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TMI Blog2011 (3) TMI 1732X X X X Extracts X X X X X X X X Extracts X X X X ..... with interest already collected on denatured spirit pursuant to the aforementioned impugned Rule 22 of the Rules and impugned notification dated 29.3.2004 (P-1). FACTS: 2. The petitioner is a public limited Company incorporated under the Companies Act, 1956. At the time of filing of writ petition, the name of the petitioner-company was M/s Industrial Organics Limited , however, during the pendency of the present proceedings it has been re-christened as IOL Chemicals and Pharmaceuticals Limited , with effect from 5.12.2006. The petitioner-company is engaged in manufacture of organic chemicals like acetic acid, ethyl acetate and acetic anhydride, which are used in pharmaceutical industry and also in manufacture of basic chemicals. In the manufacturing process of various chemicals including industrial alcohol denatured spirit is used as raw material. As per its requirements, the petitioner-company procures denatured spirit from within the country and also imports the same. For procuring, possession and storage of denatured spirit either from within the country or through imports, a permit in Form L-42A under Rule 22 of the Rules is required to be obtained from the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vied in accordance with the provisions contained in Chapter-V of the Excise Act. As per Section 31 of the Excise Act, excise duty or a countervailing duty may be imposed at such rate or rates as the State Government shall direct either generally or for any specified local area, on any excisable article . The terms excisable article , excise duty and countervailing duty have been defined under sub-sections (6) (6-b) of Section 3 of the Excise Act. The provisions of sub-sections (6) (6-b) of Section 3 and Section 31 of the Excise Act read, thus:- Sub-sections (6) (6-b) of Section 3 of the Excise Act 3. Definitions. In this Act and the rules made under it unless there is something repugnant in the subject or context:- xxx xxx xxx xxx xxx xxx xxx xxx xxx (6) Excisable article. Excisable article means:- (a) any alcoholic liquor for human consumption; or (b) any intoxicating durg. (6-a) xxx xxx xxx (6-b) excise duty and countervailing duty means any such excise duty or countervailing duty as the case may be as mentioned in entry 51 of list II in the Seventh Schedule to the Constitution. Section 31 of the Excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time, place and manner as the Financial Commissioner may prescribe, such duty shall be levied rateably, on the quantity of excisable article imported, exported, transported, collected or manufactured in or issued from a distillery, brewery or warehouse: Provided that duty may be levied:- (a) on intoxicating drugs by an acreage rate levied on the cultivation of the hemp plant or by a rate charged on the quantity collected. (b) on spirit or beer manufactured in any distillery established or any distillery or brewery licensed, under this Act in accordance with such scale or equivalents calculated on the quantity of materials used, or by the degree of attenuation of the wash or wort, as the case may be, as the State Government may prescribe; (c) on tari, by a tax on each tree from which the tari is drawn: Provided further that where payment is made upon issue of an excisable article for sale from a warehouse established or licensed under Section 22(a) it shall be made- (a) if the State government by notification so directs, at the rate of duty which was in force at the date of import of that article, or (b) in the absence of such direction by the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpted from the payment of permit fee provided that the issues are made in accordance with such conditions as may be prescribed in this behalf by State Government. (e) A permit for the possession of rectified spirit granted to any Chemist Medical Practitioner Superintendent of a Hospital, approved homoeopathic chemist or practitioner, arsenals of the Ordinance Department, or to any hospital, dispensary, scientific body or educational institution, or to any other who requires large quantities of rectified spirit, shall be granted by the Collector in Form L. 42-B. (f) The Collector is authorised to grant a permit for the possession of specially denatured spirit in excess of the limit specified for retail sale, to soap manufacturers for the purpose of their business. Such permits shall be in Form L. 42C and will be issued only on execution of a bond to secure the proper storage and use of such spirit. Such bond shall be in Form L. 48. (g) A fee at the rate of sixty paise per proof litre on Ethanol-Denature with 0.2% Crotonalddehyde and 4 gram Denatonium Benzoate/Denatonium Scharide per 100 litres of Ethanol shall be recovered at the time of issue of permit. (h) Dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee on denatured spirit has been increased from thirty paise to sixty paise and on Ethanol-Denature with 0.2% Crotonalddehyde and 4 gram Denatonium Benzoate/Denatonium Scharide per 100 litres of Ethanol from sixty paise to one rupee. Feeling aggrieved, the petitioner-company challenged the vires of the provisions of Rule 22 of the Rules in the instant petition. It is apposite to notice here that the petitioner-company had earlier approached this Court by filing C.W.P. No. 9184 of 1991 for quashing Rule 22 of the Rules. However, the aforementioned writ petition was dismissed as withdrawn vide order dated 21.4.1995 passed in C.M. No. 3581 of 1995 in CWP No. 9184 of 1991. 12. In the written statement filed by the respondents a preliminary objection has been taken that the writ petition is not maintainable since the petitioner-company itself was paying permit fee for more than 10 years and, thus, could not challenge the vires of Rule 22 of the Rules merely because some increase has been made in the rates of permit fee for the financial year 2004-2005. It has further been asserted that the petitioner-company is also estopped from filing the writ petition in view of the fact that on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... questioned against levy of permit fee before any competent authority of the State of Punjab. Justifying the increase in the rates it has been asserted that the same has been done after taking a conscious decision considering all aspects of the matter, which is just and legal. 14. It would be pertinent to mention here that when the case came up for hearing on 6.11.2009, Mr. Amol Rattan Singh, Additional Advocate General Punjab, raised two preliminary objections. Firstly, he has submitted that the petitioner had earlier filed CWP No. 9184 of 1991, which was dismissed as withdrawn on 21.4.1995. In that regard, he has drawn our attention to the order dated 21.4.1995, which reads thus: C.M. No. 3581 of 1995 in CWP No. 9184 of 1991 Mr. Mansur Ali, Advocate. C.M. is allowed as prayed. CWP No. 9184 of 1991 is dismissed as withdrawn. 21.4.1995 Sd/- (H.S. BEDI) JUDGE 15. Banking upon the provisions of Order XXIII Rule 1 of the Code of Civil Procedure, 1908, and various judgments of Hon ble the Supreme Court rendered in the cases of Surguja Transport Service v. STAT, (1987) 1 SCC 5; Upadhyay Co. v. State of U.P., (1999) 1 SCC 81; Avinash Nagra v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of such a levy is within the domain of the Parliament and the State cannot frame any law except the law in respect of liquor which is fit for human consumption. The second preliminary objection sought to be raised by the learned State counsel can also not be accepted in view of the authoritative judgment of 7-Judge Bench of Hon ble the Supreme Court rendered in the case of Synthetics and Chemicals Ltd. v. State of U.P., (1990) 1 SCC 109. In para 48 of the judgment, their Lordships has rejected a similar argument by observing as under:- At the outset, it may be noted that in view of the subsequent amendment and the additions to the levies it cannot, in our opinion, with legitimate force be contended that the levies which are sought to be impugned in the present litigation are pre-Constitutional levies. So, these submissions on behalf of the State do not require any serious consideration. 18. It is further pertinent to notice that in para 54, it has been concluded that the vend fee in Uttar Pradesh is a pre-constitution imposition could not be accepted and it would not be subject to Article 245 of the Constitution. The present extent of imposition of vend fee is not a pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Synthetics and Chemicals Ltd. (supra). In para 110 of the judgment it has been clearly laid down that there is a clear demarcation of authority under various items in three lists of the Seventh Schedule of the Constitution and Entry 8 of List II could not be invoked to justify the levies which have been imposed by the State in respect of alcoholic liquor which is not meant for human consumption. 20. Mr. Jain has also submitted that for the purpose of levy of any fees, the element of quid pro quo is a pre-requisite. However, the respondent State of Punjab has failed to place on record any material to justify its demand, therefore, the impugned levy is unsustainable and liable to be set aside. According to him, if any tax or fee is levied by the State without jurisdiction and in contravention of the Constitution, such a collection would amount to unjust enrichment on the part of the State and the same is liable to refund. In that regard reliance has been placed on a Full Bench judgment of Bombay High Court rendered in the case of New India Industries Ltd. v. Union of India, AIR 1990 Bom. 239. While summing up his arguments, Mr. Jain has finally placed reliance on the late ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facture and sale of India Made Foreign Liquor (IMFL) and beer etc. Its distillery was situated at Kasauli in the District of Solan. It held a licence in Form D-2 granted by the State of Himachal Pradesh in terms of the provisions of the Excise Act and the Rules framed thereunder. For the purpose of running the said distillery, it imported malt spirit of over proof strength from its distillery situated at Mohan Nagar in the State of Uttar Pradesh for which it was required to obtain an import permit. It also transported some quantities of malt spirit of over proof strength from certain breweries also located in the State of Uttar Pradesh during the relevant years viz. 1997-98 and 1998-99. 23. A permit/transport fee was directed to be levied for the first time in terms of the excise policy for the year 1996-97, dated 12.3.1996. A permit fee on denatured spirit, foreign spirit and country liquor respectively became leviable. Such permit fee was payable at the time of grant of permission for transportation of liquor. It was payable by a person who made an application for grant of permission for import and/or transport of foreign liquor or country liquor or both. A demand was made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State, is reserved by and/or derived under Articles 19(6) and 19(6)(ii) of the Constitution. For parting with that right a charge is levied. It was emphasised that in a series of decisions some of which have been referred to hereinbefore, it has been ruled that the charge is neither a fee nor a tax and termed it as privilege. The levy is on the manufacture, possession of alcohol. The rate of levy differs on its use, according to the State of U.P. The impost is also stipulated under the trading powers of the State under Article 298 and it was contended that the petitioners and/or appellants were bound by the terms of their licence. It was submitted that the Parliament has no power to legislate on industrial alcohol, since industrial alcohol was also alcoholic liquor for human consumption. Entry 84 in List I expressly excludes alcoholic liquor for human consumption; and due to express exclusion of alcoholic liquor for human consumption from List I, the residuary Entry 97 in List I will not operate as against its own legislative interest. These submissions have been made on the assumption that industrial liquor or ethyl alcohol is for human consumption. It is important to emphasis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osition, as we noticed from the change of rate from time to time. (emphasis in original) 25. With regard to the State's power to exercise control of inter- State transport, in para 26 of the judgment in Mohan Meakin Ltd. (supra) it has been held that it is within the exclusive legislative competence of the Parliament having regard to Entry 42, List I of the Seventh Schedule of the Constitution and would, thus, be limited. Thus, its power to impose compensatory tax and/or fee would also be limited as envisaged by Article 304(b) of the Constitution. On the question that jurisdiction of the State to impose levy on denatured spirit is limited the following observations made in para 43 of the judgment rendered in the case of Vam Organic (supra) have also been considered: 43. Considering the various authorities cited, we are of the view that the State Government is competent to levy fee for the purpose of ensuring that industrial alcohol is not surreptitiously converted into potable alcohol so that the State is deprived of revenue on the sale of such potable alcohol and the public is protected from consuming such illicit liquor. But this power stops with the denaturation of ..... 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