permits and passes:- (1) Every license, permit or pass granted under this Act:- (a) shall be granted:- (i) on payment of such fees if any, as the State Government may fix; and (ii) subject to such restrictions and on such conditions, as the State Government may impose; and (b) shall be in such form and c....
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.... (g) for prohibiting the grant to specified classes of persons of licenses of ay particular kind or class; (h) for declaring, either generally, or in respect of areas described in the rules, the persons or classes of persons to whom any intoxicant may or may not be sold; (i) for prescribing restrictions subject to which a license, permit or pass granted under this Act may be cancelled or suspended; (j) for regulating the procedure to be followed and prescribing the matters to be ascertained before any license for the wholesale or retail vend of any intoxicant is granted for any locality; (k) for restricting the exercise of any of the powers conferred by section 65, sub-section (1), and sections 66 and 67; (l) for declaring the Excise Officers to whom, and the manner in which, information or aid should be given under section 71; (m) for the grant of expenses to witnesses; (n) for the grant of compensation for loss of time to persons released by any Excise officer Under this Act on the ground that they have been improperly arrested, and to persons charged before a Magistrate with offences punishable under this Act ....
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....r this Act, and the removal of any intoxicant from any such warehouse or from any distillery or brewery; (7) for prescribing the scale of fees or the manner of fixing the fees payable in respect of any exclusive privilege granted under section 22 or any license, permit or pass granted under this Act, or in respect of the storing of any intoxicant; (8) for regulating the time, place and manner of payment of such fees; (9) for prescribing the restrictions under which or the conditions on which any license, permit or pass, may be granted, and in particular, and without prejudice to the generality or this provision, may make rule for:- (i) prohibiting the admixture with any intoxicant of any article deemed to be noxious or objectionable, (ii) regulating or prohibiting the reduction of liquor by a licensed manufacturer or licensed vendor from a higher to a lower strength, (iii) prescribing the nature and regulating the arrangement of the premises in which any intoxicant may be sold, and prescribing the notices to be exposed at such premises, (iv) prohibiting or regulating the employment by the licensee of any person o....
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....cut spirit obtained from primary distillation with the permission of the Excise Commissioner, West Bengal, provided that such second re-distillation shall be so made that no further feint spirit or cut spirit is left as residue; (ii) for any reason other than those mentioned at clause (i) with the written permission of the Commission. (2) Due notice of requirement of re-distillation shall be given by the distiller to the Excise Officer-in-Charge at least 48 hours in advance so that the latter may take steps for proper supervision of the operation. (3) The following are the maximum limits of a wastage on re-distillation that may be allowed, provided the Excise Officer-in-Charge is satisfied that no spirit was abused for extracted from the system except as provided in law:- (i) In case of re-distillation as mentioned in clause (i) of sub-rule (1):- Nature of still Maximum Limit of wastage allowance Patent still 2.0 per cent Pot still 2.5 per cent (ii) In case of re-distillation as mentioned in clause (ii) of sub-rule (1):- Nature of still Maximum Limit of wastage allowance Patent still 1.5 per cent Pot still ....
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.... percentage of Ethyl Alcohol. When a person gets license from the State Authority for manufacturing potable intoxicants for human consumption, he either prepares Ethyl Alcohol by himself in his distillery or imports Ethyl Alcohol as the basic material for preparation of Potable intoxicant for human consumption from elsewhere and then reduces the percentage of Ethyl Alcohol to the recommended percentage and mixes other ingredients of the intoxicants in the distillery for the manufacture of the final product. Thus, without Ethyl Alcohol one cannot manufacture Potable intoxicant meant for human consumption. In the case before us, there is no dispute that the writ-petitioner imports Ethyl Alcohol from outside West Bengal in the form of Rectified Spirit and also purchases from the other primary distillers spirits which has been once distilled. With that basic element of potable intoxicant and with the aid of other ingredients, it prepares the final product by way of further distillation of the imported Rectified Spirit or the "once-distilled-spirits" so purchased. By virtue of Sub-Rule (ia) of Rule 14A, one is authorized to manufacture spirit for potable pu....
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....the source of power. Although "police power" is not mentioned in the Constitution, we may rely upon it as a concept to bring out the difference between "a fee" and "a tax". The power to tax must be distinguished from an exercise of the police power. The "police power" is different from the "taxing power" in its essential principles. The power to regulate, control and prohibit with the main object of giving some special benefit to a specific class or group of persons is in the exercise of police power and the charge levied on that class to defray the costs of providing benefit to such a class is "a fee". Therefore, in the aforestated judgment in Kesoram's case, it has been held that where regulation is the primary purpose, its power is referable to the 'police power'. If the primary purpose in imposing the charge is to regulate, the charge is not a tax even if it produces revenue for the Government. But where the Government intends to raise revenue as the primary object, the imposition is a tax. In the case of Synthetics and Chemicals Ltd. v. State of U.P., reported in (1990) 1 SCC 109), it has been held that regulation is a necessary concomitant of the police power of t....
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....ment to levy any duty for violation of any of the measures provided in the Rules in exercise of power conferred under clauses (1), (2) and (9) of Section 86 of the Act except imposition of fine not exceeding Rs. 5000/-. Thus, the first essential condition for charging the so-called duty as provided in Rule 14A (4) is not authorized by the legislature and in the absence of such authorization, the second condition as to whether under the garb of regulation, any excessive fee or levy which has no connection with the cost or expense of administering the regulation need not be enquired into. As pointed out by the Supreme Court in the case of Ahmedabad Urban Development Authority vs. Sharadkumar Jayantikumar Pasawalla and others, reported in AIR 1992 SC 2038, in a fiscal matter it will not be proper to hold that even in the absence of any express provision in the Act, a delegated authority can impose tax or fee. Such power of imposition of tax and/or fee by delegated authority, the Supreme Court held, must be very specific and there is no scope of implied authority for imposition of such tax or fee. Delegated authority, according to the said decision, must act strictl....