Case: M/S Lilasons Dreweries (P) Ltd. 7 Anr Vs. State Of Madhya Pradesh

P. v. Firm Gappulal ( 1976 (1) SCC 791 : 1976 SCC(Tax) 71 : 1976 (2) SCR 1041 ) and then again in a case from Uttar Pradesh in Excise Commissioner, U. P. v. Ram Kumar 1976 (3) SCC(Tax) 360 : 1976 Supp SCR 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 aforequoted 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 ( 1975 (2) SCC 633 ; 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 afore-said 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 officers 9. 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 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 equals 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 ( 1970 (2) SCC 467 : 1970 (1) SCR 844). Firm Gappulal case ( 1976 (1) SCC 791 : 1976 SCC(Tax) 71 : 1976 (2) SCR 1041 ) and Ram Kumar case ( 1976 (3) SCC 540 : 1976 SCC(Tax) 360 : 1976 Supp SCR 532) and cannot be sustained. Rule 22 to that extent is ultra vires the Act and beyond the rule-making power of the State10. Now with regard to the suggested wide amplitude of Section 62(2)(h) 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 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 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.

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

Explanation:
1[ds]4. 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.9. 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 brewerhave 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."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 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 equals 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 ( 1970 (2) SCC 467 : 1970 (1) SCR 844). Firm Gappulal case ( 1976 (1) SCC 791 : 1976 SCC(Tax) 71 : 1976 (2) SCR 1041 ) and Ram Kumar case ( 1976 (3) SCC 540 : 1976 SCC(Tax) 360 : 1976 Supp SCR 532) and cannot be sustained. Rule 22 to that extent is ultra vires the Act and beyond the rule-making power of the State10. Now with regard to the suggested wide amplitude of Section 62(2)(h) 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 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 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