Full Judgment Text
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PETITIONER:
SHREE KRISHNA GYANODAY SUGAR LTD.M/S ARUN CHEMICAL INDUSTRIE
Vs.
RESPONDENT:
STATE OF BIHAR & OTHERS
DATE OF JUDGMENT: 14/08/1996
BENCH:
MAJMUDAR S.B. (J)
BENCH:
MAJMUDAR S.B. (J)
BHARUCHA S.P. (J)
CITATION:
JT 1996 (7) 322 1996 SCALE (6)17
ACT:
HEADNOTE:
JUDGMENT:
WITH
CIVIL APPEAL NO.4764 OF 1996
J U D G M E N T
S.B. Majmudar, J.
These civil appeals, arising out of special leave to
appeal granted against a common judgment rendered by a
Division Bench of the Patna High Court in three writ
petitions moved by the appellants, raise a common question
as to whether Rule 9 of the Bihar & Orissa Excise Rules,
1919 (hereinafter referred to as ‘the Rules’) framed under
Bihar Excise Act, 1915 (hereinafter referred to as ‘the
Act’) is ultra vires the provisions of the said Act and in
the alternative whether the said rule covers appellants’
distilleries which are manufacturing not only denatured
spirit but also potable liquor. The appellants’ aforesaid
twin contentions have been repelled by the High Court and
that is how they are before us in these appeals.
Introductory facts
A few relevant facts leading to these proceedings may
be noted at this stage. Appellant in Civil Appeal Nos.4762-
63 of 1996 is the licencee in respect of two distilleries,
one situated at Lauriya and another at Mirganj in the
districts of West Champaran and Gopalganj respectively in
Bihar State. It has been granted licences by the State of
Bihar under the Act. The appellant’s distilleries are
manufacturing liquor on the basis of licences granted in
Form No.19 for compounding and blending foreign liquor; in
Form No.19-A for manufacture of sacramental wine or alter
wine or mass wine containing not more than 42% of proof
spirit; in Form No.25 for the manufacture of denatured
spirit; in Form No.27 for wholesale country spirit; in Form
No.28 for manufacture of spirit in a distillery issued to
the grantee of the exclusive privilege of supply of country
spirit under Section 22 of the Act; and licence issued in
Form No.28-A for manufacture of spirit in distillery for use
in the manufacture of chemical, and for industrial,
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scientific and other purposes. The licences in Form Nos.27
and 28 were withdrawn with effect from 1st April 1979. The
Superintendent of Excise directed the appellant to pay a sum
of Rs.1,68,128.77 towards the establishment charges said to
have been incurred over the excise staff posted at the
Lauriya distillery from March 1973 till July 1979 and at
Mirganj distillery for the years 1975-76 to 1978-79. The
said demand was raised as per impugned Rule 9 of the Rules.
That led to two writ petitions moved by the appellant before
the High Court.
Appellant in Civil Appeal No.4764 of 1996 challenged in
its writ petition before the High Court, an order dated 27th
December 1979 passed by the Member, Board of Revenue, an
order dated 27th September 1978 passed by the Commissioner
of Excise and the demand made by Superintendent of Excise,
Bhagalpur contained in Memorandum dated 5th November 1976.
The said appellant has a distillery in Sultanganj in the
district of Bhagalpur in Bihar State. It manufactures
country spirit and holds licences in Form Nos.25, 27, 28 and
28-A. However, licences granted to it in Form Nos.27 and 28
were withdrawn with effect from 1st April 1979.
Both the appellants contended before the High Court
that their distilleries were having composite licenses to
manufacture not only denatured spirit and other spirit for
industrial use but were also manufacturing potable spirit or
country liquor and that for these distilleries the
respondent-authorities had no power or jurisdiction to
invoke Rule 9 of the Rules demanding establishment cost and
cost of officers who were posted at these distilleries for
the purpose of supervision. Their main contention was also
to the effect that Rule 9 being ultra vires the provisions
of the Act, the aforesaid demand of the respondents was
unauthorised.
As noted earlier both these contentions were rejected
by the High Court after hearing the concerned parties. The
High Court took the view that Rule 9 of the Rules was not
ultra vires the provisions of the Act. So far as the
alterative contention was concerned it was noted by the High
Court but it appears that no clear finding was rendered by
the High Court thereon. However, ultimately all the writ
petitions were dismissed leading to the present proceedings
before this Court.
Rival contentions
Learned counsel appearing for the appellants submitted
that Rule 9 of the Rules was beyond the scope of the Act and
there was no statutory provision in the said Act to sustain
such a rule. It was alternatively contended that as the
appellants’ distilleries were having licence to manufacture
liquor which was not only comprising of denatured spirit or
other type of industrial spirit but also potable liquor.
Rule 9 on its express language could not be pressed in
service against the appellants’ distilleries.
On the other hand Shri Sanyal, learned senior counsel
appearing for the respondents, submitted that impugned Rule
9 of the Rules was clearly sustainable under Section 38 of
the Act and it was enacted with a view to seeing that the
denatured spirit manufactured by the appellants’
distilleries was not illegally converted into potable liquor
especially when such an activity itself would invoke the
penalty provisions of Section 49 of the Act. Consequently
with a view to subserving the public purpose and with a view
to seeing that the society does not suffer by such illegal
activities on the part of the distilleries, Rule 9 was
enacted for fructifying the purposes of the Act and could
not be said to be de hors its provisions entitling the State
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authorities to regulate and supervise the working of these
distilleries. On the alternative contention it was submitted
by Shri Sanyal, learned senior counsel for the respondents,
that Rule 9 as framed entitled the Commissioner to impose
costs on the concerned distillery which was manufacturing
denatured spirit or any other commercial spirit which would
include even potable spirit which was sold in the market
and, therefore, had commercial characteristics. Shri Sanyal
also submitted that the words, ‘denatured spirit or any
other commercial spirit’ as found in the second part of the
impugned rule could be read as ‘denatured spirit and any
other commercial spirit’ and if so read they would include
even potable spirit manufactured by the distilleries for
commercial purposes, namely, for selling them at a price and
for earning profit by the said exercise. That consequently
according to Shri Sanyal the distilleries run by the
appellants were squarely covered by the sweep of Rule 9 of
the Rules and hence the High Court was justified in
dismissing the writ petitions.
Points for determination
In view of the aforesaid rival contentions the
following points arise for our determination:
1. Whether Rule 9 of the Rules is
ultra vires the provisions of the
Act?
2. In the alternative whether the
second part of Rule 9 imposing
establishment costs on the
distilleries, on its express
language, applies to the
distilleries run by the appellants
for manufacturing not only
denatured spirit and spirit for
industrial use but also for
manufacturing potable liquor for
human consumption?
We shall deal with the points
seriatim.
Point No.1
The Act enacted in 1915 pertains to import, export,
transport, manufacture, possession and sale of certain kinds
of liquor and intoxicating drugs in the then provinces of
Bihar and Orissa. Section 2 which is a dictionary clause
defines ‘Board’ as per clause (2) to mean ‘Board of
Revenue’. ‘Excisable article’ as per clause (6) means, ‘(a)
any alcoholic liquor for human consumption; or (b) any
intoxicating drug. Clause (6a) of Section 2 refers to
‘excise duty’ and ‘countervailing duty’ which mean, ‘any
such excise duty or countervailing duty, as the case may be,
as is mentioned in entry 51 of List II in the Seventh
Schedule to the Constitution’. Section 2(12a) defines,
‘intoxicant’ to mean, ‘(i) any liquor, or (ii) any substance
from which liquor may be distilled and which is declared by
the State Government by notification in the official Gazette
to be an intoxicant for the purpose of this Act, or (iii)
intoxicating drug, or (iv) medicinal preparation as defined
under the Medicinal and Toilet Preparations (Excise Duties)
Act, 1955’. The term ‘liquor’ is defined by Section 2(14) to
include all liquids consisting of or containing alcohol,
such as spirits of wine, spirit, wine, fermented tari,
pachwai and beer, and also unfermented tari, and also any
other substance which the State Government may, by
notification, declare to be liquor for the purposes of this
Act. The term ‘spirit’ is defined by clause (19) of Section
2 to mean, ‘any liquor containing alcohol obtained by
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distillation, whether it is denatured or not’. The term ‘to
denature’ is defined by clause 5(b) to mean ‘to mix spirit
with one or more denaturants in such manner as may be
prescribed by rule made in this behalf under clause (3) of
section 90, and "denatured spirit" means spirit so mixed’.
Section 13 deals with ‘licence required for manufacturing
intoxicants’. Section 15 deals with ‘establishment of
distilleries, breweries or warehouses’. It lays down that
the Excise Commissioner may subject to any restrictions
imposed by the State Government, establish, or authorise the
establishment of, distilleries or breweries, in which liquor
may be manufactured under a license granted under section
13. Thus under a licence granted under Section 13 a
distillery can manufacture liquor which would include not
only potable liquor but even denatured spirit or spirit for
industrial use which is not potable. Section 22 deals with
‘grant of exclusive privilege of manufacture and sale of
country liquor or intoxicating drugs or denatured spirit or
any other intoxicants’. It is the case of the appellants
that they have not got any such exclusive privilege under
the aforesaid Section to manufacture country made liquor or
intoxicating drugs or denatured spirit. Section 27 deals
with ‘power to impose duty on import, export, transport and
manufacture of any excisable article’. It is not the case of
either side that Rule 9 seeks to impose any excise duty or a
countervailing duty. The Section which is relevant for our
purpose is Section 38 which reads as under:
"38. Fees for terms, conditions,
and form of, and duration of,
licences, permits and passes. - (1)
Every licence, permit o pass
granted under this Act-
(a) shall be granted -
(i) on payment of such fees (if
any), and
(ii) subject to such restrictions
and on such conditions, and
(b) shall be in such form and
contain such particulars, as the
Board may direct.
(2) Every licence, permit or pass
under this Act shall be granted for
such period (if any) as may be
prescribed by rule made by the
State Government under section 89,
clause (e)."
A conjoint reading of Section 38 sub-Section (1)(a)(ii)
and Sections 15 and 13 of the Act leaves no room for doubt
that licences issued to the appellants’ distilleries
governed by the Act can be made subject to such restrictions
and conditions as the Board of Revenue may direct. Section
90 of the Act empowers the Board to make rules for
regulating the manufacture, supply or storage of any
intoxicant and in particular, and without prejudice to the
generality of the provision, the Board is also authorised to
make rules for regulating the establishment, inspection,
supervision, management and control of any place for the
manufacture, supply or storage of any intoxicant, and the
provision and maintenance of fittings, implements and
apparatus therein. As per sub-Section (9) of Section 90 the
Board can also prescribe restrictions under which or the
conditions on which any licence, permit or pass may be
granted, and in particular, and without prejudice to the
generality of this provision, may make rules for (i)
prohibiting the admixture with any intoxicant or any article
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deemed to be noxious or objectionable, (ii) regulating or
prohibiting the reduction of liquor by a licensed
manufacturer or licensed vendor from a higher to a lower
strength, (iii) prescribing the nature and regulating the
arrangement of the premises in which any intoxicant may be
sold, and prescribing the notices to be exposed at such
premises. It is in exercise of the aforesaid rule making
powers available to the Board of Revenue under Section 90
that the impugned Rule, amongst other rules, came to be
enacted. It is pertinent to note that Bihar and Orissa
Excise Rules of 1919 as initially framed contained Rule 9
which read as under :
"The Commissioner shall appoint
such officers and establishment as
he thinks fit to the charge of a
distillery."
It was only on 23rd August 1930 that the concept of
establishment cost to be borne by the distilleries concerned
got engrafted in the said Rule by way of second part. The
ruled consisting of both these parts is as under :
"9. The Commissioner shall appoint
such officers and establishment as
he thinks fit to the charge of a
distillery.
In the case of a distiller licensed
solely for the purpose of the
manufacture of denatured spirit or
any other commercial spirit, the
distiller shall bear the whole cost
including leave and pension
contributions and cost of uniform
of such excise staff and
establishment as may be considered
necessary by the Excise
Commissioner for proper
supervision."
The appellants contend that said impugned Rule 9 cannot
trace its origin to any of the statutory provisions of the
Act. It is difficult to agree with this contention. The
aforesaid statutory provisions clearly indicate that the
authorities functioning under the Act can supervise and
regulate the working of the distilleries which are licensees
under the Act. Power to regulate and supervise these
distilleries as engrafted in the first part of Rule 9 and
also to levy establishment cost from these distilleries
under second part of the Rule can squarely be traced to the
statutory provisions of Section 38(1)(a)(ii) which entitle
the Board to impose suitable restrictions and conditions on
the licencees like appellants’ distilleries who have to
manufacture liquor pursuant to such licences subject to such
restrictions and conditions as are imposed on them. Section
38 sub-section (1)(a)(ii) read with Section 90 sub-Section
(1)(a) and sub-Section 9(i) and (ii) represents a well-knit
statutory scheme authorising the Board to promulgate rules
for laying down restrictions and conditions on the
licensees, namely, the distilleries which could be validly
subjected to such restrictions on their manufacturing
activities before they get clearance for such activities
under Section 15 read with Section 13 of the Act. It is,
therefore, not possible to agree with the contention of the
learned counsel for the appellants that Rule 9 is ultra
vires the provisions of the Act or has no statutory coverage
for its existence. It has to be kept in view that if a
distillery which manufactures denatured spirit attempts to
alter or alters any denatured spirit with the intention that
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such spirit may be used for human consumption whether as a
beverage or internally as a medicine would be committing an
offence which is punishable under Section 49 of the Act. It
is, therefore, permissible for the excise authorities under
the Act to supervise the working of such distilleries so
that they may not commit such offence sand to oversee their
manufacturing activities. It is axiomatic to state that
prevention is better than cure. If denatured spirit is
illegally altered and made fit for human consumption, it is
likely to have devastating effect on the health of consumers
and may even result in fatal consequences or loss of vision
and other pernicious physical handicaps. In order to prevent
such social calamities, if supervision is provided at the
cost of distilleries, it cannot be said that such conditions
are not germane to the requirements of the Act or do not
flow from the statutory scheme envisaged by the Act. If for
this laudable purpose an establishment is put up at the
doorsteps of the distilleries themselves as per the impugned
rule and if cost of maintenance of such establishment is
foisted on the licensee distilleries it cannot be said that
such a rule is de hors the provisions of the Act. On the
contrary such a provision squarely falls within the
regulatory powers of the Board for framing rules with a view
to seeing that the provisions of the Act are not stifled or
tinkered with by such licencee distilleries.
Reliance placed by learned counsel for the appellants
on a Constitution Bench judgment of this Court in Indian
Mica Micanite Industries v. The State of Bihar and others
1971 (2) SCC 236 also cannot be of any avail as in that case
this Court was concerned with the question whether the
appellant who was a consumer of denatured spirit could be
subject to a levy by way of fee under Rule 111 of the Rules
framed under Section 90 of the Act. In paragraph 17 of the
Report the Constitution Bench considered the nature of the
service rendered by the Government to the appellant, namely,
consumer of denatured spirit. It was observed in the said
paragraph that so far as the manufacturing process was
concerned, the appellant or other similar licensees had
nothing to do with it. They were only the purchasers of
manufactured denatured spirit. Hence the cost of supervising
the manufacturing process or any assistance rendered to the
manufacturers could not be recovered from the consumers like
the appellant. Further under Rule 9 of the Board’s rules,
the actual cost of supervision of the manufacturing process
by the Excise Department was required to be borne by the
manufacturer. There could not be a double levy in that
regard. In this connection, it was observed that the State
was not rendering any service to the consumer of denatured
spirit when it was maintaining its own staff for regulating
the manufacturing process of such spirit. We fail to
appreciate how this decision can be of any assistance to the
learned counsel for the appellants for the simple reason
that in this very judgment Rule 9 of the Board’s Rules which
is impugned before us was referred to as a rule which was
operative qua manufacturers of spirit. It was only Rule 111
which was on the anvil of scrutiny and in connection with
the said Rule it was held that because the State was not
rendering any special service to the consumer of denatured
spirit the impugned levy under Rule 111 was not justified.
Such is not the case before us. It is also pertinent to note
that even though constitutional validity of Rule 9 was not
challenged in the aforesaid case it was noted by the Court
that the said Rule justifiably sought to recover actual cost
of supervision of the manufacturing process by the Excise
Department from the manufacturer distillery. Learned counsel
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for the appellants then placed for our consideration
decision of another Constitution Bench of this Court in
Synthetics and Chemicals Ltd. and others v. State of U.P.
and others (1990) 1 SCC 109. In that case this Court was
concerned with the constitutional validity of the levy by
way of vend fee imposed by the respondent-State on
industrial alcohol. It was held that such imposition by the
State was beyond the legislative powers conferred on the
States concerned by any of the entries in List II or III of
the Constitution of India. Reliance was placed on the
observations in paragraph 86 of the Report wherein by way of
sub-para (d) it was observed.
"However, in case State is
rendering any service, as distinct
from its claim of so-called grant
of privilege, it may charge fees
based on quid pro quo. See in this
connection, the observations of
Indian Mica case.
Even these observations cannot be of any assistance to
the appellants for supporting their contention that impugned
Rule 9 is de hors the provisions of the Act.
On the other had learned senior counsel Shri Sanyal for
the respondents heavily leaned on two decisions of this
Court in M/s Gujchem Distilleries India Ltd. v. State of
Gujarat and another (1992) 2 SCC 399 and Shri Bileshwar
Khand Udyog Khedut Sahakari Mandali Ltd. v. State of Gujarat
and another (1992) 2 SCC 42 wherein this Court has taken the
view that levy of supervisory charges from manufactures of
industrial alcohol by a manufacturer in its own distillery
governed by the provisions of Bombay Prohibition Act, 1949
was perfectly valid. Learned counsel for the appellants,
however. contended that the aforesaid two decisions were
based on the express language of Section 58-A in the Bombay
Prohibition Act, 1949 empowering the State Government by
general or special order to direct that the manufacture,
import, export, transport, storage, sale, purchase, use,
collection or cultivation of any intoxicant, denatured
spirituous preparations, hemp, Mhowra flowers, or molasses
shall be under the supervision of such Prohibition and
Excise or police Staff as it may deem proper to appoint, and
that the cost of such staff shall be paid to the State
Government by person manufacturing, importing, transporting,
storing, selling, purchasing, using, collecting or
cultivating the intoxicant, denatured spirituous
preparation, hemp, Mhowra flowers or molasses. To that
extent learned counsel for the appellants is right. However,
in the present Act with which we are concerned even though
there is no such express provision like Section 58-A of the
Bombay Prohibition Act, 1949 there is sufficient statutory
provision in that behalf in the shape of Section
38(1)(a)(ii) road with the relevant clauses of Section 90
noted by us earlier. It cannot, therefore, be said that the
impugned Rule 9 is ultra vires the provisions of the Act.
The High Court was, therefore, justified in rejecting the
said challenge. Point No.1 is accordingly answered int eh
negative.
Point No.2
This takes us to the consideration of Point No.2. So
far as the contention concerning this point goes, even
though it was noted by the High Court in para 39 of the
impugned common judgment that the principal question which
arises for consideration is as to whether the Commissioner
has the power to appoint an officer and create an
establishment to the charge of distilleries only in a case
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where a licence has been granted solely for the purpose of
manufacture of denatured spirit or any other commercial
spirit and even though it observed that the words
‘commercial spirits’ have not been defined under the said
Act and the said words have, therefore, to be given their
ordinary meaning, the High Court has not dilated further on
this aspect. Nor has it pronounced upon the alternative
contention whether said Rule 9 on its express language can
apply to the distilleries run by the appellants.
In this connection learned counsel for the appellants
vehemently contended that it is not in dispute between the
parties that the appellants are having licences under
Section 15 read with Section 13 not only to run distilleries
for manufacturing denatured spirit or other industrial
alcohol but also have licences to manufacture potable
liquor, including country made liquor. In this connection
reliance was placed on averments made in paragraph 2(b) of
the Special Leave Petition which stated that the Hon’ble
High Court on an incorrect premise that "commercial spirit"
included all kinds of spirits including the one fit for
human consumption (potable spirit) concluded that the
petitioner’s distillery, even though it manufactured
denatured and/or commercial spirit only to the extent of
about 10% of its total production, was liable to pay the
establishment charges. So far as this averment is concerned
in the counter affidavit on behalf of respondent no.1 has
been stated in paragraph 4 as under :
"4. In reply to para 2(a) and (b) I
say that it is stated that the
Distillery petitioner is bound to
pay the costs of establishment
including costs of leave and
pension, contribution and uniform
of staff posted by the Excise
Commissioner for proper
supervision, according to Rule 9
notified by Board’s Notification
No.23-137-2 dated 29th April, 1919.
he petitioner Distillery is holding
excise licence in Form 25 and 28A.
The Licence Form 25 is licence for
manufacture of Denatured Spirit and
licence Form 28A is a License for
manufacture of spirit for use in
chemicals, industrial, scientific
and other purposes. Section 2(5) of
Bihar Excise Act, 1915 (Act II of
1915) defines "to denature" as
meaning to mix spirit with one or
more denaturants in such a manner
as may be prescribed by Rule made
in this behalf under clause (3) of
Section 90 and denatured spirit
means spirit so mixed.
The commercial spirit is not
defined in Excise Act. So it will
have a liberal meaning i.e. spirit
for use of commercial purposes.
Petitioner licencee has got license
under Excise Act for manufacture of
spirit for commercial purposes
including denatured spirit and is,
therefore, undoubtedly liable to
pay the establishment costs as per
Rule 9 framed by Board in exercise
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of powers conferred under Section
90 of the Act."
It, therefore, becomes clear that the averment that
appellants’ distilleries manufacture, amongst others,
potable spirit to the extent of 90% of its total production
as compared to 10% of its production of denatured spirit or
commercial spirit is not controverted at all. Even that
apart in paragraph 2 of the judgment of the High Court it
has been stated as a fact that the appellant in Civil Appeal
Nos. 4763-63 of 1996 was having licence for compounding and
blending foreign liquor amongst others. Similarly in
paragraph 9 of the judgment in appeal it has been noted that
so far as the appellant in Civil Appeal No.4764 of 1996 is
concerned its distillery at Sultanganj was having licence
for manufacture of country spirit in Forms 25, 27, 28 and
28-A. We must, therefore, proceed on the basis of undisputed
factual position on record of these cases that the concerned
distilleries of the appellants were having licences for
manufacturing not only denatured spirit or spirit which
could be used for industrial purposes but were also having
licences for manufacturing potable liquor. In the background
o this well established factual position we have to consider
the alternative contention canvassed by learned counsel for
the appellants. We have already extracted Rule 9 earlier.
The first part of the Rule prior to its amendment by which
second part got added to it, authorised the Commissioner to
appoint such officers and establishment as he thinks fit to
the charge of a distillery. The words ‘to the charge of a
distillery’ were interpreted by the High Court to mean, ‘at
cost of the distiller’. This interpretation was strongly
relied upon by learned senior counsel Shri Sanyal for the
respondents. In our view the said interpretation cannot be
countenanced. The first part of Rule 9 contemplates
appointment of officers and establishment as thought fit by
the Commissioner with a view to taking charge of the
distillery for supervisory purposes. The context in which
the said phraseology was employed by the rule making
authority leaves no room for doubt that the words ‘to the
charge of a distillery’ were meant to empower such officers
and establishment contemplated by Rule 9 to be in charge or
control of distillery for the purposes of supervision. The
term ‘charge’ can obviously not mean the ‘cost’ of the
distillery as the aspect of cost of such establishment and
officers was taken care of by the rule making authority by
enacting the second part of the Rule. If the term ‘charge’
included the cost of such officers and establishment there
would have been no need to enact the second part of the Rule
later on for imposing such costs on the concerned
distilleries. Even that apart if we see the first part of
Rule 9 which employs the words ‘to the charge of a
distillery’ in the context of succeeding rules especially
Rule 10 which deals with the duty of the distiller to
provide suitable quarters for the officer-in-charge and
other establishment, Rule 11 which enjoins the officers in
charge of the distillery in case of fire or accident to
immediately attend to the same, Rule 15 which requires the
distiller to keep accounts which should be made open at all
times for inspection by the Excise Officer in charge and
also Rules 16 and 17 which deal with the authority and power
of Excise Officer in charge, no doubt is left that the rule
making authority contemplated the concerned officers and
establishment to be put in charge of the distillery when it
employed the words ‘to the charge of a distillery’ in the
first part of the Rule which got enacted simultaneously with
the succeeding rules, that is, Rule 10 onwards as noted by
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us above. An officer cannot take charge of the distillery
unless he is put in charge of such distillery in exercise of
powers of the Commissioner under Rule 9, first part.
Now we come to the consideration of the moot question
whether the second part of Rule 9 which is the main
provision which is impugned in the present proceedings can
apply to distilleries run by the appellants which are having
multiple licences to manufacture not only denatured spirit
or other industrial spirits but also potable spirits or
liquor fit for human consumption. The answer to this moot
question has to be found from the express wording employed
by the rule making authority in the second part of the said
rule. Before the said part can be pressed in service against
any distillery the following conditions must be shown to
have existed in connection with such a distillery :
1. The concerned distillery must have licence for the
purpose of manufacturing denatured spirit or any other
commercial spirit.
2. Such a licence must be solely for the aforesaid purpose
and for no other purpose.
If those two conditions are satisfied then only the
whole cost of such officers and establishment can by
required to be borne by such distillery. It is obvious that
the distilleries run by the appellants which are made to
defray the cost of officers and establishment under Rule 9
are not distilleries which are manufacturing only denatured
spirit or any other commercial spirit nor are they having
licences solely for the purpose. Shri Sanyal, learned senior
counsel for the respondents submitted that the words ‘any
other commercial spirits’ would include even potable spirit
or liquor fit for human consumption as it has also
commercial value and can be sold in the market. He further
submitted that the word ‘or’ found in between the terms
‘denatured spirit’ and ‘any other commercial spirit’ may be
read as ‘and’ and when so read it can be held that second
part of Rule 9 can apply to even those distilleries which
have licences for manufacturing denatured spirit and also
other commercial spirits including potable liquor. It is not
possible to agree with this contention for the simple reason
that such a contention would ignore the term ‘solely’
employed by the rule making authority in its wisdom in the
second part of Rule 9. It has to be held that before it can
be applied to any distillery it must be shown that such
distillery is licensed solely or wholly to manufacture
either denatured spirit or any other commercial spirit. If
the word ‘or’ is read as ‘or’ then it must be shown by the
respondent that the appellants’ distilleries are having
licences for either solely and wholly manufacturing
denatured spirit or are having licences for solely and
wholly manufacturing any other commercial spirit which may
be even assumed to include potable liquor. If a distillery
has the licence to manufacture denatured spirit and also a
licence to manufacture any other commercial spirit, it
cannot be said to be having a licence solely for the
manufacture of either of these two types of spirits. On the
express language of the rule, distilleries having multiple
licences get excluded from its sweep. On the facts of the
present case, we have seen that the appellant’s distilleries
are having multiple licences. None of the distilleries of
the appellants are having licence solely to manufacture
denatured spirit or only to manufacture potable liquor even
assuming that it is cover by the term ‘commercial spirit’.
Having realised this difficulty Shri Sanyal, learned
senior counsel for respondents submitted that the word ‘or’
may be interpreted as ‘and’. Even if the said submission is
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accepted it would not advance the case of the respondents
for the simple reason that the words ‘denatured spirit and
any other commercial spirit’ if read as suggested by Shri
Sanyal will result in the succeeding words ‘any other
commercial spirit’ getting colour from the proceeding words
‘denatured spirit’ meaning thereby any other commercial
spirit contemplated by the said phrase must fall in the same
category or class as denatured spirit which precedes the
class of such residuary commercial spirit as the succeeding
words refer to ‘any other commercial spirit’ meaning thereby
commercial spirits other than denatured spirits.
Consequently if the word ‘or’ is read as ‘and’ any other
commercial spirit would fall in the same category as
denatured spirit meaning thereby those spirits which are not
fit for human consumption. They would not cover potable
spirits even assuming that they are commercial spirits as
contended by Shri Sanyal. However, in our view other
commercial spirits as contemplated by the Rule are those
spirits which are unfit for human consumption and they do
not cover potable liquor which cannot fall in line with
denatured spirit. In the context of denatured spirit as
mentioned in the Rule the succeeding words, ‘or any other
commercial spirit’ must mean those spirits which fall in the
category of spirits unfit for human consumption like
denatured spirits. In other words the term ‘other commercial
spirits’ would take in its sweep only those spirits which
are used for industrial purposes or any other purpose other
than for human consumption. Consequently reading the word
‘or’ as ‘or’ or even reading it as ‘and’ the appellants’
distilleries which are having multiple licences to
manufacture not only denatured spirit or other industrial
spirit but also potable liquor would get out of the sweep of
the second part of Rule 9. On the express language of Rule
9, second part, the alternative contention canvassed by the
learned counsel for appellants has got to be accepted. It
must, therefore, be held that second part of Rule 9 will
apply to only those distilleries which are licensed solely
and wholly for the purpose of manufacturing either denatured
spirit or any other commercial spirit unfit for human
consumption but would not include those distilleries which
are licensed for manufacturing along with denatured spirit
or other industrial spirits unfit for human consumption,
also potable liquor which is fit for human consumption. As
the appellants’ distilleries are not having such sole and
only licences for manufacturing denatured spirit or other
commercial spirit unfit for human consumption but are also
having composite and multiple licences to manufacture
potable liquor which obviously yields large revenue to the
State by way of excise duties, they are outside the sweep of
second part of Rule 9. It is obvious that to such
distilleries the first part of the Rule may apply wherein
the State will have to bear the cost of providing
supervisors and establishments for that purpose but the cost
of such establishment cannot be foisted on such
distilleries. Point No.2 is, therefore, answered in the
negative.
In the result the appeals partly succeed. The common
judgment under appeal is set aside. The writ petitions filed
by the appellants in the High Court will stand allowed in
part by holding that even though Rule 9 is intra vires the
provisions of the Act the second part of Rule 9 regarding
foisting of establishments costs on the appellants’
distilleries does not cover these distilleries. However, it
is clarified that first part of Rule 9 can be applied to the
appellants’ distilleries but at the cost of the State
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exchequer only. By an interim order dated 21st March 1996
the interim stay of the impugned demands was continued
subject to the condition that the appellants shall pay 50%
of the arrears of the demand within eight weeks and will
continue to pay 50% of the future demand. ..... ......
...... Even if the appellants succeeded they will be
entitled to refund of the amount paid by them with interest
at the rate of 12%. In view of this interim order, as the
appellants have succeeded in these appeals as aforesaid in
getting the impugned demands quashed the respondents are
directed to refund the amounts collected by them from the
appellants pursuant to the impugned demands pending these
appeals with 12% interest from the date of receipt of such
amounts till repayment. The amounts shall be refunded within
eight weeks from the receipt of the copy of this order by
the respondents. The appeals accordingly are partly allowed.
In the facts and circumstances of the cases there will be no
order as to costs all throughout.
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