Case: State of M.P. &amp; Another Vs. Kedia Great Galeon Ltd. &amp; Another

and others v. KCT Drinks Ltd., (2003) 4 SCC 748 , had occasion to consider the M.P. Excise Act, 1915 , Section 27. In the above case condition 8 of the licence provides that the licensee shall pay the full cost of excise supervisory staff posted at the premises of the licensee. Although, judgment of Lilasons was cited before three-Judge Bench but, however, this Court upheld Clause 8 of the licence and laid down following in paragraphs 7 and 11:7.In view of Sections 18 and 27, the State Government is entitled to accept payment of a sum in consideration of grant of any lease in lump sum in addition to any duty leviable under the Act on terms and conditions which are mentioned in the licence deed. Condition 8 of the licence provides that the licensee shall pay the full cost of excise supervisory staff posted at the premises of KCT Drinks, Mandideep, District Raisen. 11.In view of the aforesaid settled legal position, the condition empowering the State Government to recover the actual cost of supervisory staff posted at the premises of the respondent cannot be said to be in any way illegal or ultra vires as it constitutes the price or consideration which the Government charges to the licensee for parting with its privilege and granting licence. In this view of the matter, the impugned judgment and order passed by the High Court requires to be set aside. 48. Learned counsel for the appellants has also rightly placed reliance on judgment of this Court in Government of Andhra Pradesh v. M/s. Anabeshahi Wine and Distilleries Pvt. Ltd., (1988) 2 SCC 25. In the above case, this Court held that the demand with regard to establishment charges was valid and legal. 49. In view of above, we fail to see as to how the judgment of this Court in Lilasonss case can be relied by the High Court for declaring the demand as void. 50. There is one more aspect of the matter which needs to be considered. The demand which has been claimed from the respondent pertains to 3 years. The details of the demand have been mentioned in the notice dated 23rd March, 1999, which are to the following effect: chart 51. The High Court in paragraph 8 of the judgment has noticed the details of demand and it has also held the demand to be arbitrary and unreasonable. In paragraph 8, the High Court has stated as follows:8. The demand is arbitrary and unreasonable even otherwise. The very fact that the establishment charges to the extent of 5% ought to be borne by the State goes to show that the expenses on the establishment are supposed to be within reasonable limits. In another decision in Bihar Distilleries, 1997(2) R.C.R (Civil) 136 : (AIR 1997 SC 1208 ) the Apex Court has held that the State will be entitled to levy reasonable regulatory fees to defray the cost of the staff posted in the distillery. It is, however, significant to read the impugned notice (Annexure P/2). The total income of the distillery during the relevant years 199596 to 199798 is shown to Rs. 8,63,250/. As against this, the demand towards establishment charges over and above 5% has been shown at Rs. 13,24,189.50. The total expenses shown in the establishment are more than 150% of the total income of the distillery. On the face of it, the demand is arbitrary and unreasonable. On the face of it, the demand is arbitrary and unreasonable. It is liable to be struck down on this count leave aside the question of validity of the Rule 4(41). 52. The High Court has observed that establishment charges to the extent of 5% ought to be borne by the State goes to show that the expenses on the establishment are supposed to be within reasonable limits and demand appears to be arbitrary and unreasonable. But a perusal of the writ petition indicates that no sufficient foundation was laid in the writ petition to enter into the issue as to whether the demand is arbitrary and unreasonable. From the details of the demand as noted above, it is further clear that in the demand for the year 199697 expenditure on salary was shown as Rs. 4,36,897/but no figure pertaining to the Revenue of the said year is mentioned, whether the distillery could function during the relevant period and without there being any Revenue how the expenditure on salary is fastened on respondent, is not explained. 53. Learned counsel for the respondent has further stated before us that the State of Madhya Pradesh has abandoned the Statutory Scheme as contained in Rule 4(41) and subsequently fixed amount of establishment charges included in the licence fee. Learned counsel for the State has, however, refuted the above submission of the learned counsel of the respondent. Learned counsel for the respondent has also referred to Section 28A, which has been substituted by Madhya Pradesh Act No.24 of 2000, which is to the following effect:Section 28A. Payment of supervision charges-The State Government may by general or special order in writing direct the manufacture, import, export, transport, storage, sale, purchase, use, collection or cultivation of any intoxicant, denatured spirituous preparations or hemp shall be under the supervision of such Excise staff as the Excise Commissioner may deem proper to appoint in this behalf and that the person manufacturing, importing, exporting, transporting, storing, selling purchasing, using, collecting or cultivating the intoxicant or denatured spirituous preparations shall pay to the State Government towards supervision charges as levy as may be imposed by the State Government in this behalf: Provided that the State Government may exempt any class of person or any institution from paying the whole or any part of such levy. 54. Section 28A being not in existence during the relevant period for which demand has been raised, it is not necessary for us to consider the effect and consequence of Section 28A in so far as the present case is concerned. However,

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

Explanation:
1[ds]22. Those who come forward to seek the above privilege of the State to manufacture or sell the liquor have to abide by the statutory regulations and terms and conditions of the licence. The privilege is not thrust upon anyone rather it is sought by intending persons or parties by participating in auctions for settling such right or by obtaining licence for such privilege in accordance with the statutory provisions.32. Learned counsel for the Respondents has also placed reliance on the judgment of this Court in Godrej Sara Lee Limited v. Assistant Commissioner (AA) and Another, (2009) 14 SCC 338  , in support of the proposition that when the order of an statutory authority is questioned on the ground that same suffers from lack of jurisdiction, the fact that no specific prayer has been made is inconsequential. In above case, following was held in Para 12Para 13:12.It is true that the appellant, in its writ petition, has not made a specific prayer that the said Notification dated 2112006 was ultra vires or otherwise illegal but, as indicated hereinbefore, a specific ground in that behalf had been taken in respect thereof13. Even otherwise, in our opinion, the question as to whether the said notification could have a retrospective effect or retroactive operation being a jurisdictional fact, should have been determined by the High Court in exercise of its writ jurisdiction under Article 226 of the Constitution of India as it is well known that when an order of a statutory authority is questioned on the ground that the same suffers from lack of jurisdiction, alternative remedy may not be a bar. (See Whirlpool Corpn. v. Registrar of Trade Marks and Mumtaz Post Graduate Degree v. Vice-Chancellor.). The ratio of the aforesaid judgment is contained in para 13. This Court has laid down that when an order of the statutory authority is questioned on the ground that the same suffers from the lack of jurisdiction alternative remedy was not a bar and Whether the notification dated 21.1.2006 could have a retrospective effect or retroactive operation being a jurisdiction affect, the High Court ought to have determined the question in exercise of its jurisdiction34. The present is not a case where the District Excise Officer who has issued the notice of demand lacks jurisdiction nor there was any issue of retrospective or retroactive operation. The above case in no manner helps the respondents.35. The second case relied by the counsel for the respondent is Girimallappa v. Special Land Acquisition Officer M and MIP and Another, 2013(2) R.C.R.(Civil) 844 : 2013(3) Recent Apex Judgments (R.A.J.) 101 : (2012) 11 SCC 548  36. In the above case, against an order passed by the Reference Court, a Land Acquisition Appeal was filed before the District Judge, seeking enhancement of the compensation at the rate of Rs. 24000 per acre. In the appeal before the High Court no specific amount was demanded37. The District Judge allowed the claim of Rs. 24000 per acre against which further appeal was filed before the High Court. Before this Court, it was contended that the High Court should not have preferred technicalities over substantial justice in awarding the compensation. Following was laid down in Para 1313. It was not a case where an order could be challenged on the ground that the same is a nullity for want of competence of the issuing authority and proper pleadings including appropriate grounds challenging the same have been taken, but no prayer has been made for quashing the said order. In such an eventuality the order can be examined only after considering the statutory provisions invoked therein. The court may reach a conclusion that the order suffers from lack of jurisdiction14. In case, the petitioner was serious about the matter, he could have amended the memo of appeal and that application could have been considered sympathetically by the High Court as held by this Court in Harcharan v. State of Haryana. The facts mentioned in this petition depict an entirely different picture and it gives an impression as if the High Court had not enhanced the compensation though demanded by the petitioner for want of payment of court fees which he could not afford to pay due to paucity of funds.above case also in no manner helps the respondents.38. There is an another reason due to which, the above submission of learned counsel for the respondents cannot be accepted. As noted above although, in Para 9 of the Writ Petition, petitioner have pleaded that in view of the judgment of M/s. Lilasons Rule 4(41) of the 1995 Rules is non est and void. But, there was no specific prayer in the writ petition. The reason for not making the specific prayer declaring Rule 4(41) as ultra vires was not an omission or by oversight. The pleadings on the record disclose a reason for the above. In the counter-affidavit filed on behalf of the State to the Writ Petition brought on record as Annexure P. 3 in Para 2 following statement has been made by the State:The demand made by the respondent is proper and cannot be struck down. However, if the petitioner wish to challenge the vires of Rule 4(41), the same can be challenged only before the Constitutional Bench.. Learned Single Judge, while deciding the writ petition has also in Para 7 made the following observations:In view of the aforesaid legal position, the Rule 4(41) of the present Rules, 1995 also appeared to be ultra vires the M.P. Excise Act and beyond the rule making power of the State. However, since no such prayer is made by the petitioners in the petition and no order in this behalf can be passed under the Rules by this Bench at Indore. I leave this question here only. However, the ratio of the decisions in Lilasons and Kedia Distilleries (supra) renders the demand notice(Annexure P.2) as void.. Thus from the above, it is clear that under the Rules of the High Court, the Bench hearing the writ petition at Indoor was not competent to pass the order, declaring Rules ultra vires. The statement in the counter-affidavit, as noted above indicates that there was some specific bench for hearing constitutional issues regarding vires of the Rules. Thus had the writ petitioner intended to challenge the vires of the rules, he had to file the writ petition for appropriate relief before the Bench having roster to decide the vires. Thus, it is clear that writ petitioner never intended to challenge the vires of the Rules, which is apparent from the reasons, as noted above. We are thus of the considered opinion that the something which writ petitioner never intended or prayed for cannot be looked into in this appeal.42. In Lilasons case, Rule 22 of the M. P. Brewery Rules 1970 was questioned. Rule 22 of the aforesaid Rules has been extracted in Para 2 of the judgment which is to the following effect:2.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 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 officers 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 issues made from the brewery to districts within the State, the excess shall be realised from the brewer.. This Court after noticing Rule 22 and the provisions of M.P. Excise Act, 1915, Sections 18, 25, 27 and 28, recorded its conclusion in paragraphs 8 and 9 which are extracted below:8.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 M.P., this Court had the occasion to examine some of the provisions of the Act inclusive of Sections 27 and 62(2) (h). Under the conditions 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: (SCC p.471, para 12)Neither Section 25 nor Section 26 nor Section 27 nor Section 62(1) nor clauses (d) and (h) of Section 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, manufactured, cultivated or collected under any licence granted under Section 13 or manufactured in any distillery 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 Section 25. The rule-making authority has not been conferred with any power to levy duty on any articles which do not fall within the scope of Section 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 attempting to exercise a power which it did not possessNo 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 itThe ratio in Banerjee case was followed in State of M.P. v. Firm Gappulal and then again in a case from Uttar Pradesh in Excise Commissioner, U.P. v. Ram Kumar. 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 v. State of Rajasthan 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 lump sum 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 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 for 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 officers9.The excise duty collected goes to the coffers of the State. The pay of officers has 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 districts within the State. Thus the State has not earned enough excise duty resulting in a shortfall 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 of 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 therefrom, 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 excisable articles. On this understanding arrived at the demand is hit, in our view, by the ratio of Banerjee case, Firm Gappulal case and Ram Kumar case and cannot be sustained. Rule 22 to that extent is ultra vires the Act and beyond the rule-making power of the State.. The basis of judgment of Lilasonss case (supra) was the judgment in Bimal Chandra Banerjee v. State of Madhya Pradesh Etc., 1970(2) SCC 467. In Bimal Chandra Banerjees case this Court had occasion to examine the provisions of Madhya Pradesh Excise Act, 1915 inclusive of Sections 27 and 62(2)(h). From paragraph 8 of the judgment, as quoted above, it is clear that compulsory payment of excise duty on the quantity of liquor which could not be lifted by the licensee was held to be illegal. In Bimal Chandra Banerjees case it was held that rule making authority has not been conferred with any power to levy duty on any articles which do not fall within the scope of Section 25 and the Legislature has levied excise duty only on those articles which come within the scope of Section 25, i.e., those excisable articles which have been manufactured under any licence. After referring Banerjees case, Lilasons relied on to two other judgments, namely, State of M.P. v. Firm Gapulal, (1976) 1 SCC 791     and Excise Commissioner, U.P. v. Ram Kumar, (1976) 3 SCC 540.   Both the above cases laid down the same proposition.46. Section 28, as noticed above, has been amended by M.P. Act No.6 of 1995 and after amendment in Section 28 by the aforesaid Amendment Act, the contents of Section 28 have entirely been changed and Section 28 as noticed by Lilasons cannot be relied on for finding out as to whether demand under Rule 4(41) is beyond the scope of Section 28.47. A three-Judge Bench of this Court in State of M.P. and others v. KCT Drinks Ltd., (2003) 4 SCC 748  , had occasion to consider the M.P. Excise Act, 1915 , Section 27. In the above case condition 8 of the licence provides that the licensee shall pay the full cost of excise supervisory staff posted at the premises of the licensee. Although, judgment of Lilasons was cited before three-Judge Bench but, however, this Court upheld Clause 8 of the licence and laid down following in paragraphs 7 and 11:7.In view of Sections 18 and 27, the State Government is entitled to accept payment of a sum in consideration of grant of any lease in lump sum in addition to any duty leviable under the Act on terms and conditions which are mentioned in the licence deed. Condition 8 of the licence provides that the licensee shall pay the full cost of excise supervisory staff posted at the premises of KCT Drinks, Mandideep, District Raisen11.In view of the aforesaid settled legal position, the condition empowering the State Government to recover the actual cost of supervisory staff posted at the premises of the respondent cannot be said to be in any way illegal or ultra vires as it constitutes the price or consideration which the Government charges to the licensee for parting with its privilege and granting licence. In this view of the matter, the impugned judgment and order passed by the High Court requires to be set aside.49. In view of above, we fail to see as to how the judgment of this Court in Lilasonss case can be relied by the High Court for declaring the demand as void.52. The High Court has observed that establishment charges to the extent of 5% ought to be borne by the State goes to show that the expenses on the establishment are supposed to be within reasonable limits and demand appears to be arbitrary and unreasonable. But a perusal of the writ petition indicates that no sufficient foundation was laid in the writ petition to enter into the issue as to whether the demand is arbitrary and unreasonable. From the details of the demand as noted above, it is further clear that in the demand for the year 199697 expenditure on salary was shown as Rs. 4,36,897/but no figure pertaining to the Revenue of the said year is mentioned, whether the distillery could function during the relevant period and without there being any Revenue how the expenditure on salary is fastened on respondent, is not explained.54. Section 28A being not in existence during the relevant period for which demand has been raised, it is not necessary for us to consider the effect and consequence of Section 28A in so far as the present case is concerned.19. Justice Y. V. Chandrachood, speaking through a Constitution Bench in Har Shankar and Others v. The Deputy Excise and Taxation Commissioner and Others, (1975) 1 SCC 737  , referring to various earlier Constitution Benches of this Court laid down following in Para 4545. In Nagendra Nath Bora v. Commissioner of Hills Division and Appeals, Assam, the decisions in Cooverjees case (supra) and Kidwais case(supra) were cited by a Constitution Bench as laying down the proposition that there was no inherent right in a citizen to sell liquor and that the control and restriction over the consumption of intoxicating liquors was necessary for the preservation of public health and morals and to raise revenue47. These unanimous decisions of five Constitution Benches uniformly emphasized after a careful consideration of the problem involved that the State has the power to prohibit trades which are injurious to the health and welfare of the public, that elimination and exclusion from business is inherent in the nature of liquor business, that no person has an absolute right to deal in liquor and that all forms of dealings in liquor have, from their inherent nature, been treated as a class by themselves by all civilized communities. The contention that the citizen had either a natural or a fundamental right to carry on trade or business in liquor thus stood rejected.. This Court in the above Constitution Bench has also held that one of the main purposes of selling the exclusive rights of liquor is to raise the Revenue. Following was stated in para 51:...After referring to the decisions in Cooverjees case (supra) and Krishna Kumar Narulas case (supra) it was observed that one of the important purposes of selling the exclusive right to vend liquor was to raise revenue and since the Government had the power to sell exclusive privileges there was no basis for contending that the owner of the privileges could not decline to accept the highest bid if he thought that the price offered was inadequate. Hegde, J. speaking for the Division Bench observed:(SCC p. 44, Para 13)The fact that the Government was the seller does not change the legal position once its exclusive right to deal with those privileges is conceded. If the Government is the exclusive owner of those privileges, reliance on Article 19(1)(g) or Article 14 becomes irrelevant. Citizens cannot have any fundamental right to trade or carry on business in the properties or rights belonging to the Government nor can there be any infringement of Article 14, if the Government tries to get the best available price for its valuable rights.. While delving into the nature of licence fee charged for granting the privilege to manufacture/sale intoxicant, Constitution Bench further laid in para 59: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 transactions.. Those who come forward to seek the above privilege of the State to manufacture or sell the liquor have to abide by the statutory regulations and terms and conditions of the licence. The privilege is not thrust upon anyone rather it is sought by intending persons or parties by participating in auctions for settling such right or by obtaining licence for such privilege in accordance with the statutory provisions.