TaxTMI 
TaxTMI 
2001 (7) TMI 1321
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....d imposed prohibition in that State. As a result, the manufacturing activities of the petitioner stood closed. However, when the State of Haryana revoked the prohibition in April, 1998, the petitioner restarted its manufacturing process and again obtained a bonded warehouse licence in June, 1998, as aforesaid. During the period upto 1996, the petitioner has paid to Rajasthan Excise Department by way of Import Duty a sum of ₹ 1,07,18,568 for importing 8,81,300 bulk liter and after July, 1998 as per petitioner's allegation it has paid upto December, 1998 an import duty to the extent of ₹ 20,47,500. 3. The petitioner has sought quashing of the notifications dated 9th December, 1996, 31st March, 1997 and 9th July, 1998 as being ultravires Article 265 of the Constitution of India as well as Entry 51 of List II of Seventh Schedule as well as ultravires Section 28 of the Excise Act to the extent it levied Import Duty on the excisable articles imported within the State of Rajasthan which resulted in levy of import duty on Indian made beer brought by the petitioner from Haryana in addition to Excise Duty and Countervailing duty paid by him under the aforesaid notifications.....
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.... of excisable article under Entry 51, the legislative filed of the State having been curtailed to that extent, a fee could not also be imposed on the area on which the legislative power of the State did not extent. (iii) In addition to the aforesaid contention, it was further contended that imposition of fee in question contravenes Articles 301 and 304 of the Constitution because it results in putting a barrier on free trade, commerce and intercourse throughout the territory of India and the impugned impost does not fait within the purview of Article 304 firstly because it is not authorised by law and secondly if it is a regulatory measure, it being not a legislation which has been moved with the previous sanction of the President, cannot be effective in view of Clause (b) of Article 304. (iv) Ancillary to this argument, it was also urged that the impost levied under the aforesaid impugned notifications is exhorbitantly high, confiscatory in nature and violates fundamental rights of the petitioner affecting his freedom of trade and to be treated fairly and amounts to unreasonable restrictions. 6. On the other hand, learned Advocate General has not seriously contested the posit....
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....he State of Rajasthan, he must have passed on the burden of levy on the consumers and having himself not borne, the burden of levy out of his own pocket, the refund of the amount, if at all, can only be claimed by the persons who have really suffered the burden of it and refund of the amount to the petitioner will result in his unjust enrichment. Reference has been made to Mafatlal Industries Ltd. v. Union of India (I), for relying on the principle of unjust enrichment for refusing the refund of import tax ultimately borne by the consumers in the absence of any proof of having it suffered out of his own pocket. 8. It is apparent that no tax in the nature of Import Duty can be levied in view of the Scheme of the Constitution about the imposition of tax on alcoholic liquors for human consumption and the provisions of the Act. Article 265 inhibits the power of the State to impose levy or collect any sum by way of tax except by authority of law. The authority of making law including in the field of taxation by respective legislatures of Union and States is derived from Article 246 of the Constitution read with Seventh Schedule. In respect of matters enumerated in list I in the Seventh....
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.... State of Orissa (2). The apex Court considering the term in Entry 51 of State List said after noticing that expression Countervailing duties has not been defined in Constitution and it has to be understood in its etymological sense in the context in which it has been used in Entry 51, said: "It seems, therefore, that countervailing duties are meant to equalise-the burden on alcoholic liquors imported from outside the State and the burden placed by excise duties on alcoholic liquors manufactured or produced in the State." This was reiterated by the Supreme Court in State U.P. v. DCM (3). 11. In Dunlop India v. U.O.I. (4), the Court explained that levy of Additional Duties on import of articles equal to excise duty is known as Countervailing Duties. 12. Thus, Countervailing duties are duties imposed on import of goods similar to one manufactured within the territory where such goods are imported, there it is related to equalise excise duty. Entry 51 authorises levy of countervailing duty only to the extent excise duty is imposed within the importing State on alcoholic liquors fit for human consumption. No other duty on import of potable liquor within any State is auth....
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....icle, on entry of which is effected into a local area for use or sale therein and which is liable for registration in the State under the Motor Vehicles Act, 1939. Explaining the meaning of local area, the Court said explaining the ratio in Diamond Sugar Mills Ltd. v. State of U.P. (supra) that the question whether entire area of the State was an area administered by State Government and was covered in the phrase "local area" was not decided, and held: "The expression "local area" has been used in various articles of the Constitution namely 3(b), 12, 245(1), 246, 277, 321, 323-A, and 371-D. They indicate that the constitutional intention was to understand the "local area" in the municipal board, district board etc. the High Court on this aspect rightly held that the definition does not comprehend entire State as local area as the use of word 'a' before "local area" in the section is significant." In coming to this conclusion, the Supreme Court relied on its earlier decision in State of Karnataka v. Hansa Corporation (7). 17. The impugned notifications require import duty to be paid before the import of goods in the State....
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....application as the State deems expedient. Since the right belong to the State, . it is open to the Govt. to part with that for a consideration, it is further beyond pale of doubt that apart from duties imposable on the person licensed to trade in intoxicants any amount chargeable b the State is consideration for exclusive privilege which it has parted with and it is not strictly in sense of nature of levy of fees. The principle was enunciated in Har Shankar v. Dy. E. & T. Commr. (8), wherein the court held: "The word "fee' is not used in the Act or the Rules in the technical sense of the expression. By 'licence fee' or 'fixed fee' is meant the price or consideration which the Government charges to the licensees for with parting privileges and granting them to the licensees. As the State can carry on a trade or business, such a charge is the normal incident of a trading or business transaction." 20. This view has been reiterated by the Supreme Court in 1995 (1) SCC 574 (9), AIR 1996 SC 911) (10) and (1996 (5) SCC 740 (11). It may be noticed that in Har Shankar's case licence fee whether charged by way of auction or fixed fees envisaged under....
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.... or before the specified dates every month; it is in addition to the monthly installment payable under Rule 6; its remittance is not lied up to the purchase of MGQ except to the extent that the licensee has to pay the prescribed installment of excise duty prior to the lifting of the liquor. It, therefore, cannot be said that there is any levy of excise duty upon the licensee. The concept here is altogether different. It is a case where the consideration payable by the licensee for grant of licence is made up of monthly rental plus excise duty besides the obligation t purchase the MGQ. The licensee pays the rental and excise duty as undertaken by him under the agreement/contract executed by him and as required by conditions of the licence under which he is doing business, i.e. as and by way of consideration." 23. It may be noticed in connection with this case that excise duty is levied on manufacture and not on sale or the purchaser of goods. The apex Court in State of U.P. v. D.C.M. (12) while considering the nature of excise duty and countervailing duties leviable under Section 28 of U.P. Excise Act 1910 said: "A duty of excise under Section 28 is primarily levied upo....
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....f grantee. Attention is invited to the decision in Inertia Industries v. State & Ors. (14). 27. It is also seen abov.e that even if it is levied as tax but if it is not leviable on the licensee it becomes part of consideration. For example in the case of Excise Duty, the obligation to pay Duty has arisen prior to grant of contract against manufacturer. In such cases, obligation to deposit excise duty before lifting the liquor from warehouse constitute only part of consideration and does not invite any investigation into the question of validity of tax. His locus standi to challenge the validity of such Duty has been denied in such cases. 28. However, it cannot be doubted that the levy of Import Duty is not a levy in the nature of Excise Duty which becomes payable by the manufacturer on manufacture and is otherwise obligation of somebody else than the licensee. Where a such is made payable by a licensee in addition to the price paid by him for lifting the liquor under a licence, it does not bear the character of tax paid by the licensee but it assumes the character of consideration under the contract. A party to the contract cannot challenge the consideration part of the contract ....
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.... article : - No excisable article shall be imported unless: (a) the State Government has given permission, either general or special, for its import; (b) such conditions (if any) as the State Government impose, have been satisfied, and (c) the duty (if any) imposed under Section 28 has been paid or a bond has been executed for the payment thereof. 12. Export and Transport of excisable article - No excisable article shall be exported or transported unless - (a) the duty (if any) imposed under Section 28 has been paid or a bond has been executed for the payment thereof, and (b) such conditions (if any) as the State Govt. may impose, have been satisfied. 13. Power of State Government to prohibit, import, export and transport of excisable article. - The State Government may, by Notification in the Official (a) prohibit the import or export of any excisable article into or from the territories to which this Act extends or any part thereof; (b) prohibit the transport of any excisable article. 14. Passes necessary for import, export and transport - No excisable article exceeding such quantity as the State Government may prescribe by Notification in the Official Gazette....
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....repayment of import duty in Rajasthan and under a permit issued under the next succeeding rule, from a distillery brewery or warehouse of the exporting State. Provided that duty paid Rum possessed by any unit of the Indian Armed Forces may be imported into the State without payment of duty and such import shall not require any permit/pass from the State authorities. (2) If the person authorised to import Indian made Foreign Liquor under Sub-rule (1), does not import the liquor for which he has deposited either the duty or the permit fee or both, he may be allowed refund by the Excise Commissioner. 25. Procedure for permit- (1) for a permit under the preceding rule, an application shall be made in writing to the District Excise Officer or Assistant Excise Officer of the District in which the licensed vendor holds a licence or the unit of the regiment is stationed (as the case may be) (a) the name of the distillery, brewery, bonded warehouse or bonded laboratory from which the import is to be made. (b) the name, complete description and quantity of each kind of liquor to be imported and whether the import is to be in bulk or in bottles; (c) the route of import, and (d) ....
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....ng IMFL/Beer from other States to the State of Rajasthan to make an application in writing to the District Excise Officer or Assistant Excise Officer of the District in which the licensed vendor holds a licence or the unit of the regiment is stationed. Specifying the distillery, brewery, bonded warehouse or bonded laboratory from which the import is to be made in that district. Sub-rule (3) of Rule 25 envisages paying the amount of duty as ordered by the District Excise Officer of Assistant Excise Officer and the prescribed permit fee and on production of such receipts and the application before the District Excise Officer or the Assistant Excise Officer is required to issue the permit in quadruplicate sanctioning the import by the applicant of Indian made Foreign Liquor of the kind and quantity specified in the permit for the purpose mentioned in the permit. 38. The relevant for our purpose in the context of present controversy is Rule 69-B which reads as under;- "69-B. Fees for certain permits:- The under mentioned fees are prescribed for a permit for import into, export outside or transport within the State of Rajasthan of the following excisable Articles: S.No. Name o....
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....nd only requirement is of seeking a permit by a licensee, the person authorised to sale IMFL/Beer in Rajasthan, the import duty charged under the Notifications cannot be related to a fees charged for any licence of import. Fees for the licence for vend admittedly has been prescribed otherwise and paid by the petitioner. 41. The permission required under Section 11 read with Rule 24 is to be obtained in the manner prescribed under Rule 25. 42. The permit fee as required under Rule 69-B with effect from 2.11.99 is permissible under the provisions of the statute as per the decision which we have rendered in the Writ Petition No. 6568/99 decided on 3.7.2001 which was filed by the very same petitioner. There being no permit fee prescribed under the relevant Rule 69-B prior to 2.11.99 and the continued levy of permit fee and import duty even after the issuance of the Notification dated 2.11.1999, leaves no room of doubt that the levy imposed vide impugned Notifications were never intended to be fees for parting with the part of privilege by the State in favour of licensee but was charged only as a tax for which, no authority existed with the State either under the statute or under the ....
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....three sub columns as will be apparent from the table as it stood prior to amendment vide Notification dated 31st march, 1997, which not only provided about amendments in various rules but varied scales of fees chargeable under different provisions of the rules. In this Notification Rule 69-B was amended by substituting the words import and export with the words bringing in and sending out and substituting the fee. The table, as was existing, reads as under:- "69-P Fees for certain permits: " The under mentioned fees are prescribed permit fees for import into, export outside of transport within the State of Rajasthan of the following Excisable Articles. 47. By this substitution, the former column No. 3 was divided into three sub columns and envisaging separate fees for import, export and transport. !n some of the articles where-the rule making authority wanted, it levied permit fees for all the three aspects of the privilege namely for permit for importing, permit for exporting and permit for transporting the excisable articles within the State. Under the Notification dated 31st march, 1997 Item No. 1 Absolute alcohol Methylated Alcohol Denatured spirit and preparatio....
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....imposing the tax as well as determining the scale of consideration for issuing permit leaves no room of doubt in our mind that under the impugned Notification the levy of import duty is only by way of a tax and not by way of consideration for parting with the privilege of import as contended by the respondents. 50. As there is no doubt about the fact that there is no authority to levy tax in the nature of import Duty with the state legislature, such levy cannot be sustained. 51. This necessitates the consideration for refund. We are of the opinion that since the principle is now settled that in the matter of levy of indirect taxes the ultimate burden is on the consumer. The person on whom the indirect tax is passed on and is burdened is entitled to its reimbursement. In such events, the claim of refund is ordinary not looked favourably by the Court o the principle that no person can be allowed to retain with him the amount to enrich himself unjustly at the cost of others. The principle is well established by a series of decisions of the Supreme Court. 52. Since Notifications dated 9.12.1996 and 31.3.1997 stand superseded by Notification dated 9.7.1998, to the extent it provided ....