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TMI Blog2007 (4) TMI 684X X X X Extracts X X X X X X X X Extracts X X X X ..... arges on account of salary of Excise Department staff were to be recovered from management at 50% of total expenses. This order was, however, withdrawn on 1.4.1974. On 13.8.1981, the Excise Commissioner, withdrew the exemption granted by an order dated 5-9-1973. By an order dated 10.9.1981, the Excise Commissioner made a demand for payment of salaries of Excise personnel posted at appellant's distillery. Notice of demand was issued on 6.10.1988. On 28.9.1981, the appellant filed first OWP No. 549 of 1981 challenging Rule 17 as being ultra vires the Act. The High Court stayed the recovery proceedings. The appellant has also filed Writ Petition No. 1208 of 1989 challenging the demand made on October 6, 1989 on account of staff charges, which was dismissed by the learned Single Judge by its order dated 27th September, 1990. Aggrieved thereby, the appellant preferred LPA (W) No.159 of 1990, which was dismissed by the Division Bench by the impugned order. Hence the present appeals. Section 25 of the Act empowers the Government to frame rules. The relevant portion for the present purpose reads:- 25. The Government may from time to time frame rules- .. .. (g) for the insp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f arbitrary action which apply to executive actions do not necessarily apply to delegated legislation. In order that delegated legislation can be struck down, such legislation must be manifestly arbitrary; a law which could not be reasonably expected to emanate from an authority delegated with the lawmaking power It is, therefore, clear that even in dealing with the liquor trade, the government cannot be manifestly unjust or arbitrary. Dr. Rajeev Dhawan, learned senior counsel, appearing for the appellants, contended that the concept of reasonableness applicable to delegated legislation and more generally to actions under Articles 14 and 21 is that the action should not be manifestly unjust and arbitrary. According to him, Rule 17 suffers from excessive delegation and is manifestly unjust and arbitrary. Per contra Mr.S.R. Singh, learned senior counsel, appearing for the respondents, contended that such payment postulated under Rule 17 is neither fee nor tax but such payment is being demanded in lieu of for parting with the exclusive right and privileges granted to the appellant for the services rendered to the appellant. We may at this stage notice that both the learned Sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no such provision in the J K Excise Act. Dr. Dhawan referring to Rule 17 contended that it suffers from excessive delegation, as it is manifestly unjust and arbitrary. In this connection he contended that Section 25(o) required that the rules should seek to carry out the provisions of the Act or of any other law relating to the excise revenue. It is his say, that a disjunctive reading would be violative of both the grammar and the intent if the word 'generally' is given too wide an interpretation and the word 'and' is read as 'or'. Section 25(o) would become wholly and completely unguided and applicable to just about anything. The restraining element in Section 25(o) is the fact that it must relate to excise revenue . Excise revenue is defined in Section 3 of the Act. It reads: 'Excise revenue' means revenue derived or derivable from any duty, fee, tax, fine or confiscation imposed or ordered under the provisions of this Act According to Dr. Dhawan, the term fee as defined in Section 3 is not the kind of fee that falls under Rule 17 and therefore, the fee for the purpose of Rule 17 is not authorised by the Act. He also refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated by the provisions of the Act itself . In the case of Devi Das Gopal Krishnan vs. State of Punjab, (1967) 3 SCR 557, it was pointed out at 565-566 as under: Under that section the Legislature practically effaced itself in the matter of fixation of rates and it did not give any guidance either under that section or under any other provisions of the Act-no other provision was brought to our notice. The argument of the learned counsel; that such a policy could be gathered from the constitutional provisions cannot be accepted, for, if accepted, it would destroy the doctrine of excessive delegation. It would also sanction conferment of power by Legislature on the executive Government without laying down any guide-lines in the Act. The minimum we expect of the Legislature is to lay down in the Act conferring such a power of fixation of rates clear legislative policy or guide-lines in that regard. As the Act did not prescribe any such policy, it must be held that section 5 of the said Act, as it stood before the amendment, was void. In the cases aforesaid where fees akin to Rule 17 were imposed were cases where the imposition was specifically imposed by the statute. It is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s persons such as whole-sale dealer, retail dealer or other manufacturers also requires close and effective supervision because of the risk of the denatured spirit being converted into palatable liquor and thus evading heavy duty. Assuming this conclusion to be correct, by doing so, the State is rendering no service to the consumer. It is merely protecting its own rights. Further in this case, the State which was in a position to place material before the Court to show what services had been rendered by it to the appellant and other similar licensees, the costs or at any rate the probable costs that can be said to have been incurred for rendering those services and the amount realised as fees has failed to do so. On the side of the appellant, it is alleged that the State is collecting huge amount as fees and that it is rendering little or no service in return. The co-relationship between the services rendered and the fee levied is essentially a question of fact. Prima facie, the levy appears to be excessive even if the State can be said to be rendering some service to the licensees. The State ought to be in possession of the material from which the co-relationship between the levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in benefits to the person on whom it is imposed. The work of inspection done by the Corporation which is only to see that the terms of the licence are observed by the licensee is not a service to him. No question here arises of correlating the amount of the levy to the costs of any service. The levy is a tax. It is not disputed, it may be stated, that if the levy is not a fee, it must be a tax. In the case of M/s Lilasons Breweries (Pvt.) Ltd. vs. State of Madhya Pradesh, (1992) 3 SCC 293, Rule 22 of the M.P. Breweries Rules 1970 to meet the annual expenses of the officers was struck down as ultra vires the Act and beyond the rule making power of the State. WHY IT IS TAX AND NOT FEE Under the Constitutional scheme, taxes are distinct from fees. Excise is a form of tax. It is self-evident from various constitutional provisions: (i) The concept of a Money Bill in Articles 110(2) and 199(2) clearly postulate that taxes should be voted on by Parliament See Corporation of Calcutta, (1965) 2 SCR 477 at 483 (ii) The taxes and excise in the Union List are to be found in List I, Entries 82-92B; and (iii) The taxes in the State List are to be found in List II, Entries 42- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered to individuals by some governmental agency. The amount of fee levied is supposed to be based on the expenses incurred by the Government in rendering the service, though in many cases the costs are arbitrarily assessedbut in this case there is total absence of any co- relation between the expenses incurred by the Government and the amount raised by contribution under the provision of section 76 and in these circumstances the theory of a return or counter-payment or quid pro quo cannot have any possible application to this case. In our opinion, therefore, the High Court was right in holding that the contribution levied under section 76 is a tax and not a fee and consequently it was beyond the power of the State Legislature to enact this provision. For the reasons aforestated we hold that: (a) Rule 17 has no statutory backing and it is in excess of the Act. (b) It is manifestly unjust and arbitrary. (c) Provision of Rule 17 is clearly a tax and not a fee. (d) Imposition of tax or fee on the citizens for the services that the State renders to itself and not the tax payers is clearly impermissible, arbitrary and unjustifiable. This takes us to the last leg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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