Case: Har Shankar &amp; Ors. Etc. Etc Vs. The Dy. Excise &amp; Taxation Commr. &amp; Ors

by this Court (C. A. Nos. 1642 and 1643 of 1968 decided on 21-8-1972 (SC) ), that there is no material difference between the rules and the procedure adopted in the instant cases and those which were struck down in Bhajan Lals case and therefore the rules and the procedure followed herein must also be struck down for the same reasons.64. This argument overlooks the significant difference between the rules struck down in Bhajan La1s case and in Jage Rams case, and the amended Rules now in force. Under the old Rule 36 (23-A) stiff-head duty which was admittedly in the nature of excise duty was payable by the licensee even on quota not lifted by him. The Rule and condition No. 8 founded on it were therefore struck down in Bhajan Lals case as being beyond the scope of entry 51 of List II, the taxable event under the impugned Rule being the sale and not the manufacture of liquor. Rule 36 was amended on March 31, 1967 in order to meet the judgment in Bhajan Lals case but the High Court found in Jage Rams case that even under the amended Rule, still-head duty which was in the nature of excise duty was payable on unlifted quota of liquor. The position obtaining under the Rules as amended on March 22, 1968 which are relevant for our purposes is in principle different as the still-head duty is now only 0.64 paise as against Rs. 17.60 per litre. which was in force under the old Rules and excise-duty as such is no longer payable on unlifted quota. The principle governing, the decisions in Bhajan Lals case and Jage Rams case cannot, therefore, apply any longer.65. As the amount payable by the licensees on the basis of the bids offered by them in auctions and on the basis of Fixed and Assessed Fees is neither a fee in the technical sense nor a tax but is in the nature of the price of a privilege, there is no question of the Financial Commissioner lacking power to organize auctions so as to authorize the recovery of any amount which is not a fee properly so-called. The Financial Commissioner, under Section 34 of the Act read with Rule (sic) (Section) 59 (d), has the power to direct that licences may be granted on payment of such fees, that is, such consideration as he may by rules prescribe. It is open to him to frame a rule, as he has in fact framed Rule 35, directing that any class of licences may be granted on payment of fees fixed by auction. Once it is appreciated that auctions are only a mode or medium for ascertaining the best price obtainable for the grant of privilege to sell liquor, there would be no contradiction in terms in directing as Rule 35 does, that a class of "licences may be granted on the fee fixed by auction."66. The demands for the payment of Fixed Fees made on vendors of Foreign Liquor holding licences in Forms L-3, L-4 and L-5 were challenged on the additional ground that they were contrary to the terms of Rule 12 and therefore illegal. Under Rule 11, applications for renewal of licences for the following year have to be made before the end of October. By Rule 12 the Excise Inspector has to lay before the Collector by the 7th January each year a list of licences requiring, renewal, together with a certificate of sales as provided by Rule 30, to facilitate the determination of assessed fee. No order for renewal can be made after January 20 in respect of licences to be valid for the following financial year, except with the special sanction of the Financial Commissioner. The appellants holding licences for sale of Foreign Liquor applied duly for renewal of their licences and orders granting renewals were passed before January 20. Later the Rules were amended on March 22 and March 30, 1968 under which the appellants holding licences in Form Nos. L-3, L-4 and L-5 became liable to pay fixed fees up to Rs. 20,000 per annum in addition to fees assessed under Rule 31. The grievance of those appellants is that since their licences were renewed in January 1968, the amendments made in March 1968 cannot apply to them and therefore the demand made on the basis of amended rules is illegal.67. It is true that the amendments under which the appellants have been called upon to pay fixed fees were made after the licences were renewed. But the licences, though renewed in January 1968,were to be effective from April 1, 1968.The amendments having come into force before April 1 would govern the appellants licences and they are, therefore, liable to pay the fixed fees under the amended Rules. Licences are granted under Section 34 of the Act subject to the payment of such fees as the Financial Commissioner may direct The rules made under Section 59 (d) authorize the imposition of additional fees and such authorization would operate on all Licences to be effective thereafter.68. We are accordingly of the opinion that the payments demanded from the appellants are lawfully due to the State Government. Such payments are "excise revenue" within the meaning of Section 60 (1) (a) of the Act. Section 3 (9) of the Act defines "excise revenue" to mean "revenue derived or derivable from any payment, duty, fee, tax, confiscation or fine, imposed or ordered under the provisions of this Act, or of any other law for the time being in force relating to liquor or intoxicating drugs, but does not include a fine imposed by a court of law." The payments due from the appellants holding licences in Form L-14A are also due to the Government "on account of any contract relating to the excise revenue" as provided in Section 60 (1) (c) of the Act. It is therefore open to the Government to recover its dues in the manner authorized by Section 60.69.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]This objection is well founded and must be accepted.The writ petitions filed by the appellants in the High Court are wholly directed to showing that the Financial Commissioner lacked the power to grant liquor licences through auctions and to levy through the medium of auctions a sum was not a fee in the strict sense of theis interesting that except in the title of the petition showing that it was filed "Under Article 226 of the Constitution of India", the representative Writ Petition (No. 2646 of 1968) does not even refer to so much as any provision of the Constitution much less to the infringement of any Constitutional rights. Apart from this , in the view which we are disposed to take on the main contention, no question of the waiver of a "fundamental right" cansubmission overlooks the material averments contained in the respondents countershort answer to this contention is that the bids given by the appellants constitute offers and upon their acceptance by the Government a binding agreement came into existence between the parties. The conditions of auction become the terms of the contract and it is on those terms that licences are granted to the successful bidders in Form L. 14-A of thethe situation here, a concluded contract must be held to have come into existence between the parties. The appellants have displayed ingenuity in their search for invalidating circumstances but a writ petition is not an appropriate remedy for impeaching contractualwrit jurisdiction of High Courts under Article 226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred. That, however will not estop the appellants from contending that the amended Rules are not applicable as their licences were renewed before the amendments were made.23. Though this is the true position, we do not propose to dismiss the appeals on the narrow ground that the reliefs, or some of them, sought by the appellants cannot be awarded in the writ petitions brought by them.In our opinion, the true position governing dealings in intoxicants is as stated and reflected in the Constitution Bench decisions of this Court in Balsaras case 1951 SCR 682   = (AIR 1951 SC 318  ); Cooverjees case 1954 SCR 873  =(AIR 1954 SC 220  ); Kidwais case 1957 SCR 295   = (AIR 1957 SC 414  ); Nagendra Naths case 1958 SCR 1240   = (AIR 1958 SC 398  ); Amar Chakrabortys case (1973)1 SCR 533   = (AIR J972 SC J863) and the R. M. D. C. case 1957 SCR 874   = (AI.R 1957 SC 699)   as interpreted in Harinarayan Jaiswals case (1972) 3 SCR 784   = (AIR 1972 -SC 1816) and Nashirwars AIR 1975 SC 360  .There is no fundamental right to do trade or business in intoxicants. The State, under its regulatory powers, has the right to prohibit absolutely every form of activity in relation to intoxicants - its manufacture, storage, export, import, sale and possession. In all their manifestations, these rights are vested in the State and indeed without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants.In the view we have taken, the argument that the Government cannot by contract do what it cannot do under a statute must fail. No statute forbids the Government from trading in its own rights or privileges and the statute under consideration, far from doing so, expressly empowers it by Sections 27 and 34 to grant leases of its rights and to issue the requisite licences, permits or passes on payment of such fees as may be prescribed by the Financial Commissioner.The argument that in Cooverjees case 1954 SCR 873   = (AIR 1954 SC 220  ) the impugned power having been exercised in respect of a centrally administered area, the power was not fettered by legislative lists loses its relevance in the view we are taking. It is true that in that case it was permissible to the court to find, as in fact it did, that the fee imposed on the licences was "more in the nature of a tax than a licence fee." As the authority which levied the fee had the power to exact a tax, the levy could be upheld as a tax even if it could not be justified as a fee, in the constitutional sense of that term. But the Licence fee or Fixed fee in the instant case does not have to conform to the requirement that it must bear a reasonable relationship with the services rendered to the licensees.The amount charged to the licensees is not a fee properly so-called nor indeed a tax but is in the nature of the price of a privilege, which the purchaser has to pay in any trading or business transaction.This answers the main and the more important arguments urged on behalf of the appellants. What remains to be considered is the contention in regard to the scope and extent of the powers of the Financial Commissioner and the legality, otherwise of the demand for the payment of Fixed Fees made on vendors of foreign liquor holding licences in Forms L-3, L-4 andposition obtaining under the Rules as amended on March 22, 1968 which are relevant for our purposes is in principle different as the still-head duty is now only 0.64 paise as against Rs. 17.60 per litre. which was in force under the old Rules and excise-duty as such is no longer payable on unlifted quota. The principle governing, the decisions in Bhajan Lals case and Jage Rams case cannot, therefore, apply any longer.As the amount payable by the licensees on the basis of the bids offered by them in auctions and on the basis of Fixed and Assessed Fees is neither a fee in the technical sense nor a tax but is in the nature of the price of a privilege, there is no question of the Financial Commissioner lacking power to organize auctions so as to authorize the recovery of any amount which is not a fee properly so-called. The Financial Commissioner, under Section 34 of the Act read with Rule (sic) (Section) 59 (d), has the power to direct that licences may be granted on payment of such fees, that is, such consideration as he may by rules prescribe. It is open to him to frame a rule, as he has in fact framed Rule 35, directing that any class of licences may be granted on payment of fees fixed by auction. Once it is appreciated that auctions are only a mode or medium for ascertaining the best price obtainable for the grant of privilege to sell liquor, there would be no contradiction in terms in directing as Rule 35 does, that a class of "licences may be granted on the fee fixed by auction.The demands for the payment of Fixed Fees made on vendors of Foreign Liquor holding licences in Forms L-3, L-4 and L-5 were challenged on the additional ground that they were contrary to the terms of Rule 12 and therefore illegal. Under Rule 11, applications for renewal of licences for the following year have to be made before the end of October. By Rule 12 the Excise Inspector has to lay before the Collector by the 7th January each year a list of licences requiring, renewal, together with a certificate of sales as provided by Rule 30, to facilitate the determination of assessed fee. No order for renewal can be made after January 20 in respect of licences to be valid for the following financial year, except with the special sanction of the Financial Commissioner. The appellants holding licences for sale of Foreign Liquor applied duly for renewal of their licences and orders granting renewals were passed before January 20. Later the Rules were amended on March 22 and March 30, 1968 under which the appellants holding licences in Form Nos. L-3, L-4 and L-5 became liable to pay fixed fees up to Rs. 20,000 per annum in addition to fees assessed under Rule 31. The grievance of those appellants is that since their licences were renewed in January 1968, the amendments made in March 1968 cannot apply to them and therefore the demand made on the basis of amended rules is illegal.It is true that the amendments under which the appellants have been called upon to pay fixed fees were made after the licences were renewed. But the licences, though renewed in January 1968,were to be effective from April 1, 1968.The amendments having come into force before April 1 would govern the appellants licences and they are, therefore, liable to pay the fixed fees under the amended Rules. Licences are granted under Section 34 of the Act subject to the payment of such fees as the Financial Commissioner may direct The rules made under Section 59 (d) authorize the imposition of additional fees and such authorization would operate on all Licences to be effective thereafter.We are accordingly of the opinion that the payments demanded from the appellants are lawfully due to the State Government. Such payments are "excise revenue" within the meaning of Section 60 (1) (a) of the Act. Section 3 (9) of the Act defines "excise revenue" to mean "revenue derived or derivable from any payment, duty, fee, tax, confiscation or fine, imposed or ordered under the provisions of this Act, or of any other law for the time being in force relating to liquor or intoxicating drugs, but does not include a fine imposed by a court of law." The payments due from the appellants holding licences in Form L-14A are also due to the Government "on account of any contract relating to the excise revenue" as provided in Section 60 (1) (c) of the Act. It is therefore open to the Government to recover its dues in the manner authorized by Section 60.