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TMI Blog2003 (3) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... be paid to the State Government as contemplated under Section 58A of the Act or not? The further question may also arise as to whether the Commissioner is entitled to recover the supervision charges retrospectively and raise demands for, inter alia, arrears of supervision charges as per the circular letter No. SUC1091/197/Revised/1.1.96/13-A dated 30.7.1999 for carrying out provisions of Sections 58A and 114 of the Prohibition Act and carrying out an executive function under Article 162 of the Constitution and/or a lawful order under the Act, falling under Sections 58A and 114 of the Prohibition Act or Rule 17(43) of the Rules of 1966 and Rule 6(36) of the Rules of 1973? The respondents are holding a licence in Form P.L.L. for manufacture of Indian made foreign liquor, prescribed under the provisions of the Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966 (hereinafter referred to as "the Rules of 1966") and also holds a licence in Form C.L.I. prescribed under the provisions of the Maharashtra Country Liquor Rules, 1973 (hereinafter referred to as "the Rules of 1973") for manufacture of Country liquor, made under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent, vide his letter dated 2.3.1999, informed the Sub-Inspector that he had already paid the supervision charges in advance, he would not be able to pass on the burden of the differential amount to his purchasers and that he was not liable to pay the differential amount. By reminder letter dated 24.3.2000, appellant No.4 rejected the reply of the respondent and directed him to pay the differential amount. The respondent questioning the above letter, preferred Writ Petition No. 3754/2000 in the Bombay High Court contending that, inter alia, in view of the decision of this Court in Polychem Ltd. and Anr. Vs. State of Maharashtra & Ors. reported in (1998) 6 SCC 196, the demand notice was liable to be quashed and set aside. The appellants filed a reply to the writ petition and denied the contention of the respondent herein. The writ petition came up for admission before the High Court and the learned Judges observed that they were allowing the petition at the stage of admission itself in view of the judgment in Polychem's case (supra), without considering the submissions of the appellants that on certain facts and aspects the ratio of the Polychem judgment was not applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises/bonded warehouse for excise supervision. It was further urged that condition No.3 of the licence requires the petitioners to pay such amount of cost as determined by the respondents, appellants herein, in advance before the beginning of every quarter. This condition is merely for administrative convenience and it does not prevent the State Government from recovering the cost of such staff subsequently, especially when both Section 58A of the Prohibition Act as well as Rule 7 of the 1964 Rules do not prescribe any time within which such cost has to be recovered. It was further contended that in view of the application of recommendations of the Fifth Pay Commission, the Dearness Allowance and other emoluments payable, inter alia, to such supervisory staff have been increased with effect from 1.1.1996 and the cost of supervision charges has proportionately gone up and this is to be recovered from the licensee. It was further submitted that the increased cost, however, has to be determined from 1.1.1996 because of the retrospective raise granted to the staff by the Government and that the licensee do not have any say in the salary and other emoluments paid to such staff. It was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral invited our attention to Sections 11,12, 13 and 49 of the Act, which read as under: "11. Notwithstanding anything contained in the following provisions of this Chapter, it shall be lawful to import, export, transport, manufacture, bottle, sell, buy, possess, use or consume any intoxicant or hemp or to cultivate or collect hemp or to tap any toddy producing tree or permit such tree to be tapped or to draw toddy from such tree or permit toddy to be drawn therefrom in the manner and to the extent provided by the provisions of this Act or any rules, regulations or orders made or in accordance with the terms and conditions of a licence, permit, pass or authorisation granted thereunder. 12. No person shall- (a) manufacture liquor; (b) construct or work any distillery or brewery; (c) import, export, transport or possess liquor; or (d) sell or buy liquor. 13. No person shall- (a) bottle any liquor for sale; (b) consume or use liquor; or (c) use, keep or have in his possession any materials, still, utensils, implements or apparatus whatsoever for the manufacture of any liquor. 49. Notwithstanding anything contained in this Act, the State Government shall have the exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of such staff." It is useful, in this context, to refer to the relevant Rules, which read as follows: "2(3) "Excise supervision" means the supervision of foreign liquor in relation to its receipt, issues, transport and storage in bond by member of the staff of the Prohibition and Excise Department appointed in that behalf by the Commissioner. 7. Appointment of staff - The Commissioner may appoint such staff at the bonded warehouse for excise supervision as he deems necessary and the cost of such staff shall be paid to the State Government by the licensee as provided by an order under Section 58A of the Act." CONDITION NOS. 3,10,11 & 12 OF THE LICENCE IN FORM B.W.1 GRANTED UNDER THE RULES OF 1964 : 3. The licensee shall pay to the State Government, in advance, at the beginning of each quarter commencing from the date of the licence, such cost of the staff appointed at the licensed premises for the purpose of excise supervision as may be fixed by the Commissioner from time to time. 10. No foreign liquor shall be removed by the licensee from the licensed premises for consumption within the State, except with previous permission of the Collector, in JUD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3: "I/We.hereby undertake to abide by the conditions of the licence in Form C.L.I. that may be granted/renewed in my/our favour and the provisions of the Bombay Prohibition Act, 1949 and the Maharashtra Country Liquor Rules, 1973 and other relevant rules, regulations and orders made thereunder from time to time. Signature of the licensee/applicant" Learned Attorney General drew our attention to the Notification dated 10.12.1998 issued by the Finance Department of the Government of Maharashtra which runs as follows: "GOVERNMENT OF MAHARASHTRA FINANCE DEPARTMENT Mantralaya, Mumbai 400 032, dated 10th December, 1998 NOTIFICATION No.RPS 1298/C.R. 13/98/SER-10 In exercise of the powers conferred by the proviso to Article 309 of the Constitution of India, the Governor of Maharashtra hereby makes the following rules, namely:- 1. Short title and commencement (i) These rules may be called the Maharashtra Civil Services (Revised Pay) Rules, 1998. (ii) They shall be deemed to have come into force on the 1st day of January, 1996." Learned Attorney General contended that the High Court of Bombay erred in not appreciating the true nature of the levy and recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the respondent on the facts of the case submitted for consideration with reference to the above quoted circular letters according to which recovery of additional amounts towards arrears of supervision charges was effected during the previous years. Learned Attorney General further submitted that the respondent was not and is not prevented from recovering this additional cost from his further sales as observed by the Full Bench of the Bombay High Court in paragraph 13 of the judgment in Mohan Meakin's case (supra) and which view was not before this Court in the case of Polychem (supra) and, therefore, the High Court ought to have appreciated that ratio of the Polychem's judgment (supra) was, therefore, not applicable to the case of the respondents on facts as well as in law. Learned Attorney General, in support of his contentions, placed strong reliance on the following judgments: 1. Government of Andhra Pradesh vs. M/s Anabeshahi Wine and Distilleries Pvt. Ltd. reported in (1988) 2 SCC 25 (delivered on 16.2.1988). 2. J.E. Bilimoria & Sons vs. State of Maharashtra & Ors. reported in 1990 Mh.L.J. (II) 1079 (delivered on 1.8.1989). 3. Gustad Mayur Irani vs. State of Maharashtra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervision charges" is not that equivalent to salary or wages and that the demand notice is without authority of law. He further urged that the appellants cannot recover the amount arbitrarily which is not just and proper and that since the demand notice is not legal and not maintainable, the same is not binding upon the respondents and, therefore, the respondents are not liable to pay the same and, therefore, the High Court of Bombay has rightly quashed the demand notice issued by the appellants. Mr. V.B. Joshi further urged that the question of law raised in the special leave petition is no longer res integra and it has been decided against the appellants in Polychem's case (supra). By these appeals, the appellants seek review of the aforesaid judgment of this Court long after the said judgment has become final. It was further submitted that it is totally incorrect for the appellants to submit that the decision of this Court in Polychem's case (supra) is liable to be read with the decision of the Full Bench of the High Court of Bombay in the case of Mohan Meakin (supra). It was further submitted that the Full Bench decision of the Bombay High Court upheld the view taken by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having failed to get any redress, filed writ petition challenging the demand on various grounds. The contentions raised on behalf of the respondent-Distillery found favour with the High Court which, by the judgment appealed against allowed the respondent's writ petition. In this Court, it has been urged by the State Government that the High Court committed an error in appreciating the true nature of the demand and the demand was in the nature of price for parting with the privilege which privilege exclusively vested with the Government. Having considered the respective submissions, this Court accepted the submission made by learned counsel for the appellant-State. Before this Court, it has not been disputed that the business which the respondent has been carrying on could not have been carried on by it unless licence had been granted to it under the said Act and the Rules. This Court, after considering the rival submissions, observed in paragraph 5 which runs as follows: "The perusal of the aforesaid provisions of the Act and the Rules leaves no manner of doubt that it was open to the appellant to grant the exclusive privilege of manufacturing and selling wine etc. to the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered much in excess of the actual salary of the staff employed in the licensed premises and that because there were revisions in salary of Government servants and some audit objections were raised, the respondents started taking action for recovery of supervision charges with retrospective effect from 5.5.1970 on the strength of the circular dated 7.4.1981. The Bombay High Court held that neither of these provisions clothe the State Government or the Commissioner with the authority to charge the supervision charges with retrospective effect. Obviously, when Section 58A of the Prohibition Act uses the words "the cost of such staff shall be paid to the State Government" that would have reference to the cost of the staff as obtaining for the period during which the goods are stored in the bonded warehouse and not the incidence which the State would have to bear by reason of such a remote circumstance as the upward revision of the pay scales of its own employees at a later date. The Bombay High Court held that even apart from the absence of the provisions allowing retrospective recovery, the State would be estopped from asking for the difference on the basis of unanticipated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is being recovered is only the difference in rates of charges and the liability and the quantum are two different concepts and the liability is not imposed with retrospective effect but merely rates are revised with retrospective effect. The learned Judges of the Division Bench affirmed the view taken by the learned single Judge as correct and upheld the same. On the facts and circumstances of the case, the Bench was not inclined to hold that the demand suffers from unreasonable delay and, therefore, must be struck down and the demand does not suffer from any infirmity. In the case of Mohan Meakin (supra) which was decided on 8.9.1992, the State of Maharashtra was seeking to recover supervision charges under Section 58A of the Prohibition Act with retrospective effect. It was contended that the demand for supervision charges was bad in law. Before the Full Bench, the judgment of the learned single Judge (Pendse,J.) of the Bombay High Court who negatived the contentions of the petitioners by his judgment dated 19.6.1986 and the judgment of the Division Bench of the Bombay High Court in J.E. Bilimoria's case (supra) was also cited. The Division Bench which decided Bilimoria's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined by the respondents in advance before the beginning of every quarter and that this condition is merely for administrative convenience. It does not prevent the State Government from recovering the cost of such staff subsequently, especially when both Section 58A of the Prohibition Act as well as Rule 7 do not prescribe any time limit within which such cost has to be recovered. The Full Bench further held that the demand for additional charges has been made by the State Government from the petitioners when the charges increased and hence the increased charges which have been demanded from the petitioners are from 5.5.1970 and that under Section 58A of the Prohibition Act and the relevant Rules, there is a clear existing statutory liability on the licensees to pay the cost of the supervisory staff and there is no change in the statutory liability. The Full Bench also held that the Division Bench at Nagpur in the case of J.E. Bilimoria (supra) is not right when it says that the cost of the staff which is required to be paid under Section 58A of the Prohibition Act has a reference only to the cost of the staff as obtaining for the period during which the goods are stored in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounter to an earlier judgment of the Division Bench of the same High Court on the same point and that another Division Bench in J.E. Bilimoria's case (supra) has quashed the similar demand of differential supervision charges retrospectively and, therefore, the judgment under appeal ignoring the earlier judgment of the Division Bench on the same point cannot be sustained. This Court has also noticed that the judgment in Bilimoria's case (supra) was not challenged by the Revenue as per the information passed on by the learned counsel appearing for the respondents. We have already noticed that this judgment was rendered by this Court in Polychem's case (supra) on 4.8.1998. Unfortunately, the judgment rendered in Gustad Mayur Irani's case (supra), Mohan Meakin's case(supra) and the order passed by this Court in S.L.P.(C)/94 (CC 26531) filed by Vidarbha Wine Traders dismissing the special leave petition were not cited. This Court observed as follows: "As observed in (I.T.O. vs. I.M.C. Poonnoose), it is open to a sovereign legislature to enact laws which have retrospective operation. Even when Parliament enacts retrospective laws, such laws are no doubt prime facie of questionable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 15(i) of the auction and Rule 36(22-A) of the Punjab Liquor Licence Rules, 1956 as amended. In this case, after accepting the terms and conditions in regard to the auction of retail vends of country spirit, the licensee failed to comply with the conditions of the contract. The said Rules required the licensee to pay an amount by way of charge divided in equal instalments in a year and on default in payment of any instalment, the State was justified in re-auctioning and recovering the resulting loss, if any, from the defaulter. This was the question in the appeal. This Court held as follows: "Those who offer their bids voluntarily in auctions do so with a full knowledge of the terms and conditions attaching to the auctions and they cannot be permitted to wriggle out of the contractual obligations arising out of the acceptance of their bids. The occurrence of a commercial difficulty, inconvenience or hardship in the performance of those conditions, like the sale of liquor being less in summer than in winter, can provide no justification for not complying with the terms of the contract which they had accepted with open eyes. Such vendees, therefore, cannot invoke the writ jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, no limitation can be read into the power to recover all costs present, future and past which are/or were actually incurred by the State Government in view of payments made/to be made to its employees posted for excise supervision, in spite of provisions of sub-rule 12 of Rule 17 of the Rules of 1966 and sub-rule 12 of Rule 6 of the Rules of 1973. It was submitted on behalf of the appellants that for administrative convenience only the costs are calculated and recovered in advance from the licensee and, therefore, sub-rule 12 of Rule 17 of the Rules of 1966 or under sub-rule 12 of Rule 6 of the Rules of 1973 could not be construed as an effective representation that no further cost would be recovered when provision under Section 58A of the Prohibition Act is clearly to the effect that the licensee has to bear the entire cost of the supervisory staff and, therefore, the question of application of principle of promissory estoppel, as argued by the learned counsel for the respondents, would not arise. The Full Bench of the Bombay High court also ruled accordingly. Further Rule 17(12) of the Rules of 1966 and Rule 6(12) of the Rules of 1973 providing for recovery of supervision ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seen from Rule 17(43) of the Rules of 1966 that the licensee shall abide by all the Rules, Regulations and orders made from time to time under the Act. A similar provision also exists under Rule 6(36) of the Rules of 1973. The object of Section 58A of the Prohibition Act and the intention of the Legislature, in our opinion, could not be anything other than that the entire cost incurred by the Government on account of pay-scales paid to the Government employees posted for supervision should be paid by the licensee and that this cost should not be met from the Government exchequer. We have already extracted the relevant undertaking that the respondents had given in the application in Form P.L.A. prescribed under the Rules of 1966 and application in Form C.L.A. prescribed under Rules of 1973. Apart from the undertaking under Condition No. 17 of the licence in Form C.L.A. for grant or renewal of licence that the orders made from time to time under the Act shall be complied with. Sub-rule 43 of Rule 17 of the Rules of 1966 and sub-rule 36 of Rule 6 of the Rules of 1973 also prescribed that the licensee shall abide by the orders made from to time under the Prohibition Act and these are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose given in the judgment of the High Court in Gustad Mayur irani's case(supra), the judgment dated 24.2.1994 in W.P.No. 2718/1991 and M/s. Vidarbha Wine Traders vs. State of Maharashtra and order dated 5.9.1994 of this Court rejecting S.L.P.(C)No/1994(CC 26531) filed by Vidarbha Wine Traders & fifteen other licensees. Inspite of the above position including different reasons given in the Full Bench judgment than those in Gustad Mayur Irani's case(supra) and in the rejection of the special leave petition filed by Vidarbha Wine Traders, learned counsel for the respondents is unable to give any reasons for establishing that the Full Bench decision in the Mohan Meakin's case(supra) was not correct and the High Court has also not given any reasons in the impugned judgment for disagreeing with the reasons given in the Full Bench judgment in the Mohan Meakin's case(supra). We have perused the judgment in Polychem's case(supra) which was delivered on the basis of a concession and incorrect information submitted by the learned advocate appearing for the State of Maharashtra. The above facts and the legal position that the J.E.Bilimoria decision was overruled long back in the Full Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Article 309, namely, the Notification dated 10.12.1998 and the consequential administrative instructions/orders issued for carrying out the executive function under Section 58A of the Prohibition Act and Article 162 namely, the circular letter dated 30.7.1999 had not been challenged by the respondents herein and, therefore, they were not entitled to challenge the demand notice which was merely a consequential communication. The High Court, therefore, is not right in quashing the demand notice issued by appellant No.4, namely, the Sub-Inspector of State Excise, in charge of the manufactory of the respondent, without examining the validity of or quashing the Rules of 1988 and the consequential circular letter dated 30.7.1999 issued by appellant No.2, namely, the Commissioner, since the demand notice was merely a consequential communication issued in furtherance of the Rules of 1998 and the circular letter dated 30.7.1999. For the aforesaid reasons, we are of the opinion that the impugned demand notice was nothing but final settlement of accounts communicated by appellant No.4, one contracting party to the other contracting party, the respondents, in terms of the contract exec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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