Full Judgment Text
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CASE NO.:
Appeal (civil) 2381 of 2006
PETITIONER:
STATE OF MAHARASHTRA AND ORS.
RESPONDENT:
NAGPUR DISTILLERS, NAGPUR AND ANR.
DATE OF JUDGMENT: 01/05/2006
BENCH:
S.B. SINHA & P.K. BALASUBRAMANYAN
JUDGMENT:
J U D G M E N T
(Arising out of SLP(C) No.13997 of 2005)
P.K. BALASUBRAMANYAN, J.
1. Leave granted.
2. This appeal by the State of Maharashtra and the
Officers of the State Excise Department challenges an
interim order passed by the Division Bench of the High
Court of Bombay, Nagpur Bench, in a Writ Petition filed by
the respondents herein. Respondent No.1 is a
partnership firm and respondent No.2 is a partner therof.
Respondent No.1 is engaged in the business of
manufacture and sale of Indian made foreign liquor
(hereinafter described as "IMFL") and holder of a wholesale
licence under the State Government in Form PLL as per
the Maharashtra Distillation of Spirit and Manufacture of
Potable Liquor Rules, 1966. The said Rules are made
under the Bombay Prohibition Act, 1949. Respondent
No.1 did not own a distillery and was not manufacturing
rectified spirit and extra neutral alcohol which it required
for manufacture of IMFL. Respondent No. 1 had to
purchase rectified spirit and extra neutral alcohol from
distilleries owned by others. For possession and use of
rectified spirit including the extra neutral alcohol, license
was required in Form R.S.II prescribed under the Bombay
Rectified Spirit Rules, 1951. The manufacture and sale of
IMFL is supposed to take place under the supervision of
the staff of the State Excise Department as provided in
Rule 12(2) of the Bombay Rectified Spirit Rules, 1951. As
per Rule 17 (12) of the Maharashtra Distillation of Spirit
and Manufacture of Potable Liquor Rules, 1966 and as per
condition No. 1 of the PLL license obtained thereunder,
Respondent No.1 as licensee, had to pay the cost of the
supervisory staff to the State in terms of Section 58A of
the Bombay Prohibition Act.
3. As it is elsewhere, in the State of Maharashtra
also, under Section 12 of the Bombay Prohibition Act,
manufacture of liquor, construction or working of a
distillery or brewery, import, export, transport, possession,
sale or purchase of liquor are banned. Though, under
Section 13 of the Act, the bottling of liquor for sale,
consumption or use of liquor is prohibited; under Section
11, the State has taken upon itself the right to permit any
of the aforesaid activities in the manner and to the extent
provided for, by the provisions of the Act or any Rules,
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Regulations or Orders made in that behalf. Under Section
49 of the Act, the State has the exclusive privilege of
importing, exporting, transporting, manufacturing,
bottling, selling, buying, possessing or using any
intoxicant. For consideration, the State farms out the
right to the concerned licensee. The State has made rules
in terms of Section 143 of the Act prescribing fees
including rent or consideration payable in respect of any
privilege, license, permit, pass or authorization granted or
issued under the Act.
4. In view of the relevant provisions in the Bombay
Rectified Spirit Rules, 1951, the Bombay Rectified Spirit
(Transport in Bond) Rules 1951 are made applicable for
rectified spirit. The issue of a transport pass is
contemplated for the transport of rectified spirit from the
distillery to the factory of the user subject to payment of
the fee prescribed under Rule 5(2) of the Bombay Rectified
Spirit (Transport in Bond) Rules 1951. According to the
State, the first respondent was to pay the fee at the rate of
Rs.2 per litre for rectified spirit and Rs.3 per litre for extra
neutral alcohol obtained by it for manufacture of IMFL.
The respondents filed Writ Petition No. 2417 of 2004 in
the High Court challenging the notification dated
12.7.1999, impugning rule 5 of the Bombay Rectified Spirit
(Transport in Bond) Rules 1951 and the fee prescribed
imposed on them under the Bombay Rectified Spirit
(Transport in Bond) Rules 1951. The challenge was
mainly based on a decision of the Bombay High Court in
Vam Organic Chemicals Limited Vs. State of
Maharashtra, Writ Petition No. 2275 of 2000. It was their
plea that the decision in Vam Organic Chemicals
Limited covered the position regarding the fee sought to
be collected from the Respondent No.1 and the demand
was liable to be quashed for the reasons stated in Vam
Organic Chemicals Limited. The respondents also
sought an interim order of stay of the demand pending
disposal of the Writ Petition. They pointed out that in a
number of other cases including a case of their own
relating to a previous demand, interim orders of stay had
been granted and that even in the petition for special leave
to appeal against the decision in Vam Organic Chemicals
Ltd. (supra) being SLP (C) No. 12180 of 2001, filed in the
Supreme Court, the Supreme Court has ordered Vam
Organic Chemicals Limited, a licensee similarly situated,
only to file an undertaking that in case the appeal is
allowed by the Supreme Court, Vam Organic Chemicals
Limited would satisfy the liability as per law and as
determined by the Supreme Court within the time fixed by
the Supreme Court. The prayer was opposed by the State.
The High Court granted an interim order staying the
recovery of the fee on the strength of the decision in Vam
Organic Chemicals Limited and the interim order
granted by this Court in the appeal from that decision.
5. In its counter affidavit, the State had indicated
that the position of the first respondent who does not
manufacture rectified spirit for its own consumption was
different from the case of Vam Organic Chemicals
Limited and that the decision therein or the interim order
made in appeal therefrom, does not enable the
respondents herein to contend that an interim order as
sought for by them should be granted by the Court. It
was also submitted by the State that there was a stay as
regards earlier years and if during the pendency of the
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Writ Petition the liability to pay the fee now challenged is
kept stayed or suspended, in case the Writ Petition were to
be dismissed, the accumulated liability of respondent No.1
would be huge and the interests of the State would remain
unprotected and in such a situation, the balance of
convenience was not in favour of the grant of an interim
order of stay, that too unconditional, as has been done by
that Court in some cases. The High Court declined to
accept the distinction sought to be made by the State
between the present case and the case of Vam Organic
Chemicals Limited and granted a stay of recovery, merely
on an undertaking by the respondents. The appellants
have challenged that order of the Division Bench of the
High Court dated 20.7.2004 in this appeal.
6. Learned Senior Counsel appearing for the
appellants submitted that the case of Vam Organic
Chemicals Limited was one where the licensee was a
manufacturer of rectified spirit and such manufactured
rectified spirit was being used by the manufacturer
himself. Learned counsel submitted that the view taken
by the High Court in that decision was not correct and
that there was every chance of this Court allowing the
appeal. But learned counsel submitted that even
assuming that the decision in Vam Organic Chemicals
Limited case was correct, the same would not cover the
case of the respondents since the first respondent did not
have a license to manufacture rectified spirit and
respondent No.1 was not a licensee which manufactured
rectified spirit and consumed it for its own purpose of
manufacturing IMFL. Learned counsel submitted that the
fact that the first respondent purchased rectified spirit or
extra neutral alcohol from others and transported it to its
premises for the purpose of manufacturing IMFL was a
clear distinguishing feature and the first respondent had
necessarily to pay the fee under the Bombay Rectified
Spirit (Transport in Bond) Rules 1951. The State had the
power to make the relevant Rules and to impose the
impugned fee. There was no prima facie case made out by
the respondents for the grant of an unconditional order of
stay in respect of the fee to be paid by the first
respondent. Learned counsel reminded the Court of the
observations of this Court that a Government cannot run
on securities and that in cases involving revenue, interim
orders should be passed with care and caution and only
on appropriate conditions. Learned counsel submitted
that the right to trade in IMFL was a mere privilege
granted to the licensee by the State.
7. Learned counsel for respondents, on the other
hand, submitted that the case put forward by the
respondents was squarely covered by the decision in Vam
Organic Chemicals Limited and there was no
justification in interfering with the interim order passed by
the High Court especially in the context of the order
passed by this Court in the appeal from the decision in
Vam Organic Chemicals Limited. Learned counsel
submitted that the undertaking to be given by the
respondents was adequate to protect the interests of the
State. It is submitted that the fee impugned was not an
impost on potable alcohol, but on rectified spirit and the
State has no competence to impose such a levy. Learned
counsel submitted that various Writ Petitions were
pending in the High Court and their final disposal was
being delayed only because of the attempt of the State to
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stall their hearing. There was no justification in filing an
appeal only against the interim order in their case when
similar orders have been passed in various other writ
petitions filed in the High Court.
8. In reply, learned counsel for the State submitted
that substantial amounts are outstanding from such
licensees and it would be appropriate if this Court passes
an order that protects the interests of both sides. The
State can then move the High Court for vacation of the
orders in similar cases that are distinguishable from the
case of Vam Organic Chemicals Limited.
9. Prima facie, we find some merit in the argument
that the decision in Vam Organic Chemicals Limited
may be distinguishable from cases where the licensee
himself does not manufacture the rectified spirit. Here,
rectified spirit is not manufactured by the first respondent
and such spirit is not being used captively in its own
premises for manufacture of IMFL. Respondent No.1 is
purchasing rectified spirit or extra neutral alcohol from
other manufactures and getting it transported to its own
premises for manufacturing and bottling IMFL. This
factual distinction apart, we have to keep in mind that the
right to trade in liquor is only a privilege farmed out by the
State. Article 47 of the Constitution of India clearly casts
a duty on the State at least to reduce the consumption of
liquor in the State gradually leading to prohibition itself.
It appears to be right to point out that the time has come
for the States and the Union Government to seriously
think of taking steps to achieve the goal set by Article 47
of the Constitution of India. It is a notorious fact, of which
we can take judicial notice, that more and more of the
younger generation in this country is getting addicted to
liquor. It has not only become a fashion to consume it but
it has also become an obsession with very many. Surely,
we do not need an indolent nation. Why the State in the
face of Article 47 of the Constitution of India should
encourage, that too practically unrestrictedly, the trade in
liquor is something that it is difficult to appreciate. The
only excuse for the State for not following the mandate of
Article 47 of the Constitution is that huge revenue is
generated by this trade and such revenue is being used for
meeting the financial needs of the State. What is more
relevant here is to notice that the monopoly in the trade is
with the State and it is only a privilege that a licensee has
in the matter of manufacturing and vending liquor.
10. It is pointed out by learned counsel for the
appellants that even in the conditions attached to the
license, there is an undertaking by the licensee to pay the
fees as demanded. It is his submission that there was no
reason to water down that obligation by way of an interim
order when an attempt is made to challenge the very
imposition of the fee which a licensee had agreed to pay in
the first instance. We see some force in the submission,
but have to balance it with the plea that the State has no
power to impose such a levy. We have also to take note of
the fact that after all, any amount paid to the State, could
be adjusted either towards future liability or directed to be
refunded by the State in case the challenge of the licensee
succeeds in the Writ Petition when it is finally heard and
decided. The only purpose for which the State undertakes
liquor trade, notwithstanding the mandate of Article 47 of
the Constitution of India, is the revenue that it generates.
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This aspect also cannot be lost sight of while considering
the balance of convenience in cases where a liquor
licensee seeks an interim order staying the fulfillment of
his obligation to pay all the fees or other charges
demanded from him as such a licensee. There is also
merit in the submission that in view of the long years it
takes for a Writ Petition to be decided finally, the licensee
himself would find it an onerous burden to pay the fees for
years together in case his challenge to the levy is
ultimately rejected. We are therefore satisfied that the
High Court was not justified in passing in practical terms,
an unconditional interim order of stay as sought for by the
respondents. The High Court should have paid a little
more attention to the interests of the State and the
consequences arising out of its order staying the payment
of the fee merely on an undertaking by the licensee to pay
it in case at a future point of time he is found liable to pay
the same. It is trite that Government cannot run on
undertakings. It has, therefore, become necessary to
interfere with the order of the High Court, though
normally, this Court would be reluctant, in exercise of its
jurisdiction under Article 136 of the Constitution of India,
to interfere with interim orders made in pending writ
petitions.
11. Then the question is what can be an appropriate
order in the case on hand. We feel that the interests of
both would be protected if we were to order that the
licensee is to pay 50 per cent of the license fee payable
and that it should give an undertaking to pay the balance
50 per cent in case ultimately the Writ Petition is decided
against it, within the time fixed by the High court. This,
as we see it, would balance the equities and afford
protection to the interests of the State and the interests of
the licensee. It would save the licensee from meeting the
entire liability here and now pending disposal of his
challenge to the levy and at the same time would not make
his obligation too onerous, in case ultimately, he is found
not entitled to succeed in his challenge in the Writ
Petition. This would also enable the Government to realize
a part of the revenue which alone appears to be the motive
in permitting the trade in liquor notwithstanding the
mandate of Article 47 of the Constitution of India. Thus,
on a balancing of the interests of both parties in the
background of the nature of the trade and the directive
principle of State Policy in that behalf, we are satisfied
that the order of the High Court calls for interference.
12. We therefore allow this appeal and setting aside
the order of the High Court order that if the respondents
pay one-half of the license fee payable by the respondents
and as demanded of them and give an undertaking that
they will pay the balance 50% of the levy within the time
fixed by the High Court, if the writ petition were to be
dismissed, the recovery of the licence fee payable as per
the impugned notification will be kept in abeyance until
the disposal of the writ petition by the High Court. The
respondents are given three months time from today to file
a modified undertaking and to deposit 50 per cent of the
license fee payable for the Excise Year 2005-2006. The
respondents would be liable to pay 50 per cent of the
license fee for the subsequent years on or before the
thirty-first of December of that year and to file
undertakings in the subsequent years until the Writ
Petition is heard and finally decided by the High Court. If
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the respondents fail to make the deposit and to file the
undertaking as indicated above, the appellants will be free
to take all steps that are permissible under law for
recovery of the entire fee due from the respondents as may
be demanded from them in accordance with the relevant
rules. In case the respondents succeed in their challenge
in the writ petition, the State will be liable to refund the
amount paid with interest thereon at the rate of 9% per
annum from the date of payment till the date of refund.
The amount will be refunded within two months of the
allowing of the writ petition unless otherwise agreed to by
the parties, regarding the adjustment of that sum.