Research › Search › Judgment

Patna High Court · body

2004 DIGILAW 294 (PAT)

Mcdowell & Co. Ltd. v. State Of Bihar

2004-03-12

MRIDULA MISHRA, NAGENDRA RAI

body2004
Judgment Nagendra Rai and Mridula Mishra JJ. 1. The question involved in these cases are one and the same and as such they have been heard together and are being disposed of by this common judgment. 2. The petitioners are licensees under the Bihar Excise Act and have been granted licence in different forms. The petitioner (McDowell and Co. Ltd.) in CWJC Nos. 5945 of 1990 and 7511 of 1991 is holding licence in Forms No. 1, 19, 19B, 20 and 28A granted by the Board of Revenue under the provisions of the Act. 3. The petitioner (United Distillers Ltd.) in CWJC Nos. 8180 of 1991 and 1856 of 1993 is holding licence in Forms No. 1,19, 19B, 20, 25 & 28A. The other petitioners are having licence in Form No. 25(for the manufacture of denatured spirit) and in Form 28A (licence to manufacture spirit in a distillery for use in the manufacture of potable liquors). 4. The demands issued by the respondents-authority though do not refer the specific provision but according to the same demands for establishment charge has been made either under Rule 9 or Rule 36A of the Rules under Bihar Excise Act. Rule 9 and Rule 36A runs as follows: "Rule 9:The Commissioner shall appoint such officers and establishment as he thinks fit to the charge of a distillery. [In the case of a distillery licenced solely for the purpose of the manufacture of denatured spirit or any other commercial spirit the distiller shall bear the whole cost including leave and pension contributions and cost of uniform of such excise staff and establishment as may be considered necessary by the Excise Commissioner for proper supervision." Rule 36A:The Excise Commissioner shall decide as to whether a whole time or a part time excise staff is necessary for the proper supervision of such operations in any such premises. The licensee shall pay to the Provincial Government such fees as may be determined from time to time by the Excise Commissioner as the actual cost of the excise staff, employed for the purpose of this rule. The fees shall be payable by the licensee at the end of each calendar month in case of a part-time excise staff and by the 7th of each calendar month in advance in case of a whole-time excise staff. The fees shall be payable by the licensee at the end of each calendar month in case of a part-time excise staff and by the 7th of each calendar month in advance in case of a whole-time excise staff. These fees, shall be in addition to any other fees payable under the Bihar and Orissa Excise Act." 5. There was controversy as to whether the demand for establishment charge can be made from the licensee under the Excise Act under Rule 9 of the Rules and the matter has been settled by the Apex Court in the case of Shree Krishna Gyanoday Sugar Ltd. and Arun Chemical Industries (Pvt.) Ltd. (one of the petitioners in the present case) vs. State of Bihar & others, reported in (1996)10 Supreme Court Cases 11 [ :1997(1) PLJR (SC) 34] and it has been held that Rule 9 is intra vires and referable to Section 38(1)(a)(ii) read with Sub-sections (1)(a) and (9)(i) and (ii) of Section 90 of the Act. But it has further been held that demand of establishment charge can be made under proviso to Rule 9 only with regard to distillery which are licensed solely and wholly for the purpose of manufacture of denatured spirit or other commercial spirit. In paragraph 15 of the judgment it was held as follows: "It must, therefore, be held that second part of Rule 9 will apply to only those distilleries which are licensed solely and wholly for the purpose of manufacturing either denatured spirit or any other commercial spirit unfit for human consumption but would not include those distilleries which are licensed for manufacturing along with denatured spirit or other industrial spirits unfit for human consumption, also potable liquor which is fit for human consumption," 6. In other words, if the composite licence has been granted and the distilleries which are licensed for manufacturing potable liquor which is fit for human consumption apart from denatured spirit or any other commercial spirit unfit for human consumption, then proviso to Rule 9 cannot be resorted to for charging establishment charge. 7. So far the cases of the petitioners in CWJC Nos. 2464 of 1993, 5071 of 1993, 11786 of 1993 and 8974 of 1991 are concerned, specific statements have been made that they have been granted licences in Form Nos. 25 and 28A and they are also engaged in manufacturing countrymade liquor. 7. So far the cases of the petitioners in CWJC Nos. 2464 of 1993, 5071 of 1993, 11786 of 1993 and 8974 of 1991 are concerned, specific statements have been made that they have been granted licences in Form Nos. 25 and 28A and they are also engaged in manufacturing countrymade liquor. Thus, they are also engaged in manufacturing potable liquor and their licences being composite one, they are not liable to pay establishment charge in terms of provisions contained under Rule 9 of the Rules as settled by the Apex Court in the case of Shree Krishna Gyanoday Sugar Ltd. (supra). Accordingly, the demands made in the aforesaid four cases are quashed. 8. So far other four cases, namely, CWJC Nos. 5945 of 1990, 7511 of 1991, 8180 of 1991 and 1856 of 1993, are concerned, admittedly, they are having composite licence a not only for manufacturing denatured spirit, but they are also engaged in compounding and blending of potable foreign liquor and bottling for sale of the same. 9. From perusal of Rule 36A of the Rules it is clear that establishment charge can be demanded from the distillers with regard to excise staff engaged for whole time or part time to perform the duties as mentioned in Rule 34 of the Rules. 10. Learned counsel appearing for the petitioners submitted that Rule 36A is ultra vires of Section 90 of the Act. He further submitted that establishment charge is not a grant for any privilege and as such the same is not permissible in law. 11. This Court should not detain itself for consideration on the said points for the simple reason that power to demand establishment charge with reference to Rule 9 of the Rules has already been held by the Supreme Court in the case of Shree Krishna Gyanoday Sugar Ltd. (supra) to be referable to the provisions of Section 38(1)(a)(ii) read with sub-sections (1)(a) and (9)(i) and (ii) of Section 90 of the Act. The said provisions also justify the demand of establishment charge under Rule 36A of the Rules. 12. The said provisions also justify the demand of establishment charge under Rule 36A of the Rules. 12. In the case of Government of Andhra Pradesh vs. M/s Anabeshahi Wine and Distilleries Pvt. Ltd., reported in AIR 1988 Supreme Court 771 that it has been held by the Supreme Court that the demand for establishment charge is neither in the nature of tax nor excise duty, but constituted the price or consideration which the government charges to the licensees for parting with its privileges and granting them to the licensees and the same view has been reiterated in the recent judgment of the Apex Court in the case of Government of Maharashtra and others vs. M/s Oeokars Distillery, reported in AIR 2003 Supreme Court 1216. Thus, the demand of establishment charge under Rule 36A of the Rules cannot be assailed on the ground urged on behalf of the petitioners. 13. Learned counsel for the petitioners alternatively submitted that even if it is held that Rule 36 is valid one, the respondent-authorities cannot demand establishment charge for employment of all the employees in the distillery and they can demand establishment charge only with regard to those employees who were solely engaged in compounding, blending etc. 14. The said submission is worth acceptance because in view of the settled law that in case of composite licence no charge of establishment can be demanded under Rule 9 then the demand is referable only under Rule 36A and there the establishment charge can be demanded only with regard to those who are solely engaged for the aforesaid purpose. 15. From perusal of the demands annexed to the writ applications, it is not clear that the establishment charge has been demanded by referring to the excise staff exclusively engaged in compounding, blending etc. In that view of the matter, the demand notices in the aforesaid four cases are also quashed with the direction that concerned authority will determine as to number of the excise staff engaged solely for the aforesaid purpose and issue a fresh demand. It goes without saying that if any payment has been made in excess to the actual demand determined, then the same payment should be refunded and in case of any further demand, the authorities will take steps for recovery of the same. 16. In the result, all the writ applications are allowed with the direction as mentioned above.