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TMI Blog1993 (9) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 24-A which read: "24-A. (i) Subject to the provisions of Section 31, tile Excise Commissioner may grant to any person a licence or licences for the exclusive privilege of selling by retail at shops (for consumption both on and off the licensed premises or for consumption off the licensed premises only) any foreign liquor in any locality. (2) The grant of licence or licences under sub-section (1) in relation to any locality shall be without prejudice to the grant of licences for the retail sale of foreign liquor in the same locality in hotels and restaurants for consumption on their premises. (3) Where more licences than one are proposed to be granted under sub-section (1) in relation to any locality over the same period, advance intimation of the proposal shall be given to the prospective applicants for every such licence. (4) The provisions of Sections 25 and 30 and the proviso to Section 39 shall apply in relation to the grant of a licence for an exclusive privilege under this section as they apply in respect of the grant of a licence for an exclusive privilege under Section 24." 3. Reasons for promulgation of the Ordinance were given in its preamble, thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anged under the Excise (Amendment) Rules, for bringing into effect the Ordinance as regards retail vend of foreign liquor in accordance with the Excise (Amendment) Rules. 6. Thus, the Ordinance and Excise (Amendment) Rules, enabled the Excise Commissioner to grant on behalf of the State Government periodical licence(s) for retail vend of foreign liquor either on the basis of 'fixed fee system' i.e. granting periodic shop licence(s) on 'fixed fee' determined in accordance with graduated or uniform scale, or on the basis of 'auction system', i.e. granting periodic shop licence(s) on 'licence fee' which was the highest amount of bid in a public auction, as was done in granting periodic shop licence(s) for retail vend of country liquor under the U.P. Excise Act and the U.P. Excise Rules. This situation led the U.P. Government, by its Notification dated July 5, 1972, to announce dates of public auction to be held commencing from July 18, 1972, for grant of periodic shop licence(s) for retail vend of foreign liquor in as many as 50 out of 54 districts of the State. 7. Respondents 1 to 3 herein, each of whom was, at the time of the announcement of public auctions, carrying on retail ven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 'licence fee' for vend of foreign liquor under a shop licence by a licensee in any locality of the State; (ii) not to grant shop licence to any person to vend foreign liquor, under the Ordinance and the Excise (Amendment) Rules and (iii) to renew the licences of respondents 1 to 3 (writ petitioners 1 to 3) for the remaining part of the Excise Year 1972-73 under the old 'surcharge system'. However, the High Court, by its order dated November 6, 1975, granted to the appellants herein, who were respondents in the writ petition, a certificate of fitness to appeal to this Court against its judgment dated August 29, 1972. Thus, this appeal was entertained on the basis of the said certificate. But, this appeal, has now, to be considered as against respondents 1 and 3 only, since it is already dismissed on December 17, 1984 as against respondents 2 and 4, for non-prosecution. 10. However, what needs our examination in this appeal is the sustainability of the said conclusions reached by the High Court in its judgment under appeal, viz. (i) that the Ordinance providing for grant to a person a periodic licence for the exclusive privilege of selling foreign liquor in a specified locality of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or under Section 24, apply to tile grant of a licence for the exclusive privilege of selling foreign liquor in shops in any locality of the State. Since Sections 24 and 30 of the U.P. Excise Act pertaining to grant of licence to any person for the exclusive privilege of carrying on specified activities in respect of country liquor or intoxicating drug within any local area are made to apply equally to foreign liquor, they are of importance and require reference: "24. Grant of exclusive privilege of manufacture, etc.- Subject to the provisions of Section 31 the Excise Commissioner may grant to any person a licence for the exclusive privilege- (1) of manufacturing or of supplying by wholesale or of both, or (2) of selling by wholesale or by retail, or (3) of manufacturing or of supplying by wholesale, or of both, and of selling by retail, any country liquor or intoxicating drug within any local area. 30. Payment for- exclusive privilege.- Instead of or in addition to any duty leviable under this chapter the Excise Commissioner may accept payment of a sum in consideration of the grant of licence for any exclusive privilege under Section 24." 14. Sub-rule (1) of Rule 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te person under a licence (contract) for the bid amount receivable under the U.P. Excise Act, the Ordinance or the Excise (Amendment) Rules, such amount constitutes the consideration for licence (contract) and that consideration is termed as 'licence fee'. Similarly, the fee to be determined by Excise Commissioner on a graduated or uniform scale under the subrule in lieu of 'licence fee', makes us take the view that it Could be termed as 'fixed fee', and constitutes consideration for licence (contract). 16. We find that the said view of ours that the term 'licence fee' in the context of the U.P. Excise Law connotes the idea of it being the consideration in money receivable by the Government from a private person by grant of a licence (contract), for parting in such person's favour, its exclusive privilege or right of carrying on certain activities in respect of country liquor or drugs under ,auction system' in public auctions, and the term 'fixed fee' is a fee determined by the Excise Commissioner, in lieu of 'licence fee', well accords with the view taken by the Constitution Bench of this Court in Har Shankar v. Deputy Excise and Taxation Commissioner ((1975) 1 SCC 737 : AIR 1975 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned that 'tax' defined as "a compulsory exaction of money by public authority for public purposes enforceable by law and not payment 'for services rendered' " by Latham, C.J. of the High Court of Australia in Mathews v. Chicory Marketing Board (60 CLR 263, 276) had brought out the essential characteristics of a tax as distinguished from other forms of imposition which, in a general sense, were included within it. Describing the characteristic of compulsion involved in taxation, as the essence of taxation, the learned Judge, approved the statement - "it (tax) is imposed under statutory power without the taxpayer's consent and the payment is enforced by law" - found in Lower Mainland Diary v. Crystal Diary Ltd.(1933 AC 168) Then, to describe the second characteristic of tax - as an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax, the learned Judge called attention to a statement in Findlay Shirras on Science of Public Finance (Vol.I, p. 203), where the second characteristic of tax was found described, thus: "... that the levy of tax is for the purposes of general revenue, which when collecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, a distinction between 'tax' and 'fee', in that, several entries in the lists to the Seventh Schedule refer to matters on which 'tax' or 'duty' or 'cess' can be levied by a legislative measure, while there is reference to only one entry in each of the lists relating to 'fee' that could be levied with reference to governmental action when a legislative measure is brought into existence in relation to any subject-matter of an entry in the given list. 22. What the 'tax' was; and what the 'fee' was; and what were the features which distinguished 'tax' from 'fee'; if were questions considered and answered by the learned Judge as above, those answers were applied by him to hold that the levy imposed on religious institutions under the impugned statute was not a 'fee'. However, the learned Judge, in taking the view that the impugned levy even if was expressed in the statute to be a fee levied in return for services, 'he' having regard to its nature, observed: "...that the public interest though seems to be the basis of all impositions, imposition of a fee was permissible only if it conferred special benefit which the individual receives." 23. In H.H. Sudhundra Thirtha Swami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1987 SC 933) Chinnappa Reddy, J., who spoke for this Court on the question of vesting of rights as regards sale and manufacture of intoxicants in the State, observed: (SCC p. 147, para 8) "It is well settled that all rights in regard to manufacture and sale of intoxicants vest in the State. It is open to the State to part with those rights for a consideration. The consideration for parting with the privilege of the State is neither excise duty nor licence fee but it is the price of the privilege." 26. We shall now turn to the two concepts of 'fee', that is, 'fee for licences' and 'fee for services rendered' recognised by sub-article (2) of Article 199 of the Constitution, to find as to which of them could be the subject 'fee' in the entry in List 11 of the Seventh Schedule to the Constitution respecting which State has the competence to legislate. 27. Sub-article (2) in both Articles 110 and 199 is couched in the Sam language thus: "(2) A Bill shall not be deemed to be a Money Bill by reason only the it provides for the imposition of fines or other pecuniary penalties, or for the demand or payment of fees for licences or fees for services rendered, or by reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -4) or (Form FL-5), it is held by us, to be not 'fee' at all, falling in line with the view expressed in this regard by a Constitution Bench of this Court in Har Shankar case' and other decisions adverted to. If that be so, the 'licence fee' or 'fixed fee' cannot partake of the character of either 'regulatory fee' or 'compensatory fee' so as to regard it as 'fee'. Thus, neither the 'licence fee' nor 'fixed fee' realisable from a private party for granting the privilege or right to sell or vend foreign liquor to such party can fall within the ambit of the subject 'fee' in the entry to List II of the Seventh Schedule to the Constitution. Then, the 'licence fee' or the 'fixed fee' under consideration, cannot be regarded as 'tax' since the characteristics of tax, namely, its levy being compulsive in nature, its burden being common, it being payable according to the varying abilities of the person to be charged, are wholly absent in both of them. As 'duty' or 'cess' stand on the same footing as 'tax', the 'licence fee' or 'fixed fee' under consideration, cannot be regarded either as 'duty' or 'cess'. Hence, the terms the 'licence fee' or the 'fixed fee' used in the context of the U.P. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as to whether such terms 'licence fee' and 'fixed fee' are referable to 'fee', 'tax', or 'duty' or 'cess' falling in one or the other entry in List II of the Seventh Schedule to the Constitution, furnish the background in which the sustainability or otherwise of the conclusions of the High Court to which we have adverted to earlier could be examined, we shall proceed, accordingly. 30. The High Court's first conclusion is that the licence fee leviable by the State Government under the provisions of the Ordinance for grant of periodic shop licence either to the highest bidder in a public auction or to the person paying fixed fee determined by the Excise Commissioner entitling such bidder or other person to have the exclusive privilege of selling foreign liquor in a locality was ultra vires the Constitution for the reason that the Ordinance providing for imposition of such levy was not justifiable with reference to entries in List II of the Seventh Schedule to the Constitution i.e. Entries 8, 51, 62 and 66 thereof. The first conclusion, therefore, relates to. the constitutional invalidity of the Ordinance for want of legislative competence on the part of the State. 31. Entries 8, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State to grant shop licences for sale of foreign liquors to private parties on 'licence-fee' or 'fixed fee' could have been regarded by the High Court as a subject on which the State Legislature had competence to legislate under Entry 8 of List II of the Seventh Schedule to the Constitution, for admittedly neither the Union nor a State Legislature is competent to make a law on a subject not covered in one or the other entry in the Legislative Lists of the Seventh Schedule to our Constitution. If our answer to this question has to be in the affirmative, the High Court's first conclusion, necessarily becomes unsustainable. A satisfactory answer to this question since could be found from the Constitution Bench decision of this Court in Har Shankar case1 and the seven-Judge Bench decision of this Court in Synthetics and Chemicals Ltd. v. State of U.P. ((1990) 1 scc 109) where this Court has exhaustively dealt with the law relating to the very question under consideration by reviewing all its earlier decisions rendered thereon, we find it unnecessary to make any detailed reference, to the other decisions of this Court or other Courts. 34. Har Shankar case1 a Constitution Bench decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no authority to impose; that the levy is beyond the legislative competence of the State Government; or that the terms and conditions of the licence constitute an unreasonable restriction on the fundamental right of the citizen to carry on business for the sale of liquor." 35. Thereafter, the Constitution Bench, by referring to its earlier decisions of five Constitution Benches in State of Bombay v. F.N. Balsara (1951 SCR 682: AIR 1951 SC 318 : 52 Cri LJ 1361), Cooverjee B. Bharucha v. Excise Commissioner and the Chief Commissioner, Ajmer (1954 SCR 873 AIR 1954 SC 220)", State of Assam v. A.N. Kidwai, Commissioner of Hills Division and Appeals, Shillong (1957 SCR 295 AIR 1957 SC 414), Nagendra Nath Bora v. Commissioner of Hills Division and Appeals, Assam' (1958 SCR 1240: AIR 1958 SC 398) and Amar Chandra Chakraborty v. Collector of Excise, Government of Tripura ((1972) 2 SCC 442: (1973) 1 SCR 533) as regards State's competence to make laws on liquor business observed, thus: (SCC p. 755, para 47) "These unanimous decisions of five Constitution Benches uniformly emphasized after a careful consideration of the problem involved that the State has the power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alcohol? Sabyasachi Mukharji, J. (as he then was), who spoke for six Judges constituting the seven-Judge Bench of this Court, adverted to the earlier decisions of the Constitution Benches and the decision of this Court in Har Shankar case' besides other decisions of Constitution Benches wherein it was observed: "... that the 'police power' of the State enables regulations to be made regarding manufacture, transport, possession and sale of intoxicating liquor." However, the learned Judge did not agree with the said observation that there was police power which could be exercised by a State in India in the matter of making law under our Constitution, although he described that police power to be the American Doctrine. But, the learned Judge, then attributed the power of the State to make such laws under our Constitution to State's sovereign power, thus: (SCC p. 148, para 61) "The American doctrine of police power is not perhaps applicable as such in India, but powers of the sovereignty to regulate as part of the power of the competent legislature to effectuate its aim are there." The said view was reiterated as well, thus: (SCC p. 149, para 64) "We reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .P. Excise Act. Thus, it becomes clear that Section 24-A inserted in the U.P. Excise Act by the Ordinance, which was held to be ultra vires the Constitution for want of legislative competence by Allahabad High Court stands negatived by this Court's Constitution Bench decision in Har Shankar case1 and the seven-Judge Bench decision in Synthetics and Chemicals Ltd. 11 41. Thus, we are not left in doubt that the first conclusion of the High Court adverted to above, is unsustainable. 42. Now, coming to the second conclusion relating to the power exercisable by the Excise Commissioner in the matter of the mode of levy and collection of the 'licence fee' and 'fixed fee' under the Excise (Amendment) Rules, the High Court took the view that having regard to its conclusion about State Legislature's legislative incompetence on the subject of the Ordinance, it had to hold that the impugned Rule under the Excise (Amendment) Rules was also ultra vires the Constitution. Since, we have found that High Court's view of the constitutional invalidity of the Ordinance is contrary to the decisions of this Court, in Har Shankar case1 and Synthetics and Chemicals Ltd. 11 the second conclusion of the Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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