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2015 (8) TMI 590 - SUPREME COURT

2015 (8) TMI 590 - SUPREME COURT - TMI - Legality of Andhra Pradesh Rectified Spirits Rules, 1971 - Requirement of obtaining a licence and the payment of Excise duty and Pass fee for exporting rectified spirit to be legal - Power of State Government to impose duty on rectified spirit - Held that:- While State Governments are not competent to impose taxes/levies on industrial alcohol, fee charged for services rendered to prevent the diversion and conversion of industrial alcohol for human consump .....

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incurred on such supervisory or administrative activity has perforce already been recovered or reimbursed from fees on account of storage or sale transactions on industrial alcohol. These dues paid by the Appellants are channelled towards preventing the illegal activities of unrelated third parties for which the Appellants are in no way responsible. It is evident that the intention behind this “fee” is to prevent manufacturers from exporting industrial alcohol to breweries of potable alcohol in .....

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State. If industrial alcohol is exported outside the State as industrial alcohol, these impositions partake of a totally different character, transferring it into a tax - Decided partly in favour of assessee. - Civil Appeal No. 5020 of 2005, Civil Appeal Nos. 5021-5022 of 2005 - Dated:- 12-8-2015 - Vikramajit Sen And Shiva Kirti Singh,JJ. For the Petitioner : Mr. Sanjay Parikh For the Respondent : Mr. Guntur Prabhakar JUDGMENT Vikramajit Sen,J. 1 The Appellants before us assail the impugned Judg .....

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cise Act, 1968, the Respondent State enacted the 1971 Rules. Rules 4, 13 and 15 are laid out herein for the facility of reference; although in these Appeals it is Rule 15 which is in focus - Rule 4: Rectified spirit shall not be issued from a distillery or a warehouse without pre-payment of administrative fee meant for industrial purposes. In case of potable purposes, rectified spirit shall not be issued from a distillery or a warehouse without pre-payment of Excise Duty except when rectified sp .....

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ts, charges and expenses including salaries and allowances of such Excise staff as may be determined by the Commissioner or his nominee to be posted at the manufactory of the licensee in connection with the supervision to ensure compliance with the provisions of the Act, the rules and terms of the license. The staff shall be under the supervision and control of the Commissioner or the Authorised Officer. Rule 15: (1) No rectified spirit shall be exported save under an export permit and in accord .....

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d by a competent authority of the place to which the rectified spirit is to be exported. (3) (i) on receipt of the application for permit to export, the Commissioner shall make such enquiry as he considers necessary and may grant in accordance with these rules as export permit, on payment of the export permit fee of Rupees Ten per bulk litre in Form R.S. VII in triplicate. (ii) Such permit shall not be granted unless an Indemnity Bond shall be submitted by the Exporter total quantity of Proof li .....

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er used by the latter as raw material for manufacturing potable alcohol and Indian Made Foreign Liquor (IMFL). As a consequence of the imposition of prohibition, this demand within the State of Andhra Pradesh was drastically reduced; and the Appellants were left with no alternative but to export the said rectified spirit to other States. However, due to the higher power tariffs, licence fees, duties, etc. in Andhra Pradesh, the Appellants could not compete with the prices of rectified spirit pro .....

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ltra vires the Constitution, null and void; (2) declare the action of the respondents in insisting upon the petitioner to obtain licence, pay excise duty and pass fee for exporting Rectified Spirit (Industrial Grade) as illegal, ultra vires, unconstitutional and violative of the petitioner rights guaranteed under Art. 14, 19(1)(g), 265 and 301 of the Constitution of India and consequently issue a writ of Mandamus directing the respondents not to interfere with the export of R.S. by the petitione .....

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at the State cannot charge Excise duty on alcohol that is not fit for human consumption but it is entitled to charge a fee on a quid pro quo basis in case it renders any monitoring service. Upon considering Synthetics & Chemicals Limited vs. State of U.P. (1990) 1 SCC 109, the High Court held that where rectified spirit is removed or cleared for industrial purposes, the levy of Excise duty and all other controls are to be with the Union, but where the use of rectified spirit is intended for .....

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n, so the responsibility on the State was tremendous and onerous even with regard to liquor meant for industrial purposes. The State Government was held to be entitled to post its staff at distilleries and to levy a reasonable regulatory fee to defray the expenses of such staff. No data was laid down by either party based on which the Court could come to a conclusion on whether the fee levied was reasonable or not. It was held that the amount levied from the Appellants was in the nature of a fee .....

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vernment along with the relevant case law in detail in our Judgment of even date in the Appeal titled as State of Tamil Nadu vs. Tvl. South Indian Sugar Mills, and shall therefore not repeat our reasoning herein in interest of avoiding prolixity. We merely reiterate that while State Governments are not competent to impose taxes/levies on industrial alcohol, fee charged for services rendered to prevent the diversion and conversion of industrial alcohol for human consumption is permissible and leg .....

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m of fee levied has not been challenged either before us or before the High Court and no empirical evidence in this regard is available in the Appeal records. We shall accordingly desist from commenting on whether the various heads of fee are excessive, thereby metamorphosing them from a fee to a tax. The fact that the export permit fee was reduced from ₹ 10 to ₹ 3 and finally to Re. 1 per bulk litre indicates that there has been due application of mind by the Respondent State in dec .....

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ld thus metamorphose into a tax. It appears to us that that the State Government has not undertaken any supervisory activity which would constitute a quid pro quo for the imposition of the export permit fee charged under Rule 15(3)(i). Any expenses incurred on such supervisory or administrative activity has perforce already been recovered or reimbursed from fees on account of storage or sale transactions on industrial alcohol. These dues paid by the Appellants are channelled towards preventing t .....

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