TaxTMI 
TaxTMI 
2007 (6) TMI 531
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....It was further alleged that for blending of Malt Spirit produced at Kasauli Distillery, petitioner imported some quantities of Malt Spirit of over proof strength from its own Distillery at Mohan Nagar in Uttar Pradesh, after getting import permits from the Collector Excise, Himachal Pradesh. The petitioner also transported some quantities of Malt Spirit of over proof strength from M/s Rangar Breweries Ltd., Mehatpur, Distt. Una as well as some quantities of spirit from its Distillery at Mohan Nagar, Distt. Ghaziabad to Solan Brewery during the year 1997-98 and 1998- 99. It was further alleged that prior to 1.4.1996 there was no provision which required payment of permit/transport fee on transportation of I.M.F.S., country spirit, beer etc. It was alleged that it was for the first time that permit/transport fee was levied as per announcement for excise auctions for the year 1996-97 dated 12.3.1996. It was alleged that as per the letter issued by the Excise & Taxation Commissioner, Himachal Pradesh, a permit fee at the rate of ₹ 2.50 per bulk litres on denatured spirit, ₹ 2.00 per proof litre and ₹ 1.00 per proof litre on foreign spirit and country liquor respectiv....
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....Made Foreign Spirit (hereinafter referred to as IMFS), It was alleged that the petitioner company has been granted permission to manufacture IMFS and beer and the excise licence was granted by the State Government. It was alleged that till 1983 the State Government was charging ₹ 1000/- per annum as fee for distillery licence and ₹ 500/- per annum for brewery licence under the Excise Act. The same was raised to ₹ 75,000/- per annum for distillery licence and ₹ 10,000/- per annum for brewery licence in 1993. Thereafter, the State resorted to imposition of licence fee on per bottle basis and accordingly, the distillery licence fees which was only ₹ 1000/- per annum in 1983 became around ₹ 12 Lacs in 1996-97 and the brewery licence has arisen from ₹ 500/- per annum to over ₹ 8 Lacs per annum in 1996- 97. It was alleged that this fee was being sought to be charged in addition to the excise duty and various other levies which are being paid by the petitioner to the State Exchequer. The petitioner has challenged the imposition of licence fee as without an authority of law being unconstitutional, arbitrary and ultra vires the Constitution. ....
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.... levy is arbitrary and unconstitutional, hence the writ petition filed challenging the levy of the fees raised by the State Government vide impugned notifications. In reply filed by the respondents to the writ petition they have pleaded they the petitioner has been granted the Distillery licence on his request and subject to the conditions as stipulated in the said licence which was to manufacture various types of spirit. It was pleaded that the first condition of the licence was that the licensee shall observe the provisions of the Punjab Excise Act, 1 of 1914 and all rules made thereunder applicable to manufacture, issue and sale of spirit. The licence was granted for a period of one year which was in the nature of a contract subject to fulfillment of the conditions and strict observance of the rules governing the licence. It was pleaded that the Government is the exclusive owner of the privilege to trade in liquor and the notification is duly covered by Entry No. 8 of List II of the Seventh Schedule. Therefore, the permit was essentially regulatory in nature. It was pleaded that the objective of the permit is to regulate transport including import as well under Entry No. 8. Thu....
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....d that under Entries 8 and 51 of List II read with Entry 84 of List I of the Seventh Schedule to the Constitution, the State Legislature has the exclusive privilege to legislate on 'intoxicating liquors' or alcoholic liquor for human consumption. Therefore, the State has the exclusive power to make law with respect to manufacture and production of intoxicating liquors. The Government was the exclusive owner of the privilege to trade in liquor. The citizens do not have any fundamental right to trade or carry on the business in the properties or rights belonging to the Government. The licences granted to the petitioner are in the nature of parting with the exclusive right of the State for a price or consideration and that too on his request, The petitioner as such using the right of the State is obliged to pay the price or consideration in lieu of that. The licences are granted for a period of one year which can be renewed by the Government on request and the petitioner has no where been put under compulsion to obtain the licence every year. Since the petitioner has been continuing with the licence after getting it renewed every year, he is estopped to challenge the impugned licence ....
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....as submitted that there has to be proof of the amount being spent by the State for the services rendered by the State and since there was no proof on record which was quid pro quo before levy of any fees, therefore, it was unconstitutional. The learned counsel for the petitioner has relied upon the following decisions: The decision in State of U.P. and others Vs. Vam Organic Chemicals Ltd. and others, (2004) 1 Supreme Court Cases 225, shows that it was observed in para-44 of the judgment as under: "Besides, the fee is required to be justified with reference to the cost of such regulation. The industry is already paying a fee under Rule 2 for such regulation. Indeed, the justification for levying the fee under Rule 3(a) is the identical justification given by the State for levying the fee under Rule 2. Presumably, a full complement of excise officers and staff are appointed by the State in the Excise Department to carry out their duties under the Act to oversee, control and keep duty on the various kinds of intoxicants under the Act. Having regard to the decision in Vam Organics-I we must also assume that apart from the normal strength, additional officers and staff were appointe....
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....ices being rendered at the time of grant of licence to import spirit in the State by issuing necessary permits for the same, maintaining a record of the permits and for keeping the staff at the barriers for checking as to whether the spirit being imported was in accordance with the permit issued or not. It was submitted that it is not possible to place on record as to how much extra staff was being placed at the barriers for implementation of the orders issuing import permit in favour of the petitioners. It may be that the same staff posted was doing this additional work or some extra staff was posted in view of the import licence given in favour of the petitioners which requires deployment of extra staff and it is not necessary that before said levy is charged, the State Government should place on record the details of the amount being spent by it in services being rendered by it as a quid pro quo of the levy. It was submitted that though the earlier view of the Hon'ble Apex Court was that it was necessary to place on record also the amount being spent for the services being rendered by the State Government. For the present it was not necessary and the same could be presumed that ....
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....ssary that the State must furnish particulars of the amount being spent by it on the services rendered by the State. The learned Advocate General had also relied upon the decision in Southern Pharmaceuticals and Chemicals, Trichur and others Vs. State of Kerala and others, (1981) 4 Supreme Court Cases 391. The observations made in paras 18 and 19 are relevant and are being reproduced below: "No citizen has any fundamental right guaranteed under Article 19)1)(g) of the Constitution to carry on trade in any noxious and dangerous goods like intoxicating drugs or intoxicating liquors. The power to legislate with regard to intoxicating liquor carries with it the power to regulate the manufacture, sale and possession of medicinal and toilet preparations containing alcohol, not for the purpose of interfering with the right of citizens in the matter of consumption or use for bona fide medicinal and toilet preparations, but for preventing intoxicating liquors from being passed on under the guise of medicinal and toilet preparations. It was within the competence of the State legislature to prevent the noxious use of such preparations, i.e. their use as a substitute for alcoholic beverages.....
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....ewith. A fee may be levied to meet the cost of supervision and may be, something more. It is in consideration for the privilege, licence or service. The State is undoubtedly entitled to levy excise duty on the rectified spirit issued from a distillery under Section 17(f) of the Act read with Rule 13 of the Kerala Rectified Spirit Rules, 1972, but it refrained from making any such levy by reason of Rule 21 of the Central Rules and has, therefore, by proviso to Rule 8, allowed a manufacturer of medicinal and toilet preparations to draw rectified spirit from a distillery without payment of duty. It is thus a privilege conferred on the licensee. To claim the privilege he must comply with the conditions prescribed. If one of the conditions is the payment of cost of establishment under Section 14(e) of the Act read with Rule 16(4) of the Central Rules, the manufacturer of such preparations must necessarily bear the burden as the licensee gets services in return in lieu of such payment." In referring to the term fees, their Lordships had held that fees are distinguished from taxes in that the chief purpose of a tax is to raise funds for the support of the Government or for a public purpo....
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....in the interest of public health and order takes the case out of Article 301: regulation for the purpose of Article 301 not being confined to such regulations alone which will facilitate the trade. It was further held in para 150 as under : "The decision of the Supreme Court in case of Kalyani Stores, AIR 1966 SC 1686, is not applicable to the facts of the present case. The Punjab Act is an existing law under Article 366(10) of the Constitution and its continued application is saved by Article 372 thereof. It is also saved by Article 305 from attack under Articles 301 and 303 of the Constitution. It is well within the legislative competence of the State." It is clear from the above discussion that the fees are mainly chargeable for the services being rendered by the State Government and though in the earlier decisions it was held that for the charging of levy of any fees, the element of quid pro quo was a sine-qua-non but as per the later decisions it is not necessary and no material is required to be placed on record and the amount being spent extra for the services rendered by the State Government can be presumed only. In the present case, the State has been burdened with extr....
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.... but no specific arguments were advanced as to how they are ultra vires the Constitution. In regard to the plea raised by the learned counsel for the petitioner that the State Government was not competent to levy such a fees and before levying such a fee , the expenditure likely to be incurred or to be incurred was a quid pro quo before such a levy could be imposed. I have already mentioned above that this fees could be levied by the State Government under its powers and there was no condition of quid pro quo in view of the latest law of the Hon'ble Apex Court and, therefore, the impugned notifications issued under the provisions of Punjab Excise Act and Rules framed thereunder were within the legislative competence of the State and they cannot be held to be the ultra vires of the Constitution and as such, the impugned notifications are not liable to be quashed. Coming to the facts of the case CWP No. 590 of 1999, it is clear that the Brewery Licence was issued in favour of the petitioner which was revalidated upto 31.3.1999. The petitioner has challenged the notifications Annexures P-8, P-9, P-11, P-12, P-13, P-14, P-14/A, P-16 and P-16/A, vide which the licence fee was enhanced....