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TMI Blog2019 (7) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... third category namely, Ethyl Alcohol or Ethanol (in India is usually produced from molasses derived from sugarcane) in its concentrated form and it is also known as Rectified Spirit and its strength measured in LPL signifies the strength of alcohol by volume, 13 parts of which weigh exactly equal to 12 parts of water at 51 degrees Fahrenheit. The substance of the provision is to levy charges on the product IMFL produced or manufactured by use of imported rectified spirit. In that sense, the levy is not on the input (imported rectified spirit) of the final product as such but is on the manufactured or produced product being potable alcohol palatable to human consumption. For the purposes of computing the levy, the yardstick of ₹ 6 per LPL on the total quantity of imported rectified spirit utilized for production of IMFL is reckoned. Thus, the impost is not on the imported rectified spirit as such but only on the produced foreign liquor before it is bottled for sale in the wholesale or retail market, as the case may be. If so understood, the whole edifice of the argument of respondents regarding the interpretation of the impugned rule must collapse. If it is a case of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tition (T) No.7499 of 2012 dated 25th July, 2013, whereby the writ petition filed by the respondent to assail the notification dated 6th November, 2012, as published in the official gazette on 10thNovember, 2012, issued by the Board of Revenue, Jharkhand in exercise of powers conferred under Section 90 of the Jharkhand Excise Act, 1915 came to be allowed on the ground that the State had no legislative competence to levy tax/fee on the import of rectified spirit, as it is a non-potable liquor i.e. alcohol not fit for human consumption. Additionally, the High Court opined that the appellant-State had failed to justify the impugned levy on rectified spirit on the basis of services provided by the State in lieu thereof or being in the nature of quid pro quo. The original notification is in Hindi, the same reads thus: Free translation thereof has been filed by the appellant as annexure P-2. However, during the hearing as some doubt was raised about the accuracy of annexure P-2, we thought it appropriate to get the document (original in Hindi) translated from the official translator of this Court. That translated version, reads thus: Tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tified spirit. This notification shall come into force on the date of its publication in the Official Gazette. No.1/Policy-40-21/2012-928/Ra.Pa. In Exercise of the power conferred by Section 90 of Jharkhand Excise Act, 1915 (Act 2, 1915), the Board of Revenue, Jharkhand, makes amendment in the Rule 106 (Ja) made vide notified notification No.1/Policy-10- 32/2008-583, dated 15th May 2008 in the Rules made vide Board Notification No.23-137-2 dated 29 April 1919:- Rule 106(Ja) :- On the import of spirit/rectified spirit/ENA beverage from any place/area outside the state of Jharkhand, the permit fee at the rate of Re.0.25 (Twenty Five Paisa) per Bulk Litre will be payable on the imported quantity in the State of Jharkhand. This notification shall come into force on the date of its publication in the official gazette. By the order of Board of Revenue, Jharkhand Sd/-illegible Deputy Secretary, 3. As aforesaid, the High Court accepted the challenge to the above-mentioned notification for the reasons noted hitherto. The relevant discussion in the impugned judgment in that behalf, reads thus: 13. The S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axation, cannot be held to be justified as in pith and substance, the levy is on import of rectified spirit i.e. non-potable liquor i.e. alcohol not fit for human consumption. Levy of fee on non-potable liquori.e. unfit for human consumption or industrial alcohol is permissible under Entry 52 of List-I of Seventh Schedule of the Constitution. Under Entry 84 of List-I, excise duty on tobacco and other goods manufactured or produced in India can be levied except on alcoholic liquor for human consumption; opium, Indian hemp and other narcotic drugs and narcotics. In the wake of such clear demarcation of legislative fields between Union and State Legislature, the impugned notification levying import fees on rectified spirit i.e. non potable liquor or alcoholic liquor unfit for human consumption by applying the rule of pith and substance, 18 cannot come within the legislative competence of the State Legislature. The impugned levy therefore is beyond the legislative competence of the State Legislature and consequentially also beyond the rule making power of the Board of Revenue. (emphasis supplied) And again . 16. The respondent State sought to justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court referred to herein above, the notification dated 10th November 2012 issued by the Board of Revenue, Jharkhand in exercise of powers conferred under section 90 of the Jharkhand Excise Act, 1915, cannot be sustained in law and it is accordingly quashed. Consequentially, the demand raised vide notice dated 24th November 2012 (Annexure-4) for deposit of import fees on rectified spirit, is also quashed. Petitioner shall be entitled to refund of any such import fees deposited under the impugned notification. Writ petition is accordingly allowed. (emphasis supplied) The correctness of the view so taken by the High Court is the subject matter of challenge in this appeal, at the instance of the State. In defending the notification before the High Court, the appellant-State had asserted that the rule inserted by the subject notification being Rule 106 (Tha), is an impost and is merely described as an import fee. Because, it is reckoned on the basis of quantity of pure alcohol content of rectified spirit (which is known as London Proof Liter ), imported for the purposes of manufacture of potable Foreign Liquor after the process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy is, essentially, to regulate and ensure that the imported rectified spirit is not diverted and misused as a substitute for potable alcohol. It is open to the State to deal in intoxicants its manufacture, possession, sale, transport, import, export, consumption on premises of hotel and restaurants etc. Further, the State has exclusive rights and privileges of manufacturing and selling liquor. It is urged that the approach of the High Court is completely wrong and against the settled legal position. 6. Per contra, the respondents have supported the conclusions reached by the High Court and would contend that a close reading of Rule 106(Tha) clearly indicates that it purports to levy import fee on imported rectified spirit, used for production of Indian Made Foreign Liquor (for short, IMFL ) manufactured in the respondent factory under a valid licence for import and also to manufacture of the product (IMFL). It is urged that the provision regarding collection of the fee after the rectified spirit has been used to first produce ENA and then potable liquor, would not alter the character of the levy being impost on the imported rectified spirit. The State is not competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cohol, where the alcohol carbon atom is attached to two other carbon atoms. If consumed, Isopropanol is converted into acetone in the liver, which makes it extremely toxic. Often used for disinfecting skin an antiseptic. II. Methyl Alcohol (or Methanol): Chemical Formula CH3OH: Not for human consumption. If consumed, can cause blindness and death. Methanol acquired the name wood alcohol because it was once produced chiefly by the destructive distillation of wood. Today, methanol is mainly produced industrially by hydrogenation of carbon monoxide. III. Ethyl alcohol, (also known as Ethanol and abbreviated as EtOH), is a colourless, volatile, and flammable liquid that is soluable in water. Its chemical formula is C2H6O, or can be written as C2H5OH or CH3CH2OH. It has one methyl (-CH3) group, one methylene (-CH2-) group, and one hydroxyl (-OH-) group. The first two categories are poisonous, toxic and fatal for human consumption, rendering its use only for industrial purposes. It is stated that Isopropanol and methanol, because of their inherent chemical properties, cannot be purified and used for the production of intoxicating liquor or potable li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State; nor at the stage of initial distillation thereof to Extra Neutral Alcohol (ENA) and not until the product IMFL is ready for bottling as such. Thus, the levy under the impugned rule ripens or fructifies only after the original raw material (imported rectified spirit) has undergone distillation process at two different stages and transmute and mutate into an intoxicant or potable alcohol palatable to human consumption, but its (impost) collection is effected just before bottling it in that form (potable liquor). Indeed, the levy predicated in this rule is on the total quantity of imported rectified spirit utilised for mutating it in the form of IMFL, a new produce. The last part of the rule stipulates the quantum of charges to be levied on such utilized imported rectified spirit for production of the foreign liquor. For that limited purpose, the quantity of imported rectified spirit utilized in the production of potable liquor, is reckoned. 11. Reading the impugned provision as a whole and line by line or word by word in this perspective, it must follow that the substance of the provision is to levy charges on the product IMFL produced or manufactured by use of imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IR 1957 SC 414 , Cooverjee case 1954 SCR 873 : AIR 1954 SC 318 , Kidwai case 1957 SCR 295 : AIR 1957 SC 414 , Nagendra Nath case 1958 SCR 1240 : AIR 1958 SC 398 , Amar Chakraborty case (1973) 1 SCR 533 : (1972) 2 SCC 442 and the R.M.D.C. case 1957 SCR 874 : AIR 1957 SC 699 , as interpreted in Harinarayan Jaiswal case (1972) 3 SCR 784 : (1972) 2 SCC 36 and Nashirwar case (1975) 1 SCC 29 . There is no fundamental right to do trade or business in intoxicants. The State, under its regulatory powers, has the right to prohibit absolutely every form of activity in relation to intoxicants - its manufacture, storage, export, import, sale and possession. In all their manifestations, these rights are vested in the State and indeed without such vesting there can be no effective regulation of various forms of activities in relation to intoxicants. In American Jurisprudence, Vol. 30 it is stated that while engaging in liquor traffic is not inherently unlawful, nevertheless it is a privilege and not a right, subject to governmental control (p. 538). This power of control is an incident of the society s right to self-protection and it rests upon the right of the State to care for the heal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price for its valuable rights. Section 27 of the Act recognises the right of the Government to grant a lease of its right to manufacture, supply or sell intoxicants. Section 34 of the Act read with Section 59(d) empowers the Financial Commissioner to direct that a licence, permit or pass be granted under the Act on payment of such fees and subject to such restrictions and on such conditions as he may prescribe. In such a scheme, it is not of the essence whether the amount charged to the licensees is pre-determined as in the appeals of Northern India Caterers and of Green Hotel or whether it is left to be determined by bids offered in auctions held for granting those rights to licensees. The power of the Government to charge a price for parting with its rights and not the mode of fixing that price is what constitutes the essence of the matter. Nor indeed does the label affixed to the price determine either the true nature of the charge levied by the Government or its right to levy the same. 56. The distinction which the Constitution makes for legislative purposes between a tax and a fee and the characteristics of these two as also of excise duty are wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p out the business those who are undesirable, and to keep within reasonable limits the number of those who may engage in it. 58. In the view we have taken, the argument that the Government cannot by contract do what it cannot do under a statute must fail. No statute forbids the Government from trading in its own rights or privileges and the statute under consideration, far from doing so, expressly empowers it by Sections 27 and 34 to grant leases of its rights and to issue the requisite licences, permits or passes on payment of such fees as may be prescribed by the Financial Commissioner. 59. The argument that in Cooverjee case the impugned power having been exercised in respect of a centrally administered area, the power was not fettered by legislative lists loses its relevance in the view we are taking. It is true that in that case it was permissible to the Court to find, as in fact it did, that the fee imposed on the licensees was more in the nature of a tax than a licence fee . As the authority which levied the fee had the power to exact a tax, the levy could be upheld as a tax even if it could not be justified as a fee , in the constitutional sense of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rendered to the licencee for production of foreign liquor (IMFA). 15. The fact that the manufacturer-respondent has already obtained requisite licences for import of rectified spirit and production of foreign liquor (IMFA) on payment of fixed rates does not mean that the State has surrendered all facets of its rights in respect of every form of activity in relation to potable liquor its manufacture, storage, export, import, sale and possession. The amended provision is an enabling provision authorising the State to levy charges or impost for ceding its one or more of the activity in respect of foreign liquor (IMFL) produced by use of imported rectified spirit. Such impost can be in addition to the general power of the State to issue licence on payment of fees for production and sale of potable liquor. As observed in Har Shankar (supra), in paragraph No.56, the State need bear no quid pro quo to the services rendered to the licensees of producer of foreign liquor. 16. The respondent, however, placed heavy reliance on the decision in State of U.P. Ors. Vs. Vam Organic Chemicals Ltd. and Ors. (2004) 1 SCC 225, to contend that the State is obliged to justify the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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