2020 (1) TMI 413 - HC - VAT and Sales Tax

Whether the State Government can levy the amount more than the actual cost incurred upon the excise staff deployed in distilleries / compounding and blending plants? - whether if one excise staff is deployed in more than one distillery / compounding and blending plant, can the State Government recover the entire expenses incurred upon such staff, separately from all the distilleries / compounding and blending plants, in which such staff is deployed? HELD THAT - The only plausible answers to these questions can be, that the State Government can only realise from the distilleries / compounding and blending plants, the actual expenses incurred on the salary, allowances etc., of the excise staff deployed in such distilleries / compounding and blending plants, and in case one excise staff is deployed in more than one distillery / compounding and blending plant, the actual cost can be realised proportionately from each of them. In no case the State Government can be allowed to levy the amount more than the actual cost incurred upon the excise staff deployed in distilleries / compounding and blending plants, and further, in case one excise staff is deployed in more than one distillery / compounding and blending plants, to recover the entire expenses incurred upon such staff, separately from all the distilleries / compounding and blending plants, as allowing such practice shall amount to undue enrichment to the State Government in garb of the Rules 9 and 36A of the aforesaid Rules, which these rules do not permit. A plain reading of both these rules clearly show, that they only permit the actual cost to be realised. Thus, no extra amount can be levied from the companies, than the actual cost incurred by the State Government on deployment of the excise staff. The other point to be kept into consideration is that the cost leviable under Rule 9 shall apply to only those distilleries, which are licensed solely and wholly for the purpose of manufacturing either denatured spirit or any other commercial spirit, unfit for human consumption, but it would not include those distilleries which are licensed for manufacturing along with spirits unfit for human consumption, also potable liquor - Similarly the fees leviable under Rule 36-A of the aforesaid Rules shall apply only to the compounding and blending plants of the foreign liquor. Matter remanded back to the Respondent Excise Commissioner, for re-determining the fees / costs leviable from the petitioners Companies, keeping in view of the aforesaid guidelines - appeal allowed by way of remand.

Summary

Issues involved:
Challenge to the vires of Rules 9 and 36A regarding deployment of excise staff in distilleries and blending plants; Determination of costs leviable from petitioners; Whether State can recover more than actual expenses incurred on excise staff; Deployment of excise staff in multiple plants and recovery of expenses; Applicability of rules to distilleries manufacturing potable liquor; Remand for re-determination of costs.

The judgment by the Jharkhand High Court involved multiple issues regarding the deployment of excise staff in distilleries and blending plants. The petitioners, engaged in liquor business, challenged the vires of Rules 9 and 36A, which govern the appointment and costs related to excise staff. Despite the challenge, based on precedent cases, the petitioners withdrew the challenge to the rules. However, they highlighted irregularities in the determination of costs leviable for excise staff deployment. The petitioners argued that demands for fees were arbitrary and not based on actual expenses, leading to overcharging in some instances where expenses exceeded actual costs incurred.

The Advocate General, opposing the petitioners' claims, cited previous judgments emphasizing that the State is entitled to recover expenses for excise staff deployment. The court acknowledged the State's right to recover expenses but questioned the practice of levying amounts exceeding actual costs or recovering entire expenses from multiple distilleries where one excise staff is deployed. The court held that the State can only recover actual expenses incurred on excise staff proportionately from each establishment. Any excess amount charged would result in undue enrichment for the State, contrary to the rules, which permit only the recovery of actual costs.

Furthermore, the court clarified that Rule 9 applies to distilleries solely manufacturing spirits unfit for human consumption, excluding those producing potable liquor. Similarly, Rule 36A pertains to compounding and blending plants of foreign liquor. The court directed the matter back to the Excise Commissioner for re-determining costs, instructing a fair assessment based on guidelines provided. If excess amounts were charged, refunds or adjustments were permitted unless costs were passed on to customers. Conversely, if undercharged, the actual cost should be levied. The court allowed the writ applications, providing detailed observations and directions for the re-determination of costs in compliance with the established guidelines.