2003 (3) TMI 736 - SC - Central Excise

Summary

Issues:
Challenge to levy of full costs of supervision and establishments of excise staff by a respondent company holding a D-2 licence for manufacturing Indian Made Foreign Liquor from rectified spirit.

Analysis:
The respondent company, holding a D-2 licence for manufacturing Indian Made Foreign Liquor, challenged the levy of full costs of supervision and establishment of excise staff at its factory premises. The High Court quashed the levy based on the decision in M/s Lilasons Breweries (Pvt.) Ltd.'s case, where Rule 22 was held ultra vires by the Supreme Court. The appellant challenged this decision, contending that D-2 licences were issued under different rules, not Rule 22 of the Brewery Rules. The relevant rules for granting D-2 licences were Rules IV and V of the Distillery & Warehouse Rules, not the Brewery Rules. These rules were framed under the M.P. Excise Act, 1915, empowering the State Government to grant licences for distilleries. Section 18 allowed the State Government to lease the right of manufacturing liquor, and Section 27 permitted accepting a sum for granting leases.

The State Government was entitled to accept a sum for granting leases in addition to any duty leviable under the Act. Condition 8 of the licence required the licensee to pay the full cost of excise supervisory staff. The validity of similar provisions was upheld in Government of Andhra Pradesh v. M/s Anabeshahi Wine and Distilleries Pvt. Ltd., where it was clarified that such payments were not taxes or excise duties but the price for the privilege granted by the government. The Court emphasized that a licensee was not obligated to take the licence if unwilling to pay the required price. The demand for establishment charges was deemed legal and justified.

In Shri Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. v. State of Gujarat, the validity of a demand for maintenance of excise staff was upheld under Section 58A of the Bombay Prohibition Act, citing the State's regulatory power under Entry 33 of the Concurrent List. The decision in Synthetics and Chemicals Ltd. v. State of U.P. was referenced to support the State's authority to levy fees for supervision. The settled legal position confirmed that recovering the actual cost of supervisory staff was not illegal or ultra vires, as it constituted the price for the privilege granted by the government. Consequently, the appeal was allowed, setting aside the High Court's judgment without costs.