2003 (3) TMI 727 - SC - Indian Laws

Summary

Issues Involved:
1. Whether the State of Maharashtra is empowered to charge liquor licensees for supervision costs under the Bombay Prohibition Act, 1949.
2. Whether the Commissioner can recover supervision charges retrospectively and raise demands for arrears of supervision charges.

Summary:

Issue 1: Empowerment to Charge Supervision Costs
The respondents hold licenses for manufacturing Indian made foreign liquor and country liquor under the Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966, and the Maharashtra Country Liquor Rules, 1973. Under Section 58A of the Prohibition Act, the State Government is empowered to permit the manufacture and other related activities under the supervision of excise staff, with the cost of such staff to be paid by the manufacturer. The pay scales and other allowances of Government employees are fixed by the State Government under the Maharashtra Civil Services (Revised Pay) Rules, 1998, issued under Article 309 of the Constitution. The Commissioner issues circulars for levy and recovery of supervision charges based on these pay scales. The respondents challenged the demand notices for differential amounts of supervision charges due to the retrospective revision of pay scales.

Issue 2: Recovery of Supervision Charges Retrospectively
The High Court of Bombay quashed the demand notices based on the judgment in Polychem Ltd. vs. State of Maharashtra, which held that the State Government is not empowered to collect supervision charges with retrospective effect. The appellants contended that the judgment in J.E. Bilimoria & Sons vs. State of Maharashtra, which was confirmed by the Supreme Court in Polychem's case, was overruled by the Full Bench in Mohan Meakin Ltd. vs. State of Maharashtra. The Full Bench held that the State Government has the power to recover the cost of supervision staff retrospectively under Section 58A of the Prohibition Act and that the licensees are liable to pay the increased cost due to the retrospective revision of pay scales.

Judgment:
The Supreme Court held that the State Government is empowered to recover all costs of supervision, including those incurred due to retrospective pay scale revisions, under Section 58A of the Prohibition Act. The Court emphasized that the licensees had undertaken to abide by all orders under the Prohibition Act while obtaining the licenses and could not avoid their contractual obligations. The judgment in Polychem's case was delivered based on incorrect information and did not consider the Full Bench decision in Mohan Meakin's case. The Supreme Court set aside the High Court's judgment and upheld the demand notices for differential supervision charges. The appeals were allowed with no order as to costs.