Case: State Of M.P.  Vs. K.C.T. Drinks

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, Distt. Raisen. 8. Similar provisions were considered by this Court and their validity is upheld in Government of Andhra Pradesh vs. M/s. Anabeshahi Wine and Distilleries Pvt. Ltd. (1988) 2 SCC 25 ) wherein this Court observed thus:- 5. The perusal of the aforesaid provisions of the Act and the Rules leaves no manner of doubt that it was open to the appellant to grant the exclusive privilege of manufacturing and selling wine etc. to the respondent only provided it was, apart from making any other payment, also willing to pay the salaries and allowances referred to in the aforesaid provisions which for the sake of convenience have been described as establishment charges, and which were sought to be recovered as such under the impugned notice of demand. The respondent-Company was not under any obligation to take the licence. It was open to it to have refrained from taking any licence under the Act and the Rules if it was not willing to pay the price as required by the government for the great of privilege to manufacture and sell intoxicants. The nature of the payment which a licensee such as the respondent is required to make to the State By reason of the State parting with the privilege in regard to manufacture sale etc. of intoxicants came up for consideration before a Constitution Bench of this Court in Har Shankar vs. Deputy Excise and Taxation Commissioner (1975) 3 SCR 254 ). It was held that the amounts charged to the licensees are neither in the nature of tax nor excise duty but constituted the price or consideration which the government charges to the licensees for parting with its privileges and granting them to the licensees... 6. The principles laid down in the aforementioned cases will, in our opinion, apply to the instant case also. The fact of the demand being with regard to establishment charges will make no difference. A predetermined amount equivalent to or even higher than the amount which is sought to be recovered by the appellant from the respondent calculated for the entire period of the licence could have been demanded in a lump sum as price for parting with the privilege and it could not have been challenged by the respondent in view of the principle enunciated by this Court in the aforesaid cases. Simply because the demand was spread over with a view to making it just and reasonable so as to represent the actual expenditure incurred by the government to maintain the requisite excise staff at the factory premises of the respondent as contemplated by the relevant provisions of the Act and the Rules, it would not become illegal and vulnerable. 9. In Shri Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. vs. State of Gujarat and Anr. (1992) 2 SCC 42 ) validity of demand under Section 58A of the Bombay Prohibition Act, 1949 for maintenance of excise staff for supervision of manufacture of industrial alcohol was assailed on the ground of lack of legislative competence of the State. In that case, the Court observed thus:- 4. According to learned counsel since the entire judgment of the High Court proceeded on privilege theory it cannot withstand the principle laid down in Synthetics and Chemicals Ltd. vs. State of U.P. (1990) 1 SCC 109 ). Levy as a fee under Entry 8 of List II of Seventh Schedule or excise duty under Entry 51 are different than cost of supervision charged under Section 58-A. The former has to stand the test of a levy being in accordance with law on power derived from one of the constitutional entries. Since Synthetics and Chemicals Case finally brought down the curtain in respect of industrial alcohol by taking it out of the purview of either Entry 8 or 51 of List II of Seventh Schedule the competency of the State to frame any legislation to levy any tax or duty is excluded. But by that a provision enacted by the State for supervision which is squarely covered under Entry 33 of the Concurrent List which deals with production, supply and distribution which includes regulation cannot be assailed. The bench in Synthetics and Chemicals case made it clear the even though the power to levy tax or duty on industrial alcohol vested in the Central Government the State was still left with power to lay down regulations to ensure that non-potable alcohol that is, industrial alcohol, was not diverted and misused as substitute for potable alcohol. This is enough to justify a provision like Section 58-A. In paragraph 88 of the decision it was observed that in respect of industrial alcohol the States were not authorised to impose the impost as they have purported to do in that case but that did not effect any imposition of fee where there were circumstances to establish that there was quid pro quo for the fee nor it will affect any regulatory measure. This completely demolishes the argument or behalf of the appellant. 10. The aforesaid decision was referred to and relied upon in M/s. Gujchem Distillery India Ltd. vs. State of Gujarat (1992) 2 SCC 399 ). 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 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.

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

Explanation:
1[ds]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, Distt. Raisen9. In Shri Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. vs. State of Gujarat and Anr. (1992) 2 SCC 42 ) validity of demand under Section 58A of the Bombay Prohibition Act, 1949 for maintenance of excise staff for supervision of manufacture of industrial alcohol was assailed on the ground of lack of legislative competence of the State10. The aforesaid decision was referred to and relied upon in M/s. Gujchem Distillery India Ltd. vs. State of Gujarat (1992) 2 SCC 399 )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 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.