TaxTMI 
TaxTMI 
1979 (12) TMI 149
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....itions are by the aggrieved parties. For the sake of convenience appellants in Civil Appeals by Special Leave except the State would be referred as the appellants in this judgment. Similarly the petitioners in Writ Petitions and Special Leave Petitions will be referred to as petitioners. The appellants in Civil Appeals by Special Leave filed writ petitions before the High Court of Allahabad praying for quashing the Excise Commissioner's order dated 18th September, 1974 whereby it was provided that the vend fee be continued to be charged for the wholesale licence dealer of denatured spirit. They also prayed for a direction to the Excise Commissioner to refund the vend fee actually paid by the appellants for a period of three years prior to the institution of the writ petitions. The appellants have licenses for the wholesale vend of denatured spirit. It was contended that the State was providing no service to the trade of the denatured spirit and, therefore, the levy of fee is not justified. The State, it was submitted, was not competent to authorise a levy of excise duty or tax as it was within the jurisdiction of the Parliament. On behalf of the State it was contended that in la....
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....f the levy was challenged in the High Court of Allahabad and a Bench of that Court on 24th March, 1973 held the notification was ultra vires. After the decision of the Allahabad High Court holding that the levy was illegal, this Court in two decisions Nashirwar v. State of Madhya Pradesh (supra) and Har Shankar v. The Deputy Excise and Taxation Commissioner, (supra) held that the State under its regulatory powers can prohibit every form of activity in relation to intoxicants, its manufacture, storage, export, import and sale. The State's power to auction the right to vend by retail or wholesale foreign liquor was upheld. Relying on the two decisions of this Court, the U.P. State Legislature repealed and re-enacted the U.P. Excise (Amendment) Act No. 30 of 1972 by the U.P. Excise (Amendment) (Re-enactment and Validation) Act, 1976. The validity of the amendment Act 1976 was again challenged in the Allahabad High Court in V. P. Anand and Sons v. State of U.P. A Full Bench of the Court held that the State has exclusive privilege of auctioning the right of wholesale or retail vend of intoxicating liquor and upheld the validity of the Act. Mr. Nariman learned counsel raised several con....
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....he King Emperor, stated as follows:- "A power to legislate with respect to intoxicating liquors could not well be expressed in wider terms." Again the Learned Chief Justice observed:- "It is difficult to conceive of legislation with respect to intoxicating liquors and narcotic drugs which did not deal in some way or other with their production, manufacture, possession, transport, purchase or sale; and these words seem apt to cover the whole field of possible legislation on the subject." The above observations were affirmed by this Court in Balsara's case (supra). Dealing with the meaning of word 'liquor', the Court referred to the various Abkari cases in several provinces and found that all the Provincial Acts of this country have consistently included liquor containing alcohol in the definition of 'liquor' and 'intoxicating liquor' and, therefore, the framers of the Government of India Act, 1935, could not have been entirely ignorant of the accepted sense in which the word 'liquor' has been used in the various excise Acts of this country and con....
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.... was concerned only with legislation relating to prohibition and the decisions should be restricted to liquor which may contain alcohol which is likely to be misused as potable liquor. In support of his contention, the learned counsel referred to two decisions A. Nageshwara Rao v. State of Madras and Malitlal Chandra v. Emperor and submitted that if the State can exercise any control over intoxicating liquor, it can only be restricted for the purpose of preventing subversion of its use for defeating the prohibition policy. We are unable to accept this contention for in Balsara's case after explicitly approving of the definition of word 'liquor' in various Abkari Acts in the Provinces of India, the Court held that liquor would not only cover alcoholic liquor which is generally used for beverage purposes and produce intoxication but would also include liquids containing alcohol. We will now briefly refer to the decisions of the Supreme Court which the learned counsel submitted were confined only to potable liquor. Cooverjee B. Bharucha v. The Excise Commissioner and Chief Commissioner, Ajmer & Anr. related to an auction sale of liquor shop under the Excise Regulation Act, 1915. In ....
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....ght to prohibit absolutely every form of activity in relation to intoxicants-its manufacture, storage, export, import, sale and possession". Though most of the cases dealt with the right of the State Government as regard auction of country liquor, in Balsara's case, Nashirwar's case and Har Shankar's case, the Court was concerned with the right of the State Government over foreign liquor. After considering all the decisions of five Constitutional Benches, Chandrachud, J. as he then was summed up the position at page 274 as follows:- "These unanimous decisions of five Constitutional Benches uniformly emphasised after a careful consideration of the problem involved that the State has the power to prohibit trades which are injurious to the health and welfare of the public is inherent in the nature of liquor business, that no person has an absolute right to deal in liquor and that all forms of dealings in liquor have, from their inherent nature, been treated as a class by themselves by all civilised communities." Har Shankar's case related to licensing of retail sale of foreign liquor for consumption on the premises....
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....33 in List III Concurrent List which provides:- "Trade and commerce in, and the production, supply and distribution of (a) the products of any industry where the control or such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products: (b) x x x (c) x x x (d) x x x (e) x x x" The subject of trade and commerce in, and the production supply and distribution of the products of any industry which has been declared by Parliament under Item 1 Entry 52 is in the Concurrent List on which both Parliament and State can legislate. The Industries (Development and Regulation) Act, 1951 was enacted by Parliament to provide for development and regulation of certain industries. Section 2 declares that it is expedient in the public interest that the Union shall take in its control industries specified in First Schedule. Item 26 in the First Schedule is fermentation industries (i) Alcohol (ii) other products and fermentation industries. Chapter II of the Act provides for establishment of Central Advisory Council and Development Council.....
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....51), the Central Government hereby makes the following order further to amend the Ethyl Alcohol (Price Control) order, 1971 namely: 1. (1) This order may be called the Ethyl Alcohol (Price Control) Amendment order, 1975. (2) It shall come into force on the date of its publication in the official gazette. 2. In the Ethyl Alcohol (Price Control) order, 1971 (hereinafter referred to as the said order), in clause 2, for the Table the following Table shall be substituted, namely:- (1) (2) 1 Absolute Alcohol Conforming to ISI Standard No. 321-1952., names for equivalent volume at 100 per cent v/v strength Six hundred and sixty eight rupees and ; forty one paise per kilo litre. 2 Rectified spirit conforming to ISI standard No. 323-1959 named for equivalent volume at 100 per cent v/v strength Six hundred and twenty two rupees and twenty paise for kilo litre. 3 Rectified spirit conforming to ISI standard No. 323-1959 named for 94.68 per cent v/v strength. Five hundred and eighty nine rupees and ten paise per kilo litre. The table prescribes the price of various types of alcohol and rectified spirit. The price of ethyl alcohol is fixed under the powers con....
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....; "Trade and Commerce within the State subject to the provisions of entry 33 of List III." Under Entry 33 List III the Parliament and the State have concurrent powers to legislate regarding the production, supply and distribution of the products of industries notified by the Parliament. Furthermore it has to be noted that the exclusive power of the State to provide for manufacture, distribution, sale and possession etc. of intoxicating liquor is vested with the State. The power of the State Government to levy a fee for parting with its exclusive right regarding intoxicating liquor has also been recognized as is seen from the various State Acts regulating manufacture, sale. etc. of intoxicating liquor. A fair scrutiny of the relevant entries makes it clear that the power to regulate the notified industries is not exclusively within the jurisdiction of Parliament as List II Entry 33 in the concurrent list enables a law to be made regarding production, supply, distribution of products of a notified industry. In Ch. Tika Ramji and ors. etc. v. The State of Uttar Pradesh and Ors. a question arose whether Sugarcane regulation, supply and purchase Act....
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....became the subject-matter of Entry 33 of List III and both Parliament and the State Legislatures had jurisdiction to legislate in regard thereto." The learned Judge proceeded to observe:- "That sugarcane being goods which fell directly under entry 27 of List II was within the exclusive jurisdiction of the State Legislature and it was competent to legislate with regard to it and as such the impugned Act was intra vires of the state Legislature. The power to legislate regarding production, supply and distribution of goods is subject to provisions entry 33 List III which deals with products and industries notified by Parliament. Entry 33 being in the concurrent List, legislative power of the State regarding production, supply and distribution of goods cannot be denied." The Court on the facts of the case found that even assuming that sugarcane was an article or class of articles relating to the notified industries within the meaning of Section 18(G) of Act 65 of 1951, no order was issued by the Central Government in exercise of its powers vested in it and, therefore, no question of repugnancy arose. In the cas....
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....or under List II, Entry 8, it has no power to impose any tax. The power to tax by the State is confined only to Entry 51, List II which empowers the State to levy duty on alcoholic liquors for human consumption and as denatured spirit is not alcoholic liquor for human consumption, a levy of excise duty is not permissible by the State. It was contended that the levy of a fee was also not permissible unless it had some relation to the expenses incurred for that purpose. According to the Solicitor- General, Mr. Kakkar, the levy was not a tax or a fee but a levy for parting with the exclusive right of the State in respect of intoxicating liquor. In view of the stand taken by the State, it is unnecessary for us to go into the question as to whether the levy is a tax or a fee. For dealing with the contention of Mr. Nariman that the levy was never collected in lieu of the State parting with its rights, it is necessary to refer to the relevant provisions of the Act. The United Provinces Excise Act, 1910 (Act 4 of 1910) was passed in 1910. Subsequently, it was adapted and modified by the Government of India (Adaptation of Indian Laws) order, 1927 and Adaptation of Laws order, 1950 Chapter ....
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....xclusive privilege under S. 24 was confined only to country liquor within a local area. Before examining the impact of amended S. 24A by U.P. Act 30 of 1972, it may be mentioned that Chapter VI empowers the collection of fees for licence or permits granted under the Act. A licence fee was only collected under notification dated 22-5-1930 for licence for wholesale vend of denatured spirit. The Excise Department on 23-1-1937 introduced rule 17(2) under S. 40(2)(d) imposing vend fee of Annas 7 per bulk gallon for the issue from the distillery. This fee was not collected regarding denatured spirit issued to industries engaged in the manufacture of synthetic rubber. By notification dated 3rd November, 1972 the U.P. Government amended the Excise Rules and substituted rule 17(2). The rule is purported to have been issued under S. 40(2) (d) in exercise of the powers conferred on the Government under S. 40(1). By the notification on the issue of denatured spirit from a distillery a vend fee of Rs. 1.10p. per litre was made payable in advance except regarding the issue to institutions exempted under the rule. The Learned Counsel strenuously contended that this levy does not purport to be i....
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....quor which includes denatured spirit, cannot, therefore be accepted. Rule 17(2) no doubt purports to have been issued under the rule making powers conferred on the Government under S. 40(2)(d) which enables the Government to make rules for regulating the import, export, transport for possession of any intoxicants. It may be noted that when the amended rule 17(2) was introduced on 3-11-1972, S. 24A had been amended by U.P. Act, 30/1972 and the power of the Excise Commissioner to accept payment for grant of licence for exclusive privilege cannot be denied. The validity of Act 30/1972 which authorised the Excise Commissioner to collect a vend fee for the retail or wholesale vend of foreign liquor was challenged. The Allahabad High Court upheld the challenge holding that the State did not have the exclusive privilege to collect the vend fee. This view was not accepted by the Supreme Court in Nashirwar's case (supra) and Harishankar's case (supra) which held that under the regulatory power, the State had power to auction the right to vend by retail or wholesale foreign liquor. As Act 30 of 1972 was struck down by the Allahabad High Court the State came forward to validate Act 30 of 197....
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....ur findings that U.P. Excise (Amendment) Act, 1972 was valid, the effect of U.P. Act 5 of 1976 is to remove all doubts and to give retrospective effect. It was next contended that foreign liquor which is defined under rule 12, as including denatured spirit, cannot apply to specially denatured spirit. Foreign liquor was defined as including specially denatured spirit. By a notification the Excise Commissioner of U.P. on 3-5-1976 framed U.P. Licences for the possession of denatured spirit and specially denatured spirit Rules, 1976. In the preamble to the rules, it is stated that the Excise Commissioner with the previous sanction of the State Government was making the rules relating to licence for possession of denatured spirit including specially denatured spirit for industrial purposes. Rule 1 (iii) provides that specially denatured spirit means rendered unfit for human consumption in such manner as may be prescribed by the Excise Commissioner by notification in this behalf and does not include ordinary denatured spirit for general use. Rule 2 provides that licences for the possession of the denatured spirit including specially denatured spirit for industrial purpose shall be of th....
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....any difference so long as the Government had a right to impose the levy. It has been found that after the addition of S. 24A by Act 30 of 1972, the Commissioner was entitled to accept payment for conferring the privilege which the State owned exclusively. The learned counsel submitted that so far as his clients M/s. Rallis Chemicals, Kanpur and M/s. Rallis India, petitioners in Special Leave Petitions Nos. 125 to 126 of 1979 are concerned they are only holders of licences for possession and are not licencees under F.L. 16. In the same class fall the appellants in Civil Appeal No. 2248 of 1978, M/s. Synthetic and Chemicals who are only purchasers of denatured spirit. It was submitted that for this class of persons if the vend fee is for the grant of exclusive privilege of the State for sale of liquor, it cannot be recovered from the purchasers. Rule 17(1) relates to vend of denatured spirit. It empowers the Collector (1) to grant to a distiller a licence for manufacture of denatured spirit (2) to grant to approved dealers of denatured spirit a licence in form F.L. 16 for the wholesale vend of denatured spirit. Scale of fee is given in the rule which prescribes that for sales not ex....