TaxTMI 
TaxTMI 
2008 (12) TMI 730
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....unning the said distillery, it imported `Malt Spirit of over proof strength' from its distillery situated at Mohan Nagar in the State of Uttar Pradesh. For the said purpose, it was required to obtain import permit from the Collector Excise, Himachal Pradesh. It also transported some quantities of Malt Spirit of over proof strength from M/s. Rangar Breweries Ltd., Mehatpur, Distt. Una as well as from its distillery situated at Mohan Nagar, Distt. Ghaziabad during the relevant years, viz., 1997-98 and 1998-99. 4. Admittedly, prior to 1.04.1996, no payment was required to be made for obtaining permit/ transport fee on transportation of IMFL, country spirit, beer, etc. It was directed to be levied for the first time in terms of an excise policy for the year 1996 - 97 dated 12.03.1996. A permit fee at the rate of Rs. 2.50 per bulk litres on denatured spirit, Rs. 2.00 per proof litre and Rs. 1.00 per proof litre on foreign spirit and country liquor respectively became leviable. Such permit fee was payable at the time of grant of permission for transportation of liquor. It was payable by a person who makes an application for grant of permission for import and/ or transport of forei....
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....ermit holders can be prevented. Business in both potable liquor as also Malt Spirit of over proof strength is required to be regulated by the State for which the State must have a machinery. 9. We will assume, as has been contended, that no person has any fundamental right to carry on business in liquor, it being res extra commercium. 10. The question which would, however, arise for consideration is as to whether the State has the jurisdiction to impose any restriction on the movement of industrial alcohol and/ or Malt Spirit of over proof strength. 11. Part XI of the Constitution of India provides for relations between Union and the States. Chapter I thereof provides for legislative relations. In terms of Article 245(1) of the Constitution of India, ordinarily the Parliament has the exclusive legislative competence to make laws for the whole or any part of the territory of India and the Legislature of a State may make laws for the whole or any part of the State. Article 246 provides for the subject matter of laws made by the Parliament and by the Legislatures of States. Indisputably, the Parliament has the exclusive power to make laws, in respect of the matters enumerated....
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....lation of barley or other grain. The strength of Malt Spirit after distillation is said to be 66% to 70% v/v. It is also with over proof strength. Proof liquor is of around 50% v/v. Liquor which is sufficiently below the same is termed as under proof liquor. 14. Appellant herein contends that it had imported Malt Spirit of over proof strength and the application for grant of permit vis-`-vis levy of fee pertained only thereto. It has furthermore been contended that the Malt Spirit imported by it being rectified spirit, it is not potable as per ISI Specifications. It is not bought and sold in the market as potable liquor. It is used as a raw material for blending to manufacture IMFL. Contention of the appellant, therefore, is that it is not an excisable article within the meaning of the provisions of Section 3(6) of the Act. Section 16 of the Act restricts import, export and transportation of intoxicants, except upon payment of any duty or execution of a bond or compliance with such conditions as the State Government may impose. Section 18 provides for issuance of passes for import, export and transport to be granted in terms of Section 19 thereof. Sub-section (2) of Section 2....
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....importing, exporting or transporting foreign liquor, country spirit, rectified spirit or denatured spirit must obtain - (a) a permit in form L-32 in the case of import and transport or corresponding permit in case of export from the officer authorized to grant such permits in the district, State or Union territory of destination; and (b) a pass in form L-34 for export and transport and a corresponding pass for import from the officer authorized to grant such passes in the place of issue; Provided that a pass for the removal of spirit and beer from a licensed distillery or brewery or a warehouse issued in accordance with the rules made by the Financial Commissioner, shall be deemed to be a pass for the purpose of this rule; Provided further that a permit shall not be required for the transport or foreign liquor, country spirit, rectified spirit or denatured spirit within a district, except when denatured spirit is transported from the bonded warehouse of a licensed distillery; Provided further that the members of the diplomatic staff of a foreign embassy located in the State of H.P. shall not be required to obtain a permit for import and ....
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....er of any vehicle or laden animal arriving at an excise post shall stop his vehicle or animal or arrival at the outpost until the excise officer has conducted his search. The excise officer will proceed with the search forthwith." 18. Indisputably, the State has the exclusive authority to grant licence. Our attention has been drawn to one of the conditions of the licence granted in favour of the appellant in Form D-2 which reads as under: "1. The licensee shall observe the provisions of the Punjab Excise Act, 1 of 1914 and all rules made thereunder and all rules made under any other law for the time being in force applicable to the manufacture, issue and sale of spirit." 19. Indisputably, the appellant being a licensee must abide by the terms and conditions of licence. It is also bound to follow the rules framed in this behalf. A subordinate legislation which, however, is beyond the legislative competence of the State would be ultra vires. Furthermore, there cannot be any doubt that the State possesses the right to have complete control over all aspects of intoxicants, viz., manufacture, collection, sale and consumption, etc. It also has the exclusive right to manufa....
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....ood in its common and normal sense. Industrial alcohol as it is, is incapable of being consumed by a normal human being. The expression `consumption' must also be understood in the sense of direct physical intake by human beings in this context. It is true that utilisation in some form or the other is consumption for the benefit of human beings if industrial alcohol is utilised for production of rubber, tyres used. The utilisation of those tyres in the vehicle of man cannot in the context in which the expression has been used in the Constitution, be understood to mean that the alcohol has been for human consumption. 54. We have no doubt that the framers of the Constitution when they used the expression `alcoholic liquor for human consumption' they meant at that time and still the expression means that liquor which as it is is consumable in the sense capable of being taken by human beings as such as beverage of drinks. Hence, the expression under Entry 84, List I must be understood in that light. We were taken through various dictionary and other meanings and also invited to the process of manufacture of alcohol in order to induce us to accept the position that dena....
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....ticle 304(b) of the Constitution of India. 22. The State has not made any distinction between import/ export of spirit and potable alcohol. By its letter dated 28.10.1997, it was stated: "Whereas you have imported/ transported 4,46,880.00 PLs of spirit from R.B.L. Mehatpur and Mohan Meakin Limited, Mohan Nagar (UP) to Kasauli Distillery for the year 1996-97 upon which permit fee @ Rs. 2/- per P.L. was leviable. Out of the quantity mentioned above 35,884,350 PLs of IMFS was (sic) and you have paid the permit fee @ Rs. 2/- per PL for the said quantity." [Emphasis supplied] The said demand was reiterated by the State in terms of its letter dated 27.01.1999. In its representation dated 30.01.1999, the appellant averred: "3. Under entry 51 of List II of Seventh Schedule to Constitution of India, State is empowered to levy and charge Excise Duty on "Alcoholic Liquors for human consumption" and similarly under item No. 66 the State is empowered to levy and charge fees in respect of matters in this list i.e. on Alcoholic liquors for human consumption. Bulk spirit on which Permit/ Transport Fee is sought to be charged is of over proof strength and is not an Alc....
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...." The contention of the State as would appear from its counter-affidavit filed before us is as under: "...It is further submitted that the fee in question is neither a tax nor duty so as to attract the provisions of Entry 42 of List - I of Seventh Schedule to the Constitution of India. Permit fees, it is reiterated is not levied on the import of liquor rather it is charged on every permit to import/ transport the liquors whether inter - state or intra- state for the services. Therefore, the Hon'ble High Court is justified to hold that the State Government is empowered to make rules authorizing it to levy permit fee." The State furthermore asserts its right to regulate the business of liquor including over proof spirit in terms of the provisions of the Act and the Rules framed thereunder. 24. We have noticed hereinbefore that even in terms of the explanation appended to Rule 7.2A of the Rules, the fees specified in the said Rule would not be payable on denatured spirit, rectified spirit or perfumed spirit and the transport shall not include the transport of Foreign Spirit or Country Spirit in course of export inter-State or across the customs frontier of India.....
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....ointed to regulate the denaturation of the industrial alcohol. There is nothing to show that there has been any deployment of any additional staff to oversee the possibility of renaturation of the denatured spirit." 25. The question as regards `aspects of power to levy fee vis-`-vis tax' came up for consideration before this Court in Jindal Stainless Ltd. (2) and Another v. State of Haryana and Others [(2006) 7 SCC 241] wherein this Court held: "38. In the generic sense, tax, toll, subsidies, etc. are manifestations of the exercise of the taxing power. The primary purpose of a taxing statute is the collection of revenue. On the other hand, regulation extends to administrative acts which produces regulative effects on trade and commerce. The difficulty arises because taxation is also used as a measure of regulation. There is a working test to decide whether the law impugned is the result of the exercise of regulatory power or whether it is the product of the exercise of the taxing power. If the impugned law seeks to control the conditions under which an activity like trade is to take place then such law is regulatory. Payment for regulation is different from payment ....
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....strative charges. [See also Ashok Lanka and Another v. Rishi Dixit and Others (2005) 5 SCC 598] 26. This Court in Kerala Samsthana Chethu Thozhilali Union v. State of Kerala and Others [(2006) 4 SCC 327], upon noticing State of Kerala and Others v. Maharashtra Distilleries Ltd. and Others [(2005) 11 SCC 1], opined: "39. In State of Kerala v. Maharashtra Distilleries Ltd. this Court took notice of the provisions of Section 18-A of the Act. It was held that the State had no jurisdiction to realise the turnover tax from the manufacturers in the garb of exercising its monopoly power. It was held that turnover tax cannot be directed to be paid either by way of excise duty or as a price of privilege." 27. Even while levying a fee, a quantum jump is deprecated. In Indian Mica Micanite Industries v. The State of Bihar and Others [(1971) 2 SCC 236], it has been held: "17... There cannot be a double levy in that regard. In the opinion of the High Court the subsequent transfer of denatured spirit and possession of the same in the hands of various persons such as wholesale dealer, retail dealer or other manufacturers also requires close and effective supervision b....