Andhra HC (Pre-Telangana)
Kalyan Chemicals vs Government Of A.P. And Ors. on 21 October, 2003
Equivalent citations: 2004(1)ALT264, 2003(4)ALD726
Author: B. Sudershan Reddy
Bench: B. Sudershan Reddy, K.C. Bhanu
JUDGMENT B. Sudershan Reddy, J.
1. Thepetitioner herein invokes the extraordinary jurisdiction of this Court under Article 226 of the Constitution of India seeking a declaration that the amendment of Rule 3 of the Andhra Pradesh Denatured Spirit and Denatured Spirituous Preparations Rules, 1971 as amended by G.O. Ms. No. 147, dated 16-3-1998 providing the levy of "Administrative Fee" at the rate of Rs. 0.50 paise per bulk litre or such other rate as may be fixed by the Government from time to time on the quantity obtained by the licencee from a distillery is arbitrary, illegal, ultra vires and unenforceable.
2. In order to appreciate as to whether Rule 3 of the Andhra Pradesh Denatured Spirit and Denatured Spirituous Preparations Rules, 1971 (for short 'the Rules') suffers from the vice of any unconstitutionality, we may require to notice a few relevant facts leading to filing of this writ petition:
The petitioner has been manufacturing Ethyl Acetate. The basic raw material required for the purpose of manufacturing the said Chemical is Industrial Alcohol. The petitioner possesses the requisite licence issued by the licencing authority under the provisions of the said Rules ever since 1972. It had been receiving allotment of denatured spirit from the respondents. The licence inter alia provides the quantity of denature spirit quota for which the petitioner is entitled every month.
3. The case of the petitioner is that the second respondent has been insisting on the payment of the gallonage fee as prescribed under sub-rule (4) of Rule 6 of the said Rules at the rate of Rs. l/- per bulk litre. The levy and collection of such an amount as gallonage fee, according to the petitioner, is arbitrary and without jurisdiction. The said collection is nothing but a compulsory exaction of what is styled as gallonage fee for which no services are rendered by the respondents. The petitioner altogether paid a sum of Rs. 2,23,500/-towards the gallonage fee. The petitioner's case is that such illegal collection cannot be allowed to be retained by the respondents and they are liable to refund the same, as such levy and collection of gallonage fee is arbitrary and illegal. The levy of such fee without rendering any service is illegal and without jurisdiction.
4. The petitioner, while referring to the amendment made to Rule 3, contended that the collection of the gallonage fee by amending the caption under Rule 3 as 'privilege fee' is illegal. It is under those circumstances, the petitioner filed W.P.No. 234 of 1995 in this Court, which was disposed of by a Division Bench vide its order dated 13th October, 1997 with a direction to approach the concerned authorityseeking refund of the amounts within a period of two months and with a further directionto the authorities to consider the same in accordance with law.
5. That in pursuance of the said order dated 13th October, 1997 passed by this Court, the petitioner herein approached the respondents accordingly. The Government, on consideration of the application filed by the petitioner, issued G.O.Rt.No. 313, dated 13-3-2000 stating that in pursuance of G.O.Ms.No. 147, Revenue, dated 16-3-1998 introducing the collection of administrative fee of Rs. 0-50 paise per bulk litre in lieu of withdrawal of collection of privilege fee of Rs. 1/- per bulk litre as per the orders of the Supreme Court in Synthetics and Chemicals Limited v. State of U.P., , permitted the Commissioner of Prohibition and Excise to adjust the excess amount of privilege fee paid by the units with effect from 25-10-1989 towards the future allotments of alcohol for industrial purpose against administrative fee. The said orders were given retrospective effect from 25-10-1989. The Government noticed that the petitioner altogether remitted an amount of Rs. 2,09,500/- for the period from 21-1-1991 to 27-3-1993 for industrial alcohol. That as against the said amount of Rs. 2,09,500/- an amount of Rs. 1,04,750/- is to be adjusted towards administrative fee and the unit will have the title for refund of Rs. 1,04,750/-after adjustment of administrative fee for a quantity of 2,09,500 bulk litres of denatured spirit at the rate of Rs. 0-50 paise per bulk litre. The Government accordingly permitted the Commissioner of Prohibition and Excise to refund an amount of Rs. 1,04,750/- to the petitioner company.
6. The said order dated 13-3-2000 issued by the first respondent-Government directing the Commissioner to adjust the excess amount of privilege fee and to refund only Rs. 1,04,750/- to the petitioner is challenged on various grounds.
7. Initially the petitioner challenged the validity of G.O. Ms. No. 313, Revenue (Excise-Ill) Department, dated 13-3-2000 and sought for a declaration to declare the same as illegal and the respondents are not entitled to collect the so called administrative fee at the rate of Rs. 0-50 paise per bulk litre from and out of the privilege fee collected from the petitioner at the rate of Rs. l/- per bulk litre on the denatured spirit issued by the petitioner. Having realised the difficulty that G.O. Ms. No. 313, Revenue, dated 13-3-2000 itself has been issued giving effect to the amended Rule 3 of the Rules, the petitioner filed WPMP No. 8219 of 2001 seeking amendment of the prayer in the writ petition by substituting the relief as "writ of mandamus declaring that the amendment of Rule 3 of Andhra Pradesh Denatured Spirit and Spirituous Preparation Rules, 1971 as amended by G.O. Ms. No. 147 dated 16-3-1998 providing the levy of "Administrative Fee" at the rate of Rs. 0.50 paise for bulk litre or such other rate as may be fixed by the Government and also giving the effect from 25-10-1989 retrospectively is arbitrary, illegal and ultra vires and unenforceable".
8. Sri Koka Raghava Rao, learned Counsel for the petitioner, submitted that Rule 3 of the Rules as amended by G.O, Ms. No. 147 dated 16-34998 providing the levy of administrative fee at the rate of Rs. 0-50 paise per bulk litre is arbitrary, illegal and ultra vires. The learned Counsel mainly relied upon the decision of the Supreme Court in Synthetics and Chemicals Ltd v. State of U.P. (supra) in support of his submission that the State in exercise of the powers under Entry 8 of List II and by appropriate law regulate and that regulation could be to prevent the conversion of alcoholic liquors for industrial use to one for human consumption and for purpose of such regulation, the regulatory fees only could be justified and the State in the process cannot be allowed to make any substantial earnings under the guise of imposing the fee. The learned Counsel contended that the State cannot make any law or rule in purported exercise of its legislative competency with reference to Entry 8 of List II to levy any fees in respect of alcoholic liquors which are not meant for human consumption. The learned Counsel contended that what is sought to be collected under the garb of administrative fee is not an incidental one and cannot be equated to the amount that could have been imposed by the State as regulatory fee.
9. The learned Government Pleader for Prohibition and Excise contended that the question that falls for consideration is not res integra but squarely covered by an authoritative pronouncement of the Supreme Court in Bihar Distillery v. Union of India, , wherein the Supreme Court after referring to the decision in Synthetics and Chemicals Limited v. State of U.P. (supra) justified the levy and collection of similar fee.
10. The un-amended Rule 3 of the Rules reads as follows:
3. Privilege Fees :--(1) No excise duty or countervailing duty shall be levied on the Denatured Spirit Methylated Spirit, Methyl Alcohol or Denatured spirituous preparations except the gallonage fees at the rate of Rupee one only per bulk litre on the quantity obtained by the licensee from a distillery within the State.
(2) The fee is payable by the licencee as consideration for grant of right of purchasing, possessing and transacting business in alcohol in which the Government have got the monopoly.
The petitioner admittedly paid the privilege fee in accordance with the un-amended rule. The said rule has been amended and as at present it reads as follows:
3. Administrative Fee :--(1) No excise Duty or countervailing duty shall be levied on the Denatured Spirit, Methylated Spirit Methyl Alcohol or Denatured Spirituous preparations except the administrative fee at the rate of 0.50 paise only per bulk litre or such other rate as may be fixed by the Government from time to time on the quantity obtained by the licence from a Distillery.
The said Rule is deemed to have come into force with effect from 25th October, 1989,
11. In Synthetics and Chemicals Limited v. State of U.P. (supra), the Supreme Court while dealing with the stand taken by the State Government to justify the levies based on the doctrine of police power observed:
"These questions about the privilege and the doctrine of police powers in fact would be material to be considered when the question about the various levies imposed by the State in respect of alcoholic beverages is considered and so far as the present cases are concerned which pertain to only alcoholic liquors which are not for human consumption that is which are meant for industrial use, the only question will be as to whether the State could justify the respective levies under any of the entries in List II. The main theme of the argument on behalf of the States has been that they have imposed levies because the alcohol which is not for human consumption is a commodity which could be easily converted into alcoholic liquors for human consumption and \therefore the levies have been imposed assuming that it is for human consumption or in other words the contention has been that these levies have been imposed in order to prevent the conversion of alcoholic liquors which are not for human consumption to those which are for human consumption. A contention therefore was suggested that these levies could be justified as regulatory fees although it was frankly conceded that although the revenue earned out of it is substantial and may not be justifiable as fees but have been imposed and it was therefore that the main theme on behalf of the respondents has been based on the doctrine of the privilege of the State to trade in these commodities as that trade is considered to be obnoxious and injurious to public health."
12. The Supreme Court while adverting to the contention that those levies could be justified as regulatory fees observed:
"In our opinion, therefore so far as the present case is concerned the State in exercise of powers under Entry 8 of List II and by appropriate law regulate and that regulation could be to prevent the conversion of alcoholic liquors for industrial use to one for human consumption and for purpose of regulation, the regulatory fees only could be justified. In fact, the regulation should be the main purpose, the fee or earning out of it has to be incidental and that is why the learned Counsel appearing for the State attempted to use this terminology by saying that the purpose is regulation, the earnings are incidental but frankly conceded that in fact the earnings are substantial. In fact in some of the excise laws in the States they have even used terminology relying on the doctrine of privilege and parting with privilege but in my opinion it is not necessary for us to go into these questions in greater detail as we are not here concerned with the trade in alcoholic liquors meant for human consumption and therefore in view of clear demarcation of authority under various items in the three lists, Entry 8 List II could not be invoked to justify the levies which have been imposed by the State in respect of alcoholic liquors which are not meant for human consumption."
13. In Vam Organic Chemicals Ltd. v. State of U.P., , the Supreme Court had an occasion to consider the validity of the notification dated 18-5-1990 issued by the Excise Commissioner, Uttar Pradesh in exercise of the power conferred by Section 41 of the Uttar Pradesh Excise Act, 1910. By the said notification, certain amendments were made in the Rules published in the notification dated 26-9-1910. Section 41 of the U.P. Excise Act authorises the Excise Commissioner to make Rules, inter alia, for regulating the manufacture, supply, storage or sale of any intoxicant; for regulating deposit and removal of any intoxicant and prescribing the scale of fees or manner of fixing the fees payable for licence, permit or pass, including for the grant of any exclusive or other privilege under Sections 24 and 24-A of the said Act. The amended Rule provides for a new licence for denaturation of spirit in a prescribed form and it further prescribes that the distilleries mentioned and holding licence for denaturation of spirit shall be liable to pay a denaturation fee at the rate of 7 paise per litre in advance. The appellants therein -Vam Organic Chemicals Limited are manufacturing vinyl acetate monomer, a basic organic chemical for which industrial alcohol is the main feed stock. The industrial alcohol is being produced in the distillery of the appellants therein and according to them the entire industrial alcohol produced is denatured as per the method approved by the authorities and was being used in their factory for manufacturing vinyl acetate monomer. They were obliged to take out licence in the prescribed form and pay a licence fee at the rate of 7 paise per litre with effect from 2-6-1990. The said notification was challenged on two grounds, namely, that the State of Uttar Pradesh has no power to legislate in respect of industrial alcohol or to levy taxes in respect thereof and further that the levy being not based on quid pro quo was otherwise bad.
14. The contentions that were raised in the above decision are exactly similar to the one raised in this writ petition by the learned Counsel for the petitioner. Reliance was placed on the decision of the Supreme Court in Synthetics and Chemicals Limited v. State of U.P. (supra).
15. The Supreme Court in Vam Organic Chemicals Ltd. v. State of U.P. (supra) after an elaborate consideration of the matter observed:
"It is to be noticed that the States under Entries 8 and 51 of List II read with Entry 84 of List I have exclusive privilege to legislate on intoxicating liquor or alcoholic liquor for human consumption. Hence, so long as any alcoholic preparation can be diverted to human consumption, the States shall have the power to legislate as also to impose taxes etc. In this view, denaturation of spirit is not only an obligation on the States but also within the competence of the States to enforce."
16. It is held in categorical terms that on a proper appreciation of the legal situation, the fee of 7 paise per litre has to be seen as a part of the regulatory measure, namely, denaturation of spirit and supervision of the said process.
17. So far as the second contention relating to the existence of quid pro quo, the Supreme Court confirmed the view taken by the High Court that in the case of regulatory fees, like the licence fees, existence of quid pro quo is not necessary although the fee imposed must not be, in the circumstances of the case, excessive. The Supreme Court confirmed the view taken by the High Court that keeping in view the quantum and nature of the work involved in supervising the process of denaturation and the consequent expenses incurred by the State; the fee of 7 paise per litre was reasonable and proper.
18. The said decision rendered by the Supreme Court in Vam Organic Chemicals Ltd., v. State of U.P. (supra) is the complete answer to the submission made by the learned Counsel for the petitioner. In the instant case, the administrative fee is levied at the rate of 50 paise only per bulk litre or such other rate as may be fixed by the Government from time to time on the quantity obtained by the licencee from the distillery. The Supreme Court justified the levy and collection of regulatory fee at the rate of 7 paise per litre and we do not find any reason or justification to hold that the administrative fee at the rate of 50 paise only per bulk litre is excessive.
19. Sri Koka Raghava Rao, however, made an halfhearted attempt to contend that there is no reason or justification to give retrospective effect to the amended rule. There is neither any plea nor submission as to how the said rule could not have been made with retrospective effect by the rule making authority. The competency of the rule making authority to make the rule with retrospective effect is not in dispute. No grounds are made out to hold that the rule making authority ought not to have given the retrospective effect to the amended rule providing for levy and collection of administrative fee at the rate of 50 paise only per bulk litre. The contention is devoid of any merit.
20. Viewed from any angle, we do not find any merit in the writ petition. The same shall accordingly stand dismissed. There shall be no order as to costs.