Case: State Of Madhya Pradesh &amp; Ors Vs. Tikam Das

2. As is obvious, the facts are brief and beyond dispute, the issue of law straight and simple and our decision, on a careful study of the alternative constructions of the relevant provision, is that the State is entitled to collect the fee on the revised scale. The respondent runs a cafe at Indore and a foreign liquor bar boosts expensive sales and attracts affluent addicts. Naturally, as a profitable proposition the respondent obtained a licence for the sale of foreign liquor (in Form F.L.3) issued under the Foreign Liquor Rules framed under the Excise Act, 1915*. The licence which he held was for one year from April 1, 1963 to March 31, 1964. At that time, under the extant rules the fee payable was 37 paise per quart bottle of malt liquor and different rates for other kinds of foreign liquor. On the date of expiry of the licence, viz, 31st March 1964, the respondent had with him a large quantity of unsold liquor which was already in the licensed premises, having , been brought earlier. He obtained a fresh licence for a further period of one year commencing from April 1, 1964. Meanwhile Government was entertaining the idea of enhancing the scales of licence fee for the various kinds of foreign liquor. The balance quantity left over with the respondent at the end of the licensed period, viz., March 31, 1964 was checked by the concerned Excise . Officials and a panchnama prepared in that behalf. Ordinarily, the surplus stock has to be surrendered by the licensee but, on an undertaking to pay the difference in the event of an enhancement of the, rates, the bar owner was permitted to keep on his , premises the balance quantity so ascertained. Apparently the State Government had decided on the increased rate because we find from Annexure B a demand being made by the Excise Inspector on the licensee to pay the difference of fees consequent on the enhancement of the scale of fees, as worked out on the stock which remained in hand with the owner of the bar on the night of March 31, 1964. Despite the undertaking given to comply with such enhanced demand, the hotelier resisted it and took up the stand that the balance stock had already been subjected to license fee when it was brought in and that the subsequent raising of the rate of license fee could not be applied validly to such stocks. Since the State insisted on levying at the larger rate even on the balance stock held on March 31, 1964 the respondent moved the High Court for the issuance of a writ quashing the demand as illegal. The legality of the levy depends on the applicability of the enhanced scales of license fee to the balance of foreign liquor stock held by the licensee on the mid-night of 31/3-1/4/1964.*Madhya Pradesh Excise Act.1915 (Act II of 1951 )3. The facts being thus plain, we will straight go to the law relied on by the State in support of its claim. The Excise Act and the Foreign Liquor Rules made thereunder govern sales of these intoxicants and Form F.L. 3 applies to bars which sell foreign liquor for consumption on the premises.4. On April 25, 1964 the Government, by virtue of its powers under the Act, amended in certain respects the Foreign Liquor Rules, One such amendment concerns the scale of fees in respect of licence in Form F.L. 3 an upward revision having been effected. The rule itself, although promulgated on April 25. 1964, was given effect retrospectively from April 1, 1964. Apart from raising the rates. Rule IV was also amended by the addition of the following provision at the end of it:"The licensee shall be liable to pay the difference of fees per bottle on the balance of stocks of foreign liquor in the event of the enhancement of the scale of fees during the currency or on expiry of the licence."Based on this modification of the rules, the State made the demand for the difference.

Court's reasoning:
First of all we have to ascertain the scope and area of the rule-making powers, the limitations thereon and the retro-active operation of such rules, There is no doubt that unlike legislation made by a sovereign Legislature, subordinate legislation made by a delegate cannot have retrospective effect unless the rulemaking power in the concerned statute expressly or by necessary implication confers power in this behalf. Ourattention has been drawn to Sections 62 (g) and (h) and 63 in this connection by counsel for theState. The State-Government may make rules for the purpose of carrying out the provisions of the Act (S. 62). Such rules may regulate the amount of fee, the terms and conditions of licences and the scale of fees and the manner of fixing the fees payable in respect of such licenses (62(g) and (h)).This provision, by itself, does not expressly grant power to make retrospective rules. But Section 63 specifically states that all rules made and notifications issued under this Act shall be published in the Official Gazette, and shall have effect from the date of such publication or from such other date as may be specified in thatbehalf. Clearly the Legislature has empowered, its delegate, the State Government not merely to make the rules but to give effect to them from such date as may be specified by the delegate. This provision regarding subordinate legislation does contemplate not merely the power to make rules but to bring them into force from any previous date. Therefore antedating the effect of the amendment of Rule IV is not obnoxious to the scheme nor ultra vires Section,fair reading of this rule yields only one result. The licensed vendor in possession of surplus intoxicants on the date preceding expiry of his license should ordinarily deposit such stock with the appointed Excisehave already set out the provisions of Sections 62 and 63 bearing on the subject and have no doubt that, in the present case, the statute does authorise the State, as its delegate, to make retroactive rules. Therefore we negative the contention that the enhanced levy of license fee cannot operate as from April 1, 1964.There is a measure of absurdity in the rule, if this be the construction. Indeed, the High Court itself notices that the words used to tax at a higher rate the balance of stocks would become redundant in R. XXVI. A fair reading of the rule giving full effect to the words used in R. XXVI of the Excise Rules and the explanation added to R. IV (of the Foreign Liquor Rules already extracted) leave us in no doubt that the balance of stocks envisioned by the rules and subjected to enhancement or reduction of duty is such surplus stock as is held immediately before the expiry of the previous license. So construed, in this case the quantity held over on March 31, 1964 becomes liable to enhancement of license fee on April 1, 1964 and that is precisely what the State has claimed.10. Indeed, commonsense suggests no alternative construction., For, otherwise, some persons who by accident have huge stocks left over will not have to pay the enhanced rate of license fee while others with virgin licenses for that year and begin with no stock-on-hand have to pay at a higher rate. Again, if only the respondent had surrendered his surplus stocks on 31-3-1964, as ordinarily he would have had to, had he not been permitted to retain that quantity in view of his getting a fresh license for the same premises, he would have had, to pay the enhanced rate for such leftover stock. Thus, both law and logic, correct construction and commonsense, coincide in the conclusion that the Eagle Cafe Bar owner (the respondent) had to pay the higher fee on the balance of stock as on April 1, 1964. The High Court erred in its interpretation of the rules as applicable to the presentverification of the actual quantity of such stock, the District Excise Officer may order that the difference of duty be levied on the balance of stocks, and the , licensee shall then pay such duty.... Of course the above procedure primarily visualizes enhancement of duty but is made applicable to reduction of duty when refund of duty shall be made by the State. Rule IV virtually extends this kind of dealing with balance of stocks when the subject matter is license fee as distinguished from duty. Moreover, licensees are bound by the general license conditions (vide condition No. 6 of the license) and the general licence conditions with which we are concerned are set out in Rr. XXV and XXVI already adverted to .