Case: State Of M.P.  Vs. K.C.T. Drinks

The respondent - company having a D-2 licence for manufacture of Indian Made Foreign Liquor from rectified spirit by blending, reducing and compounding Indian Made Foreign Liquor concentrate, challenged the levy of full costs of supervision and establishments of excise staff posted at its factory premises by filing M.P. No. 1456 of 1993 in the High Court of Madhya Pradesh at Jabalpur. By judgment and order dated 4.5.1993, the High Court quashed the levy of expenses incurred on supervision and establishment cost on the ground that Rule 22 of M.P. Breweries Rules, 1970 was struck down as ultra vires by this Court in case of M/s. Lilasons Breweries (Pvt.) Ltd. vs. State of Madhya Pradesh (1992) 3 SCC 293 ). In M/s. Lilasons Breweries (Pvt) Ltds Case, this Court arrived at the conclusion that Rule 22 to the extent it permits raising a demand, which in sum and substance is additional excise duty, without its being actually due, is ultra vires the Act and beyond the rule making power of the State2. Impugned judgment and order passed by the High Court is challenged by filing this appeal.

Court's reasoning:
7. In view of Sections 18 and 27, the State Government is entitled to accept payment of a sum in consideration of grant of any lease in lump sum in addition to any duty leviable under the Act on terms and conditions which are mentioned in the licence deed. Condition 8 of the licence provides that the licensee shall pay the full cost of excise supervisory staff posted at the premises of KCT Drinks, Mandideep, Distt. Raisen9. In Shri Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. vs. State of Gujarat and Anr. (1992) 2 SCC 42 ) validity of demand under Section 58A of the Bombay Prohibition Act, 1949 for maintenance of excise staff for supervision of manufacture of industrial alcohol was assailed on the ground of lack of legislative competence of the State10. The aforesaid decision was referred to and relied upon in M/s. Gujchem Distillery India Ltd. vs. State of Gujarat (1992) 2 SCC 399 )11. In view of the aforesaid settled legal position, the condition empowering the State Government to recover the actual cost of supervisory staff posted at the premises of respondent cannot be said to be in any way illegal or ultra vires as it constitutes the price or consideration which the Government charges to the licensee for parting with its privilege and granting licence. In this view of the matter, the impugned judgment and order passed by the High Court requires to be set aside.