TMI Blog2008 (12) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... ry is situated at Kasauli in the District of Solan. It holds a licence in Form D-2 granted by the State of Himachal Pradesh in terms of the provisions of the Punjab Excise Act, 1914 (for short the Act ) and the Rules framed thereunder. For the purpose of running the said distillery, it imported `Malt Spirit of over proof strength' from its distillery situated at Mohan Nagar in the State of Uttar Pradesh. For the said purpose, it was required to obtain import permit from the Collector Excise, Himachal Pradesh. It also transported some quantities of Malt Spirit of over proof strength from M/s. Rangar Breweries Ltd., Mehatpur, Distt. Una as well as from its distillery situated at Mohan Nagar, Distt. Ghaziabad during the relevant years, viz., 1997-98 and 1998-99. 4. Admittedly, prior to 1.04.1996, no payment was required to be made for obtaining permit/ transport fee on transportation of IMFL, country spirit, beer, etc. It was directed to be levied for the first time in terms of an excise policy for the year 1996 - 97 dated 12.03.1996. A permit fee at the rate of ₹ 2.50 per bulk litres on denatured spirit, ₹ 2.00 per proof litre and ₹ 1.00 per proof litre on f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, would contend that the State has to incur a huge expenditure towards maintenance of staff for regulating the business of liquor. Permit is granted for import of country spirit, beer, IMFL, etc. in the interest of the permit holders themselves so that abuse of import by non- permit holders can be prevented. Business in both potable liquor as also Malt Spirit of over proof strength is required to be regulated by the State for which the State must have a machinery. 9. We will assume, as has been contended, that no person has any fundamental right to carry on business in liquor, it being res extra commercium. 10. The question which would, however, arise for consideration is as to whether the State has the jurisdiction to impose any restriction on the movement of industrial alcohol and/ or Malt Spirit of over proof strength. 11. Part XI of the Constitution of India provides for relations between Union and the States. Chapter I thereof provides for legislative relations. In terms of Article 245(1) of the Constitution of India, ordinarily the Parliament has the exclusive legislative competence to make laws for the whole or any part of the territory of India and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 3(18) of the Act defines spirit and Section 3(14) thereof defines liquor. These definitions cover even denatured spirit. They are broadly worded pre-constitutional definitions. Malt spirit is said to be spirit obtained by distillation of barley or other grain. The strength of Malt Spirit after distillation is said to be 66% to 70% v/v. It is also with over proof strength. Proof liquor is of around 50% v/v. Liquor which is sufficiently below the same is termed as under proof liquor. 14. Appellant herein contends that it had imported Malt Spirit of over proof strength and the application for grant of permit vis-`-vis levy of fee pertained only thereto. It has furthermore been contended that the Malt Spirit imported by it being rectified spirit, it is not potable as per ISI Specifications. It is not bought and sold in the market as potable liquor. It is used as a raw material for blending to manufacture IMFL. Contention of the appellant, therefore, is that it is not an excisable article within the meaning of the provisions of Section 3(6) of the Act. Section 16 of the Act restricts import, export and transportation of intoxicants, except upon payment of any duty or executio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in form L-34 for export and transport and a corresponding pass for import from the officer authorized to grant such passes in the place of issue; Provided that a pass for the removal of spirit and beer from a licensed distillery or brewery or a warehouse issued in accordance with the rules made by the Financial Commissioner, shall be deemed to be a pass for the purpose of this rule; Provided further that a permit shall not be required for the transport or foreign liquor, country spirit, rectified spirit or denatured spirit within a district, except when denatured spirit is transported from the bonded warehouse of a licensed distillery; Provided further that the members of the diplomatic staff of a foreign embassy located in the State of H.P. shall not be required to obtain a permit for import and transport of imported liquor. 7.2A. A fee at the rate of (a) ₹ 2.00 per proof litre of foreign liquor (excluding beer, secremental wine, wine and cider) and (b) Re. 1.00 per proof litre of country spirit shall be payable by a person who makes an application for the grant of permission to import and/ or transport of the foreign liquor; (excluding beer secremental wine, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich reads as under: 1. The licensee shall observe the provisions of the Punjab Excise Act, 1 of 1914 and all rules made thereunder and all rules made under any other law for the time being in force applicable to the manufacture, issue and sale of spirit. 19. Indisputably, the appellant being a licensee must abide by the terms and conditions of licence. It is also bound to follow the rules framed in this behalf. A subordinate legislation which, however, is beyond the legislative competence of the State would be ultra vires. Furthermore, there cannot be any doubt that the State possesses the right to have complete control over all aspects of intoxicants, viz., manufacture, collection, sale and consumption, etc. It also has the exclusive right to manufacture and sell liquor and to transfer the said right with a view to raise revenue. Right to fix the amount of consideration for grant of said privilege for manufacturing or vending liquor is also beyond any doubt or dispute. 20. The State has to make distinction between a Malt Spirit of over proof strength and potable liquor. Entries 8, 51 and 66 of List II of the Seventh Schedule of the Constitution of India confer jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of those tyres in the vehicle of man cannot in the context in which the expression has been used in the Constitution, be understood to mean that the alcohol has been for human consumption. 54. We have no doubt that the framers of the Constitution when they used the expression `alcoholic liquor for human consumption' they meant at that time and still the expression means that liquor which as it is is consumable in the sense capable of being taken by human beings as such as beverage of drinks. Hence, the expression under Entry 84, List I must be understood in that light. We were taken through various dictionary and other meanings and also invited to the process of manufacture of alcohol in order to induce us to accept the position that denatured spirit can also be by appropriate cultivation or application or admixture with water or with others, be transformed into `alcoholic liquor for human consumption' and as such transformation would not entail any process of manufacture as such. There will not be any organic or fundamental change in this transformation, we were told. We are, however, unable to enter into this examination. Constitutional provisions specially dealing wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned above 35,884,350 PLs of IMFS was (sic) and you have paid the permit fee @ ₹ 2/- per PL for the said quantity. [Emphasis supplied] The said demand was reiterated by the State in terms of its letter dated 27.01.1999. In its representation dated 30.01.1999, the appellant averred: 3. Under entry 51 of List II of Seventh Schedule to Constitution of India, State is empowered to levy and charge Excise Duty on Alcoholic Liquors for human consumption and similarly under item No. 66 the State is empowered to levy and charge fees in respect of matters in this list i.e. on Alcoholic liquors for human consumption. Bulk spirit on which Permit/ Transport Fee is sought to be charged is of over proof strength and is not an Alcoholic Liquor for human consumption. Thus, State is not empowered to levy/ charge permit/ transport fee on transport of spirit of over proof strength. Levy of any duty or fee on spirit of over proof strength is within the competence of Government of India as mentioned in entry 84 and 96 of List I to Seventh Schedule to the Constitution of India. In view of this position the demand is illegal and against the provision of Constitution of India. App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the services. Therefore, the Hon'ble High Court is justified to hold that the State Government is empowered to make rules authorizing it to levy permit fee. The State furthermore asserts its right to regulate the business of liquor including over proof spirit in terms of the provisions of the Act and the Rules framed thereunder. 24. We have noticed hereinbefore that even in terms of the explanation appended to Rule 7.2A of the Rules, the fees specified in the said Rule would not be payable on denatured spirit, rectified spirit or perfumed spirit and the transport shall not include the transport of Foreign Spirit or Country Spirit in course of export inter-State or across the customs frontier of India. The levy, therefore, ex facie could not have been imposed on rectified spirit. The jurisdiction of the State to impose such a levy is limited. It has been so held in State of U.P. and Others v. Vam Organic Chemicals Ltd. and Others [(2004) 1 SCC 225] in the following terms: 29. The State's power is thus limited to (i) the regulation of non-potable alcohol for the limited purpose of preventing its use as alcoholic liquor, and (ii) the charging of fees based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dies, etc. are manifestations of the exercise of the taxing power. The primary purpose of a taxing statute is the collection of revenue. On the other hand, regulation extends to administrative acts which produces regulative effects on trade and commerce. The difficulty arises because taxation is also used as a measure of regulation. There is a working test to decide whether the law impugned is the result of the exercise of regulatory power or whether it is the product of the exercise of the taxing power. If the impugned law seeks to control the conditions under which an activity like trade is to take place then such law is regulatory. Payment for regulation is different from payment for revenue. If the impugned taxing or non-taxing law chooses an activity, say, movement of trade and commerce as the criterion of its operation and if the effect of the operation of such a law is to impede the activity, then the law is a restriction under Article 301. However, if the law enacted is to enforce discipline or conduct under which the trade has to perform or if the payment is for regulation of conditions or incidents of trade or manufacture then the levy is regulatory. This is the way of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the manufacturers in the garb of exercising its monopoly power. It was held that turnover tax cannot be directed to be paid either by way of excise duty or as a price of privilege. 27. Even while levying a fee, a quantum jump is deprecated. In Indian Mica Micanite Industries v. The State of Bihar and Others [(1971) 2 SCC 236], it has been held: 17... There cannot be a double levy in that regard. In the opinion of the High Court the subsequent transfer of denatured spirit and possession of the same in the hands of various persons such as wholesale dealer, retail dealer or other manufacturers also requires close and effective supervision because of the risk of the denatured spirit being converted into palatable liquor and thus evading heavy duty. Assuming this conclusion to be correct, by doing so, the State is rendering no service to the consumer. It is merely protecting its own rights. Further 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 thos ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
