Indian Kanoon - Search engine for Indian Law

Bhajan Lal Saran Singh & Co. v. State of Punjab, [1967] Current Law Journal, p. 460; overruled.

2. There is no doubt that a distinction does exist between the Rules which were impugned in Bhajan Lal, and in the instant case on one hand and the Rules which were impugned in Har Shanker's case on the other. In fact in Har Shanker's case the impugned Rules were those as amended on 22-3-68 in order to meet the judgment of the High Court under appeal in the instant case. Even assuming that there is a material difference in the Rules which are impugned in the instant case and those in Har Shanker's, yet the jurisdiction of the High Court is a bar to the respondents to wriggle out of their contractual obligation. [756 E-H] In Har Shanker's case, this Court held that since rights in regard to the manufacture and sale of intoxicants are vested in the state; it is open to it to part with these rights for consideration; that the amounts which are charged to the licensees who offer their bids in auction sales of vends are neither in the nature of a tax nor in the nature of excise duty; and that, the true nature of the charge which the Government levies in such cases is that it is price which the State charges as a consideration for parting with its privileges in favour of licensee. Such a charge is a normal incident of a trading or business transaction. What the State could itself do in the exercise of its privilege, it authorises another to do by charging a price for parting with its privilege. A price can neither be a tax nor excise duty. Therefore, even if any concession was made in the High Court, the true legal position that the amounts which the respondents became liable to pay under the terms of the auction is not excise or still-head duty but is a price which the Government charged for parting with its privilege, during the current of the period covered by the contract. The amount which the respondents agreed to pay to the State Government under the terms of the auction is neither a fee properly so called which would require the existence on a quid pro quo, nor indeed is the amount in the nature of excise duty, which by reason of the constitutional constraints has to be primarily a duty on the production or manufacture of goods produced or manufactured within the country. The requirement to multiply by a certain figure per proof-litre the quota for which the respondents gave their bid by a certain figure and the facility of paying the amount by instalments while lifting the quota from time to time, do not make such payment an excise or still-head duty. What the Government is trying to recover from the respondents is not excise duty on undrawn liquor. [757 B-D, 758 A-C, E-F, 759 A] Panna Lal v. State of Rajasthan, [1976] 1 SCR 219; Bimal Chandra Banerjee v. State of Madhya Pradesh, [1971] 1 SCR 844; State of Madhya Pradesh v. Firm Gappu Lal etc., [1976] 2 SCR 1041 and Excise Commissioner U.P., Allahabad v. Ram Kumar, [1976] Suppl. SCR 532; distinguished.

In M/s. Bhajan Lal Saran Singh & Co. v. The State of Punjab and others, (Civil Writs Nos. 538 and 1991 of 1966), the High Court had struck down the relevant Rules of 1966 by holding that the levy, charge or recovery of any amount of still-head duty in respect of liquor which had not been actually lifted by the licensee was not justified and that the demand to that extent was liable to be quashed. In the instant case, since the liability under the 1967 rules was of a similar nature as the liability under the 1966 Rules, the High Court followed the Judgment in Bhajan Lal, (supra) quashed the levy and set aside the order whereby the respondents' licence was cancelled and they were called upon to pay the difference between the amount which they had agreed to pay under the terms of their auction and the amount realised in the re-auction of the vend.

The sheet-anchor of the respondents' argument before us is that the decision of the High Court in Bhajan Lal was affirmed by this Court in Civil Appeals 1042 and 1043 of 1968 (decided on August 21, 1972) and since, in the instant case, the High Court has merely followed the decision in Bhajan Lal, the State's appeal must fail. If the matter were to rest there, as assumed by the respondents' counsel Shri Tirath Singh Munjral, the contention would be unassailable because the position would then approximate to the application of a mathematical formula: Bhajan Lal was affirmed by this Court; the judgment of the High Court in the instant case follows Bhajan Lal; the judgment under appeal must therefore be upheld. But after the decision of the High Court in Bhajan Lal (supra) was affirmed by this Court on August 21, 1972, the legal position has been further examined by a Constitution Bench of this Court in Har Shankar & Ors. v. The Dy. Excise & Taxation Commissioner & Ors. The learned Solicitor General places strong reliance on that decision and contends that the judgment of the High Court must, in the light of that decision, be over-ruled. We must proceed to consider the decision in Har Shankar straightaway.

Learned counsel for the respondents has called our attention to the distinction, which this Court drew in Har Shankar, (supra) between the Rules which were impugned in Har Shankar on one hand, and those which were impugned in Bhajan Lal, (supra) and in the instant case on the other. There is no doubt that such a distinction exists. In fact, the judgment of the Punjab and Haryana High Court which is impugned before us was specifically referred to at page 282 of the Report in Har Shankar but was distinguished on the ground that the rules in the two sets of cases were different. As we have already pointed out, the licensing rules were amended on March 22, 1968 because of the judgment which the High Court gave in this case on March 12, 1968 and the auction in Har Shankar was held in pursuance of the amended rules on March 23, 1968. But that, to our mind, is a separate matter altogether. Even if it be true that there is difference between the rules involved in the present case and those which came up for examination in Har Shankar, the preliminary objection rests on an entirely different basis which would remain unaffected by the difference in the two sets of Rules. We must therefore affirm that, even assuming that there is a material difference in the Rules which are relevant for our purpose and the Rules which were impugned in Har Shankar, (supra) the writ petitions filed by the respondents are liable to fail on the narrow ground on which the preliminary objection of the State was upheld in Har Shankar.