Full Judgment Text
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PETITIONER:
LILASONS BREWERIES (PVT.) LTD.
Vs.
RESPONDENT:
STATE OF MADHYA PRADESH AND ORS.
DATE OF JUDGMENT21/04/1992
BENCH:
PUNCHHI, M.M.
BENCH:
PUNCHHI, M.M.
RAY, G.N. (J)
CITATION:
1992 AIR 1393 1992 SCR (2) 595
1992 SCC (3) 293 JT 1992 (3) 236
1992 SCALE (1)834
ACT:
Madhya Pradesh Excise Act, 1915: Sections 13,18,25,27,28
and 62(2)(h).
Madhya Pradesh Brewery Rules, 1970: Rule 22- Nature of levy
under and validity of -Breweries-Appointment of Excise Offi-
cers as Incharge of breweries- Provision for pay of such
Officers- Rule providing that their pay should be met by
State but when the charges exceed five per cent of the duty
leviable the excess shall be realised from the brewer-Rule
22 held ultra vires and beyond the Rule making power of
state-Levy under Rule 22 held as additional excise duty not
actually due and not authorised by section 25.
HEADNOTE:
Rule 22 of the Madhya Pradesh Brewery Rules, 1970
empowers the Excise Commissioner to appoint an officer-in
-charge of the brewery and to appoint such other officers of
the excise department as he may deem fit to be incharge of
the brewery with the object of exercising a control over the
breweries. It further provides that the pay of all such
officers shall be met by the Government but in case the
annual charges and pay of such officers exceed 5% of the
duty leviable on the issue made from the brewery to the
districts within the State then the excess shall be realised
from the brewer.
Demands raised under the said Rule on the appellant-
brewery were challenged by it and a Division Bench of the
Madhya Pradesh High court upheld the same holding that (i)
the demand under Rule 22 was in the nature of a condition of
licence for brewery: and (ii) Section 62 (2)(h) read with
Section 28 of the Madhya Pradesh Excise Act, 1915 was wide
enough to enable the State Government to make the impugned
rule as a condition of the licence.
In appeal to this Court, it was contended on behalf of
the appellant-brewery that the excise duty leviable under
the Act was a tax imposed by the State Legislature in exer-
cise of its plenary powers and there cannot be
596
a further demand, which is in the nature of an additional
duty, by means of a rule.
On behalf of the State it was contended that the demand
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under Rule 22 was nothing but a further fee or additional
consideration, apart from Licence fee, which was neither a
further duty nor a further tax and the demand was referable
to sections 27 and 28 of the Excise Act.
Allowing the appeal and setting aside the judgment of
the High Court, this Court,
HELD: 1. Rule 22 of the Madhya Pradesh Brewery Rules,
1970 to the extend it permits raising a demand, which in sum
and substance is additional excise duty, without its being
actually due is ultra vires the act and beyond the rule
making power of the State. [604 E]
2. The excise duty collected goes to the coffers of the
State. The pay of officers have to come out from coffers of
the State. Under Rule 22 five per cent of the duty leviable
is assessed to meet the pay of such officers, which the
Government, but for the Rule, is otherwise supposed to
meet.This part of the rule is purely internal between the
Government and its officers. The licensee is least concerned
as to how the excise duty leviable would be appropriated. It
is only in the case of a shortfall when the excess is sought
to be realised from the brewer that he gets affected. The
excess is obviously the sum which falls short of the duty
leviable. It cannot for a moment be suggested that when
there is a shortfall, the demand is as if of an "additional
fee or consideration" and not additional excise duty. It is
obvious from the language of Rule 22 that in the event of
the excise duty leviable falling short of the expected five
per cent to meet the pays of the officers cannot be met
therefrom, the state has all the same to pay. The measure
under Rule 22 goes to recoup the state of the charges by
demanding a sum equal to the duty leviable to that extent
without lifting exciseable articles. On this understanding
arrived at the demand cannot be sustained and is quashed.
[603 C-H;604 E]
3. Though under Section 28 of the Excise Act licences
are issued on the prescribed forms and on payment of such
fee as prescribed and licences containing such particulars
as the State Government may direct etc. this power even
though wide is yet confined within its frame and can in no
event assume the power to impose or levy a tax or excise
duty by
597
means of a rule without the sanction of the Act. The payment
asked, on the contingency of events, cannot partake the
character of a fee so as to come within the purview of
Section 28. And if it does not the support of Section
62(2)(h) is sterile. Seeking help from Section 27 would also
be of no avail because the additional payment conceived of
therein is also a payment over and above the duty leviable
and as a part consideration towards the grant of any lease
under section 18. The additional consideration conceived of
in Section 27 is a consideration over and above the excise
duty. The terms of Section 27 do not go to retrieve the
situation [604 A-D]
Bimal Chandra Banerjee v. State of Madhya Pradesh,
[1971] ISCR 844; State of M.P. V. Firm Gappulal etc;[1976]
2SCR 1041;Excise Commissioner, U.P. etc. etc. v. Ram Kumar
etc.etc;[1976]Supp. 532, relied on.
Panna Lal & Ors.etc.etc.v. State of Rajasthan and
Ors;[1976] 1 SCR 219 distinguished.
Nashirwar v. State of M.P. {1975] 2 SCR 861, referred
to.
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JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1265 of
1981
From the judgment and Order dated 4.9.80 of the Madhya
Pradesh High Court in Misc. Petition No.48 of 1978.
S.K. Mehta, Dhruv Mehta, Aman Vachher and Arvind Verma for
the Appellants.
B.Y. Kulkarani and S.K. Agnihotri for the Respondents.
The judgment of the Court was delivered by
PUNCHHI, J. This appeal is directed against the judgment and
order dated September 4,1980 of a Division bench of the High
Court of Madhya Pradesh at Jabalpur in Miscellaneous Peti-
tion No.48 of 1978.
Vires of rule 22 of the Madhya Pradesh Brewery
Rules,1970 framed under Section 62 of the Madhya Pradesh
Excise Act, 1915 stands questioned. That Rule says:
"22. EXCISE COMMISSIONER TO APPOINT OFFICER
IN-CHARGE OF BREWERY: Every brewery shall be placed
598
by the Excise Commissioner under the charge of an Excise
Inspector to be designated as officer-in-charge of the
brewery. The Excise Commissioner will further appoint such
other officer of the Excise Department as he may deem fit to
the charge of breweries. The pay of all such officers shall
be met by the Government; provided that when the annual
charges exceed five per cent of the duty leviable on the
issue made from the brewery to districts within the State
excess shall be realised from the brewer".
The roots of the Rule, through the provisions of the
Madhya Pradesh Excise Act, require to be traced, as well as
the nature of the exaction provided in it. A broad framework
of the working of the Act would thus be necessary.
The State has the exclusive right or privilege of
manufacture or sale of liquor. There is no fundamental right
of any citizen to carry on trade and business of liquor.
This is the Settled position of law. See in this connection
Nashirwar v. State of M.P. [1975] 2 SCR 861,a case under the
Madhya Pradesh Excise Act and other cases of the same
strand. It is open to the State through its Government to
part with those rights in regard to liquor and intoxicants
for a consideration. Any citizen wanting to do the business
in liquor or intoxicants in the State of madhya Pradesh has
to seek permission under the Madhya Pradesh Excise Act,
1915. Section 13 of the Act provides inter alia that no
intoxicant shall be manufactured or collected no liquor
shall be bottled for sale, no distillery or brewery shall be
constructed or worked and no person shall use or have in his
possession any materials, still, utensil, 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. Section 18 empowers the State Government to
lease to any person on such conditions and for such period
as it may think fit, the right of manufacturing, supplying
or selling of any liquor or intoxicating drug within any
specified area. For the purpose there is a duty leviable and
other fees collectable. chapter v of the Act is earmarked
for the purpose. Therein Section 25 provides that Excise
Duty is payable on all excisable articles imported, export-
ed, transported, manufactured, cultivated or collected under
any licence or manufactured in any distillery established,
or any distillery or brewery licensed under the Act. In the
same Chapter is Section 27 which enables the government to
get payment for grant of
599
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leases. It says:
"27. PAYMENT FOR GRANT OF LEASE Instead of or in addi-
tion to any duty leviable under this Chapter, the state
Government may accept payment of a sum in consideration of
the grant of any lease under section 18".
It is evident from a bare reading of the aforesaid
provision that two situations are envisaged. The first
situation is when duty is leviable under Chapter V, the
Government may accept instead a sum in substitution of the
duty, in consideration of the grant of a lease under Section
18. The second situation is that the government may accept
payment of an additional sum over and above the duty levi-
able under chapter V, in consideration of the grant of a
lease under section 18. Section 28 in the following Chapter
then provides for the forms and conditions of licences and
fees charged thereon. It provides that every licence, permit
or pass granted under the Act shall be granted on payment of
such fees, if any, for such period, subject to such restric-
tions, and on such conditions, and shall be in such form and
contain such particulars as the State Government may direct
either generally by Rules made under Section 62 or in any
particular instance. Section 62 Contains the Rule making
power of the Government on the usual pattern. Sub-section(i)
of section 62 vests the power for the purpose in the State
Government, and sub-section (2) enumerates specific sub-
jects, in particular and without prejudice to the generality
otherwise of the rule making power. In particular Clause (h)
of sub-section(2)of section 62 permits the State Government
to prescribe the authority by, the form in which, and terms
and conditions subject to which any licence, permit or pass
shall be granted. It is in its rule making power, that the
State Government framed the Madhya Pradesh Brewery Rules,
1970, from amongst which Rule 22 stands above-quoted, vires
of which was challenged before the High Court, though unsuc-
cessfully, for which purpose effort stands renewed.
The appellant is a company carrying on business in the
manufacture and sale of beer. For the purpose it has
established a brewery in the industrial area at Bhopal. It
has obtained three licences in the requisite forms for
manufacturing, bottling and sale of beer. It is aggrieved
against the recovery of annual charges relating to the pay
of the officer-in-charge etc. of the brewery from the brewer
to the extent such charges exceed 5
600
per cent of the duty leviable on the issue made from the
brewery to the districts within the state. The appellant
claims relief of quashing of the demand notice in respect of
those charges. The High Court negatived the plea of the
appellant taking the view that the licences in Form B-1-A,
which is a licence to work a brewery in private premises,
issued to the appellant is specifically in terms subject to
the Madhya Pradesh Brewery Rules . And since there was an
obligation laid on the brewer under Rules 22, that if annual
pay of the officers-in-charge etc. of the brewery exceeded 5
percent of the duty leviable, the excess had to be realised
from the brewer. It was viewed as a condition of licence for
working the brewery and well within the rule making power
conferred under Section 62(2)(h read with Section 28 of the
Act, whereunder the State Government could lay down terms
and conditions subject to which licence could be granted.
Support for the view was taken by the High court from the
first part of Rule 22 empowering the Excise Commissioner to
appoint an officer-in-charge of the brewery and to appoint
such other officers of the excise department as he may deem
fit to be incharge of the brewery with the object of exer-
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cising a control over the breweries, as also perform duties
assigned to these officers under Rules 23 to 26 which by
themselves were reasonable . And since those were reasona-
ble, the provision made in the latter part of Rule 22 that
in case the annual charges and pay of such officers exceeded
5 per cent of the duty leviable on the issue made from the
brewery to districts within the state, the excess to be
realised from the brewer was also reasonable. The High court
in conclusion expressed itself as follows:
"It is true that the Act provides for payment of excise
duty as consideration for grant of licence and does not
specifically provide for realisation of charges in respect
of pay of officers posted for control of breweries. But in
our view Section 62 (2)(h) read with section 28 is wide
enough to enable the state Government to make the impugned
rule as a condition of the licence".
The appellant maintains that though the excise duty
leviable under the Act is a tax imposed by the State
Legislature in exercise of its plenary power there cannot be
a further demand, which is the nature of an additional duty,
by means of a rule. On the basis of Section 18 it is
contended that a lease is granted subject to payment of duty
leviable only under Chapter V and not otherwise. The State
Government under Section
601
27, may forego the excise duty and accept payment of a sum
in consideration of the grant of any lease under Section 18
in its stead. The State Government while keeping the duty
leviable under Chapter V intact may accept an additional
payment of a sum in consideration of the grant of a lease
under Section 18. The appellant maintains that the instant
demand raised is not referable at all to Sections 27 and 18.
The stand of the State is based on the literal reading of
Rule 22. The State terms the additional payment as "a fur-
ther fee apart from licence fee on the brewer in case the
charges of supervision exceed 5 per cent of the duty levi-
able on the issue made from the brewery to various districts
in the State." It has also been maintained that the charge
created under Rule 22 is nothing but a further fee or addi-
tional consideration, which is neither a further duty nor a
further tax. The exaction is suggestive of roots is Sections
27 and 28.
Now is the demand a further duty and hence a further
tax or is it a further fee or consideration for transferring
the right is the pointed question. In Bimal Chandra Banerjee
v. State of Madhya Pradesh, [1971]1 SCR 844 this Court had
the occasion to examine some of the provisions of the Act
inclusive of Sections 27 and 62 (2) (h). Under the condi-
tions of licence of the then appellants they were required
to make compulsory payment of excise duty on the quantity of
liquor which they failed to take delivery of, since those
conditions prescribed the minimum quantity of liquor which
they had to purchase from the Government. Releasing them
from such obligation, this Court ruled as follows:
"Neither s. 25 s. or 26 s. 27 or s. 62 (1) or
cls. (d) and (h) of s. 62 (2) empower the rule
making authority viz the State Government to levy
tax on excisable articles which have not been
either imported, exported, transported, manufac-
tured, cultivated or collected under any licence
granted under s. 13 or manufactured in any distill-
ery established or any distillery or brewery
licensed under the Act. The legislature has levied
excise duty only on those articles which come
within the scope of s. 25. The rule making authori-
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ty has not been conferred with any power to levy
duty on any articles which do not fall within the
scope of s. 25 Therefore it is not necessary to
consider whether any such power can be conferred on
that authority. Quite clearly the State
Government purported to levy duty on
liquor which the contractors failed to
lift. In so doing it was
602
attempting to exercise a power which it did not
possess.
No tax can be imposed by any bye-law or rule
or regulation unless the statute under which the
subordinate legislation is made specially
authorises the imposition even if it is assumed
that the power to tax can be delegated to the
executive. The basis of the statutory power
conferred by the statute cannot be transgressed by
the rule making authority. A rule making authority
has no plenary power. It has to act within the
limits of the power granted to it."
The ratio in Banerjee’s case (supra) was followed in
State of M. P.v. Firm Gappulal etc., [1976] 2 SCR 1041 and
then again in a case from Uttar Pradesh in Excise Commis-
sioner, U. P. etc. etc. v. Ram Kumar etc. etc., [1976]
(Supp.) 532 Now if the exaction under Rule 22 of the Brewery
Rules is an exaction not authorised under Section 25 and is
being made as if additional excise duty, the three cases
afore-quoted would nip the demand outright. But if it is an
additional payment under Section 27 as consideration for the
grant of licence, or a further fee or condition of licence,
as contended by the respondent-State then it may have to be
sustained. It would be relevant to take note of another
decision of this Court in Panna Lal & Ors. etc. etc. v.
State of Rajasthan and Ors., [1976] 1 SCR 219 at this stage
in which the contractual obligation of the licensee to pay
the guaranteed or stipulated sum mentioned in the licence
was held not to be dependent on the quantum of liquor held
by him and no excise duty was held charged or chargeable on
undrawn liquor under the licence. The aforesaid case cannot
advance the defence of the State for there is no lumpsum
payment stipulated as such in the instant licence. The
licence only mentions that the licensee would be bound by
the Brewery Rules. The High Court in that situation went on
to lean on Sections 62 (2) (h) and 28 when discovering there
was no express provision in the Act for realisation of
charges in respect of pay of officers posted for control of
breweries. But when we analyse the latter part of Rule 22,
the following position emerges:-
(i) the pay of all such officers shall be met
by the Government; [the government
owns the responsibility]
(ii) if the annual charges do not exceed 5
per cent of the duty leviable on the
issue made from the brewery to districts
603
within the State, nothing is realisable
from the brewer;
(iii) 5 per cent of the duty has been considered
enough from which to reimburse the Government of
the pay of such officers; and
(iv) in case the annual charges exceed 5 per cent
of the duty leviable then the excess shall be
realised from the brewer, i. e., to reimburse the
Government for the pay of all such officers.
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The excise duty collected goes to the coffers of the
State. The pay of officers have to come out from coffers of
the State. Five per cent of the duty leviable is assessed to
meet the pay of such officers, which the Government, but for
the Rule, is otherwise supposed to meet. This part of the
rule is purely internal between the Government and its
officers. The licensee is least concerned as to how the
excise duty leviable would be appropriated. It is only in
the case of a shortfall when the excess is sought to be
realised from the brewer that he gets affected. Now what is
this excess? It is obviously the sum which falls short of
the duty leviable. In other words it is this for the brewer:
"You have not lifted enough quantities of beer and sent them
to distincts within the State. Thus the State has not earned
enough excise duty resulting in a short fall in its 5%. That
does not go to meet the annual expenses of the officers.
Therefore you meet the shortfall, without lifting the
goods." Therefore the shortfall partakes the same colour and
content. It cannot for a moment be suggested that when there
is a shortfall, the demand is as if of an "additional fee or
consideration" and not additional excise duty. It is obvious
from the language of the Rule that in the event of the
excise duty leviable falling short of the expected five per
cent to meet the pays of the officers cannot be met there-
from, the State has all the same to pay. The measure goes
to recoup the State of the charges by demanding a sum equal
to the duty leviable to that extent without lifting excise-
able articles. On this understanding arived at the demand is
hit in our view, by the ratio of Bannerjee’s case, firm
Gappulal’s case and Ram Kumar’s case (supra), and cannot be
sustained. Rule 22 to that extent is ultra vires the Act and
beyond the rule making power of the state.
Now with regard to the suggested wide amplitude Section
62 (2) (h)
604
and Section 28 and condition of licence, all we need to say
is that though under Section 28 licences are issued on the
prescribed forms and on payment of such fee as prescribed
and licences containing such particulars as the State Gov-
ernment may direct etc. this power even though wide is yet
confined within its frame and can in no event assume the
power to impose or levy a tax or excise duty by means of a
rule without the sanction of the Act. As we have analysed
earlier, the payment asked on the contingency of events,
cannot partake the character of a fee so as to come within
the purview of Section 28. And if it does not the support of
Section 62 (2) (h) is sterile. Seeking help from Section 27
would also be of no avail because the additional payment
conceived of therein is also a payment over and above the
duty leviable and as a part consideration towards the grant
of any lease under Section 18. The additional consideration
conceived of in Section 27 is a consideration over and above
the excise duty. The way we have analysed Rule 22, the terms
of Section 27 do not go to retrieve the situation.
For the aforesaid reasons, this appeal is allowed, the
judgment and order of the High court of Madhya Pradesh is
set aside, declaring Rule 22 to the extent it permits
raising a demand, which in sum and substance is additional
excise duty, without its being actually due; as ultra vires
the Act and beyond the rule making power of the State. The
demand raised against the appellant is therefore quashed.
The appellant shall have his costs.
T.N.A. Appeal allowed.
605
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