TMI Blog1975 (8) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... price of exclusive privilege the contractors are not called upon to pay excise duty. For these reasons the contentions of the appellants fail - Civil Appeals Nos. 1213- 1220, 1353, 1354, 1385-1386, 1387-1388, 1564, 1566-1567, 1579-1581. 1608, 1622, 1623-1624, 1626, 1630, 1647, 1764, 1862, 1432, 1433 & 1871 of 1974 - - - Dated:- 1-8-1975 - RAY, A.N. (CJ), BEG, M. HAMEEDULLAH AND CHANDRACHUD, Y.V., JJ. A. K. Sen and B. D. Sharma, Badri Das Sharma and S. R. Srivastava, D. V. Patel and S. S. Khanduja, for the appellant L. M. Singhvi and S. M. Jain, for the respondent JUDGMENT: RAY C.J. These appeals by certificate turn on the question as whether the excise license granted to the appellants rendered them lube to pay the stipulated lump sum mentioned in the licence. These appeals relate to country liquor licences (a) for the years 1962-63 and 1963-64; (b) for the years 1967-68 and (c) for the years 1968-69, 1469-70 and 1970-71. For the years 1962-63 and 1963-64 licences for sale of country liquor were given to contractors under a guaranteed system. There was a total guaranteed amount. Where the contractors failed to fulfil the guaranteed amount and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing principal conditions:- (1) The licensee will have to deposit Rs.. as licence fee under section 24 of the Rajasthan Excise Act 1950 for his exclusive privilege as fixed by the Excise Commissioner. From it the amount of excise duty will be adjusted towards the payment of the amount for the exclusive privilege but this adjustment will be limited to the payment of the amount for the exclusive privilege. The licensee will have to deposit the aforesaid amount in 12 equal instalments and will have to deposit the monthly instalments by the 10th of the next month in Government Treasury. The fees deposited by the license-holder in that month in the form of the component of the issue price will be treated as excise duty under the instalment of the license-fee. (2) If the licence-holder does not deposit the instalments for any two months as laid down in the aforesaid condition within the prescribed period then the officer issuing the license will have the right to realise the amount of that instalment from the cash security of the licence-holder or from his surety. In addition to this, he will also have the right to cancel the licence of the licensee. The appellants repeated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;excise duty' is a distinct item agreed to be paid as such in terms of the licences. The licences were granted under the Rajasthan Excise Act, 1950 (referred to as the Act.) Section 24 of the Act confers power on the Excise Commissioner to grant any person a license for the exclusive privilege. (1) of manufacturing or supply by wholesale, or of both, or (2) of selling by wholesale, or by retail, or (3) of manufacturing or of supplying by wholesale, or of both, and of selling by retail, any country liquor or intoxicating drug within any local area of those parts of the State of Rajasthan to which the Act extends. Section 28 of the Act provides that an excise duty or a countervailing duty, as the case may be, at such rate or rates as the State Government shall direct, may be imposed either generally or for any specified area, on any excisable article imported or exported, or transported or manufactured, cultivated or collected under any licence granted under the Act, or manufactured in any distillery, pot-still or brewery established or licensed under the Act. The Explanation to section 28 provides that duty may be imposed under this section at different rates acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncident of a trading or business transaction. This Court in the recent decision in Nashirwar and Ors. v. State of Madhya Pradesh and ors.([1975] Vol. I S.C.C. 29) and in the unreported decision Hari Shanker v. Deputy Excise and Taxation Commissioner(2) held that the State has exclusive right to manufacture and sell liquor and to sell the said right in order to raise revenue. The nature of the trade is such that the State confers the right to vend liquor by farming out either by auction or by private treaty. Rental is the consideration for the privilege granted by the Government for manufacturing or vending liquor. Rental is neither a tax nor an excise duty. Rental is the consideration for the agreement for grant of privilege by the Government. The licences in the present case are contracts between the parties. The licensees voluntarily accepted the contracts. They fully exploited to their advantage the contracts to the exclusion of others. The High Court rightly said that it was not open to the appellants to resile from the contracts on the ground that the terms of payment were onerous. The reasons given by the High Court were that the licensees accepted the licence by excluding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to production or manufacture was that it enabled the licensee to sell it. The excise duty is paid on toddy in the form of tree tax. He who keeps toddy pays tree tax. The privilege of selling toddy was auctioned well before the goods came into existence. In view of these characteristics the health cess was found not to be excise duty. The taxable event in regard to the health cess was not the manufacture or production of goods but the acceptance of the licence to sell the goods. A Bench decision of this Court in State of Orissa and ors v. Harinarayan Jaiswal and ors. (1) considered the grant of exclusive privilege of manufacture and sale of country liquor by licensees. This Court held that the power given to the Government to sell the exclusive privilege in such manner as it thinks fit is a very wide power. In Coverjee B. Bharucha v. The Excise Commissioner and the Chief Commissioner, Ajmer and ors. 2) this Court held that an important purpose of selling the exclusive right to sell liquor in wholesale or retail is to raise revenue. Excise revenue forms an important part of' State revenues. The power of the Government to sell the exclusive privilege is by public auction or by neg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... varieties are different. The appellants are not bound to take any particular quaintly or any particular quality of any variety. Without reference to any quantity or quality, it is impossible to predicate the alleged levy of excise duty. Before imposition of excise duty in 1965, the issue price did not have even a notional component of excise duty under Issue Price Rules. Therefore, no excise duty could be attributed to the contractual amounts payable by the appellants. The references to excise duty in licences under the guarantee system or exclusive privilege system prevalent subsequent to the year 1965 are only for the purposes of adjustment or concession as a unit of measure. It is not all excise duty currently imposed or levied in the year of the licence that is being collected with regard to undrawn liquor because the adjustment of issue price is with reference to the issue price prevailing in the preceding year. Rule 67-A of the Rajasthan Excise Rules, 1966 defines value as the price current on the 1st January preceding the financial ye`ar to which the guarantee relates. Under Rule 67-A licences for retail shops of country liquor under the guarantee system may be granted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide a scheme of remission. The liquor contractor is given a remission in the matter of his obligation to pay the stipulated amount to the extent of the excise duty component of The issue price paid by him. The excise duty component of the issue price is, therefore, only a measure of the quantum or extent of the concession or the remission to be given to the liquor contractor. The concession is not what is paid by the contractor to the State but it is a remission or a reduction in the stipulated amount for exclusive privilege allowed by the State to the contractor. The lump sum amount payable for the exclusive privilege is not to be confused with the issue price. In essence what is sought to be recovered from the liquor contractors is the shortfall occasioned on account of failure on the part of liquor contractor to fulfil the terms of licence. The contractual obligation of the appellants to pay the stipulated amounts is Not dependent on the quantum of liquor sold by them which is relevant only for the purpose of remission to be earned by them under the licence. No excise duty is charged or chargeable on undrawn liquor under the licence. To suggest that the licence obliges the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... area for the period fixed for a stipulated sum of money for enjoying the privilege. If the contractors do not sell any liquor they arc yet bound to pay the stipulated sum. IF they sell liquor they are given the benefit of remission in the price of the exclusive privilege. The measure for this remission is the excise duty leviable to the extent that the liquor contractors can neutralise the entire amount of exclusive privilege in the excise duty payable by them. If the contractors fail to lift adequate quantity of liquor and thereby fail in neutralising the entire price of exclusive privilege the contractors are not called upon to pay excise duty. For these reasons the contentions of the appellants fail. The ap peals arc dismissed save what follows hereinafter in Civil Appeal No. 1433 of 1974 and Civil Appal No. 1871 of 1974. Parties to pay and bear their own costs as they did in the High Court. In Civil Appeal No. 1433 of 1974 there is a short supply of liquor in respect of the year 1963-64. In Civil Appeal No. 1871 of 1974 there is a short supply of liquor in respect of the year 1967-68. In these appeals for these two years, the order will be the same as order dated 29 August, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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