Case: M/S Lilasons Dreweries (P) Ltd. 7 Anr Vs. State Of Madhya Pradesh

This appeal is directed against the judgment and order dated September 4, 1980 of a Division Bench of the High Court of Madhya Pradesh at Jabalpur in Miscellaneous Petition No. 48 ofVires of Rule 22 of the Madhya Pradesh Brewery Rules, 1970 framed under Section 62 of the Madhya Pradesh Excise Act, 1915 stands questioned. That ruleExcise Commissioner to appoint officer in charge of brewery. - Every brewery shall be placed by the Excise Commissioner under the charge of an Excise Inspector to be designated as officer in charge of the brewery. The Excise Commissioner will further appoint such the officers of the Excise Department as he may deem fit to the charge of breweries. The pay of all such officers shall be met by the Government; provided that when the annual charges exceed five per cent of the duty leviable on the issues made from the brewery to districts within the State, the excess shall be realised from the brewer"The appellant is a company carrying on business in the manufacture and sale of beer. For the purpose it has established a brewery in the industrial area at Bhopal. It has obtained three licences in the requisite forms for manufacturing, bottling and sale of beer. It is aggrieved against the recovery of annual charges relating to the pay of the officer in charge etc. of the brewery from the brewer to the extent such charges exceed 5 per cent of the duty leviable on the issue made from the brewery to the districts within the State. The appellant claims relief of quashing of the demand notice in respect of those charges. The High Court negatived the plea of the appellant taking the view that the licences in Form B-1-A which is a licence to work a brewery in private premises, issued to the appellants specifically in terms subject to the Madhya Pradesh Brewery Rules. And since there was an obligation laid on the brewer under Rule 22, that if annual pay of the officers in charge etc. of the brewery exceeded 5 per cent of the duty leviable, the excess had to be realised from the brewer. It was viewed as a condition of licence for working the brewery and well within the rule-making power conferred under Section 62(2)(h) read with Section 28 of the Act, whereunder the State Government could lay down terms and conditions subject to which licence could be granted. Support for the view was taken by the High Court from the first part of Rule 22 empowering the Excise Commissioner to appoint an officer in charge of the brewery and to appoint such other officers of the Excise Department as he may deem fit to be in charge of the brewery with the object of exercising a control over the breweries, as also perform duties assigned to these officers under Rules 23 to 26 which by themselves were reasonable. And since those were reasonable, the provision made in the latter part of Rule 22 that in case the annual charges and pay of such officers exceeded 5 per cent of the duty leviable on the issue made from the brewery to districts within the State, the excess to be realised from the brewer was also reasonable. The High Court in conclusion expressed itself asis true that the Act provides for payment of excise duty as consideration for grant of licence and does not specifically provide for realisation of charges in respect of pay of officers posted for control of breweries. But in our view Section 62 (2)(h) read with Section 28 is wide enough to enable the State Government to make the impugned rule as a condition of the licence."The appellant maintains that though the excise duty leviable under the Act is a tax imposed by the State Legislature in exercise of its plenary power there cannot be a further demand, which is the nature of an additional duty, by means hoof a rule. On the basis of Section 18 it is contended that a lease is granted subject to payment of duty leviable only under Chapter V and not otherwise. The State Government under Section 27, may forego the excise duty and accept payment of a sum in consideration of the grant of any lease under Section 18 in its stead. The State Government, while keeping the duty leviable under Chapter V intact may accept an additional payment of a sum in consideration of the grant of a lease under Section 18. The appellant maintains that the instant demand raised is not referable at all to Sections 27 and 18. The stand of the State is based on the literal reading of Rule 22. The State terms the additional payment as "a further fee apart from licence fee on the brewer in case the charges of supervision exceed 5 per cent of the duty leviable on the issue made from the brewery to various districts in the State". It has also been maintained that the charge created under Rule 22 is nothing but a further fee or additional consideration, which is neither a further duty nor a further tax. The exaction is suggestive of roots in Sections 27 and

Court's reasoning:
4. The State has the exclusive right or privilege of manufacture or sale of liquor. There is no fundamental right of any citizen to carry on trade and business of liquor. This is the settled position of law.9. The excise duty collected goes to the coffers of the State. The pay of officers has to come out from coffers of the State. Five per cent of the duty leviable is assessed to meet the pay of such officers, which the Government, but for the rule, is otherwise supposed to meet. This part of the rule is purely internal between the Government and its officers. The licensee is least concerned as to how the excise duty leviable would be appropriated. It is only in the case of a shortfall when the excess is sought to be realised from the brewer that he gets affected. Now what is this excess ? It is obviously the sum which falls short of the duty leviable. In other words, it is this for the brewerhave not lifted enough quantities of beer and sent them to districts within the State. Thus the State has not earned enough excise duty resulting in a shortfall in its 5%. That does not go to meet the annual expenses of the officers. Therefore you meet the shortfall, without lifting the goods."the shortfall partakes of the same colour and content. It cannot for a moment be suggested that when there is a shortfall, the demand is as if of an "additional fee or consideration" and not additional excise duty. It is obvious from the language of the rule in the event of the excise duty leviable falling short of the expected five per cent to meet the pays of the officers cannot be met therefrom, the State has all the same to pay. The measure goes to recoup the State of the charges by demanding a sum equals to the duty leviable to that extent without lifting excisable articles. On this understanding arrived at the demand is hit, in our view, by the ratio of Banerjee case ( 1970 (2) SCC 467 : 1970 (1) SCR 844). Firm Gappulal case ( 1976 (1) SCC 791 : 1976 SCC(Tax) 71 : 1976 (2) SCR 1041 ) and Ram Kumar case ( 1976 (3) SCC 540 : 1976 SCC(Tax) 360 : 1976 Supp SCR 532) and cannot be sustained. Rule 22 to that extent is ultra vires the Act and beyond the rule-making power of the State10. Now with regard to the suggested wide amplitude of Section 62(2)(h) and Section 28 and condition of licence, all we need to say is that though under Section 28 licences are issued on the prescribed forms and on payment of such fee as prescribed and licences containing such particulars as the State Government may direct etc., this power even though wide is yet confined within its frame and can in no event assume the power to impose or levy a tax or excise duty by means of a rule without the sanction of the Act. As we have analysed earlier, the payment asked, on the contingency of events, cannot partake the character of a fee so as to come within the purview of Section 28. And if it does not the support of Section 62(2)(h) is sterile. Seeking help from Section 27 would also be of no avail because the additional payment conceived of therein is also a payment over and above the duty leviable and as a part consideration towards the grant of any lease under Section 18. The additional consideration conceived of in Section 27 is a consideration over and above the excise duty. The way we have analysed Rule 22, the terms of Section 27 do not go to retrieve the situation