TaxTMI 
TaxTMI 
1996 (7) TMI 568
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....e of M.P. in exercise of its powers conferred under clauses (g) and (h) of Sub-section (2) of Section 62 of the Madhya Pradesh Excise Act, 1915 (for short the Act of 1915), has published the notification dated 27th March, 1995 by which a new licence in form FL-8A has been, introduced. This licence is granted on a prepayment of an annual licence fee of Rs. 20,000/- and also contains a schedule by which bottling fee has been introduced to be payable at different rates. The impugned notification has been placed on record as Annexure-B. This charge of bottling fee is over and above all the excise duty payable by the licensee. This is known as bottling fee. The bottling fee comes to Rs. 5/- per bottle of Rs. 15/- per proof litre, raising the cost of IMFL by Rs. 135/- per case. This notification is applicable only to the units which have been franchised for bottling certain specified brands of IMFL by the holder of a similar licence in any part of the country outside Madhya Pradesh. 3. In substance, the contention of the petitioner is that the distillers who are locally situated and are engaged in the process of manufacturing, have been exempted and for them, the bottling fee per bott....
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....ant is produced or prepared and also redistillation and every process for the rectification, flavouring, blending or colouring of liquor." Section 13 of the Act of 1915 deals with licence required for manufacture, etc. of intoxicants. Section 13 of the Act reads as under : "13. Licence required for manufacture, etc. of intoxicants :- (a) No intoxicant shall be manufactured or collected; (b) no hamp plant shall be cultivated; (c) no tari producing tree shall be tapped and no tari shall be drawn from any tree; (d) no liquor shall be bottled for sale; (e) no distillery or brewery shall be constructed for work; and (f) no person shall use, keep or have in his possession any materials, still, untensil, implement or apparatus whatsoever for the purpose of manufacturing any intoxicant other than tari; except under the authority and subject to the terms and conditions of a licence granted in that behalf : Provided that the State Government may, by notification declare that the provisions of this section shall not apply, in any area specified in this behalf, to the tapping of tari producing trees, or to the dra....
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....ties) Act, 1955 (No. 16 of 1955)- (a) imported; or (b) exported; or (c) transported; or (d) manufactured, cultivated or collected under any licence granted under Section 13; or (e) manufacture any distillery established, or any distillery or brewery licensed, under this Act: Provided that it shall be lawful for the State Government to exempt any excisable article from any duty to which the same may be liable under this Act. (2) Duty may be imposed under Sub-section (1) at different rates according to - (i) the place to which any excisable article is to be removed; or (ii) the strength and quality of excisable article; or (iii) the use of excisable article for different purposes; or (iv) The value of excisable articles based on principles as may be prescribed. (3) Notwithstanding anything contained in Sub-section (1), (i) duty shall not be imposed thereunder on any article which has been imported into India and was liable, on such importation, to duty under the Sea Customs Act, 1878 (VIII of 1878), or the Indian Tariff Act, 1894 (VIII of 1894); (ii) omitted. (4) Nothing contained in this ....
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....cture of liquor and for which leases are issued on such conditions and for such period on payment of such sum as may be specified by the State Government. 5. Section 27-A provides savings for duties being levied at commencement of the Constitution : Section 27-A reads as under : "27-A. Savings for duties being levied at commencement of the Constitution - (1) Until provision to the contrary is made by Parliament, the State Government may continue to levy any duty to which this section applies which continue to levy any duty to which this section applies which it was lawfully levying immediately before the commencement of the Constitution under this Chapter as then in force. (2) The duties to which this section applies are - (a) any duty on intoxicants which are not excisable articles within the meaning of this Act; (b) any duty on an excisable article produced outside India and imported into the State whether across a customs frontier as defined by the Central Government or not; (3) Nothing in this section shall authorise the levy by the State Government of any duty which, as between goods manufactured or produced in the State and simi....
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....nted, any by such rules, among other matters, - (i) fix the period for which any licence, permit or pass shall continue in force, (ii) prescribe the scale of fees or the manner of fixing the fees payable in respect of any such licence, permit or pass, (iii) prescribe the amount of security to be deposited by holders of any licence, permit or pass for the performance of the conditions of the same, (iv) prescribe the accounts to be maintained and the returns to be submitted by licence-holders, and (v) prohibit or regulate the partnership in, or the transfer of, licenses." Thus, the provisions of Sub-section (2)(h) of Section 62 provides that the authority may issue forms laying down terms and conditions on which such licence, permit or pass shall be granted. In exercise of power Under Section 62(2)(h) of the Act, the State Government has framed rules known as Foreign Liquor Rules and Rule I clause (viii) of the Foreign Liquor Rules deals with bottling licence, Clause (viii) of Rule I of the said Rules reads thus - "(viii) - F.L. 8 - Bottling licence which may be granted to the holders of a licence in Form F.L. 10,11, or D-2 on ....
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....angement. 1. 2. 3. _____________________________________________________________________________________ (A) If the declared ex-distillery selling price per 12 quarts (each containing 750 mls.) of each brand and label does not exceed Rs. 150/- (i) Per quart Bottle Rs. 5.62 (ii) Per pint Bottle Rs. 2.81 (iii) Per Nip Bottle Rs. 1.40 (iv) Per Magnum Bottle Rs. 8.43 (B) If such declared ex-distillery selling price per 12 quarts (each containing 750 mls.) of each brand and label exceeds Rs. 150/- (i) per quart BottleRs. 8.44 (ii) Per pint BottleRs. 4.22 (iii) Per Nip BottleRs. 2.11 (iv) Per Magnum Bottle Rs. 12.66 NOTE. - A bottle of the capacity of less than 191 mililitres but not less than 142 mililitres shall be classed as a Nip bottle, a bottle of the capacity of less than 383 mililitres but not less than 246 mililitres shall be pint bottle, a bottle of the capacity of less than 767 mililitres shall be classed as quart bottle, and a bottle of the capacity of less than 1001 mililitres but not less than 767 mililitr....
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....l be arranged, stocked and stacked labelwise, bottle sizewise, separate from one another. (12) The licensee shall have an accessible passage free of cartons containing IMFL in the middle as well as along the walls of the Stove room to facilitate free movement and verification of the stock. (13) The licensee shall maintain day-to-day labelwise and bottle-size-wise account of IMFL manufactured, bottled and disposed. He will also maintain an accurate account of spirit used. (14) He shall comply with any subsidiary instructions issued by the Excise Commissioner from time to time during the currency of this licence. (15) If the licence D-1, and/or EL. 10 to which this licence has been granted as an adjunct stands suspended, cancelled, withdrawn, or the principal/franchiser mentioned in Column 3 of Schedule II this licence, withdraws his authority/franchise, this licence shall automatically stand suspended/cancelled/withdrawn or discontinued as the case may be. (16) The licensee shall be bound by all the general licence conditions except Nos. II, VIII (2), (1-A), XIV, XVI, XXII and XXIX. (17) On breach of any conditions of this licenc....
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....ad as under : "8. Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors." "66. Fees in respect of any of the matters in this list, but not including fees taken in any Court." Entry 51 of List-II, VIIth Schedule lays down duties on excise. Article 301 of the Constitution of India gives freedom in trade, commerce and intercourse throughout the territory of India. 8. The State in its reply has pointed out that as per the provisions of the Foreign Liquor Rules, the distillers situated out of State who have got well established brands and marketing network in the State of M.P. were importing Indian Made Foreign Liquor and they were required to pay import fee as per the rates laid down. By way of import fee, the distillers were required to pay Rs. 15/- per proof litre, where the exfactory price is more than Rs. 151/- per case of 12 quart bottles which comes to Rs. 101.25 per case (box containing 12 bottles) for past few years. The manufacturers situated outside the State started giving their franchise to the manufacturing units situated in M.P. and started getting the bottling done withi....
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....he other class which is locally bottling the liquor. There are two different classes. Since the classification is based on a rationale principle and the object sought to be achieved is the check of loss of revenue, this class of manufacturers which bottle the liquor under the franchise arrangement after obtaining the blending material is a class apart and they cannot be treated to be similarly situated as local class of persons which manufacture and bottle liquor here. There is distinction in these two classes and that distinction is a reasonable classification and makes a class, which bottles the liquor under franchise arrangement by obtaining blending material, easily distinguishable from the class which manufactures the liquor of its own without any franchise arrangement or without obtaining blending material from outside the State. Therefore, State by this amendment has checked the loss of revenue. This kind of classification neither prohibits nor violates the provisions of Article 301 of the Constitution of India nor Section 27-A(3) of the Act of 1915. 10. It is also relevant to mention that Sub-section (3) of Section 27-A of the Act of 1915 says that two classes of persons....
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....ate can grant licence of bottling on such terms and conditions as it deems fit. In exercise of power Under Section 62 of the Act of 1915 State Government framed Rules known as Foreign Liquor Rules. The State Government amended the Foreign Liquor Rules and inserted Rule viii(e) prescribing certain fee for various kinds of bottling. Hence, the issuance of the impugned notification is within the competence of the State and there is no prohibition for the State in issuing such notification. In this connection, a reference may be made to a decision of the Hon. Supreme Court in the case of State of U.P. v. Sheopat Rai, 1994 Supp. (1) SCC 8. In this case, in somewhat identical situation, Allahabad High Court struck down the rule, which was negatived by the Hon'ble Supreme Court and it was held :- "The term 'licence fee' in the context of the U. P. Excise Law connotes the idea of it being the consideration in money receivable by the Government from a private person by grant of a licence (contract), for parting in such person's favour, its exclusive privilege or right of carrying on certain activities in respect of country liquor or drugs under 'auction system&#....
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....ness transaction." There is always a distinction which has been made between 'excise duty' and 'fee'. So far as the 'duty' is concerned, that stands on different footing than the 'fee'. 'Fee' is chargeable, in the context of liquor contract, for parting away the privilege of manufacturing of liquor, as it is a well settled proposition that no citizen has a right, so far as the manufacturing of liquor is concerned, since it happens to the privilege of the State and if State parts with the said privilege and levy fee for the same, it is within the competence of the legislature. This proposition has been accepted by a series of decisions of the Hon'ble Supreme Court and all the earlier decisions have been discussed by their Lordships in the case of Sheopat Rai (supra). 13. Shri Jain, learned counsel for the petitioner has also invited our attention to various decisions of the Hon. Supreme Court in the case of Lilasons Breweries v. State of M.P., 1992 JLJ 545, Collector of Central Excise, Bombay v. M/s Kiran Spinning Mills, AIR 1988 SC 871 and Dy. Commissioner, Sales Tax, Ernakulam v. Pio Food Crackers, AIR 1980 SC 1226. Suffice it to s....