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

Those petitions were filed by liquor contractors and hoteliers to challenge the demands made upon them by the Department of Excise and Revenue, Government of Punjab.2. The appellants are mostly retail vendors of country liquor holding licenses for the sale of liquor in specified vends. Those licences were granted to them on acceptance of their bids in the auctions held by the Excise Department, Government of Punjab. The licence fees realised through bids made in the auctions are said to be in.the neighbourhood of Rs. 29 crores.3. In Civil Appeals Nos. 485 and 2205 of 1969, the appellants held licences for the retail sale of foreign liquor for consumption on the premises of their respective establishments.4. Civil Writ No. 2646 of 1968 out of which Civil Appeal No. 365 of 1971 arises, may be taken to be typical of the petitions filed by retail vendors of country liquor. For understanding the points in controversy it would be enough to refer to the facts of that petition.5. Auctions for granting the right to sell country liquor for the year 1968-69 were initially held in various districts of Punjab on or about 8-3-1968 in pursuance of conditions of auction framed on February 19,1968. Those auctions became ineffective by reason of a judgment, D/- 12-3-1968 of a Division Bench of the High Court of Punjab and Haryana in Civil Writ No, 1376 of 1967 (Jage Ram v. State of Haryana) Following an earlier judgment in Bhajan Lal v. State of Punjab (Civil Writ No. 538 of 1966 decided on 6-2-1967) = (1967 Cur LJ 460) the High Court took the view that the licence fee realised through the medium of auctions was really in the nature of "still-head duty" and that the licensees could not be called upon by the Government to pay still-head duty on the liquor quota which, under the terms of auctions, they were bound to lift but which in fact was not lifted by them.6. On March 21, 1968 a meeting of the State Excise Officers was held under the chairmanship of the Financial Commissioner to evolve a new formula for leasing the right to sell liquor so as to meet the judgment in Jage Rams case. The new policy containing fresh terms and conditions of auction was announced on the 22nd and the impugned auctions in pursuance of that policy were held immediately thereafter.7. On March 23, 1968 the first respondent - the Deputy Excise and Taxation Commissioner, Jullunder - held an auction for granting the right to sell country liquor at the Town Hall Vend and the Kailash Cinema Chowk Vend, Ludhiana. The appellants gave bids in the sum of Rs. 34,01,000 and Rs. 12,02,000 respectively for the two vends and those bids were duly accepted by the first respondent. The appellants were then granted licences in Form L, 14-A of the Punjab Liquor Licence Rules, 1956 (herein called " the Rules"). Form L, 14-A is prescribed under the Rules for the grant of licences for "retail vend of country spirit for consumption off the premises."8. The conditions governing auctions were notified through announcements made at the time of auctions. Condition No. 1 provides that all licences for sale of country spirit, foreign liquor, Beer, etc. shall be granted subject to the provisions ofthe Punjab Excise Act,1 of 1914,(hereinafter called "the Act") and the rules framed thereunder. By Condition 14 (i), licences for retail vend of country spirit are granted on the basis of "licence fee" fixed by auction. Condition 14 (ii) requires that the quota of country liquor fixed for each vend must be announced before the vend is put to auction. Under Condition 15 (i) the successful bidder has to deposit security equivalent to 1/24 th of the amount of the annual licence fee within the stated period. The security is refundable to the licensee at the end of the year unless it is liable to be forfeited or adjusted against any amount due from him in respect of the licence. Clause (ii) of Condition 15 requires the successful bidder to pay the whole amount of licence fee in 24 equal instalments spread over the year. Clause (iii) of Condition 15 authorises the Collector to resell the vend if the successful bidder fails to deposit the security or refuses to accept the licence. In the event of such resale, any deficiency in the licence fee is recoverable from the defaulter in the manner laid down in Section 60 of the Act which provides by clauses (a) and (c) that all  excise revenue" and all amounts due to the Government on account of any contract relating to the excise revenue may be recovered from the person liable to pay the same by any process for the recovery of arrears of land revenue. By Condition 15 (iv) similar right is conferred on the Collector to resell the vend in the event of the cancellation of a licence. By condition 17, the still-head duty on ordinary spiced country spirit is leviable at the rate of Re. 0.64 per proof litre. Condition 18 (i) entitles the licensee to the refund of the proportionate part of the licence fee if there is a shortfall in the supply of liquor to him but he is not entitled to any compensation or damages for the short supply. By Condition No. 24, the maximum price at which the spiced country liquor may be sold by the licensee, is fixed at Rs. 10.00 per quart, Rs. 5.25 per pint and Rs. 2.75 per Nip.9. The Town Hall Vend was auctioned on the basis of the fixed quota of 1,50,560 proof litres which is equivalent to 4,01,000 bottles per year. The Kailash Cinema Chowk Vend was auctioned on the basis of the fixed quota of 50,506 proof litres which is equivalent to 1,34,685 bottles per year.10. The appellants deposited Rupees 1,41,708 for the Town Hall Vend and Rupees 50,091 for the Kailash Cinema Chowk Vend being 1/24 th of the licence fee required to be deposited by way of security. They were however, unable to meet their obligations under the conditions of auction, and fell in arrears. The State Government, demanded the payment, threatened to cancel the licences granted to the appellants and declared its intention to resell the vends at the risk of the appellants.11. On August 22, 1968 the appellants filed their writ petition in the High Court of Punjab and Haryana. They prayed for three reliefs out of which only two were pressed at the hearing. .They asked for a direction quashing the auctions held on March 23, 1968 and secondly they asked that the respondents be restrained from enforcing the obligations arising under the terms and conditions of the auctions. The Deputy Excise and Taxation Commissioner, Jullundur, is the first respondent to the petition; the Excise and Taxation Commissioner, Punjab, Patiala, is the second respondent; and the State of Punjab is the third respondent. The relief sought against the fourth respondent - a private firm - was not pressed.12. Though several contentions - factual and legal - were raised in the petitions, the appellants restricted their challenge in the High Court, to the following points:(1) The Excise and Taxation Commissioner (who in the Punjab exercised the powers of a Financial Commissioner under the Act) had no jurisdiction to determine the method of disposal of the country 1iquor vends;(2) The power conferred on the Financial Commissioner, under section 34 of the Act to grant a licence, permit or pass on payment of such fees , if any, as he may direct did not extend to disposing of the country liquor vends by auction ;(3) The impugned auctions conducted under the amended Rule 36 on the basis of estimated quota in proof litres was in substance founded on the same system which had been struck down by the High Court in Jage Rams case where it was held that the levy imposed through the medium of auctions was a tax and not a licence fee;(4) The State Government alone was competent to impose a tax or an excise duty under the Act; that power could not be delegated to the Financial Commissioner or any other officer;(5) Section 34 of the Act which empowered the Financial Commissioner to levy fees was not a charging section; but if it is construed as containing a delegation to him of the power of the State to levy taxes, no guidelines were laid down and thus the delegation was excessive.(6) The fee which could be imposed by the Financial Commissioner under Section 34 of the Act could only be justified if it had a reasonable relation to the services rendered to the licensees. If it was imposed solely or mainly for the purpose of collecting revenue, it was outside the ambit of Item 66 of List II of the Seventh Schedule of the Constitution. The amounts realised in the auctions in the guise of licence fees were so exhorbitant that they could not possibly be justified under item 66.(7) The rule fixing the maximum price at which a licencee could sell a bottle of liquor was ultra vires of the rule-making powers of the Financial Commissioner under Section 59 of the Act.13. The High Court negatived all of these contentions. It held that the State Legislature was competent to regulate the business of vending intoxicating liquors, that various provisions of the Act showed that the State Government had the exclusive right to manufacture or sell intoxicants, that the Financial Commissioner had the jurisdiction to determine the method of disposal of country liquor vends, that the rules under which the impugned auctions were held are substantially different from those under which the auctions challenged in Jage Rams case were held, that Section 34 of the Act is not an instance of delegated legislation and that the fixation of the maximum price of country liquor was a part of the power to regulate the trade in liquor. On the main contention that the levy in the shape of licence fee was unconstitutional, the High Court held that licences granted for regulating trade in intoxicating liquors stand in a class by themselves and that the consideration which governs licence fees charged in return for services rendered cannot apply to licences issued to the successful bidders at auctions of liquor vends. The High Court further held that Entry 66 in the State List is not confined to fees levied for services rendered but extends to all kinds of fees and therefore the imposition of the licence fee was within the ambit of that Entry.

Reasoning: 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.