CHANDRASHERHAR, J. ( 1 ) IN this petition under Art. 226 of the Constitution, the petitioner has prayed for- (i) striking down Clause, (d) of Sec. 23 of the Karnataka Excise Act, 1965, (hereinafter referred to as 'the Act') as ultra vires of the State legislature; (ii) striking down sub-rule (1) of Rule 8 of the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968, (hereinafter referred to as 'the Rules') as ultra vires of the powers of the State Govt. and " (iii) directing the respondents (the State of Karnataka and the Excise authorities in Karnataka) to refund to the petitioner the amounts collected from it as license fee under Rule 8 (1) of the Rules. ( 2 ) THE petitioner is a partnership firm. Though it has not been expressly stated so in the petition, Mr N. Santhosh Hegde, learned Counsel for the petitioner, submitted that the petitioner has obtained licences for selling liquors in retail at certain places, on payment of licence fee under Item 2 of Rule 8 (1) of the Rules. ( 3 ) ON behalf of the State Government and the Excise Authorities, no counter affidavit or statement of objections has been filed. However, the learned Government Advocate sought to justify the validity of Clause (d) of S. 23 of the Act and sub-rule (1) of Rule 8 of the Rules. He put forth an alternative contention that even if licence fee under Rule 8 (1) of the Rules should be held to be not an excise duty, the levy of such licence fee could be justified as a tax on luxuries. ( 4 ) IN order to appreciate the rival contentions of the learned Counsel, it is necessary to set out the relevant provisions of the Act and the Rules. The material parts of Section 17 of the Act read : " 17 Power to grant lease of right to manufacture etc.- * * * * *" the material parts of Section 22 of the Act read : "22. Excise duty or countervailing duty on excisable articles- * * * * * " the material parts of Section 23 of the read : "23. Ways of levying such duties- * * * * *" section 24 of the Act reads : " 24 Excise duty in respect of grant of leases- * * * * * " sub-sec. Excise duty or countervailing duty on excisable articles- * * * * * " the material parts of Section 23 of the read : "23. Ways of levying such duties- * * * * *" section 24 of the Act reads : " 24 Excise duty in respect of grant of leases- * * * * * " sub-sec. (1) of S. 71 of the Act empowers the State Government to make rules to carry out the purposes of the Act The relevant parts of sub-sec. (2) of that section read : " 71 (2): In particular and without prejudice to the generality of the foregoing provision, the State Government may make rules- (a ). . . . . . . . . . . . . (h) prescribing the authority by which, the form in which and the terms and conditions on and subject to which any licence or permit shall be granted, and may, by such rules, among other matters,- (i ). . . . . . . . . . . . . . . . . . . . . . (ii) prescribe the scale of fees, or the manner of fixing the fees payable in respect of any lease, licence or permit, or the storing of any excisable article; (iii ). . . . . . . . . . . . " ( 5 ) IN exercise of the rule-making power under S. 71 of the Act, the State govt. made rules called the Karnataka Excise (Sale of Indian and Foreign liquors) Rules, 1968. Sub-rule (2) of Rule 1 states, that these rules shall apply to the sale of Indian liquor (other than arrack) and Foreign liquor. Rule 3 of the Rules provides for issue of wholesale or retail licences for the vending of Indian liquor or Foreign liquor or both, not to be drunk on the premises. Rule 4 provides that any person desiring to obtain licence under these rules shall make an application to the Deputy Commissioner of the Dist. in that behalf. ( 6 ) RULE 5 of the Rules provides, inter alia, that on receipt of an application under Rule 4 the Deputy Commissioner may, with the previous sanction of the Excise Commissioner, grant the licence on payment of the fee prescribed under Rule 8 for such licence. The material parte of Rule 8 read : "8. in that behalf. ( 6 ) RULE 5 of the Rules provides, inter alia, that on receipt of an application under Rule 4 the Deputy Commissioner may, with the previous sanction of the Excise Commissioner, grant the licence on payment of the fee prescribed under Rule 8 for such licence. The material parte of Rule 8 read : "8. Fee to Be paid- (1) The licence fee for the severalm kind of licences shall be as follows, namely; 1, wholesale licence rs. 5,000 per year 2. Retail off licence referred to in Rule 3 (2) rs. 10,000 3. . . . . . . . . . . . . . . . . . . . . . . (2) In addition to the licence fee specified in sub-rule (1), the 'licensee of retail off shop' shall pay a 'litre Fee' at the following rates, in advance at the time of obtaining of the several Indian and foreign Liquors namely :. . . . . . . . . . " mr. Santhosh Hegde contended that licence fee for retail vending of indian and Foreign liquors cannot be regarded as excise duty and that hence the State Legislature has no competence to legislate for levy of licence fee fpr retail vending of Indian and Foreign liquors In that view, he contended that Clause (d) to Sec. 23 of the Act should be declared as ultra vires of the nevers of the State Legislature for the purpose of this petition; we do not consider it necessary to pronounce on the question whether Clause (d) to S 23 of the Act is ultra vires of the powers of the State Legislatpre It is sufficient in our opinion, to decide whether the licence fee prescribed under Rule 8 (1) of the Rules, for retail vending of Indian and Foreign liquors, is valid mr Santhosh Hegde contended that licence fee for the privilege of vending liquor, cannot be regarded as excise duty and that the State Govt. cannot, in the guise of levying excise duty, lew such licence fee which is not an excise duty In supoort of his contention, he relied on the majority judgment of the Supreme Court in Shinde Bros. V. Dy. cannot, in the guise of levying excise duty, lew such licence fee which is not an excise duty In supoort of his contention, he relied on the majority judgment of the Supreme Court in Shinde Bros. V. Dy. Commr,, Raichur, AIR 1067 SC 1512, sikri, J (as he then was) who spoke for the majority, examined the nature of Shop Rent for Toddy under the Mysore Excise Act, 1900, and observed thus at page 1521 : " The taxable event is not the manufacture or production of goods but the acceptance of the license to sell In other words the levv is in respect of the business of carrying on the sale of toddy There is no. connection of any part of the levv with anv manufacture or production of any goods To accept the contention of the State would mean expanding the definition of 'excise duty' to include a levy which has close relation to the sale of excisable goods It is now too late in the day to do so. " ( 7 ) THE majority view in Shinde Bros', case (1) was reiterated by thie Supreme court in State of Mysore v Cawasji and Co. , AIR 1971 SC 152 , Shah, J (as he than was), who spoke for the Court said thus at page 155 : " If a levy was made for the privilege of selling an excusable article and the excisable article had already borne the duty and the duty had been paid, there must be clear terms in the charging section to indicate that what was being levied for the purpose of the privilege of sale was in fact a duty of excise. . . . . The licensee paid what he considered to be equivalent fo the value of the right and it had no relation to the production or manufacture of toddy. . . the 'shop-rent' was not excise duty within the meaning of Entry 51 of List II of the Constitution. " ( 8 ) THE effect of the ruling of the majority of the Bench of the Supreme court in Shinde Bros', case (1) on the Karnataka Excise Act, 1065, was considered by a Division Bench of this Court consisting of one of us in cowasji and Co. v. State of Mysore, (1968) 2 Mys. L. J. 78. " ( 8 ) THE effect of the ruling of the majority of the Bench of the Supreme court in Shinde Bros', case (1) on the Karnataka Excise Act, 1065, was considered by a Division Bench of this Court consisting of one of us in cowasji and Co. v. State of Mysore, (1968) 2 Mys. L. J. 78. This Court observed at page 91 : "in the light of the majority view of the Supreme Cpurt in Shinde bros case, S. 24 of the new Excise Act (Mysore Act 21 of 1966) which declares that the sum accepted in consideration of grant of any lease relating to excisable articles, shall be the excise duty, cannot expand the definition of excise duty and cannot render shop rent a duty of excise. " ( 9 ) IN view of the aforesaid rulings of the Supreme Court and of this court, it is clear that licence fee sought to be levied under Rule 8 (1) of the Rules for the privilege of retail vending Of Indian and Foreign liquors,. cannot be regarded as excise duty on such liquors The State Government, in our opinion, has no power under the Act to make rules providing for a levy which is not in the nature of excise duty. However, the learned Government Advocate contended that even if licence fee for the privilege of vending liquor, is not an excise duty Within the meaning of Entry 51 of List II of Schedule VII to the Constitution, such licence fee comes within the ambit of Entry 8 of List II which reads intoxicating liquors' that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors ". He argued that the levy of such licence fee cannot be regarded as being without the authority of law. He sought to derive support from the following observations of the Supreme Court in Cooverjee B. Bharucha v. Excise Commr. AIR 1914 SC 220. Mahajan, J. (as he then was), who spoke for the Court, sajd thus at p. 224: " The next contention that the charge of fee by public auction is excessive and is not in the nature of a fee but a tax ignores the fact that that licence fee described as a licence fee is more in the nature of a tax than a licence fee. One of the purposes of the regulation is to raise revenue. By the provisions of S. 24 (of the Ajmer Excise Regulation, 1915) duties can be imposed on the manufacture, import, export and transport of liquor and other excisable articles. Revenue is also collected by the grant of contracts to carry on tra,de in liquors and these contracts are sold by auction The grantee is given a licence on payment of the auction price. The regulation specifically authorises this. It is not a fee levied without authority of law as was the situation in AIR 1950 SC 163 -". ( 10 ) IN the above case, the only question that arose, for consideration before the supreme Court, was whether a charge of fee for the privilege of vending liquor, was authorised by the Ajmer Excise Regulation, 1915. The question whether such fee could be regarded as excise duty within the meaning of Entry 51 of List II, did not arise for consideration. The question whether for Legislative power to regulate or restrict manufacture, sale and consumption of liquor, would also include the poorer to impose any tax on manufacture sale or consumption of liquor, did not arise for consideration in that case as pointed out by the Supreme Court in Sundara Ramier and Co. v. State of AP. , AIR 1958 SC 468 , taxation is considered to be a distinct matter for the purposes of legislative competence and the power to, tax cannot be deduced from a general legislative entry as an ancillary power. The legslative power to tax alcoholic liquor must be derived from one of the entries of taxation, i. e. , Entries 46 to 63 in List II of the Seventh Sch. We, have already held that licence fee for the privilege of vending liquor does not come within Entry 51. The power to levy such licence fee cannot be deduced from Entry 8 of List II which is a general legislative entry relating to production, manufacture, possession, purchase and sale of intoxicating liquors. ( 11 ) LASTLY it was contended by the learned Government Advocate that even if licence fee for retail vending of Indian and Fpreign liquors, cannot be justified as excise duty on liquor, such licence fee can be regarded as a tape on luxuries coming within Entry 62 of List II of Sch. ( 11 ) LASTLY it was contended by the learned Government Advocate that even if licence fee for retail vending of Indian and Fpreign liquors, cannot be justified as excise duty on liquor, such licence fee can be regarded as a tape on luxuries coming within Entry 62 of List II of Sch. VII to the Constitution and that as liquor is an article of luxury the State Government has competence to levy tax on liquor in the form of a licence fee. A similar contention had been urged on behalf of the State in Cawasji and co. v. Stale of Mysore (3) Repelling that contention, this is what this court said in that case at page 95 ; " Even assuming for the sake of argument that alcoholic liquors are articles of luxury and that Shop Rent is a tax we shall examine whether shop rent can be regarded as a tax on luxuries coming within entry 62 of List II of the Seventh Schedule to the Constitution. . . . . . There is no manifestation of the legislative intent to treat alcoholic liquors as articles of luxury and to impose tax on them as articles of luxury. On the other hand the legislative intent appears to be to collect excise revenue in the form of shop rent as a duty of excise. " at page 98 of the report, this Court further observed : " In the light of the opinion expressed by the majority of the Bench in Shinde Bros. ' case ( AIR 1967 SC 1916 ) we must hold that shop rent if not correlated to the quality, quantity or value of luxuries i. e. , liquors, but is a levy imposed for the privilege of vending liquor, and hence it cannot be regarded as a tax on luxuries coming within entry 62 in the List II of the Seventh Sch. to the Constitution, even if it is assumed that alcoholic liquors are articles of luxury and shop cent is a tax. " ( 12 ) THE above ruling is equally applicable to the present case as licence fee under the Act (The Karnataka, Excise Act, 1965) for the privilege of vending liquor is analogous to shop rent under the Mysore Excise Act, 1900. Hence licence fee under Rule 8 (1) cannot be justified as a tax on luxury. " ( 12 ) THE above ruling is equally applicable to the present case as licence fee under the Act (The Karnataka, Excise Act, 1965) for the privilege of vending liquor is analogous to shop rent under the Mysore Excise Act, 1900. Hence licence fee under Rule 8 (1) cannot be justified as a tax on luxury. Thus Rule 8 (1) must be held to be invalid, in so far as it relates to levy of licence fee on retail vending of Indian and Foreign liquors. As the levy of licence fee on the petitioner for granting the privilege for retail vending of Indian and Foreign liquors, was without authority of law, the petitioner is entitled to obtain refund of licence fee paid by it. However, our direction in this petition to refund licence fee collected from the petitioner should be limited to what has been collected from it within three years next before the date on which this petition was presented i. e , 2-8-1968. ( 13 ) IN the redult, we allow this petition partly and (i) declare as invalid sub-rule (1) of Rule 8 of Karnataka Excise (Sale of Indian and Foteign Liquors) Rules, 1968, in so far as it rentes to levy of licence fee for retail vending of Indian and Foreign liquors, and (ii) direct the State Govt to refund to the petitioner the amounts collected from it within three years next before 2-8-1971 by way of licence fee for retail vending of Indian and Foreign liquors. In the circumstances of this petition, we direct the parties to bear their own costs. --- *** --- .