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TMI Blog2007 (4) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... se personnel posted at appellant's distillery. Notice of demand was issued on 6.10.1988. On 28.9.1981, the appellant filed first OWP No. 549 of 1981 challenging Rule 17 as being ultra vires the Act. The High Court stayed the recovery proceedings. The appellant has also filed Writ Petition No. 1208 of 1989 challenging the demand made on October 6, 1989 on account of staff charges, which was dismissed by the learned Single Judge by its order dated 27th September, 1990. Aggrieved thereby, the appellant preferred LPA (W) No.159 of 1990, which was dismissed by the Division Bench by the impugned order. Hence the present appeals. Section 25 of the Act empowers the Government to frame rules. The relevant portion for the present purpose reads:- "25. The Government may from time to time frame rules- .. .. (g) for the inspection and supervision of stills, distilleries, private warehouses and breweries; (o) generally to carry out the provisions of this Act or of any other law for the time being in force and relating to the Excise revenue." Rule 17 of the Rules is claimed to stream from Section 25, which has been assailed as ultra vires the Act reads:- "The lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing with the liquor trade, the government cannot be manifestly unjust or arbitrary. Dr. Rajeev Dhawan, learned senior counsel, appearing for the appellants, contended that the concept of reasonableness applicable to delegated legislation and more generally to actions under Articles 14 and 21 is that the action should not be manifestly unjust and arbitrary. According to him, Rule 17 suffers from excessive delegation and is manifestly unjust and arbitrary. Per contra Mr.S.R. Singh, learned senior counsel, appearing for the respondents, contended that such payment postulated under Rule 17 is neither fee nor tax but such payment is being demanded in lieu of for parting with the exclusive right and privileges granted to the appellant for the services rendered to the appellant. We may at this stage notice that both the learned Single Judge and the Division Bench erroneously relied on the decision rendered by this Court in Government of Andhra Pradesh vs. M/s Anabeshahi Wine and Distilleries Pvt. Ltd., (1988) 2 SCC 25. In Anabeshahi's case (supra) the fee was imposed by Section 28(2) of the A.P. Excise Act, 1968 itself. Section 28 reads as under:- 28. Form and conditions of licen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s his say, that a disjunctive reading would be violative of both the grammar and the intent if the word 'generally' is given too wide an interpretation and the word 'and' is read as 'or'. Section 25(o) would become wholly and completely unguided and applicable to just about anything. The restraining element in Section 25(o) is the fact that it must relate to "excise revenue". Excise revenue is defined in Section 3 of the Act. It reads: "'Excise revenue' means revenue derived or derivable from any duty, fee, tax, fine or confiscation imposed or ordered under the provisions of this Act" According to Dr. Dhawan, the term fee as defined in Section 3 is not the kind of fee that falls under Rule 17 and therefore, the fee for the purpose of Rule 17 is not authorised by the Act. He also referred to various sections under the Act where the terms duty and fee are mentioned and their collection is specifically authorised: Section 5(a) Payment of duty for import Section 6 Payment of fee or duty for export Sections 8-10 Permits for transport Sections 11-A 12-A Licenses for possession Section 16 Imposition of duty Section 17(d) Imposition of duty by fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision was brought to our notice. The argument of the learned counsel; that such a policy could be gathered from the constitutional provisions cannot be accepted, for, if accepted, it would destroy the doctrine of excessive delegation. It would also sanction conferment of power by Legislature on the executive Government without laying down any guide-lines in the Act. The minimum we expect of the Legislature is to lay down in the Act conferring such a power of fixation of rates clear legislative policy or guide-lines in that regard. As the Act did not prescribe any such policy, it must be held that section 5 of the said Act, as it stood before the amendment, was void." In the cases aforesaid where fees akin to Rule 17 were imposed were cases where the imposition was specifically imposed by the statute. It is, therefore, clear that Rule 17 has no statutory backing. The case of the respondents is that Rule 17 intended that in lieu of parting with exclusive right and privileges granted to the appellant and for the services rendered and therefore it is neither fee nor tax. It is contended that the Government was rendering service to the appellant by deputing excise staff not only for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case, the State which was in a position to place material before the Court to show what services had been rendered by it to the appellant and other similar licensees, the costs or at any rate the probable costs that can be said to have been incurred for rendering those services and the amount realised as fees has failed to do so. On the side of the appellant, it is alleged that the State is collecting huge amount as fees and that it is rendering little or no service in return. The co-relationship between the services rendered and the fee levied is essentially a question of fact. Prima facie, the levy appears to be excessive even if the State can be said to be rendering some service to the licensees. The State ought to be in possession of the material from which the co-relationship between the levy and the services rendered can be established at least in a general way. But the State has not chosen to place those materials before the Court. Therefore the levy under the impugned Rule cannot be justified." In the case of Commissioner of Central Excise vs. Chhata Sugar Co.Ltd., (2004) 3 SCC 466, one of the issues was whether the state government's administrative charges to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a tax." In the case of M/s Lilasons Breweries (Pvt.) Ltd. vs. State of Madhya Pradesh, (1992) 3 SCC 293, Rule 22 of the M.P. Breweries Rules 1970 to meet the annual expenses of the officers was struck down as ultra vires the Act and beyond the rule making power of the State. WHY IT IS TAX AND NOT FEE Under the Constitutional scheme, taxes are distinct from fees. Excise is a form of tax. It is self-evident from various constitutional provisions: (i) The concept of a Money Bill in Articles 110(2) and 199(2) clearly postulate that taxes should be voted on by Parliament See Corporation of Calcutta, (1965) 2 SCR 477 at 483 (ii) The taxes and excise in the Union List are to be found in List I, Entries 82-92B; and (iii) The taxes in the State List are to be found in List II, Entries 42-63 (iv) Excise is specifically dealt with in List I, Entry 84 and List II, Entry 51 (v) List II, Entry 51 specifically deals with excise on alcohol (vi) Fees are specifically dealt with in both these lists (List I, Entry 96 and List II, Entry 66) and are a distinct concept that has to be voted by Parliament Thus, taxes, excise and fees must be voted by Parliament. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of section 76 and in these circumstances the theory of a return or counter-payment or quid pro quo cannot have any possible application to this case. In our opinion, therefore, the High Court was right in holding that the contribution levied under section 76 is a tax and not a fee and consequently it was beyond the power of the State Legislature to enact this provision." For the reasons aforestated we hold that: (a) Rule 17 has no statutory backing and it is in excess of the Act. (b) It is manifestly unjust and arbitrary. (c) Provision of Rule 17 is clearly a tax and not a fee. (d) Imposition of tax or fee on the citizens for the services that the State renders to itself and not the tax payers is clearly impermissible, arbitrary and unjustifiable. This takes us to the last leg of submission of the counsel for the respondents. It is strenuously urged by the counsel for the respondents that in the event this Court struck down Rule 17 being ultra vires the Act, such decision must be prospective and the State should inter alia be permitted to retain the fees paid by the appellant in the interregnum. In support of his contention, counsel for the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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