State Of Maharashtra And Ors vs Nagpur Distillers, Nagpur And Anr

2. This appeal by the State of Maharashtra and the Officers of the State Excise Department challenges an interim order passed by the Division Bench of the High Court of Bombay, Nagpur Bench, in a Writ Petition filed by the respondents herein. Respondent No.1 is a partnership firm and respondent No.2 is a partner therof. Respondent No.1 is engaged in the business of manufacture and sale of Indian made foreign liquor (hereinafter described as "IMFL") and holder of a wholesale licence under the State Government in Form PLL as per the Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966. The said Rules are made under the Bombay Prohibition Act, 1949. Respondent No.1 did not own a distillery and was not manufacturing rectified spirit and extra neutral alcohol which it required for manufacture of IMFL. Respondent No. 1 had to purchase rectified spirit and extra neutral alcohol from distilleries owned by others. For possession and use of rectified spirit including the extra neutral alcohol, license was required in Form R.S.II prescribed under the Bombay Rectified Spirit Rules, 1951. The manufacture and sale of IMFL is supposed to take place under the supervision of the staff of the State Excise Department as provided in Rule 12(2) of the Bombay Rectified Spirit Rules, 1951. As per Rule 17 (12) of the Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966 and as per condition No. 1 of the PLL license obtained thereunder, Respondent No.1 as licensee, had to pay the cost of the supervisory staff to the State in terms of Section 58A of the Bombay Prohibition Act.

4. In view of the relevant provisions in the Bombay Rectified Spirit Rules, 1951, the Bombay Rectified Spirit (Transport in Bond) Rules 1951 are made applicable for rectified spirit. The issue of a transport pass is contemplated for the transport of rectified spirit from the distillery to the factory of the user subject to payment of the fee prescribed under Rule 5(2) of the Bombay Rectified Spirit (Transport in Bond) Rules 1951. According to the State, the first respondent was to pay the fee at the rate of Rs.2 per litre for rectified spirit and Rs.3 per litre for extra neutral alcohol obtained by it for manufacture of IMFL. The respondents filed Writ Petition No. 2417 of 2004 in the High Court challenging the notification dated 12.7.1999, impugning rule 5 of the Bombay Rectified Spirit (Transport in Bond) Rules 1951 and the fee prescribed imposed on them under the Bombay Rectified Spirit (Transport in Bond) Rules 1951. The challenge was mainly based on a decision of the Bombay High Court in Vam Organic Chemicals Limited Vs. State of Maharashtra, Writ Petition No. 2275 of 2000. It was their plea that the decision in Vam Organic Chemicals Limited covered the position regarding the fee sought to be collected from the Respondent No.1 and the demand was liable to be quashed for the reasons stated in Vam Organic Chemicals Limited. The respondents also sought an interim order of stay of the demand pending disposal of the Writ Petition. They pointed out that in a number of other cases including a case of their own relating to a previous demand, interim orders of stay had been granted and that even in the petition for special leave to appeal against the decision in Vam Organic Chemicals Ltd. (supra) being SLP (C) No. 12180 of 2001, filed in the Supreme Court, the Supreme Court has ordered Vam Organic Chemicals Limited, a licensee similarly situated, only to file an undertaking that in case the appeal is allowed by the Supreme Court, Vam Organic Chemicals Limited would satisfy the liability as per law and as determined by the Supreme Court within the time fixed by the Supreme Court. The prayer was opposed by the State. The High Court granted an interim order staying the recovery of the fee on the strength of the decision in Vam Organic Chemicals Limited and the interim order granted by this Court in the appeal from that decision.

12. We therefore allow this appeal and setting aside the order of the High Court order that if the respondents pay one-half of the license fee payable by the respondents and as demanded of them and give an undertaking that they will pay the balance 50% of the levy within the time fixed by the High Court, if the writ petition were to be dismissed, the recovery of the licence fee payable as per the impugned notification will be kept in abeyance until the disposal of the writ petition by the High Court. The respondents are given three months time from today to file a modified undertaking and to deposit 50 per cent of the license fee payable for the Excise Year 2005-2006. The respondents would be liable to pay 50 per cent of the license fee for the subsequent years on or before the thirty-first of December of that year and to file undertakings in the subsequent years until the Writ Petition is heard and finally decided by the High Court. If the respondents fail to make the deposit and to file the undertaking as indicated above, the appellants will be free to take all steps that are permissible under law for recovery of the entire fee due from the respondents as may be demanded from them in accordance with the relevant rules. In case the respondents succeed in their challenge in the writ petition, the State will be liable to refund the amount paid with interest thereon at the rate of 9% per annum from the date of payment till the date of refund. The amount will be refunded within two months of the allowing of the writ petition unless otherwise agreed to by the parties, regarding the adjustment of that sum.