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TMI Blog1996 (7) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... conferred under clauses (g) and (h) of Sub-section (2) of Section 62 of the Madhya Pradesh Excise Act, 1915 (for short the Act of 1915), has published the notification dated 27th March, 1995 by which a new licence in form FL-8A has been, introduced. This licence is granted on a prepayment of an annual licence fee of ₹ 20,000/- and also contains a schedule by which bottling fee has been introduced to be payable at different rates. The impugned notification has been placed on record as Annexure-B. This charge of bottling fee is over and above all the excise duty payable by the licensee. This is known as bottling fee. The bottling fee comes to ₹ 5/- per bottle of ₹ 15/- per proof litre, raising the cost of IMFL by ₹ 135/- per case. This notification is applicable only to the units which have been franchised for bottling certain specified brands of IMFL by the holder of a similar licence in any part of the country outside Madhya Pradesh. 3. In substance, the contention of the petitioner is that the distillers who are locally situated and are engaged in the process of manufacturing, have been exempted and for them, the bottling fee per bottle is of ₹ 0.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edistillation and every process for the rectification, flavouring, blending or colouring of liquor." Section 13 of the Act of 1915 deals with licence required for manufacture, etc. of intoxicants. Section 13 of the Act reads as under : "13. Licence required for manufacture, etc. of intoxicants :- (a) No intoxicant shall be manufactured or collected; (b) no hamp plant shall be cultivated; (c) no tari producing tree shall be tapped and no tari shall be drawn from any tree; (d) no liquor shall be bottled for sale; (e) no distillery or brewery shall be constructed for work; and (f) no person shall use, keep or have in his possession any materials, still, untensil, implement or apparatus whatsoever for the purpose of manufacturing any intoxicant other than tari; except under the authority and subject to the terms and conditions of a licence granted in that behalf : Provided that the State Government may, by notification declare that the provisions of this section shall not apply, in any area specified in this behalf, to the tapping of tari producing trees, or to the drawing of tari subject to such conditions as it may prescribe: Provided further that the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licence granted under Section 13; or (e) manufacture any distillery established, or any distillery or brewery licensed, under this Act: Provided that it shall be lawful for the State Government to exempt any excisable article from any duty to which the same may be liable under this Act. (2) Duty may be imposed under Sub-section (1) at different rates according to - (i) the place to which any excisable article is to be removed; or (ii) the strength and quality of excisable article; or (iii) the use of excisable article for different purposes; or (iv) The value of excisable articles based on principles as may be prescribed. (3) Notwithstanding anything contained in Sub-section (1), (i) duty shall not be imposed thereunder on any article which has been imported into India and was liable, on such importation, to duty under the Sea Customs Act, 1878 (VIII of 1878), or the Indian Tariff Act, 1894 (VIII of 1894); (ii) omitted. (4) Nothing contained in this section shall be construed to preclude the State Government from enhancing or reducing the rates of duty during the course of a financial year and the power to give retrospective effect to such enhancement or reduction fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution : Section 27-A reads as under : "27-A. Savings for duties being levied at commencement of the Constitution - (1) Until provision to the contrary is made by Parliament, the State Government may continue to levy any duty to which this section applies which continue to levy any duty to which this section applies which it was lawfully levying immediately before the commencement of the Constitution under this Chapter as then in force. (2) The duties to which this section applies are - (a) any duty on intoxicants which are not excisable articles within the meaning of this Act; (b) any duty on an excisable article produced outside India and imported into the State whether across a customs frontier as defined by the Central Government or not; (3) Nothing in this section shall authorise the levy by the State Government of any duty which, as between goods manufactured or produced in the State and similar goods not so manufactured or produced discriminates in favour of the former, or which, in the case of goods manufactured or produced outside the State, discriminates between goods manufactured or produced in the locality and similar goods manufactured or produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss for the performance of the conditions of the same, (iv) prescribe the accounts to be maintained and the returns to be submitted by licence-holders, and (v) prohibit or regulate the partnership in, or the transfer of, licenses." Thus, the provisions of Sub-section (2)(h) of Section 62 provides that the authority may issue forms laying down terms and conditions on which such licence, permit or pass shall be granted. In exercise of power Under Section 62(2)(h) of the Act, the State Government has framed rules known as Foreign Liquor Rules and Rule I clause (viii) of the Foreign Liquor Rules deals with bottling licence, Clause (viii) of Rule I of the said Rules reads thus - "(viii) - F.L. 8 - Bottling licence which may be granted to the holders of a licence in Form F.L. 10,11, or D-2 on payment of a fee of ₹ 100 per annum; Provided that the licensee shall in addition to the licence fees, pay a bottling fee at the rate of 5 paise per bottle of foreign liquor including beer." This form F.L. 8 has been prescribed by the State Government. In the original form, it was mentioned that in view of clause (viii) of Rule II of Foreign Liquor Rules and in consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y selling price per 12 quarts (each containing 750 mls.) of each brand and label exceeds ₹ 150/- (i) per quart BottleRs. 8.44 (ii) Per pint BottleRs. 4.22 (iii) Per Nip BottleRs. 2.11 (iv) Per Magnum Bottle ₹ 12.66 NOTE. - A bottle of the capacity of less than 191 mililitres but not less than 142 mililitres shall be classed as a Nip bottle, a bottle of the capacity of less than 383 mililitres but not less than 246 mililitres shall be pint bottle, a bottle of the capacity of less than 767 mililitres shall be classed as quart bottle, and a bottle of the capacity of less than 1001 mililitres but not less than 767 mililitres shall be classed as Magnum bottle for the purpose of levying and recovering bottling fees." 2. After form F.L. 8, the following form shall be inserted, namely :- FORM F.L. 8-A Licence for manufacture and bottling of Indian Made Foreign Liquor under Franchise arrangement. Under Clause (viii-a) of Rule II of the Foreign Liquor Rules and in consideration of an annual licence fee of Rs..........that has been paid, this special licence is granted to Shri................for manufacturing and bottling I.M.F.L. from .. to.............sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (15) If the licence D-1, and/or EL. 10 to which this licence has been granted as an adjunct stands suspended, cancelled, withdrawn, or the principal/franchiser mentioned in Column 3 of Schedule II this licence, withdraws his authority/franchise, this licence shall automatically stand suspended/cancelled/withdrawn or discontinued as the case may be. (16) The licensee shall be bound by all the general licence conditions except Nos. II, VIII (2), (1-A), XIV, XVI, XXII and XXIX. (17) On breach of any conditions of this licence or provisions of the M.P. Excise Act or Rule made thereunder, or order issued by the Excise Commissioner, this licence may be suspended or cancelled by the licensing authority. SCHEDULE-I Boundary of the Licensed Premises ____________________________________________________________________________________ Description of the licensed premises Boundary of the licensed premises North East South West ____________________________________________________________________________________ (1)(2) (3) (4) (5) ____________________________________________________________________________________ ____________________________________________________________ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/- per proof litre, where the exfactory price is more than ₹ 151/- per case of 12 quart bottles which comes to ₹ 101.25 per case (box containing 12 bottles) for past few years. The manufacturers situated outside the State started giving their franchise to the manufacturing units situated in M.P. and started getting the bottling done within the State. Under this franchise system the liquor of the same distiller under the same brand after getting bottling done in the State is sold within the State and exported as well. Originally, these distillers were importing IMFL in the State of M.P. after paying the import fee. Under this arrangement, the blending material was imported from outside the State. This so called concentrate substance or blending material alleged to be imported from outside the State is not liable to be levied import fee, as it is not excisable article under the Act. The very object of low rates of bottling fee is being defeated by the adoption of this new self created franchise agreement. Therefore this necessitated the amendment to check the evasion of import fee by prescribing the special bottling licence and payment of differential bottling fee of lic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, State by this amendment has checked the loss of revenue. This kind of classification neither prohibits nor violates the provisions of Article 301 of the Constitution of India nor Section 27-A(3) of the Act of 1915. 10. It is also relevant to mention that Sub-section (3) of Section 27-A of the Act of 1915 says that two classes of persons who are similarly situated should not be discriminated in matter of imposing duty. It is true that such discrimination cannot be permitted but if these two classes of persons stand on different footing, then there is no question of discrimination. Here there are two classes of persons, one who bottles the imported liquor and another who has franchise from a manufacturer and brings blending material from outside and then bottle them in the State. As such, these classes are distinguishable and thus there is no violation of Section 27-A of the Act of 1915. 11. There is another aspect of the matter also that Section 27-A talks of duty and not the fee. It is a fee which the State is charging and not duty. Entry 8 of List-II of VIIth Schedule lays down that the State is competent to legislate on intoxicating liquors, that is to say, the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ext 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'." It was further observed by their Lordships of Hon. Supreme Court as under : "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'. Since the view taken by the High Court that the Ordinance could not be regarded as that competently made by the State under Entries 51, 62 and 66 of List II, has not been questioned as unjustified, there is no need to examine the correctness of the said view of the High Court." Their Lordships quoted from the decision of the Constitution Bench given in the case of Har Shankar v. Deputy Excise and Taxation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the petitioner has also invited our attention to various decisions of the Hon. Supreme Court in the case of Lilasons Breweries v. State of M.P., 1992 JLJ 545, Collector of Central Excise, Bombay v. M/s Kiran Spinning Mills, AIR 1988 SC 871 and Dy. Commissioner, Sales Tax, Ernakulam v. Pio Food Crackers, AIR 1980 SC 1226. Suffice it to say that all these cases do not help the petitioner in any manner. In the case of Lilasons Breweries (supra), which is a case from State of M.P., question arose was whether the State Government can assume the power to impose or levy tax or excise duty without sanction of the Act. It is true that so far as the duty which is in the nature of tax cannot be authorised unless the Act empowers the State Government to legislate. But as already mentioned above a distinction has been made between 'tax' or 'duty' on one hand and 'fee' on the other hand. So far as duty is concerned, it cannot be levied by way of rule unless it is sanctioned by the Act. Lilasons Breweries case (supra) stands entirely on different footing. We have already distinguished above that the fee is not an excise duty. It is simple a fee charged by the State ..... X X X X Extracts X X X X X X X X Extracts X X X X
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