Madras High Court
M/S.Mohan Breweries And Distilleries ... vs State Of Tamil Nadu on 28 June, 2022
Author: Anita Sumanth
Bench: Anita Sumanth
WP Nos.21180 of 2009 & batch
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 28.06.2022
CORAM
THE HONOURABLE DR. JUSTICE ANITA SUMANTH
WP Nos.21180, 18903, 25891, 19414, 19474, 19456, 25627, 19415,
26091 of 2009 & 13550, 13559, 13577 & 2839 of 2010 and
WMP.Nos.38339, 20669 & 20670 of 2017 & 1344 of 2018 and
MP.Nos.2, 3, 1, 2, 3, 2, 3, 2 to 2, 3 to 3, 2, 3, 1, 2, 3, 4, 2, 3, 3 of 2009 &
MP.Nos.1, 1 to 1, 1, 2, 3, 2, 3, 1, 2, 2, 3 & 4 of 2010
WP.No.21180 of 2009:
M/s.Mohan Breweries and Distilleries Limited,
No.7, Selva Street, M.M.Nagar,
Valasarawalkam, Chennai – 600 087.
Rep. by its Senior Vice President (Finance),
And Company Secretary. ...Petitioner
Vs
1.State of Tamil Nadu,
Rep. by the Secretary to Government,
Excise & Prohibition Department,
Secretariat, Fort St George,
Chennai – 600 009.
2.The Commissioner of Prohibition & Excise,
Chepauk, Chennai – 600 005.
3.The Excise Supervisory Officer,
M/s.Mohan Breweries and Distilleries Limited,
No.7, Selva Street, M.M.Nagar,
Valasarawalkam,
Chennai – 600 087.
4.The Accountant General,
Audit (C & RA),
https://www.mhc.tn.gov.in/judis
1
WP Nos.21180 of 2009 & batch
Lekha Pariksha Bhawan,
361, Anna Salai, Chennai-600 018. ... Respondents
Prayer: Writ Petition filed under Article 226 of the Constitution of India, for
the issuance of a Writ of Certiorarified Mandamus, calling for the records of
the third respondent comprised in its letter in Rc.No.28/2009/IMFS dated
15.9.2009 and quash the same as being arbitrary, illegal and violative of the
provisions of the Tamil Nadu Indian Made Foreign Spirits (Manufacture)
Rules, 1981 and consequently direct the respondents to continue to levy and
collect import fee of Re.1/- per bulk litre of spirits in respect of import of spirits
and to refund a sum of Rs.80,000/- which has been paid by the petitioner to the
respondents under protest for issuance of permit consequent upon the impugned
demand.
For Petitioner : Mr.R.Parthasarathy &
Mr.Rahul Balaji (In all WPs)
For Respondents : Mr.Haja Nazrudeen
Additional Advocate General
Assisted by Mrs.C.Sangamithirai,
Special Government Pleader
and Mr.P.Haribabu
Government Advocate
(For all the Respondents in
WP.Nos.18903, 19414, 19474, 19456,
25267, 19415 & 26091 of 2009,
13577 of 2010 and
For R1 to R3 in WP.No.21180 of 2009 &
For R1 & R2 in WP.No.25891 of 2009
&WP.Nos.13550 & 13559 of 2010
Mr.T.Ravikumar,
Senior Standing Counsel
(for R4 in WP.No.21180 of 2009 &
for R3 in WP.No.25891 of 2009)
https://www.mhc.tn.gov.in/judis
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WP Nos.21180 of 2009 & batch
COMMON ORDER
This batch of 13 Writ Petitions has been filed by different distilleries. Petitioner in W.P.No.13577 of 2010 seeks a Writ of Declaration challenging Clause 2(3) of Notification in G.O.Ms.No.112, Prohibition and Excise (III) Department, dated 03.06.2003 and clause 2(4) of Notification in G.O.Ms.No.23, Home, Prohibition & Excise (III) Department, dated 18.05.2010. A consequential direction is sought for refund of sums collected prior to impugned Notification dated 18.05.2010.
2. The other Writ Petitions filed by the Distilleries seek Writs of Certiorari challenging orders of recovery on the ground that there is a short payment of fee paid by the petitioners. If the Writ of Declaration is answered, there would be, as a consequence, an effective disposal of Writs of Certiorari as well.
3. The facts in brief, as necessary to decide these Writ Petitions, are as follows:
(i) The Government of Tamil Nadu / R1 had issued G.O.Ms.No.112 dated 03.06.2003 (in short ‘Notification I’) causing certain amendments to the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981. The amendment as relevant to these matters is Rule 22, where under a new sub-rule https://www.mhc.tn.gov.in/judis 3 WP Nos.21180 of 2009 & batch (4) had been inserted in substitution of the existing sub-rule (4), reading as follows:
“(d) An import fee of rupees five per bulk litre shall be paid by the licensee on the stocks of concentrates imported for the manufacture of 'Indian Made Foreign Spirit'.”
(ii) The Notification stopped there as far as the levy of the import fee was concerned and did not proceed to define what a ‘Concentrate’ would be for the purposes of said levy.
(iii) This was followed by G.O.(D).No.272, Home, Prohibition and Excise (VI) Department, dated 23.10.2009 (in short ‘Notification II’) according approval to the Commissioner of Prohibition and Excise to permit seven Indian Made Foreign Spirit (IMFS) manufacturing units in the State, to import special spirits of the stated quantities for quarter ending dated 31.12.2009 for the use in the manufacture of IMFS.
(iv) This portion of the Government order is not relevant, per se, and what is relevant is the direction at clause (2) of Notification II, whereunder, the Commissioner of Prohibition and Excise was requested to collect Import Permit Fee that had been imposed under Notification I at the rate of Rs.5 per bulk litre as Import Permit Fee.
(v) Then came G.O.Ms.No.23 dated 18.05.2010 (‘in short Notification III’) when finally wisdom donned upon the State and realisation that https://www.mhc.tn.gov.in/judis 4 WP Nos.21180 of 2009 & batch ‘Concentrates’ and ‘Special Spirits’ had not been defined anywhere in the Tamil Nadu Prohibition Act, 1937 (in short ‘Act’) and must hence be defined in order to render the levy of import fee under Notification I, viable and enforceable.
(vi) The definitions, as inserted by amendments to Rule 2 are as follows:
“.......
In the said Rules:
(1) In rule 2:
(i) After clause (c), the following clause shall be inserted namely:
“(cc) “Concentrate” means any spirit which can be consumed by diluting it directly except rectified spirit, extra neutral alcohol and denatured spirit.”
(ii) After clause (1), the following clause shall be added, namely:
“(m) “Special Spirit” means all spirits which are used as an essence or flavouring agent except rectified spirit, extra neutral alcohol and denatured spirit”.
(2) .............
(3) The amendment hereby made shall deemed to have come into force on 03.06.03.”
(vii) There is no dispute on the position that post 2010, all petitioners have been compliant with the Rules and have been remitting import fee, as https://www.mhc.tn.gov.in/judis 5 WP Nos.21180 of 2009 & batch introduced in 2003. Their challenge is only in respect of the demands raised prior to 18.05.2010.
4. Their submissions may be briefly summarised as under.
(i) The Act does not envisage the levy of tax or duty but only regulates the manufacture and sale of liquor. The thrust of the Act is to control the licensing of such activities and consider the era of prohibition.
(ii) Though Sections 18A, 18B and 18BB authorize levy of excise duty or countervailing duty (CVD) on rigorous and intoxicated drugs, excise duty or CVD on excisable articles and special fee on import of excisable articles, and Section 18C talks of the manner in which the excise duty or the CVD may be levied, there is no provision providing for the levy of import fee and no mechanism under the Act to enable such levy. Thus, they argue that the levy is itself bad in law.
5. This submission is not liable to be accepted for the simple reason that the petitioners have succumbed to such levy from the year 2010 onwards and thus, the scope of the challenge before me is really not to levy itself but only to whether such levy will be sustained even prior to the terms ‘Concentrates’ and ‘Special Spirits’ being defined.
6. The petitioners point out that neither the Act nor the Tamil Nadu Distillery Rules, 1981 defines the two terms. Thus, the levy of import fee https://www.mhc.tn.gov.in/judis 6 WP Nos.21180 of 2009 & batch cannot be complied with by the petitioners in the absence of any clarity on what a ‘Concentrate’ or ‘Special Spirit’ is and till 2010, when the terms were defined.
7. That apart and without prejudice to the aforesaid submission, even on the merits, the petitioners would argue that they use only rectified spirit, extra neutral alcohol and denatured spirit which have been specifically exempted in both the definitions of ‘Concentrate’ and ‘Special Spirit’ under Notification III.
8. Per contra, the respondents point out that in paragraph 4 of the affidavit that the petitioner submits that their products are manufactured using spirits such as, malt spirit, grape spirit, raisin blended spirit, high bouquet spirit, matured grape spirits along with other spirits and blended for the manufacture of IMFS. This position would apply to all the petitioners equally. Thus, the ingredients of the IMFS manufacture include ‘Special Spirits’, that would be amenable to the impugned levy, respondents argue.
9. Again, in light of the fact that it is only the retrospectivity of the 2010 Notification that is being argued and in light of the admitted position that the petitioners are paying the import fee from 2010, there is no necessity for me to advert to this argument at all. In any event, the levy of the import fee would depend upon the ingredients imported/used by the petitioner, which details https://www.mhc.tn.gov.in/judis 7 WP Nos.21180 of 2009 & batch would be available with the authority. There is nothing more to be said on this aspect of the matter.
10. Mr.Haja Nazruddin, learned Additional Advocate General assisted by Mrs.C.Sangamithirai, learned Special Government Pleader for the respondents has advanced detailed arguments on the challenge to the Government Order referring to Section 54(2-A) of the Act which enables the Government sufficiently to make Rules for the purpose of carrying into effect the provisions of the Act, including with retrospective effect. Section 54(2-A) reads thus:
“54. Power to make rules. (1) The State Government may make rules for the purpose of carrying into effect the provisions of this Act.
…………..
(2-A) A rule or notification under this Act may be made or issued so as to have retrospective effect on and from a dote not earlier than, -
(i) the 1st September, 1973, insofar as it relates to toddy; and
(ii) the 1st September, 1974, insofar as it relates to any liquor other than toddy;
(iii) the 1st May 1981, insofar as it relates to the matters dealt with in sections 17-B, 17-C, 17-D, 17-E, 18-B and 18-C.” In light of the fact that the Statute specifically enables the State to enact a Rule with retrospective operation, there is no merit in the challenge put forth by the petitioners.
https://www.mhc.tn.gov.in/judis 8 WP Nos.21180 of 2009 & batch
11. He further draws attention to G.O.Ms.No.82, dated 03.10.2007 which refers to an Audit Report of the office of the Accountant General on the basis of which the impugned levy of import fee has been made. The recommendations of the Audit Committee and the acceptance of the State on the recommendations are extracted below for completion of this order:
Home, Prohibition & Excise (III) Department G.O.(Ms).No.82 Dated 03.10.2007 ORDER:
In the Government Order first read above, orders have been issued amending rule 22(4) of the Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981 where vend fee has been substituted by import fee and Rs.5/- per bulk litre shall be paid by the licensee on the stock of concentrates imported. Subsequently, it was amended by deleting the words, “Foreign Countries”. Removal of the word, “Foreign Countries” further facilitated to collect rupees five for the Concentrates imported either from Foreign Countries or other states. But at any stage, i.e. While making original rule and then during the subsequent amendment, no definition has been given for “Concentrates”.
2. In Audit para No.9 of the Accountant General's audit report on the accounts of the Commissioner of Prohibition and Excise, it has been pointed out that it was noticed by Audit in six Indian Made Foreign Liquor units that though 3.75 lakh bulk litres of various types of special spirits used as Concentrates / flavourings agents in the manufacture of Indian Made Foreign Spirits, which were imported during 2003-2004 to 2005-2006, import fee of Rs.1.89 crore was not levied.
3.As it is not clear that the special spirits imported from other States are being used as concentrates in the manufacture of Indian Made Foreign Spirits, the Commissioner ofProhibition and https://www.mhc.tn.gov.in/judis 9 WP Nos.21180 of 2009 & batch Excise after consulting the Director of Forensic Science Department in the matter has requested the Government to accord permission to form a Technical Committee with the same members as that of the Technical Committee constituted for the grant of RL4 licence, to arrive at a final conclusion whether concentrates and other special spirits imported are one and the same and whether an import fee of Rs.5/- for bulk litre, be collected for all Special Spirits imported.
4.The Government after careful examination, accept the proposal of the Commissioner of Prohibition and Excise and direct that a Technical Committee be constituted with the following members to arrive at a final conclusion whether Concentrates and other Special Spirits imported are one and the same and whether an import fee of Rs.5/- per bulk litre, be collected for all Special Spirits imported.”
12. A committee had been formed and report issued on 16.04.2008 on the definitions to be adopted of 'Concentrates’ and ‘Special Spirits'. Prior to the formulation of the report, all Distillery units in the State of Tamil Nadu were heard and thus, it is the contention of the State that all the petitioners have been solicited and have participated in the deliberations leading to the passing of Notification III.
13. The Technical Report goes into the details of the ingredients utilised in the manufacture of IMFS and ultimately concludes as follows:
“..............
5. To arrive at a final conclusion in the above, the Technical Committee meeting again held on 30-1-2008 as decided by the other Members.
6. During the meeting held on 30-1-2008, the Joint Director (Chemicals), Chennai has stated that all special spirits https://www.mhc.tn.gov.in/judis 10 WP Nos.21180 of 2009 & batch irrespective of Alcoholic strength are blended with spirits to give flavour and Aroma and as such based on end use, all the special spirits are classified as one and the same and hence an import fee of Rs.5/- to be collected for all special spirits used for blending with spirits to give Aroma and flavour. The Professor, Head of Department, Chemistry, Presidency College hast also reiterated the same.
7. The Deputy Director of Drugs, Chennai-6 has stated that since Special Spirits like Grape Spirit, Malt Spirit, Rum Spirit etc. are used for the purpose of flavour and aroma, these Spirits are to be considered as Concentrate. The concentrates and other special spirits imported are one and the same an import fee of Rs.5/- per bulk litre be collected for all special spirits, since they are used for the purpose of flavour aroma, in the manufacture of IMFS units.
8.1. The Assistant Director (Excise Division), Forensic Science Department, Chennai-4 by whom all the special spirits are analysed has stated that in this regard, the former Commissioner (P&E), Thiru P.V. Venkatakrishnan, in his Proceedings Rc.No.D1/33902/88 dated 12-12-88 while fixing the norms for the manufacture/import of Grape and Malt Spirit, has stated that Malt and Grape Spirit should have a strength of 10° OP to 50° OP, and Malt and Grape Spirit with a strength below 10" OP will be designated as concentrates and duty will be levied on this. But careful study of the special spirits imported for flavoring by all the IMFS units, reveals that 41% of the special spirits imported were below 10° OP and around 54% of the special spirit imported were between 10° OP to30° OP during the years 2003-
2006. However to accommodate all the possible way of importing special spirits, the following definition may be given for concentrates and duty may be levied on this concentrates. 8.2. All Special spirits which are used us flavoring agents in the manufacture of IMFS and which are either manufactured or imported, having strength upto 30" OP shall be considered as 'Concentrates' (which is also supported by the literature available, stated in para 4.3 above).
https://www.mhc.tn.gov.in/judis 11 WP Nos.21180 of 2009 & batch 8.3. The above definition may be incorporated in the Tamil Nadu Indian Made Foreign Spirit (Manufacture) Rules, 1981 so as enable all the IMFS manufacturing units to understand the term concentrates imported by them and also to have a definite rule for levying duty for concentrates.
9. The Joint Commissioner-I, Prohibition and Excise Department, Chepauk, Chennai-5 who is the Chairman of the Technical Committee is also the same views of the Director of Forensic Science Department, Chennai-4 and Special Spirits which are either manufactured or imported having strength upto 30° OP used as flavouring agents in the manufacture of Indian Made Foreign Spirit shall be considered as "Concentrate" and duty may be levied on this concentrates.”
14. The report would itself has no bearing on either the issue to be decided or my decision, except to state that it is now very clear that the Technical Committee's Report has been received in April, 2008, on the basis of which, the impugned Government Notification has been issued in the year 2010. This is critical to decide on the validity of the retrospective operation of Notification III.
15.Mr.Haja Nazruddin has relied on the following judgments, all in the context of the constitutionality of the Notification itself, which I see no reason to deal with the details seeing as the question of constitutionality is not really in challenge.
i) State of Jharkand & Ors. Vs M/s.Ajanta Bottlers & Blenders Pvt. Ltd.
(Civil Appeal No.5138 of 2019 dated 02.07.2019).
ii) Khoday Distilleries Ltd. Vs State of Karnataka reported in (1995 SCC (1) 574) https://www.mhc.tn.gov.in/judis 12 WP Nos.21180 of 2009 & batch
iii) Arun Kumar Agrawal Vs Union of India and Others reported in ((2013) 7 SCC 1) and
iv) Godrej Properties Limited Vs Accountant General (A & E), Tamil Nadu and Others (W.P.Nos.29304 of 2019 dated 08.12.2020)
16.As far as the retrospectivity is concerned, it is an oft settled position that a taxing provision must have clarity in order to be enforceable, both in terms of the various components of the provision itself as well as in terms of the machinery to enforce the same.
17.In the present case, the levy of the import fee is on ‘Concentrates’ and ‘Special Spirits’. Thus, I fail to understand how such a fee may be levied and demanded unless there is clarity on what ‘Concentrates’ or ‘Special Spirits’ constitute. It would have been a different matter altogether had the terms been defined in the relevant Act or Rules, but admittedly, neither the Prohibition Act nor the Distillery Rules define the terms and, in fact, it is only the Technical Committee which has, at para No.8.2 defined the terms ‘Special Spirits’ and 'Concentrates'. Prior thereto, neither of the parties had any clarity whatsoever on what the terms connoted.
18.In light of the above discussion, I am of the categoric view that while there is no infirmity whatsoever in the levy of import fee, such levy and demand shall run only from the date of Notification III, being dated 18.05.2010, onwards. Any amounts collected on this account prior to the https://www.mhc.tn.gov.in/judis 13 WP Nos.21180 of 2009 & batch aforesaid date are liable to be quantified and returned to the petitioners forthwith and not more than four (4) weeks from date of issuance of this order.
19.In fine, W.P.No.13577 of 2010 stands ordered. As a consequence, Writ Petitions seeking Writs of Certiorari also stand ordered in the aforesaid terms. No costs. Consequently, connected Miscellaneous Petitions are closed.
28.06.2022 Index : Yes/No Speaking Order/Non speaking Order sl To
1.State of Tamil Nadu, Rep. by the Secretary to Government, Excise & Prohibition Department, Secretariat, Fort St George, Chennai – 600 009.
2.The Commissioner of Prohibition & Excise, Chepauk, Chennai – 600 005.
3.The Excise Supervisory Officer, M/s.Mohan Breweries and Distilleries Limited, No.7, Selva Street, M.M.Nagar, Valasarawalkam, Chennai – 600 087.
4.The Accountant General, Audit (C & RA), Lekha Pariksha Bhawan, 361, Anna Salai, Chennai-600 018.
https://www.mhc.tn.gov.in/judis 14 WP Nos.21180 of 2009 & batch Dr.ANITA SUMANTH, J.
sl WP Nos.21180, 18903, 25891, 19414, 19474, 19456, 25627, 19415, 26091 of 2009 & 13550, 13559, 13577 & 2839 of 2010 and WMP.Nos.38339, 20669 & 20670 of 2017 & 1344 of 2018 and MP.Nos.2, 3, 1, 2, 3, 2, 3, 2 to 2, 3 to 3, 2, 3, 1, 2, 3, 4, 2, 3, 3 of 2009 & MP.Nos.1, 1 to 1, 1, 2, 3, 2, 3, 1, 2, 2, 3 & 4 of 2010 28.06.2022 https://www.mhc.tn.gov.in/judis 15