TMI Blog2004 (4) TMI 635X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity from the distilleries and use the same for the manufacture and bottling of arrack. The State has also been exercising the power to fix the price of Rectified Spirit supplied to the arrack manufacturers. In order however to rationalise the fixation of price payable for the spirit supplied to the arrack manufacturers, the Government engaged the services of Sri G. Sudhakar Rao, a Chartered Accountant who was required to study the details and recommend an appropriate price structure for sale and purchase of Rectified Spirit and to submit a report in that regard. The Chartered Accountant appears to have selected three distilleries in the State which were according to him representative in character for purposes of determining the cost elements involved in the manufacture of Rectified Spirit. On the basis of the data collected by the Chartered Accountant, he submitted a report in which it was pointed out that the average cost of production of rectified spirit worked out to ₹ 6.01/- which left enough margin of profit to the units. The report submitted by the Chartered Accountant accordingly recommended that in the case of sugar units with captive distilleries manufacturing Rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Year 1992-93 had been fixed. 5. In W.P. No. 36275 of 1993 relevant to W.A. No. 8220 of 1999 also, the controversy relates to the payment and recovery of the price of Rectified Spirit at the rate stipulated in the impugned Government Order. The petitioner-Company has in the petition assailed its classification as a captive distillery inter alia on the ground that the Government Order does not provide any rational basis for classification of distilleries into captive and non-captive. A mandamus directing the respondents to treat the appellant as a non-captive unit was prayed for with a further direction to the respondents to release the balance amount of Re. 1/- per litre payable to it in terms of its representation dated 23-6-1992 addressed to the Excise Commissioner. 6. W.P. No. 7751 of 1993 relevant to W.A. No. 7354 of 1999 similarly seeks a mandamus directing the respondents to pay the rates applicable to non-captive distillery units for the quantity supplied by the petitioner to the arrack bottling units and to release the amount claimed by it in that regard, A certiorari quashing communication dated 2-11-1992 issued by the Deputy Commissioner of Excise has also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an consumption. Since Rectified Spirit did not fall in that category, the State Legislature could not impose any excise duty on the same. Alternatively it was submitted that even if the Government had the power to fix the price of Rectified Spirit, the same could not be exercised in an arbitrary or fanciful manner by bringing about an artificial classification like the one in the instant case. It was also argued that petitioner in W.P. No. 7751 of 1993, had made a representation for being classified as a non-captive unit and supported the said claim by furnishing particulars which the authorities had promised to consider but had failed to do so. 9. Mr. Shantha Raju, learned Senior Counsel appearing for the appellant in W.A. No. 8220 of 1999 argued that so long as molasses which was the raw material for the manufacture of Rectified Spirit was controlled under statutory regulations, the so-called captive distilleries could not without an appropriate allotment in its favour make use of the same no matter it was being produced or was available within the sugar factory itself or at a short distance from the distillery. The very basis on which the classification was made was according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck manufacturers after such supplies have been made without registering a protest? (3) If the answer to Question No. 2 be in the affirmative, whether the State's power to fix prices extends to rectified spirit produced by the petitioner-Distilleries? Re: Question No-1.-- 12. The need for classifying distillery into captive and non-captive appears to have arisen because of the fact that the cost of production of rectified spirit by the Distillery depends upon whether the Distillery has the raw material in the form of molasses available at its doorstep or has to purchase and transport the same from other sugar mills. The report submitted by the Chartered Accountant engaged by the Government to study the price structure suggested that where a distillery has set up a sugar factory as one of its units and therefore has the advantage of getting molasses without any additional cost being incurred on transportation and payment of taxes, the cost of production of rectified spirit is lesser in comparison to another distilleries which does not have such advantages and therefore depends upon purchase of molasses from other sugar mills either wholly or substantially apart fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... around and question the validity of the same nor can it demand a higher price than the one stipulated in the Order. The petitioners could not approbate or reprobate by accepting the orders placed on them for supply on the one hand and demanding a higher payment for the same on the other. 14. The distilleries had at no stage before making of the supply of the allotted quantity of rectified spirit raised the question of price payable to them for the same. It is not the case of the petitioner that the distilleries were coerced to make supplies against their will by any arm-twisting methods or by use of any other coercive measures. The supplies were without any protest or demur till long after the same a claim for payment of higher amount towards consideration was lodged. There was in the circumstances no real justification for the petitioners to demand more than what the arrack contractor had been asked to pay or had paid. Even in cases where the payment was made at a rate higher than the one admissible to the distillery, the excess of Re. 1/- per litre in the case of captive units was made on the specific understanding that the said excess shall be remitted to the Government. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s between the parties, all that the distilleries would be entitled towards price would be a reasonable amount within the meaning of Section 9 of Sub-section (2) of the Sale of Goods Act, 1930. The Government had on the basis of data collected by a qualified Chartered Accountant come to the conclusion that in the case of captive distilleries, the reasonable amount payable would be ₹ 5 per litre whereas in the case of non-captive units, the amount would go upto ₹ 6 per litre. Except the petitioners-appellants before us, the remaining units manufacturing rectified spirit had no difficulty in accepting the said amount as the price representing supplies made by them. In the absence of any compelling reason, we see no justification for the appellants claiming a higher amount than what was stipulated by the Government and accepted by the distilleries as the price reasonably payable for the product sold by them. 16. There is apart from the above, yet another angle from which the controversy may be viewed. The appellant-distilleries have relying upon the decision of this Court in Gowri Industries case, supra argued that the Government had no power to fix the sale price of rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed or undisclosed fact . 17. Silence on the part of the distilleries while making the supplies may even tantamount to a declaration to the opposite party viz., the arrack contractors that the distilleries have by their silence decided to adopt a particular course or attitude namely that they have chosen to make the supply on the rates stipulated by the Government. Any such election for one of the two courses available would estop the distilleries from resorting to the alternative course or attitude at a subsequent point of time. 18. Suffice it to say that both from the point of view of the right to demand a price in terms of the Sale of Goods Act as also from the point of view of estoppel by conduct and representation, the distilleries have disentitled themselves to demand a higher price than what was stipulated in the Government Order. Their claim for payment of a higher amount in cases where they have received less or their failure to reimburse to the Government the excess where they have received more is not therefore legally sustainable. Question No. 2 is in that view answered in the negative. Re: Question No. 3.-- 19. In the light of the answers to questions 1 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier two questions formulated above. 20. We may before parting deal with the grievance made by appellant in W.A. No. 7354 of 1999. It was contended by M/s. Patil and Shariff that the appellant had been wrongly classified as a captive unit. It was submitted that a representation had been made by the said appellant to the authorities pointing out that it was purchasing molasses from six units from outside and therefore qualified for being treated as a non-captive unit. The receipt of this representation had been acknowledged by the respondents and an assurance given that the same would be looked into but no action had been taken by them in that direction. A mandamus directing the respondents to examine the representation and the claim for being classified as non-captive was therefore prayed for. 21. Learned Advocate General had no objection to a mandamus as prayed for being issued. He submitted that the competent authority would within the time stipulated by this Court examine the claim made by the appellant for being classified as a non-captive unit and take a decision under intimation to the appellant. That submission in our opinion should sufficiently satisfy the appella ..... 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