TMI Blog2015 (8) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... or industrial alcohol, contrary to the argument of the Respondents. Therefore, so long as expenses are incurred by the State Government in ensuring that industrial alcohol is not used as potable alcohol, recovery thereof shall be permissible. SEBI Act postulated and permitted the charging of two types of fees – (i) under Section 11(2)(k) of the SEBI Act for carrying out the several and sundry purposes contained in Section 11, and (ii) for the registration of applicants under Section 12(2). It was also clarified by the Court that the said service or regulatory or administrative fee can be levied on all contributors, regardless of whether or not services were being directly rendered to them. This decision cannot be extrapolated to permit the State to make recoveries in the guise of administrative expenses of all the outgoings of its Excise Department even though they have no bearing or connection with the possible misuse and diversion of industrial alcohol to potable alcohol. If administrative or service charges are sought to be recovered from the Respondent Distilleries to cover nefarious activities carried out by third parties such as smuggling and countryside brewing etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the ten petitioners therein had prayed for a declaration that Rule 5-A of the Tamil Nadu Distillery Rules introduced by G.O.M. No.662 issued by Home, Prohibition and Excise(III) Department, dated 4.6.1990, and the amendment to the said Rule brought into effect by G.O.M. No.64, Home Prohibition and Excise (XIII) Department, dated 12.04.2000, are unconstitutional, illegal and void. The learned Single Judge noted that the decision of a Seven-Judge Bench of this Court in the case of Synthetics and Chemicals Ltd. v. State of U.P. (1990) 1 SCC 109; AIR 1990 SC 1927 concluded the conundrum. In that case it was held that the sundry States of the Union of India are not competent to impose taxes/levies on industrial alcohol or rectified spirit. This Court, however, clarified that the States are empowered under Entry 8 of List II of the Seventh Schedule to the Constitution of India to regulate this business and ensure that industrial alcohol is not diverted as potable alcohol, and in carrying out this exercise, States would be fully competent to collect administrative/regulating service fee. The writ petitioners first foray in the Writ Court did not meet with success. Accordingly, the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was competent and justified in recovering expenses for ensuring the prevention of illegal diversion of industrial alcohol within the premises of the distilleries themselves, as also expenses incurred for supervising the transit of industrial alcohol from the distilleries to the trader. The Writ Court then adverted to the decision in Vam Organic Chemicals Ltd. v. State of UP (1997) 2 SCC 715, as well as Secunderabad Hyderabad Hotel Owners Association v. Hyderabad Municipal Corporation (1992) 2 SCC 274. It is important to note that the learned Single Judge, after carrying out the said analysis of the law, pithly observed that the Appellant State had not furnished the relevant and requisite particulars and material to establish that the impost indeed had the character of quid pro quo. Referring to the quantum of recoveries made on the basis of 50 paise per bulk litre for almost one decade, it was noted that this collection roughly corresponded to one-third of the total expenses incurred by the Excise Department, which per se was not excessive; and that there can be no cavil that in regulating the trade of potable liquor the State is gathering considerable income. So far as the incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as of the opinion that there was only an expenditure of 93.2 lakhs against which there was an estimated collection of administrative fee aggregating 11.73 crores which collection, therefore, was excessive. Whilst it seems to us that there is no scope for our interference in the impugned Judgment, we must hasten to clarify that the charges should not be restricted only to those establishment expenses incurred by the State in the distilleries alone, or that any collection over and above those expenses would ipso facto tantamount to unjust enrichment. However, the fact remains that the figures noted by the Division Bench were 93.20 lakhs whereas the collections even at the rate of 50 paise per bulk litre aggregated 11.73 crore, which since it was not interfered with, would undoubtedly cover expenses over and above those incurred by the State only on its establishments/office in the respective distilleries. The Division Bench also underscored the fact that details of expenses incurred by the State in connection with the supervision or regulation of production of industrial alcohol, with a view to ensure that there is no diversion thereof for the purpose of or reconversion to potable al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court. We shall reproduce these paragraphs from B.S.E. Brokers Forum, Bombay and Others v. Securities and Exchange Board of India and others, (2001) 3 SCC 482 to enable their fruitful consideration: 30. This Court in the case of Sreenivasa General Traders v. State of A.P. (1983) 4 SCC 353 has taken the view that the distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common burden, while a fee is for payment of a specific benefit or privilege although the special advantage is secondary to the primary motive of regulation in public interest. This Court said that in determining whether a levy is a fee or not emphasis must be on whether its primary and essential purpose is to render specific services to a specified area or class. In that process if it is found that the State ultimately stood to benefit indirectly from such levy, the same is of no consequence. It also held that there is no generic difference between a tax and a fee and both are compulsory exactions of money by public authorities. This was on the basis of the fact that the compulsion lies in the fact that the payment is enforceable by law against a person in spite of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... important aspect of the law has been further crystallised thus 34. The word service in the context of a fee could, therefore, include, a levy for a compulsory measure undertaken vis- -vis the payer in the interest of the public. This coercive measure has been subsequently judicially clarified to mean a regulatory measure . But in the case of both kinds of services, whether compulsorily imposed or voluntarily accepted, there would have to be a correlation between the levy imposed and the counterpayment or quid pro quo . However, correlationship between the levy and the services rendered is one of general character and not of mathematical exactitude. All that is necessary is that there should be a reasonable relationship between levy of the fee and the service rendered. Contrariwise when there is no such correlation, the levy, despite its nomenclature is in fact a tax. In Corpn. of Calcutta v. Liberty Cinema the licence fee charged under Section 548 of the Calcutta Municipal Act, 1951 had been challenged on the ground that no service was rendered commensurate with the tax. 7 Considerable reliance was placed by the learned Senior Counsel for the Appellant State on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he regulatory expenses of the Board. Hence, this classification had a direct nexus with the object to be achieved. The Preamble to the SEBI Act emblazons that its purpose is to provide for the establishment of a Board to protect the interests of the investors in securities and to promote the development of, and to regulate, the securities market. It further noted that stock-brokers formed a distinct class. 8 We may also, with short shrift, reject an argument put forward on behalf of one of the Respondents, namely, Tvl. Chemplast Sanmar Limited, that its production of industrial alcohol was entirely captive for its own activity of manufacture of PVC. Even assuming this to be so, there is always a brooding and omnipresent possibility of diversion of industrial alcohol to potable alcohol. 9 It seems to us, facially, that if administrative or service charges are sought to be recovered from the Respondent Distilleries to cover nefarious activities carried out by third parties such as smuggling and countryside brewing etc. which have no causal connection with the production of industrial alcohol, or for collection of excise duties from other industries carrying out distinctly diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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