Case: Polychem Limited and Another Vs. State of Maharashtra and Others

The facts leading to the filling of this appeal are as follows:-The first appellant is a company registered under the provision ofthe Companies Act, 1956. The second appellant is a share-holder and director of the first appellant- company. The appellants, for the sake of convenience, will be referred to hereinafter as the Company. The company is engaged in the manufacture of alcohol potable liquor, country liquor and alcohol based chemicals. As required under Section 58 A of the Act read with Condition No.2 of the License issued to the Company in Form I, the Company used to pay in advance the supervision charges towards the costs of the staff deputed for the purpose of supervising the operation of manufacture, storage and issue of spirit. The Inspector of prohibition and Excise by a letter dated 19th July, 1979 informed the company that the wages and dearness allowance of Government servants were increased retrospectively and on account of that the supervision charges payable by the Company comes to Rs. 1, 54, 379.79 for the period 1970 to 1979. However, pursuant to the said letter dated 19th July, 1979, no steps were taken by the respondents to collect the differential amount from the Company. While so, the Company on 7th April, 1983 received a demand Notice dated 21st March, 1989 calling upon the Company to pay the differential amount of supervision charges amounting to Rs. 99, 702.10 immediately within 15 days from the date of the receipt of the said Demand Notice, failing which legal action to recover the amount as arrears of land revenue would be taken.Aggrieved by the said demand of differential supervision charges retrospectively, the company moved the High Court by filing a writ Petition No. 1672/83 under Article 226 of the Constitution of India. The sa id Writ Petition was heard along with writ Petition No. 940/82 and the main judgment was rendered in Writ Petition No. 940/82. A Division Bench of the Bombay High Court upheld the impugned demand of differential supervision charges retrospectively. The Company, aggrieved by the judgment of the Bombay High Court dated 12.9.90, has preferred this appeal by special leave.

Reasoning: Section 58-A of the Bombay Prohibition Act,1949 enables the Statement Government to levy and collect what is called supervision charges. It is common ground that this supervision charges are collected in advance at the beginning of every quarter. The question for consideration is whether this collection of supervision charges in advance can be revised as a consequence of revision of salaries to Government servants. While upholding such revision and collection of differential supervision charges retrospectively, the learned judges in the judgment under appeal he ld that the liability to pay supervision charges and the quantification of the same are two different concepts and, therefore, the liability was not imposed with retrospective effect, but merely rates are revised with retrospective effect. The Division Bench for coming to the above conclusion placed reliance on a single Judges judgment in Writ Petition No. 631/82. As a matter or fact, we find that the judgment of the learned Single judge in Writ Petition No. 631/82 was expressly overruled by an earlier Division Bench of the Bombay High Court on 1.8.89 in M/s J.E. Bilmorias case (supra). We presume that this Division Bench judgment was not brought to the notice of the latter Division Bench, otherwise they would not have taken diametrically opposite view without referring the issue to a larger Bench. We further notice that the judgment in M/s J.E. Bilmorias case was not challenged by the Revenue as per the information passed on by Mr. Nargolkar, learned counsel for thedescribing in detail how the petitioners order their affairs, the petitioners have stated in ground No. (vi) of para 2 of the petition that on a rational interpretation of the relevant conditions and provisions, the petitioners were entitled to know in advance the costs payable by them so as to enable them to fix the price of goods, and the respondents, having acted in the manner and permitted to the petitioners to sell the goods on the effective representation that the cost of supervision charges for incoming quarter was fixed for the said quarter, cannot now be permitted to go back on their said representation and demand additional amount, more so with retrospective effect from 5.5.1970."On a scrutiny of these two Division Bench judgments, the view taken in M/s J.E. Bilmorias case commends to us and we are of the view that the reasonings given therein are well-founded. We are, therefore, of the view that the impugned demand of differential supervision charges retrospectively cannot be sustained and accordingly the judgment under appeal is set aside and the Writ Petition No. 1672/83 filed by the company stands allowed. The question posed at the beginning is answered in the negative.