Case: Government Of Maharashtra  Vs. M/S. Deokar'S Distillery

2. The respondents are holding a licence in Form P.L.L. for manufacture of Indian made foreign liquor, prescribed under the provisions of the Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966 (hereinafter referred to as "the Rules of 1966") and also holds a licence in Form C.L.I. prescribed under the provisions of the Maharashtra Country Liquor Rules, 1973 (hereinafter referred to as "the Rules of 1973") for manufacture of Country liquor, made under the provisions of the Prohibition Act. All transactions pertaining to receipt, transport, storage of spirit and manufacture, bottling and issues of the liquor manufactured are required to be under excise supervision under both the aforesaid sets of Rules. Under Section 58A of the Prohibition Act, the State Government is empowered to permit the manufacture and other related activities in respect of any intoxicant under the supervision of excise staff and the cost of such staff is to be paid to the State Government by the manufacturer. The cost of such staff is required to be paid to the State Government by the licensee in advance as per(12) of Rule 17 of the Rules of 1966 and(12) of Rule 6 of the Rules of 1973. The pay scales and other allowances of Government employees are fixed by the State Government by issue of Rules and Government Resolutions under the power vested in it by the proviso to Article 309 of the Constitution of India. The Commissioner, as empowered by the State Government, issues circulars for levy and recovery of the supervision charges based on the pay scales and other allowances of the Government employees fixed by the State Government under the Rules and Government Resolutions made under Article 309 in respect of the excise staff posted for supervision. Demand notices were issued by appellant No. 4r of State Excise to the respondents to pay the differential amounts of cost of supervision on account of revision ofwith retrospective effect ordered vide Government Notification, Finance Department dated 10.12.1998, as per the revised pay scales for oneand two constables. By the aforesaid Notification, the State of Maharashtra had promulgated, under the power vested in it by the proviso to Article 309 of the Constitution, the Maharashtra Civil Services (Revised Pay) Rules, 1998 (hereinafter referred to as "the Rules of 1998"), whereunder the pay scales of the Government employees were revised and fixed with retrospective effect from 1.1.1996. It was pointed out that because of the increase in the cost of supervision with effect from 1.1.1996, vide aforesaid Notification dated 10.12.1998, on account of revision of pay scales and transport charges of the employees posted for supervision, it was necessary to increase the said charges, which should be paid by the respondent within 15 days. The respondent, vide his letter dated 2.3.1999, informed thethat he had already paid the supervision charges in advance, he would not be able to pass on the burden of the differential amount to his purchasers and that he was not liable to pay the differential amount. By reminder letter dated 24.3.2000, appellant No.4 rejected the reply of the respondent and directed him to pay the differential amount. The respondent questioning the above letter, preferred Writ Petition No. 3754/2000 in the Bombay High Court contending that, inter alia, in view of the decision of this Court in Polychem Ltd. and Anr. vs. State of Maharashtra & others reported in (1998) 6 SCC 196 , the demand notice was liable to be quashed and set aside. The appellants filed a reply to the writ petition and denied the contention of the respondent herein. The writ petition came up for admission before the High Court and the learned Judges observed that they were allowing the petition at the stage of admission itself in view of the judgment of Polychems case (supra), without considering the submissions of the appellants that on certain facts and aspects the ratio of the Polychem judgment was not applicable to the case of the respondent, as set out in the affidavit in reply. However, learned counsel appearing for the respondents herein, contended before the High Court of Bombay that the challenge sought to be raised by them to the impugned demand notices has already been concluded in their favour in the case of J.E. Bilimoria & Sons vs. State of Maharashtra & others reported in 1999 Mh. L.J. (ii) 1079, wherein a similar issue was considered by the Division Bench and it was held therein that the demand notice of the differences of the supervision charges with retrospective effect was without jurisdiction. Thus, the notice in that case was quashed and set aside. Learned counsel further contended that the aforesaid judgment of the High Court of Bombay in J.E. Bilimerias case (supra) has been confirmed by this Court in the case of Polychem (supra) wherein this Court was pleased to hold that the payment of supervision charges with retrospective effect was without jurisdiction and the impugned demand of differences of supervision charges retrospectively could not be sustained. Learned counsel appearing for the respondents therein (appellants herein) contended that the judgment of the Division Bench of the Bombay High Court in the case of J.E. Bilimoria (supra) was no longer of good law in view of the Full Bench judgment of the said Court in the case of Mohan Meakin Ltd. and Anr. vs. The State of Maharashtra & others, reported in 1993 Mh. L.J. (i) 13. The Full Bench while resolving the conflict did not approve the view taken in the case of J.E. Bilimoria (supra) and overruled the same and confirmed the view of view of another Division Bench of the High Court of Bombay is the case of Gustad Mayur Irani vs. The State of Maharashtra reported in 1991 (51) ELT 232 (Bom) . (W.P. No. 940/1982). It was, therefore, submitted that the ratio of the decision in J.E. Bilimorias case (supra) has no application in the facts and circumstances of the present case. It was further contended that under Section 58A of the Prohibition Act, the State Government has the power to recover from a licensee of cost of the staff appointed to supervise the licensed premises for excise purposes. The Maharashtra Foreign Liquor (Storage in Bond) Rules, 1964 (hereinafter referred to as "the Rules of 1964) also provide that the State Government can recover from the licensees the cost of staff appointed at the licensed premises/bonded warehouse for excise supervision. It was further urged that condition No.3 of the licence requires the petitioners to pay such amount of cost as determined by the respondents, appellants herein, in advance before the beginning of every quarter. This condition is merely for administrative convenience and it does not prevent the State Government from recovering the cost of such staff subsequently, especially when both Section 58A of the Prohibition Act as well as Rule 7 of the 1964 Rules do not prescribe any time within which such cost has to be recovered. It was further contended that in view of the application of recommendations of the Fifty Pay Commission, the Dearness Allowance and other emoluments payable, inter alia, to such supervisory staff have been increased with effect from 1.1.1996 and the cost of supervisions charges has proportionately gone up and this is to be recovered from the licensee. It was further submitted that the increased cost, however, has to be determined from 1.1.1996 because of the retrospective raise granted to the staff by the Government and that the licensee do not have any say in the salary and other emoluments paid to such staff. It was also contended that under Section 58A of the Prohibition Act and the relevant Rules, there is a clear existing statutory liability on the licensees to pay the cost of the supervisory staff and what is sought to be recovered from the respondents herein is the increased cost of such supervision which has been taken place from 1.1.1996 and the demand was made when the cost increased.3. The Division Bench held that the case on hand is squarely covered by the decision of the Bombay High Court in J.E. Bilimorias case (supra) and that the view taken by the Bombay High Court has been confirmed by this Court in Polychems case (supra) wherein it was held that the State Government is not empowered to collect supervision charges with retrospective effect under the Prohibition Act. The Division Bench held that they are around by the aforesaid view taken by this Court and, therefore, they have no other alternative but to quash and set aside the demand notices issued by respondent No.4 dated 22.3.2000 and 19.2.2000 in W.P. No. 3753/2000 and W.P. No. 3754/2000 respectively., The writ petition was allowed and the rule made absolute in terms of prayer clause (a) in both the petitions with no order as to costs.4. Aggrieved by the orders passed by the Bombay High Court in the above writ petitions, these appeals by way of special leave petitions were filed by the Government of Maharashtra and others reiterating the contentions raised before the Bombay High Court.

Reasoning: 30. In the case on hand, the licensees gave an undertaking at the time of obtaining grant or renewal of the license in the application form itself, both under the Rules of 1966 and the Rules of 1973, that they would abide by all orders made under the Prohibition Act and the Rules. Under Rule 17(43) of the Rules of 1966 and under Rule 6(36) of the Rules of 1973, there are residuary powers of making a demand in special circumstances not foreseen in Rule 17(12) of the Rules of 1966 or Rule 6(12) of the Rules of 1973. It is seen from Rule 17(43) of the Rules of 1966 that the licensee shall abide by all the Rules. Regulations and orders made from time to time under the Act. A similar provision also exists under Rule 6(36) of the Rules of 1973. The object of Section 58A of the Prohibition Act the intention of the Legislature, in our opinion, could not be anything other than that the entire cost incurred by the Government on account ofpaid to the Government employees posted for supervision should be paid by the licensee and that this cost should not be met from the Government exchequer.31. We have already extracted the relevant undertaking that the respondents had given in the application in Form P.L.A. prescribed under the Rules of 1966 and application in Form C.L.A. prescribed under Rules of 1973. Apart from the undertaking under Condition No. 17 of the licence in Form C.L.A. for grant or renewal of licence that the orders made from time to time under the Act shall be complied with.43 of Rule 17 of the Rules of 1966 and36 of Rule 6 of the Rules of 1973 also prescribed that the licensee shall abide by the orders made from to time under the Prohibition Act and these are the provisions which give residuary powers to the petitioners, inter alia, direct to pay the supervision charges.The legal licensee does not have a fundamental right to deal in liquor under Entry 8, List II in the Seventh Schedule to the Constitution of India and thereby under Sections 49 and 143(2)(u) of the Prohibition Act, the State has the exclusive right/privilege in respect of potable liquor and the State, in our opinion, can charge any reasonable expenses or even consideration for permitting such activity by grant of licence and that respondents ought to comply with all reasonable orders, as undertaken by them while obtaining the licence. This factor, the High court, has not appreciated. Once the liquor licensee has undertaken to abide by all reasonable orders under the Prohibition Act while obtaining the licence, they cannot wriggle out of the contractual liability voluntarily incurred by them.33. The order of the High Court is bad in law. The High Court, in our view, has erred in not appreciating the impugned demand notice was also in the nature of demanding balance of the price of the exclusive privilege which would become final only on issue of the Notification, order under Article 309, the bulk of which have already been recovered in advance, which privilege exclusively vests with the Government considering effect of provisions especially Section 49 and Section 143(2)(u) of the Prohibition Act. In our opinion, the establishment charges demanded are in the nature of price for parting with the privilege to permit manufacture and sale of liquor, and the privilege exclusively vests with the Government.34. We have already noticed the observations made by this Court in the case of M/s. Anabeshahi Wine and Distilleries Pvt. Ltd. (supra). In this context, it isby catena of decisions of this Court that there is no fundamental right to trade in liquor and State can charge consideration for granting the privilege in respect of potable liquors for raising revenue as ruled in M/s. Anabeshahi Wines judgment (supra).35. As already noticed, the High Court has failed to appreciate that the judgment of this Court in Polychems case (supra) was required to be read with the decision f the Full Bench of the said Court in Mohan Meakins case (supra) in which the earlier decision in J.E. Bilimorlas case (supra) was overruled on entirely different reasons than those given in the judgment of the High Court in Gustad Mayur Iranis case (supra), the judgment dated 24.2.1994 in W.P. No. 2718/1991 and M/s. Vidarbha Wine Traders vs. State of Maharashtra and order dated 5.9.1994 of this Court rejecting S.L.P.(C) No....../1994 (CC 26531) filed by Vidarbha Wine Traders & fifteen other licensees.36. Inspite of the above position including different reasons given in the Full Bench judgment than those in Gustad Mayur Iranis case (supra) and in the rejection of the special leave petition filed by Vidarbha Wine Traders, learned counsel for the respondents is unable to give any reasons for establishing that the Full Bench decision in the Mohan Meakins case (supra) was not correct and the High Court has also not given any reasons in the impugned judgment for disagreeing with the reasons given in the Full Bench judgment of the Mohan Meakins case (supra).37. We have perused the judgment in Polychems case (supra) which was delivered on the basis of a concession and incorrect information submitted by the learned advocate appearing for the State of Maharashtra. The above facts and the legal position that the J.E. Bilimoria decision was overruled long back in the Full Bench judgment in the case of Mohan Meakin (supra) and which Full Bench judgment was already confirmed by this Court by order dated 8.9.1994 rejecting the Special Leave Petition No.... /1994 (CC 26531) filed by Vidarbha Wine Traders and 15 other licensees were not placed for consideration of this Court in the Polychems case by the State of Maharashtra as would be seen from the following observation in Polychems case, inter alia, that "It is common ground that these supervision charges are collected in advance at the beginning of each quarter.... 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 J.E. Bilimorias case was not challenged by the Revenue as per the information passed on by Mr. Nargolkar, learned counsel for the respondents."38. It appears that the learned counsel appearing for the State of Maharashtra had not sought any instruction in the Polychems case (supra) before making any statement in respect of J.E. Bilimoria judgment (supra), when it was already overruled long back in the judgment of the Mohan Meakins case (supra). Therefore, the correct facts and the legal position, as submitted above, could not be placed for consideration of this Court in the Polychem matter. We are, therefore, of the opinion that the judgment of this Court in Polychems case was delivered on the basis of the concession by the learned Government advocate when he conceded that supervision charges are collected only in advance, when under the residuary powers under Rule 17(43) of the Rules of 1966 and Rule 6(36) of the Rules of 1973, additional amounts were or could be demanded, as also di9rectly under Section 58A and Section 114 of the Prohibition Act. In our opinion, the High court has erred in not appreciating the submission of the appellants that the judgment in the case of Polychem appears to have been delivered on the basis of a concession/incorrect information and its ratio ought to be applied to the facts placed for consideration and the issues considered and decided.39. This apart, the High Court has also not right in rejecting the writ petition of the respondents at the threshold. The High Court has failed to notice another important factor that the statutory provision under Article 309, namely, the Notification dated 10.12.1998 and the consequential administrative instructions/orders issued for carrying out the executive function under Section 58A of the Prohibition Act and Article 162 namely, the circular letter dated 30.7. 1999 had not been challenged by the respondents herein and, therefore, they were not entitled to challenge the demand notice which was merely a consequential communication. The High Court, therefore, is not right in quashing the demand notice issued by appellant No. 4, namely, theof State Excise, in charge of the manufactory of the respondent, without examining the validity of or quashing the Rules of 1988 and the consequential circular letter dated 30.7.1999 issued by appellant No.2, namely, the Commissioner, since the demand notice was merely a consequential communication issued in furtherance of the rules of 1998 and the circular letter dated 30.7.1999.