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TMI Blog2003 (9) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in the business of manufacture of spirit in the State of Bihar for which they hold licence under the Bihar Excise Act, 1915 (the 1915 Act). The respondents had been granted different licence under the provisions of the Bihar and Orissa Excise Act, the details whereof are as under : SI. No. Name of the distilleries Licence granted in Excise Form Nos. Writ applications filed by them 1. M/s Bihar Distillery Ltd. 25, 28-A CWJC No. 6845/ 89, 11972/93 2. M/s. Arun Chemical Industries 25, 27, 28 1517 and 1518 of 1984 3. M/s. Cawnpore Sugar Works Ltd. 25,27,28 2334/84, 5648 and 5649 of 1986 4. M/s. S.K.G. Consolidated Ltd. 25, 27, 28, 28-A 2385/88 5. M/s. New Swadeshi Distillery Ltd. 25, 28-A 6433/88, 4696/94 & 8032/95 6. M/s. Ram Narain & Sons 28, 28-A 28, 28-A 5484 & 5487/90 It is not in dispute that the respondents herein admittedly were engaged in the manufacture of rectified spirit from molasses which are allotted by the Controller of Molasses in terms of the provisions of the 1947 Act and the rules framed thereunder. Some of them are also holders of licences granted in terms of Section 13 of the 1915 Act. While carrying on such manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irit was meant for human consumption. The matter was heard before a Division Bench of the Patna High Court. The appellants herein conceded that the penal duty is not in the nature of a duty under the Excise Act. However, imposition of penalty was sought to be justified on the ground that since condition No. 8 of tender notice, provided that in the event any shortfall occurs in recovery of spirit from the molasses allotted, the licencee would be liable therefor. The High Court noticed that the purported clause 8 of the afore-mentioned tender notice was incorporated only in the licences contained in Form No. 27. It further noticed that all the respondents were not holders of licences in the said form. The High Court considered the jurisdiction of the appellants herein for impost of such levy from the viewpoint of the State's legislative competence in the light of the decision of this Court in Synthetics and Chemical Ltd. v. State of U.P., [1990] 1 SCC 109. Upon a detailed consideration of the contentions raised by the parties, the High Court allowed the writ applications upon setting aside the levy impugned in the writ applications holding : (i) before creating a demand of penal du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the appellants, inter alia, urged that in the facts and circumstances of the case, no opportunity was required to be given to the respondents before imposing the penalty and that the State legislature is competent to levy duty on the products of the molasses, which partakes to the character of compensation. In any case the penalty imposed was in the nature of compensation for the breach of Condition No. 8 of the tender notice. Coming to the first ground, it is not disputed that no opportunity of hearing of any kind was afforded to the respondents herein before the penalty was sought to be imposed and recovered. It is also admitted that there was no adjudication of the alleged breach of condition No. 8 of the tender notice. In A. Mohammed Basheer v. State of Kerala and Ors., [2003] 6 SCC 159, it was held that unless there is a determination of breach of contract and damages are quantified, no damages can be imposed and recovered. In General Manager, North East Frontier Railway and Ors. v. Dinabandhu Chakraborty, reported in [1971] 3 SCC 883, this Court held that the Government cannot be a judge in its own cause in absence of any statutory provision empowering it to act as such. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an order passed by any court of law which is not binding on him. The very basis upon which a judicial process can be resorted to is reasonableness and fairness in a trial. Under our Constitution as also the International Treaties and Conventions, the right to get a fair trial is a basic fundamental/human right. Any procedure which comes in the way of a party in getting a fair trial would be violative of Article 14 of the Constitution of India. Right to a fair trial by an independent and impartial Tribunal is part of Article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms 1950." In the present case, what we find is that before creating a demand of penal duty or penalty, there was no adjudication by any authority as regard to the breach committed by the respondents. We also find that no opportunity of any kind was offered to the respondents before the demand as regard the penal duty was pressed against the respondents. The matter was not even examined as to what was the reason for shortfall in the production of rectified spirit. The Molasses Act does not provide for imposition of such penalty in the event of shortfall of spirit. It must, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or human consumption", meant, and the expression still means, that liquor which, as it is, is consumable in the sense that it is capable of being taken by human beings as such as a beverage or drink. Alcoholic or intoxicating liquors had to be understood as they were, not what they were capable of or able to become. Entry 51 of List II was the counterpart of Entry 84 of List I. It authorised the State to impose duties of excise on alcoholic liquors for human consumption manufactured or produced in the State. It was clear that all duties of excise save and except the items specifically excepted in Entry 84 of List I were generally within the taxing power of the Central Legislature. The State Legislature had limited power to impose excise duties. That power was circumscribed under Entry 51 of List II. It had to be borne in mind that, by common standards, ethyl alcohol (which had 95 per cent strength) was an industrial alcohol and was not fit for human consumption. The ISI specifications had divided ethyl alcohol (as known in the trade) into several kinds of alcohol. Beverages and industrial alcohols were clearly and differently treated. Rectified spirit for industrial purposes was de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f rectified spirit both for the purpose of supplying it to industries and for obtaining and manufacturing potable liquor in relation whereto it was stated : "...The power to permit the establishment and regulation of the functioning of the distillery is concerned, it shall be the exclusive domain of the Union. But so far as the levy of excise duties is concerned, the duties on rectified spirit removed/cleared for supply to industries (other than industries engaged in obtaining or manufacturing potable liquors), shall be levied by the Union while the duties of excise on rectified spirit cleared/removed for the purposes of obtaining or manufacturing potable liquors shall be levied by the State Government concerned. The disposal, i.e., clearance and removal of rectified spirit in the case of such an industry shall be under the joint control of the Union and the State concerned to ensure evasion of excise duties on rectified spirit removed/cleared from the distillery. It is obvious that in respect of these industries too, the power of the States to take necessary steps to ensure against the misuse or diversion of rectified spirit meant for industrial purposes (supply to industries oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. Xx xx xx Liquor is defined in section 2(14) of the Act which "includes all liquids consisting of or containing alcohol, such as spirit of wine, spirit, wine fermented tari pachwai and bear, and also unfermented tari, and also any other substance which the State Government may, by notification, declare to be liquor for the purposes of this Act." Intoxicant has been defined in section 2(12a) of the Act, which means "any liquor or intoxicating drug". Section 2(19) defines 'spirit' as 'any liquor containing alcohol obtained by distillation, whether it is denatured or not.' Thus, the total effect of the definition of 'intoxicant', 'liquor' and 'spirit', read with the definition of excisable article, means that only a spirit meant for human consumption can be subjected to excise duty." For the aforesaid reason, it must be held that no penal duty could have been imposed on rectified spirit. So far as the third submission of Mr. Ray to the effect that the penalty was in the nature of compensation for the breach of condition No. 8 of the tender notice is concerned, the same has no merit. The tender notice does not provide for imposition of any penalty and in the absence of any opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titute the terms of the contract. The extraordinary jurisdiction of the High Court under Article 226, which is of a discretionary nature and is exercised only to advance the interests of justice, cannot certainly be employed in aid of such persons. Neither justice nor equity is in their favour." Therein the liability of the respondents were found to have arisen from the terms of contract qua contract. Such is not the position herein. Mr. Ray, therefore, is not correct when he submits that such demand was made in terms of the condition of the contract in respect whereof the writ petitions of the respondents were not maintainable. However, before we part with this case, we would like to clarify that the opinion of the High Court to the effect that in view of the decision of this Court in Synthetics and Chemicals (supra), the State has no legislative competence even in relation to potable liquor (which is fit for human consumption) is not correct. The legal position in this behalf has succinctly been explained inter alia in State of U.P. v. Synthetics and Chemicals Ltd., [1991] 4 SCC 139, State of U.P. and Another v. Synthetics & Chemicals Ltd. and Another, [1993] 2 SCC 308 and Sie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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