Judgment sc-2017-4-163-186

A The Judgment of the Court was delivered by ASHOK BHUSHAN, J. I. These appeals have been filed by the State of Madhya Pradesh against the judgment and order dated 04.05.2000 of the High Court by which judgment the writ petition filed by the Respondents has been allowed and demand of Rs. 13,24,189.50, B claiming to be excess expenditure incurred on State Government establishment on Distillery of respondents has been set-aside.

2. Brief facts of the case are: The Respondent Kedia Great Galeon Ltd. held a licence under Madhya Pradesh Distillery Rules, 1995 (hereinafter referred to as Rules c 1995) for manufacturing of Liquor/Spirit. A notice dated 2J'd March, 1999 was issued to Respondent No. I by the District Excise Officer, demanding an amount of Rs. 13,24,189.50 as excess expenditure on the establishment of officers and emplo~ees as per Rule· 4(41) of Madhya Pradesh Distillery Rules, 1995 pertaming to year 1995-96, 1996-97 and 1997-98.

D 3. The Respondents aggrieved by the above notice filed a writ petition in the High Court of Madhya Pradesh, Bench at Indore being Writ Petition No. 589of1999. The Respondent in its writ petition placed reliance on a Judgment of this Court in Mis. Lilltso11s Breweries (Pvt.) . Ltd. versus State of Madhya Pradesh a11d Others, (1992) 3 SCC E 293, in which case Rule 22 of Madhya Pradesh Brewery Rules, 1970 which also entitled the State to realise from the brewery charges on officers exceeding five per cent-of the duty leviable was struck down. Respondents pleaded in the writ petition that Rule 4( 41) of the Rules, 1995 is also 11011 est and void, consequently demand raised on the strength of such rule is liable to be struck down. In the writ petition following F prayers were made in Para 7 by the Respondents: "(i) A writ, direction or order in the nature of mandamus or as deemed fit be issued quashing tile order A1111exure/2 and it be declared tllat 110 demand can be raised under Rule 4(41) of the Distillery Ruies. G (ii) Suell other relief be granted (IS deemed fit. (iii) This petition be allowed with costs."

4. A counter-affidavit was filed by the State, stating that Rule 22 of M: P. Breweries Rules, 1970 is out of context and has no relevance since the demand has been raised under Rule 4( 41) of Rules, 1995.

STATE OF M.P. & ANR. v. KEDIA GREAT GALEON LTD.. · 167 · [ASHOK BHUSHAN, J.]

5. State pleaded that demand made by the State is proper and cannot be struck down, however, if the writ petitioner wishes to challenge the vires of Rule 4( 41 ), same can be challenged before the Constitution Bench.

6. A learned Single Judge allowed the writ petition and quashed the demand notice. Learned Single Judge although, opined that Rule B 4( 41) of the Rules 1995 appears to be ultra vires to the Madhya Pradesh Excise Act beyond the.rule making power, however since no such prayer is made by the writ petitioner, no order in this behalf can be passed in the rules.by Bench at Indore.

7. Learned Single Judge, however, held that decision of this Court c in Lilasons (Supra) renders the demand. notice Annexure P.2, as void. Learned Single Judge also held that the demand towards establishment charges is more than 150 per cent of the total income of the distilleries on the basis of which, the demand is arbitrary and unreasonable.

8. Aggrieved by the judgment of learned Single Judge, the State o filed a Letter Patents Appeal before the Division Bench of the High Court, which was dismissed on 06.09 ,2005, as not maintainable ..

9. Aggrieved by the judgment oflearned Single Judge as well as .. the judgment of the Division Bench of the High Court, these appeals have been filed by the State of M.P. E

10. We have heard Shri Ankit Kumar Lal, Learned Counsel appearing for the State ofM.P. and Shri Jayant Kumar Mehta, learned counsel appearing for the respondents. l J.. Learned counsel for the appellants in support of the appeal· contends that the judgment of the learned Single Judge, declaring tlie F demand, as void is erroneous. It is contended that the learned Single Judge, relying on the judgment of Li/t1S011s case had declared the demand, as void whereas, judgment ofthe··Lih1so11s was concerned with Rule 22 of M. P. Breweries Rules·-1970, but the demand impugned before the High Court was raised under Rule 4( 41) of the Rules 1995. · · G . 12. Learned Counsel also submits that the judgment of Li/asims has not been followed bythis Court in soti1e subsequentjudginents. It is submitted that in the writ petition, there was no challenge to Rule 4(41) of Rules i995, hence, the demand which was fully covered by Rule 4(41) could nothave been struckdown: It is submitted tliat Rule 4 (41) .. H

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A is intra vires and the State in accordance with the M. P. Excise Act, 1915 is fully entitled to realise the above demand. The demand raised under Rule 4( 41) was fully covered under Section 27 and 28 of the M.P. Excise Act, 1915. Learned Counsel submits that licensee having taken the licence B under the conditi0t1s, as contained under Rule 4(41) of Rules 1995, cannot turn round and challenge the demand. He submits that provisions for realization of .establishment charges from licensee are contained in different Exci~e Acts of various States and such provisions have been held to be intra vires, by this Court.

13Copy pinpoint13. Shri Mehta, learned counsel appearing for the respondents, c refutingthe submissions of the learned counsel for the appellants contends that the judgment of Li/(lso11s (supm) is fully applicable in the facts of the present case and had rightly been relied by learned Single Judge for quashing the demand. Learned counsel submits that in the writ petition, there were specific grounds, challenging the vires of Rule 4(41) and the mere fact that no specific relief was claimed in the writ petition is inconsequential and this Court can very well examine the vires of the rule, which rule is liable to be struck down following the judgment of this Court in Lilllsons (suprll). It is contended that the expenditure on the establishment is claimed as 150 per cent on revenue earned whereas, rule making authority has contemplated 5 per cent of revenue to meet the establishment charges, the demand is unreasonable and arbitrary and exorbitant. Learned counsel has relied on Para 9 of the judgment of learned Single Judge where the demand has been held to be arbitrary and unreasonable. Learned Counsel further pointed out that from the demand notice, it is apparent that there was no revenue earned in the year 1996-97 whereas, expenditure in excess of 5 per cent have been claimed as Rs.4,36,897/-.

14Copy pinpoint14. Learned counsel further contended that the State itself in subsequent years have changed its policy and instead of realising the demand in excess of 5 per cent ofrevenue, now a fix amount is charged from the licensee. He contended that there was no provision in the Act to realise such charges prior to insertion of Section 28-A in the M. P. Excise Act, 1995 by M.P. Act No. 24 of 2000 which indicates that charges were not recoverable from the licensee.

15Copy pinpoint15. We have heard the submissions of the learned counsel for the parties and perused the records.

STATE OF M.P. & ANR. v. KEDIA GREAT GALEON LTD. 169 [ASHOK BHUSHAN, J.]

16Copy pinpoint16. The Trade ofLiquor is in existence from the time immemorial. A All civilized societies had soon realised the necessity to control and regulate such trade. In an early decision, Field, Jin Crowley versus Cllristensen 34 LED 620 had made the following observations in the above context: "The sale of sucll liquors ill this way has, tllerefore, been, at B all times, by the courts of every State, considered as tile proper subject of legisfotive regufotion. Not only may a licence be exacted from tile keeper of tile saloon before a glass of his liquors can be Illus disposed of, but restrictions may be imposed as to the class of persons to wllom they may be sol<I, all(/ tile hours ofthe day, mu/ the days ofthe week 011 which the saloons c may be opened. Their sale in that form may be absolutely prollibited. It is a question of public expediency and public morality, all(/ not offederal law. The police power of the State is fully competent to regulate the business - to mitigate its evils or to suppress it entirely. There is no inhere11t right i11 a D citizen to thus sell illtoxicati11g liquors by retail; it is not a privilege of a citizen of tile State or of a citizen of the United States. As it is a business attended with danger to tile community, it may, as already said, be e11tirely prollibited, or be permitted under such co11ditio11s as as will limit to tile utmost its evils. The numner and extent of regulatio11 rest in E tile discretion of the governing autllority. Tllat authority may vest in sucll officers as it may deem proper tile power of passing upo11 applicatio11s for permissio11 to carry it on, a11d to issue licences for that purpose. It is a matter of legislative wil/.011ly." F

17Copy pinpoint17. This Court in Cooverjee B. Bluiruclla versus Tile Excise Commissioner, Ajmer, AIR 1954 SCC 220, speaking through Mallaja11, C.J., after approving the above passage of Field, J. stated: "These observations llave our e11tire concurrence a11d they completely negative tile contention raised 011 behalf of tile G petitions. The provisions of tile Regulation purport to regulate trade in liquor in all its different splleres and are valid."

18Copy pinpoint18. Mahajan, C.J., further held in above case: "It cm1 also not be tlenietl that the State llas tile power to H

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A prohibit 'the trades whiclt are illegal or immoral or injurious to the health am/ welfare of tlie public. Laws pro/iibiting the trades in noxious o'r da11gerous goods or tmfflcking i11 women cannot be held to be illegal as enacting a prohibition and not a mere regulation.'"

19Copy pinpoint19. Justice Y. VChandrachood, speaking through a Constitution Bench in Har S/umkar and Others versus· Tiie Deputy Excise and Taxation Commissioner (llU/ Others, (1975) 1 SCC 737, referring to various earlier Constitution Benches of this Court laid down following in Para 45 & 47: c "45. In Nagenilra .Nath Bora v. Commissioner of /Ii/ls ·Division and Appeals, Assam, tlie decisi01is ill ·cooverjee's case (supra) and Kidwai's cttse(supra) were cited by tt Constitutio,i Benc/1 aS" laying down tlie proposition tlwi tl1ere was no ii1/ierent rigltt in a citize)1 to self' liquor and that tlte control (llU/ restrictiol1 over the consumption of illtoxicating liquors was necessary for the preservation of public liealtlt and morals and to raise revenue;" "47. Tltese unanimous decisions ofjive Constitution Bencltes . uniformly empltasized after ~ care/u/ consideration of tlte problem involved tltat tlte State Jws tlte power to pro/tibit trades which are injurious to tlie liea/tli and welfare of tlie public, that elimination and exclusion from business is inherent in tlte nature of liquor business, that no person ltas an absolute rigltt to deal ill liquor and that all forms of dealings in liquor ltave, from their inlterent nature, been treated as a class by tltemselves by all civilized communities. Tlie contention tliat tlte citizen liad either a natural or a fundamental rigltt to carry 011 trade or business in liquor thus stood rejected."

20Copy pinpoint20. This Court in the above Constitution Bench has also held that one of the main purposes of selling the exclusive rights of liquor is to raise the Revenue. Foil owing was stated in para 51: "...After referring to tlie decisions in Cooverjee's case (supra) and Krisltna Kumar Narula's case (supra) it was observed that one of tlte important purposes of selling tlie exclusive rig/it to vend liquor was to raise revenue t11ul since tlte Government /iad the power to sell exclusive privileges tltere H

STATE OF M.P. & ANR. v. KEDIA GREAT GALEON LTD. 171 [ASHOK BHUSHAN, J.]

was no basis for contending tlwi tile owner of tlie privileges could not decline to accept the liigliest bid if lie tliouglit that tile price offered was inadequate. Hegde, J. speaking for tlie Division Benell observed: (SCC p. 44,l'<tra 13) Tile fact that the Govemment was tile seller does not change tile legal position once its exclusive right to deal with those privileges is conceded. If tlie Government is the exclusive owner of t/iose privileges, reliance 011Article19(l)(g) or Article 14 becomes irrelevant. Citizens cannot have any f u11damental rig/it to trade or carry 011 business in tlie properties or rigIt ts belonging to tlte Govemment nor can tliere be any infrii1gement of Article 14, if tile Govemme11t tries to c .get tile best available price for its valuable rights." 2 I. While delving into the nature oflicence fee charged for granting the privilege to manufacture/sale intoxicant, Constitution Hench further lai~ in para 59: . . . . . . . D "Tlte amount cltarged to tlte licensees is not a fee properly so-called nor indeed a tax but is in tlte nature of tlte price of a privilege, wliiclt tlte purcltaser ltas to pay ill any trading or business transactions."

22Copy pinpoint22. Those who come forward to seek the above privilege of the E State to manufacture or sell the liquor have to abide by the statutory regulations and terms and conditions of the licence. The privilege is not thrust upon anyone rather it is sought by intending persons or parties by participating in auctions for settling such right or by obtaining licence for such privilege in accordance with the statutory provisions. F

23Copy pinpoint23. After noticing the nature of the privilege, pertaining to manufacture and sale of intoxicant it is relevant to have a birds eye view on the relevant statutory provisions governing the field.

24Copy pinpoint24. The Central Provinces Act I 9 I 5 (M.P. Excise Act 19 I 5 hereinafter referred to as Act I9 I 5) was enacted to consolidate and G amend the laws relating to import·export, transport, manufacture, sale and possession of intoxicating liquor and drugs. Chapter IV of the Act deals with manufacture, possession and sale. Section 13 provides that no intoxicant shall be manufactured or collected except under the authority and subject to the terms and H

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A conditions of a licence granted in that behalf. Section 14 deals with establishment and licensing of distilleries and warehouses. Section 18 deals with the power to grant lease ofright to manufacture, etc .. Section 18 (1) is quoted below. "18.1. The State Governme11t may lease to tmy person, Oil B sue/I conditiolls and for such period as it may think fit, the right- (a) ofMallufacturillg, or ofsupplying by wholesale or of both, or c (h) of selling by wlioles(lle or by retail, or (c) of nwnujacturing or of supplying by wholesale, or of both, am/ selling by retail, ally 1 [omitted by Madhya Prudesh Act No. 19of1964]"liquor or intoxicating drug witlii11 any specified areq. D

25Copy pinpoint25. Chapter V deals with the duties and fees. Section 25 ( 1) deals with the duty on excisable articles. Section 25 (I) is quoted below. "25(1). An excise duty or a countervailing duty, as the case may he; shall, if the State Government so direct, he leviecl 011 all excisable articles other tlum medicinal and toilet E preparations specified for the time being i11 the Schedule to tile Medical a11d Toilet Preparatio11 (Excise Dutie:,~ Act, 1955 (No. 16 of 1955)- (a) imported; or F (h) exported; or (c) tra11sported; or (d) manufactured, cultivated or collected under any licence granted under section 13; or

G (e) manufactured any distillery established, or a11y distillery or brewery lice11sed, under this Act: Provicletrtllat it shall he law/ul for the State Govemme11t to exempt any excisable article from duty to which the same may liable under this Act." H

STATE OF M.P. & ANR. v. KEDIA GREAT GALEON LTD. 173 [ASHOK BHUSHAN, l]

26Copy pinpoint26. Section 27 deals with payment for grant of leases. Section 27 A is as follows: . . ..

"2 7.lJnstead of or in additi011 to any duty leviable under this . Chapter, the State Government may accept payment ofa. sum in consideraiion of the grant ofany lease itnder Sec. 18. 27.2 Nothing contained in subcsection (1) s/wllbe construed B . to preclude the State Gove.mment from enhancing or reducing tlte sum received in consideration of a grant of any lease U1uler Section 18 during the course of a jhumcial year or during the currency of a licence and power to enhance or reduce t/1e sum shall include power to give retrospective effect C to such enlwnce111e11t or reduction from a <late not earlier · . than the co111me11ce111ent of the financial year."

27Copy pinpoint27. Chapter VJdeals with the licences, permits and passes. Section .28 is as follows: "28. Form and co1itlitions of licence etc. D · (I). Every ·permit or pass issued or licence grantee/ under .this Act shall be issued or granted 011 pllyment of such fees, . for such period, subject to such restrictions am/ conditions and shall be ill such form and contain such particulars as may be prescribed. E (2). The conditlo11s prescribed llluler sub-section(l) may. require, inter alia tlte licensee to lift for sale, tlte minimum quantity of country spirit or Indian-made liquor, fixed for his 1>hop and to pay the penalty at the prescribed rate 011 the quantity of liquor short lifted. . . F (3). Penalty at the prescribe</ r<ite 011 infraction or infringement of any conditions /ail/ dow11 in sub-section (1) of · specifically enun.1erated in sub-section(2) shall be /eviable on and recoverable from the licensee." 28, Section 62 is rule ~aking power of the State. G Sub ~section (1) (h), which is relevantforthe pi·esent case is as follows: "62(1)(11). prescribing the authority by, the form bi which, and terms am[ COIU[itions Oil ll/U[ subject to which any fice11ce, permit or pass s/ui/l be granted, amt by such rules, among other matters- H

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A (i) fix the period for which any licence, permit or pass shall continue in force, (ii) prescribe tile scale offees or the manner offixing the fees payable in respect of any sucll licence, permit or pass, (iii) prescribe the amount ofsecurity to be deposited by holders B of any· licence, permit or pass for the performance of the conditions of the same, (iv) prescribe tlte accounts to be maintained and tlte returns to be submitted by licence-llolders, and C (v) prohibit or regulate tile partnership ill, or tile transfer of, licences;"

29Copy pinpoint29. In exercise of above power, the State has framed the rule, namely, Madhya Pradesh Distilleries Rules, 1995. Section 4( 41) which is involved in the present case is as follows: D "4(41) If tlte expenditure incurred on tlte State Government estab/isltmenl at a distillery exceeds jive per cent of the revenues earned 011 tile issues of spirit therefrom, by export fee or any ollter levy, tlte amount, in excess of the aforesaid five per cent, shall be realised.from the distiller."

30Copy pinpoint30. After noticing the statutory scheme, now we proceed to consider the issues raised by the learned counsel for the parties. The first issue which is to be considered is as to whether this Court need to examine the vires of Rule 4( 41) of 1995 Rules, whereas in the writ petition filed by the respondents, no prayer was made to strike down Rule4(41)ofthe Rules 1995. F

31Copy pinpoint31. Learned counsel for the Respondents submitted that in the writ petition and in the grounds, there was a challenge to Rule 4( 41) and mere omission to claim a specific relief for declaring Rule 4( 41) as ultra vires cannot preclude examination of the vires of Rule 4( 41) and to grant necessary declaration. He has referred to Para 9 of the Writ G Petition , which is to the following effect: "Tit at in view of the judgment of lite Hon 'ble Supreme Court iJ1 lite case of Mis. Leela Sons Brewery Rule 4(41) of the Distillery Rules is also 11011 el·t and void. Co11seque11tly 1to demand ca11 be raised 011 the strength of suclt a rule ltence H

STATE OF M.P. & ANR. v. KEDIA GREAT GALEON LTD. 175 [ASHOK BHUSHAN, J.]

the demand in A1111exure/l is liable to be struck down. AS per A t/ie law declared by the Ilon'ble Supreme Court Old Rule 22 of tlie Brewery Rules is ultra vires aml consequentially Rule 4(41) of the Distillery Rules is non est. Hence it is not necessary to seek separate relief to strike down Rule 4(41)."

32Copy pinpoint32. Learned counsel for the Respondents has also placed reliance B on the judgment of this Court in Godrej Sara Lee Limited versus Assistant Commissioner (AA) and Another, (2009) 14 SCC 338, in support of the proposition that when the order of a statutory authority is questioned on the ground that same suffers from lack ofjurisdiction, the fact that no specific prayer has been made is inconsequential. In above c case, following was held in Para 12 & Para 13:

"12.It is true that tlie appellant, in its writ petition, has 11ot made a specific prayer that the said Notification dated 21-1- 2006 was ultra vires or otherwise illegal but, as indicated herein before, a specific ground in that behalf fwd been taken D in respect thereof. .

13. Even otherwise, in our opinion, tlie question as to whether the said notification could Jiave a retrospective effect or retroactive operation being a jurisdictional fact, shou/<I have . been determined by tile High Court in exercise of its writ E ;urisdiction under Article 226 vf the Constitution of India as it is well known t/iat when an order of a ~·tatutory authority is questioned 011 the ground that the same suffers from lack of ;urisdiction, (lltemative remedy may not be " b(lr.(See Whirlpool Corpn. v. Registrar of Trade Marks mu/ Mumt(IZ Post Gr"duate Degree v. Vice-Chancellor.)" F

33Copy pinpoint33. The ratio of the aforesaid judgment is contained in para 13. This Court has laid down that when an order of the statutory authority is questioned on the ground thatthe same suffers from the lack ofjurisdiction alternative remedy was not a bar and Whether the notification dated G 21.1.2006 could have a retrospective effect or retroactive operation being a jurisdiction affect, the High Court ought to have determined the question in exercise of its jurisdiction.

34Copy pinpoint34. The present is not a case where the District Excise Officer who has issued the notice of demand lacks jurisdiction nor there was H

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A . any issue of retrospective or retroactive operation. The above case in · no n1airner helps the responderits.

35Copy pinpoint35. The second case relied by the .counsel for the resp~ndent is .· Girfmallappa versus Special Lund Actjuisition Officer M and Af/P · (//UIA11otlier, .(2012). 11 SCC ' .

36Copy pinpoint36. In the above case, again~t an order passed by the Reference Court; a Land Acquisition Appeal was filed before the District Judge, . seeking enhancement ofthe compensation at the rate of Rs. 24000 per ·. acre. In the appeal before the. High Court no specific amount was demanded. . c 37. The District Judge allowed the claim of Rs.24000 per acre against which further appeal was filed before the High Cou.rt Before · this Comt, it was contended that the High Court should not have preferred technicalities over substantial justice in awarding the compensation. Following was laid down in Pai·a 13 &14: · D •. "13.It was not a case Where fm order coultl be challenged 011 · tile g;ound tlrntt/ie same is a nullity for wm1t of co11ipete11ce of the issuing authority wul proper plettdings i11cludiJ1g appropriate grounds clutlle11gi11g the S((llle //((ve been fake11 1 bui 110 prayer has bee11 nuule for quas/1iilg the saidoTller. /11 ·. E . . such a11 eventuality the order C(//I. be examined only after . co11sideri11g t/Je statutory provisions bivoked therein. The court may reach a conclusion that the order suffers from lack of iurisdictio11." . "14. /11 case, tile petitioner W{IS l·erious about the matter, lie could have amended the memo ofappeal and that. application· F could have been considered sympathetically by t/Je1ligliC011rt . as held by. this Court in llarclrnra11. v; ·State of l;larywla. T/Je · · facts. mentioned in this petition depict an entirely <lijferent picture mul it gives an impression as if tl1e 1/igti Court !tad not enlumced tile co111pe11satio11 though <lemanded by tile. G petitioner for want of payment of courtfees whiclt Ile could not afford to pay due to pauciiy offunds." · . .

· . The above case also i11 no mann~r helps the responde11ts. ' 38. There is another reason due to which, the above submission. of learned counsel for the respondents cannot be accepted. As noted . H

STATE OF M.P. & ANR. v. KEDIA GREAT GALEON LTD. 177 (ASHOK BHUSHAN, J.) . .

·.above although, in Para 9 of the Writ Petition, petitioner have plead~d A that in view of the judgment of Mls•. Lilasons Rule 4(41) of the 1995 ·Rules is non est and void. But; there was no specific, prayer in the writ petition. The reason for not maki11g the specific prayer deClaring Rule · 4( 4 J) as. ultra vires was not an omission or by oversight. The pleadings on the record disclose a reason for the above. Ii1 the counter-affidavit B filed on behalf of the State to the Writ Petition brought on record as Annexure P. 3 in Para 2 following statement has been made by the State: ·

"Tile demaml m(tde by tlie respondent is proper mu/ cannot be struck <{Own. However, if tile petitioner wisll to cllallenge c tile vires ofRule4(41), tile same can. be cllallenged 011/y before tlie Constitutional Benell. " .39. Learned Single Judge, while d¢ciding the writ petition has also in Para 7 made the following observations: "In view o/t/1e aforesaid legalpositiot1,. the Rule 4(41) of tlie . D present Rules, 1995 also appeared to be ultra vires the M.P. Excise Act anti beyond the rule makillg power of the State• . However, since 110 sucli prayer is nuuie by the petitioners ill the petition and no order in this behalf cm1 be passed under t/1.e Rules by tltis Bench ai lndore. I leave this lju~stion here E 011/y. IIQwever, tire ratio ofthe decisions in Lilaso11s am/ Kedia · Distilleries (supra) renders tire tlem<11ul 11otice(Alli1exure P.2) as· void." . · 40. Thus fro1n the above; it is clear that under the Rules of the. High Court; the Bench hearing the writ petitionat Indore was 1i.ot F competentto pass the order, declariqg Rules ultra vil'es. The statement in the counter-affidavit, as noted above· indic~tes that there was some specific bench for hearing constitutional issues regarding vires of the . Rulc;:s. Thus had thewrit petitioner intei1ded to challenge tl.1e vires of the rules, he had to file the writ petition for appropriate relief before the;: · Bench having roster to .decide the vires. Thus, it is clear that writ . G petitioner never intended to challenge the vires of the Rules; which is ·apparent from tlfe reasons, as noted above; We are thus of the considered · . opinion that the so1nething which writ petitioner never intended or prayed for cannot be looked into in this appeal. H

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A 41. The learned Single Judge, in the impugned judgment has struck down the demand, relying on Mis. Lilasons (supra). As noted above, learned Single Judge in Para 7 held that the ratio of the decision in Li/asons and Kedia Distilleries renders the demand notice as void. The judgment of Lilasons having been heavily relied by learned Single Judge as well as learned counsel for the respondents, it is necessary to B notice the said judgment in some detail.

42. In Li/asons case, Rule 22 of the M. P. Brewery Rules 1970 was questioned. Rule 22 of the aforesaid Rules has been extracted in Para 2 of the judgment which is to the following effect: "2. Vires of Rule 22 of the Madhya Pradesh Brewery Rules, c 1970 framed under Section 62 of the Madhya Pradesh Excise Act, 1915 stands questioned. That rule says: "22. Excise 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 other officers of the Excise Depru1ment 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."

43. This Court after noticing Rule 22 and the provisions ofM.P. Excise Act, 1915, Sections 18, 25, 27 and 28, recorded its conclusion in paragraphs 8 and 9 which are extracted below: F "8. Now is the demand a further duty and hence a further tax or is it a further fee or consideration for transferring the right, is the pointed question. In Bimal Chandra Banerjee v. State of MP., this Court had the occasion to examine some of the provisions of the Act inclusive of Sections 27 and 62(2)(h). Under the conditions of licence of the then appellants they were required to make compulsory payment of excise duty on the quantity of liquor which they failed to take delivery of, since those conditions prescribed the minimum quantity of liquor which they had to purchase from the Government. Releasing them from such obligation, this Court ruled as follows: (SCC p.471, para 12)

STATE OF M.P. & ANR. v. KEDIA GREAT GALEON LTD. 179 [ASHOK BHUSHAN, J.]

"Neither Section 25 nor Section 26 nor Section 27 nor A Sectiqn 62(1) nor clauses (d) and (h) of Section 62(2) empower the rule-making authority viz. the State Government to levy tax on excisable articles which have not been either imported, exported, transported, manufactured, cultivated or collected under any licence B granted under Section 13 or manufactured in any distillery established or any distillery or brewery licensed under the Act. The legislature has levied excise duty only on those articles which come within the scope of Section 25. The rule-making authority has not been conferred with any power to levy duty on any articles which do not fall within c the scope of Section 25. Therefore it is not necessary to consider whether any such power can be conferred on that authority. Quite clearly the State Government purported to levy duty on liquor which the contractors failed to lift. Jn so doing it was attempting to exercise a D power which it did not possess. No tax can be imposed by any bye-law or rule or regulation unless the statute under which the subordinate legislation is made specially authorises the imposition even if it is assumed that the power to tax can be delegated to the executive. The basis of the statutory power conferred E by the statute cannot be transgressed by the rule"making authority. A rule-making authority has no plenary power. It has to act within the limits of the power granted to it. " The ratio in Banerjee case was followed in State of MP. v. Firm Gappulal and then again in a case from Uttar Pradesh F in Excise Commissioner, UP. v. Ram Kumar. Now if the exaction under Rule 22 of the Brewery Rules is an exaction not authorised under Section 25 and is being made as if additional excise duty, the three cases aforequoted would nip the demand outright. But if it is an additional payment under Section 27 G as consideration for the grant of licence, or a further fee or condition of licence, as contended by the respondent-State then it may have to be sustained. It would be relevant to take note of another decision of this Court in Panna Lal v. State of Rajasthan at this stage in which the contractual obligation H

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A of the licensee to pay the guaranteed or stipulated sum· mentioned in the licence was held not to be dependent 011 the quantum of liquor held by him and no exdse duty was held .. charged or chargeable on undrawn liquor under the licence. The afore-said cas.e cannot ad)'ance the· defence of the State for there is no lump sum payment stipulated as such ·in the B instant licence. The licence only. mentions that the licensee would be bound by the Brewery Rules. The High Court in that situation went on to lean on Sections 62(2)(h) and 28 when discovering there was no express provision in _the Aci: for realisation of charges in respect of pay of officers posted c for control of breweries. But when we analyse the latter part of Rule 22, the following position emerges: (i) The pay ofall such officers shall be met by the Government; [the Govermnent owns the responsibility} (ii) if the annual charges do not exceed 5 per cent ofthe D duty leviable on the issue made from the brewery to districts within the State, nothing is realisable from the brewer; · (iii) 5 per cent of the duty has been considered enough · from which to reimburse the Government for the.pay of such officers; and E (iv) in case the annual charges exceed 5 per cent of the duty leviable then the excess shall be realised from the brewer, i.e., to reimburse the Government for the pay of all such officers. ·

F 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 othenvise supposed to meet. This part of the rule is purely internal between the Government and its .officers. The . G 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 e:Xcess? It is obviously the . sum which falls short of the duty leviable. .Jn other words it is this for the brewer: "You have. not lifted enough quantities of H

STATE OF M.P. &, ANR. v. KEDIA GREAT GALEON LTD.·• 181 [ASHOK BHIJSHAN, J.] ·.

A . has not earned enough excise duty resulting in a shorifall in . its 5%: Thqt does not goto meetthe annual expenses of the officers. Therefore you meet the shorifall, ·without lifting the goods." Therefore, the short/all partakes of the same .colour· and content It cannot for a moment be suggested that when there is a shor/fall, the demand is as· if ofan "additfoncilfee or consideration" andnot additional excise duty. It is· obvious from the language of the rule that in the event of the excise duty leviable falling short. of the expected five per cent to · .meet the pays of the· officers cann.ot. be met therefrom, the State has all ihe same to pay. The measure goes to recoup the c State of the charges by delnanding a sum eqlml to the duty .. . leviable to that extent without lifting excisable articles .. On this understanding arrived at the demai1d is hit, in our view,. by the ratio of Banerjee case, Firm Gappulal case and Ram Ku1111:tr case (md cannot be sustailied. Rule 22 to tha.t extent 0 is ultra vires the Act and beyond the nife-making power of the State. " 44, The basis of judgment of Lilasons's case(suprt1) Was the judgment in Binta/ Clumtlm Blinerjee vs, State of M(l(//lya Pratlesll . Etc., 1970(2) SCC 467. hi Bimal C/u11ufrt1 Bmierjee's case this . Court had occasion to examine the provisions of Madhya Pradesh Excise · E Act, 1915 inclusive ofSections 27 ai1d 62(2}(h). From paragraph 8 of the judgment, as quoted above, it is clear that compulsory payment of excise duty on the quantity of liquor which could not .be lifted by the licensee was held to be illegal. In Binwl Clumtlm B(lf1e1:jee's case it was held that rule making authority has not been conferred with any F power to levy duty on any articles which do not fall within the scope 'of Section 25 and the Legislature has levied excise duty only on those articles · which come withinthe scope of Section 25, i.e., those excisable artiCles which have been IJlanufacttired under any licence. After referring Banerjee's case, Lilasons relied on to two (>ther judgments, namely, State of M.P. v. Firm Gtipulal, (1976) 1 SCC 791 m1tl Excise .G <;ommissio11er, U.P. v. Ram Kumllr, (1976) 3 SCC 540, .. Both the above cases laid down the same proposition.

45. Judg~ei1t in Ba11erjee's case was delivered-0.11l9 1hAugust,

1970. There .has been amendment in Section 28 by Madhya Pradesh. H

182 SUPREME COURT REPORTS [2017] 4 S.C.R.

A Act No.6 ofl995 by which provision specific provision requiring licensee to lift for sale, the minimum quantity of country spirit or Indian-made liquor, fixed for his shop and to pay the penalty at the prescribed rate on the quantity of Iiquor short lifted, has been brought in the statute book. The Scheme of M.P. Excise Act, 1915 having been amended by the aforesaid Act of 1995, the very basis of case of Bauerjee is knocked B down and cannot be relied on in view of changed statutory scheme. The judgment i11 Lilasons' Cllse was delivered on 21" April, 1992 that is before the above amendment in Section 28 by M.P. Act No.6of1995. In paragraph 9 of the judgment in Lifllsons it was held that when there is a short-fall in the lifting of the enough quantities of beer, the demand is c for additional excise duty which is not permissible. Sections 27 and 28 were also referred in Li/asous's CllSe in paragraph 10. Paragraph I 0 is as quoted below: "JO. 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 confine<j 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 F 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 G of Section 27 do not go to retrieve the situation. "

46. Section 28, as noticed above, has been amended by M.P. Act No.6 of 1995 and after amendment in Section 28 by the aforesaid Amendment Act, the contents of Section 28 have entirely been changed and Section 28 as noticed by Lil<tso11s cannot be relied on for finding H

STATE OF M.P. & ANR. v. KEDIA GREAT GALEON LTD. 183 [ASHOK BHUSHAN, J.]

out as to whether demand under Rule 4( 41) is beyond the scope of A Section 28. 4 7. A three-Judge Bench of this Court in State ofM.R mu/ others vs. KCT Drinks Ltd., (2003) 4 SCC 748, had occasion to consider the M.P. Excise Act, 1915, Section 27. In the above case condition 8 of the licence provides that the licensee shall pay the full cost of excise B supervisory staff posted at the premises of the licensee. Although, jttdgment of Lilasons was cited before three-Judge Bench but, however, this Court upheld Clause 8of the licence and laid down following in paragraphs 7 and 11 : "7. In view of Sections 18 and 2 7, the State Government .C 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, District D Raisen.

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 the respondent cannot be said to be in any way illegal or ultra E vires as it constitutes the price or consideration which the Government charges to the licensee for parting with its privilege and granting licence. Jn this view of the matter, the impugned judgment and order passed by the High Court requires to be set aside. " F

48. Learned counsel for the appellants has also rightly placed reliance on judgment of this Court in Governmellt ofAnt/Jim Pradesh vs. Mis. Anabeslwlii Wine and Distilleries Pvt. Ltd., (1988) 2 SCC

25. In the above case, this Court held that the demand with regard to establishment charges was valid and legal. G

49. In view ofabove, we fail to see as to how the judgment of this Court in Lilaso11s's case can be relied by the High Court for declaring the demand as void.

50. There is one more aspect of the matter which needs to be considered. The demand which has been claimed from the respondent H

. .. . . . . 1.84 SUPREME COURT REPORTS •. [ZO 17) 4 S.C.R.

· A · pertains to 3 years'. The details of the demalld havebeen mentioned in the notice dated 23'd March, 1999, which are to the following effect: · . .

Year ·Revenue . . 5%of . Expenditure . Expenditure ir. Revenue on salary .· cxcessof5% . B· ·I . (Rs.) (Rs.) (Rs.) (Rs.) I 1995-96 3,08,250/c .•. 15,412.50 3,91,956/~ . 3,76;543.50 . . . ,. .

Total 13,241189.s() .

. . . . . . . D · 51. The High Court in paragraph 8 of the jtidgment has noticed the.details of demand and it has also held the demand to be arbitrary and. unreasonable. In paragraph 8, the High Court has stated. as foll~ws: . . . .

''8 . . The demand is arbitrary and unreasonable even ·otherwise. T.he very fact that the establishment charges to the · E extento/5% ought to. be borne by the State goes to show that ihe expenses· on the establishment are supposed to be within · ·reasonable limits. Jn another decision in /Jillllr Distilleries . ' {AIR 1997SC1208)the . Apex. Court. has held that the State will · be entitled to levy reasonable regulatory fees to defray the cost of F· · the.staff posted in the distillery. It is, however, significanttoread · the. impugned notice (Aimexure P/2). The total income of the •. distillery during the relevant years 1995-96 to 1997-98 is shown to Rs. 8,63,250/-, As againstthis, the de1.nand towards establishment ..charges over and above$% has been shown at Rs.13,24, 189.50. The total expenses ~hown in the establishment are more thqn G 150% of the total incomeofthe distillery. On the face of it, the . demand is arbitrary and unreasonable.. On the· face of it, the. deniand is arbitrary and unreasonable; It .is liable· to be struck down onth.iscountleaveaside thequestio1i ofva:iidity oftl1e Rule 4(41).". . .

. STATE OF M.P. & ANR. v. KEDIA GREAT GALEON LTD. . J85 [ASHOK BHUSHAN, J.J ... ·. ·. . . . ' .· . . . . . . ... .. "'. .. : .... . .: . .

.52.The High Court has ~bse1:ved that establishment charges to A . the extent of 5% ought to be borne by the State goes to show that the e~pei1ses 611the establishment are supposed to be withi11 reasonable Iii11its and demand appears to be arbitrary and unreasonable. But a perusal ·oftlw \\frit petition indicates that no sufficient foundation was laid in the writ petition to enter into the issue as to whether the demand is arbitrary B ·.·and u11reasonable. From the details ofthe demand as noted above, it is . further clear that in the demand forth~ year 1996-97 expenditure on salary was shown as Rs.4,36,897 /-but no figure pertaining to the Revenue of the said yeads mentioned, whether the distillery could function during the. relevant period and without there being. any Revenue how the. ·. expenditure Oil salary is fastened on respondent, is notexplained. . . C 53, Learned counsef for the respopdentha,sfurther ~tated b~fore .. us that the State of Madhya Pradeshhas abandoned the Statutory ··Scheme as contained in Rule 4(41) and subsequently fixed amount of · ·· establish1nent charges inclu(led in the licence fee. Learned counsel for the State has, however, refuted the above submission c:ifthe learne(I · D .counsel of the respondent. Learned counsel for the responden.t has also referred to Section 28-A, which has bee1i substituted by Madhya Pradesh. ActNo.24 of2000, . whieh is to thefollowing . effect: . . . . "Sedio11 28~A; Payme1it ojsupervisio11 diarges~The . State Government inay by ger1eral or special order. in writing direct the 1i1anufaciure, import,. export, transport, storage, sale;·. purchase, use, collection or cultivati.011 of any intoxicant, denatured :,pii'ltuouspreparations or hemp shail be under , · .· the supervision ofsuch Excise staffas the Excise. Commissioner may deem proper to appoint in this behalf and that the person manufacturing,. importing, exporting, transporting, storing, · selling purchasing, using, c;ollecting or cultivating the · intoxicant or denatured spirituous preparations shall pay· to the State Govermnei1t towards supervisiOn charges as levy as may be imposed by the State Government in this beha(f' . ·Provided that the State Government may exempt any class G · ·. of person or any institution from paying the whole or any part of such levy. " 54, Section 28-A being not in existence duringthe relevant period for which demand has been raised,. it is not necessary for us to consider .

186 SUPREME COURT REPORTS [2017] 4 S.C.R.

A the effect and consequence of Section 28-A in so far as the present case is concerned. However, taking into consideration the overall circumstances, as noted above, ends of justice will be served in giving liberty to the respondent to represent against the demand notice dated 23n1 March, 1989 before the State. The State Government shall consider such representation taking into consideration relevant facts relating to B concerned years and the other factors as relevant in the present case. In the event, such representation is submitted to Appellant No.2 within four weeks from today, the State shall consider the representation and take appropriate decision expeditiously. It goes without saying that further steps shall be taken consequent to such decision by the State Government c as indicated above.

55. In result, the judgment of the High Court dated 04.05.2000 is set aside and the appeals are disposed of with the directions aforesaid.

D Kalpana K. Tripathy Appeals disposed of.