2017 (3) TMI 580 - SC - Indian Laws

Liquor - trade in liquor - establishment charges - Those who come forward to seek the privileges of the State to manufacture or sell the liquor have to abide by the statutory regulations and terms and conditions of the licence. The privilege is not thrust upon anyone rather it is sought by intending persons or parties by participating in auctions for settling such right or by obtaining licence for such privilege in accordance with the statutory provisions. Whether this Court need to examine the vires of Rule 4(41) of 1995 Rules, whereas in the writ petition filed by the respondents, no prayer was made to struck down Rule 4(41) of the Rules 1995? - Held that - under the Rules of the High Court, the Bench hearing the writ petition at Indoor was not competent to pass the order, declaring Rules ultra vires. The statement in the counteraffidavit, as noted above indicates that there was some specific bench for hearing constitutional issues regarding vires of the Rules. Thus had the writ petitioner intended to challenge the vires of the rules, he had to file the writ petition for appropriate relief before the Bench having roster to decide the vires. Thus, it is clear that writ petitioner never intended to challenge the vires of the Rules, which is apparent from the reasons, as noted above. We are thus of the considered opinion that the something which writ petitioner never intended or prayed for cannot be looked into in this appeal. Establishment charges - demand - Section 28A - Held that - Section 28A being not in existence during the relevant period for which demand has been raised, it is not necessary for us to consider the effect and consequence of Section 28A in so far as the present case is concerned. However, taking into consideration the overall circumstances, as noted above, ends of justice will be served in giving liberty to the respondent to represent against the demand notice dated 23rd March, 1989 before the State. Appeal disposed off.

Summary

Issues Involved:
1. Validity of the demand notice issued under Rule 4(41) of the Madhya Pradesh Distillery Rules, 1995.
2. Applicability of the judgment in M/s. Lilasons Breweries (Pvt.) Ltd. vs. State of Madhya Pradesh to the present case.
3. Examination of the vires of Rule 4(41) in the absence of a specific prayer in the writ petition.
4. Reasonableness and arbitrariness of the demand.

Detailed Analysis:

1. Validity of the Demand Notice:
The State of Madhya Pradesh issued a demand notice to the respondents for ?13,24,189.50, claiming it as excess expenditure on the establishment of officers and employees under Rule 4(41) of the Madhya Pradesh Distillery Rules, 1995. The respondents challenged this demand in a writ petition, arguing that the rule under which the demand was raised is void and non est, relying on a precedent set by the Supreme Court in M/s. Lilasons Breweries (Pvt.) Ltd. vs. State of Madhya Pradesh.

2. Applicability of the Judgment in M/s. Lilasons Breweries:
The respondents heavily relied on the judgment in M/s. Lilasons Breweries, where Rule 22 of the Madhya Pradesh Brewery Rules, 1970, which allowed the State to realize charges exceeding five percent of the duty leviable, was struck down. The respondents argued that Rule 4(41) of the 1995 Rules is similarly void. However, the State contended that the judgment in Lilasons was not applicable as it dealt with a different rule and that the demand was fully covered under Rule 4(41).

3. Examination of the Vires of Rule 4(41):
The respondents did not specifically pray for declaring Rule 4(41) as ultra vires in their writ petition. The State argued that the vires of Rule 4(41) could only be challenged before a Constitution Bench. The learned Single Judge noted that Rule 4(41) appeared to be ultra vires but did not pass any order in this regard due to the absence of a specific prayer and the jurisdictional limitations of the bench at Indore.

4. Reasonableness and Arbitrariness of the Demand:
The learned Single Judge found the demand notice void, relying on the judgment in Lilasons and reasoning that the demand towards establishment charges was more than 150 percent of the total income of the distilleries, making it arbitrary and unreasonable. The State argued that the demand was proper and within the powers conferred by the M.P. Excise Act, 1915. The Supreme Court examined whether the demand was arbitrary and unreasonable, noting that the respondents had not laid a sufficient foundation in their writ petition to challenge the reasonableness of the demand.

Conclusion:
The Supreme Court set aside the judgment of the High Court dated 04.05.2000, which had quashed the demand notice. The Court provided liberty to the respondents to represent against the demand notice before the State, which should consider the representation and take an appropriate decision expeditiously. The Supreme Court did not find the reliance on the Lilasons case appropriate and upheld the validity of the demand under Rule 4(41), subject to the State's reconsideration of the specific circumstances of the case.