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TMI Blog1996 (8) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... this stage. Appellant in Civil Appeal Nos.4762- 63 of 1996 is the licencee in respect of two distilleries, one situated at Lauriya and another at Mirganj in the districts of West Champaran and Gopalganj respectively in Bihar State. It has been granted licences by the State of Bihar under the Act. The appellant's distilleries are manufacturing liquor on the basis of licences granted in Form No.19 for compounding and blending foreign liquor; in Form No.19-A for manufacture of sacramental wine or alter wine or mass wine containing not more than 42% of proof spirit; in Form No.25 for the manufacture of denatured spirit; in Form No.27 for wholesale country spirit; in Form No.28 for manufacture of spirit in a distillery issued to the grantee of the exclusive privilege of supply of country spirit under Section 22 of the Act; and licence issued in Form No.28-A for manufacture of spirit in distillery for use in the manufacture of chemical, and for industrial, scientific and other purposes. The licences in Form Nos.27 and 28 were withdrawn with effect from 1st April 1979. The Superintendent of Excise directed the appellant to pay a sum of ₹ 1,68,128.77 towards the establishment ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not only comprising of denatured spirit or other type of industrial spirit but also potable liquor. Rule 9 on its express language could not be pressed in service against the appellants' distilleries. On the other hand Shri Sanyal, learned senior counsel appearing for the respondents, submitted that impugned Rule 9 of the Rules was clearly sustainable under Section 38 of the Act and it was enacted with a view to seeing that the denatured spirit manufactured by the appellants' distilleries was not illegally converted into potable liquor especially when such an activity itself would invoke the penalty provisions of Section 49 of the Act. Consequently with a view to subserving the public purpose and with a view to seeing that the society does not suffer by such illegal activities on the part of the distilleries, Rule 9 was enacted for fructifying the purposes of the Act and could not be said to be de hors its provisions entitling the State authorities to regulate and supervise the working of these distilleries. On the alternative contention it was submitted by Shri Sanyal, learned senior counsel for the respondents, that Rule 9 as framed entitled the Commissioner to impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as defined under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955'. The term `liquor' is defined by Section 2(14) to include all liquids consisting of or containing alcohol, such as spirits of wine, spirit, wine, fermented tari, pachwai and beer, and also unfermented tari, and also any other substance which the State Government may, by notification, declare to be liquor for the purposes of this Act. The term `spirit' is defined by clause (19) of Section 2 to mean, `any liquor containing alcohol obtained by distillation, whether it is denatured or not'. The term `to denature' is defined by clause 5(b) to mean `to mix spirit with one or more denaturants in such manner as may be prescribed by rule made in this behalf under clause (3) of section 90, and denatured spirit means spirit so mixed'. Section 13 deals with `licence required for manufacturing intoxicants'. Section 15 deals with `establishment of distilleries, breweries or warehouses'. It lays down that the Excise Commissioner may subject to any restrictions imposed by the State Government, establish, or authorise the establishment of, distilleries or breweries, in which liquor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular, and without prejudice to the generality of this provision, may make rules for (i) prohibiting the admixture with any intoxicant or any article deemed to be noxious or objectionable, (ii) regulating or prohibiting the reduction of liquor by a licensed manufacturer or licensed vendor from a higher to a lower strength, (iii) prescribing the nature and regulating the arrangement of the premises in which any intoxicant may be sold, and prescribing the notices to be exposed at such premises. It is in exercise of the aforesaid rule making powers available to the Board of Revenue under Section 90 that the impugned Rule, amongst other rules, came to be enacted. It is pertinent to note that Bihar and Orissa Excise Rules of 1919 as initially framed contained Rule 9 which read as under : The Commissioner shall appoint such officers and establishment as he thinks fit to the charge of a distillery. It was only on 23rd August 1930 that the concept of establishment cost to be borne by the distilleries concerned got engrafted in the said Rule by way of second part. The ruled consisting of both these parts is as under : 9. The Commissioner shall appoint such officers and establishment as he t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offence sand to oversee their manufacturing activities. It is axiomatic to state that prevention is better than cure. If denatured spirit is illegally altered and made fit for human consumption, it is likely to have devastating effect on the health of consumers and may even result in fatal consequences or loss of vision and other pernicious physical handicaps. In order to prevent such social calamities, if supervision is provided at the cost of distilleries, it cannot be said that such conditions are not germane to the requirements of the Act or do not flow from the statutory scheme envisaged by the Act. If for this laudable purpose an establishment is put up at the doorsteps of the distilleries themselves as per the impugned rule and if cost of maintenance of such establishment is foisted on the licensee distilleries it cannot be said that such a rule is de hors the provisions of the Act. On the contrary such a provision squarely falls within the regulatory powers of the Board for framing rules with a view to seeing that the provisions of the Act are not stifled or tinkered with by such licencee distilleries. Reliance placed by learned counsel for the appellants on a Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hemicals Ltd. and others v. State of U.P. and others (1990) 1 SCC 109. In that case this Court was concerned with the constitutional validity of the levy by way of vend fee imposed by the respondent-State on industrial alcohol. It was held that such imposition by the State was beyond the legislative powers conferred on the States concerned by any of the entries in List II or III of the Constitution of India. Reliance was placed on the observations in paragraph 86 of the Report wherein by way of sub-para (d) it was observed. However, in case State is rendering any service, as distinct from its claim of so-called grant of privilege, it may charge fees based on quid pro quo. See in this connection, the observations of Indian Mica case. Even these observations cannot be of any assistance to the appellants for supporting their contention that impugned Rule 9 is de hors the provisions of the Act. On the other had learned senior counsel Shri Sanyal for the respondents heavily leaned on two decisions of this Court in M/s Gujchem Distilleries India Ltd. v. State of Gujarat and another (1992) 2 SCC 399 and Shri Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. v. State of Gujarat and anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further on this aspect. Nor has it pronounced upon the alternative contention whether said Rule 9 on its express language can apply to the distilleries run by the appellants. In this connection learned counsel for the appellants vehemently contended that it is not in dispute between the parties that the appellants are having licences under Section 15 read with Section 13 not only to run distilleries for manufacturing denatured spirit or other industrial alcohol but also have licences to manufacture potable liquor, including country made liquor. In this connection reliance was placed on averments made in paragraph 2(b) of the Special Leave Petition which stated that the Hon'ble High Court on an incorrect premise that commercial spirit included all kinds of spirits including the one fit for human consumption (potable spirit) concluded that the petitioner's distillery, even though it manufactured denatured and/or commercial spirit only to the extent of about 10% of its total production, was liable to pay the establishment charges. So far as this averment is concerned in the counter affidavit on behalf of respondent no.1 has been stated in paragraph 4 as under : 4. In reply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this well established factual position we have to consider the alternative contention canvassed by learned counsel for the appellants. We have already extracted Rule 9 earlier. The first part of the Rule prior to its amendment by which second part got added to it, authorised the Commissioner to appoint such officers and establishment as he thinks fit to the charge of a distillery. The words `to the charge of a distillery' were interpreted by the High Court to mean, `at cost of the distiller'. This interpretation was strongly relied upon by learned senior counsel Shri Sanyal for the respondents. In our view the said interpretation cannot be countenanced. The first part of Rule 9 contemplates appointment of officers and establishment as thought fit by the Commissioner with a view to taking charge of the distillery for supervisory purposes. The context in which the said phraseology was employed by the rule making authority leaves no room for doubt that the words `to the charge of a distillery' were meant to empower such officers and establishment contemplated by Rule 9 to be in charge or control of distillery for the purposes of supervision. The term `charge' can ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for the aforesaid purpose and for no other purpose. If those two conditions are satisfied then only the whole cost of such officers and establishment can by required to be borne by such distillery. It is obvious that the distilleries run by the appellants which are made to defray the cost of officers and establishment under Rule 9 are not distilleries which are manufacturing only denatured spirit or any other commercial spirit nor are they having licences solely for the purpose. Shri Sanyal, learned senior counsel for the respondents submitted that the words `any other commercial spirits' would include even potable spirit or liquor fit for human consumption as it has also commercial value and can be sold in the market. He further submitted that the word `or' found in between the terms `denatured spirit' and `any other commercial spirit' may be read as `and' and when so read it can be held that second part of Rule 9 can apply to even those distilleries which have licences for manufacturing denatured spirit and also other commercial spirits including potable liquor. It is not possible to agree with this contention for the simple reason that such a contention wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suming that they are commercial spirits as contended by Shri Sanyal. However, in our view other commercial spirits as contemplated by the Rule are those spirits which are unfit for human consumption and they do not cover potable liquor which cannot fall in line with denatured spirit. In the context of denatured spirit as mentioned in the Rule the succeeding words, `or any other commercial spirit' must mean those spirits which fall in the category of spirits unfit for human consumption like denatured spirits. In other words the term `other commercial spirits' would take in its sweep only those spirits which are used for industrial purposes or any other purpose other than for human consumption. Consequently reading the word `or' as `or' or even reading it as `and' the appellants' distilleries which are having multiple licences to manufacture not only denatured spirit or other industrial spirit but also potable liquor would get out of the sweep of the second part of Rule 9. On the express language of Rule 9, second part, the alternative contention canvassed by the learned counsel for appellants has got to be accepted. It must, therefore, be held that second par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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