2011 (3) TMI 1732 - HC - Central Excise

Summary

Issues Involved:
1. Applicability of Rule 22 of the Punjab Liquor Permit and Pass Rules, 1932 to industrial/denatured spirit.
2. Validity of notification enhancing permit fee for denatured spirit.
3. Competence of the State to levy permit fees on denatured spirit.
4. Refund of permit fees collected under the amended Rule 22.

Issue-Wise Analysis:

1. Applicability of Rule 22 of the Punjab Liquor Permit and Pass Rules, 1932 to industrial/denatured spirit:
The petitioner challenged the applicability of Rule 22 of the Punjab Liquor Permit and Pass Rules, 1932 (the Rules) to industrial/denatured spirit. The court examined the provisions of the Excise Act and the Rules, noting that Rule 22 prescribes different forms for permits for possession of various types of spirits, including denatured spirit. The court found that a permit for possession of denatured spirit for business purposes is granted in Form L.42-A and is subject to a fee as per the provisos of sub-clause (d) of Rule 22.

2. Validity of notification enhancing permit fee for denatured spirit:
The petitioner sought to quash notification No. G.S.R. 25/P.A. 1/14/Ss. 334 and 59/Amd.(22)/2004, dated 29.3.2004, which increased the permit fee for denatured spirit from 30 paisa per bulk litre to 60 paisa per bulk litre. The court noted that the notification was issued under the powers conferred by Sections 34 and 59 of the Excise Act. However, the court found that the imposition of such a fee by the State was beyond its legislative competence, as industrial alcohol is not fit for human consumption and thus falls outside the purview of the State's regulatory power.

3. Competence of the State to levy permit fees on denatured spirit:
The court addressed the issue of whether the State of Punjab had the competence to levy permit fees on denatured spirit. It referred to the 7-Judge Bench judgment of the Supreme Court in Synthetics and Chemicals Ltd. v. State of U.P., which held that industrial alcohol, not being fit for human consumption, cannot be regulated by the State. The court reiterated that the State's power to regulate is limited to alcoholic liquor for human consumption, and industrial alcohol falls under the exclusive control of the Union Government as per Entry 52 of List I of the Seventh Schedule of the Constitution.

4. Refund of permit fees collected under the amended Rule 22:
The petitioner also sought a refund of the permit fees collected under the amended Rule 22. The court, having found the levy of permit fees on denatured spirit to be beyond the State's competence, directed the respondents to refund the permit fees collected from the petitioner. The court emphasized that any tax or fee levied without jurisdiction amounts to unjust enrichment and must be refunded.

Conclusion:
The court allowed the writ petition, holding that the imposition of permit fees on denatured spirit by the State of Punjab under Rule 22 of the Rules was invalid. The notification enhancing the permit fee was quashed, and the respondents were directed to refund the collected permit fees to the petitioner.