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2008 DIGILAW 269 (ORI)

HI-TECH BOTTLING (P) LTD. v. STATE OF ORISSA

2008-04-02

ASOK KUMAR GANGULY, N.PRUSTY

body2008
JUDGMENT : N. Prusty, J. - The Petitioner, M/s. Hi-Tech Bottling (P) Ltd., which is a Small Scale Industrial Unit, registered under the District Industries Centre, Sambalpur, has filed this writ petition for quashing the Demand Notice dated 30.3.2006 issued by the Superintendent of Excise, Sambalpur (Annexure-5) directing the Petitioner to pay an amount of Rs. 1,36,69,672/- towards Excise Duty on short production of I.M.F.L. of Hi-Tech Bottling Plant, as the install capacity of the unit was 15,00,000 litres as assessed by the District Industries Centre, Sambalpur. 2. Heard Dr. Debi Pal, learned Senior Advocate leading Mr. A.K. Patra, learned Counsel for the Petitioner and Mr. J.K. Mohanty, learned Government Advocate for the State. 3. Dr. Pal, learned Counsel for the Petitioner submitted that either in the DIC certificate or in the licence granted in favour of the Petitioner, there is no reference to any installed capacity and there is no reference to the MGQ of the installed capacity which is to be produced or sold. The D.I.C. certificate only refers to annual quantity and also in the licence, which is approved by the Commissioner of Excise. Even after introduction of Rule 6C, the production capacity of the Unit was 1,00,000 BL and as such the MGQ to be sold is 50,000 BL. In the licence granted in favour of the Petitioner it was categorically stated that the MGQ to be sold in 2500 cases monthly, which comes to 45,000 LPL per year. The audit objection was made by the Audit Department and was sent to the Superintendent, Sambalpur on 3.3.2003. The said audit objection was not communicated to the Petitioner at any point of time nor the Petitioner was given an opportunity of being heard by the Audit Department before the said objections were raised. The audit objection proceeded on the footing that the installed capacity of the bottling plant of the Petitioner is 15,00,000 BL and the MGQ as required to be sold under Rule 6C of the Rules will be 7,50,000 BL which on conversion will be 4,50,000 BL per year. It has been pointed out in the said audit objection that on the basis of the said quantity there has been a short fall of the MGQ to be sold in terms of Rule 6C on the basis of the installed capacity of the bottling plant of the Petitioner. It has been pointed out in the said audit objection that on the basis of the said quantity there has been a short fall of the MGQ to be sold in terms of Rule 6C on the basis of the installed capacity of the bottling plant of the Petitioner. Therefore, a demand has been raised for the short fall payment of Rs. 1,36,69,672/-. Since the impugned demand notice was issued on the basis of the audit objection, which has been raised without giving an opportunity of hearing to the Petitioner and ex parte, the same is liable to set aside. The production capacity of the Petitioner has been fixed at 1,00,000 BL and the MGQ fixed is 50% of the production capacity i.e. 50,000 BL per year and no install capacity has even refixed against the Petitioner during the year 1997-98 to 2001-2002. Hence the impugned demand which has been raised vide letter dated 30.3.2006 is illegal, invalid and without authority of law as well as in violation of the principle of natural justice. The audit report refers to the installed capacity in the DIC certificate. In the DIC certificate there is no reference to the install capacity. The demand notice points out that the audit report has proceeded on the footing that the installed capacity of the Petitioner unit was 15,00,000 LPL as assessed by the District Industries Centre, Sambalpur. In the DIC certificate, nowhere it has been mentioned that the installed capacity is 15,00,000 LPL nor there is any requirement in the said certificate to sell 50% of the alleged installed capacity viz. 7,50,000 LPL (in conversion 4,50,000 LPL). The General Manager of the District Industries Centre, Sambalpur by his letter dated 30.11.2005 has categorically stated that the DIC does not assess annually the installed capacity, which would indicate the limit to which the plant can produce. Therefore, the basis on which the demand notice has been issued is absolutely wrong and based upon incorrect facts. Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor (Amendment) Rules, 1997 was introduced in the year 1997 with effect from 1.11.1997. Therefore, the basis on which the demand notice has been issued is absolutely wrong and based upon incorrect facts. Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor (Amendment) Rules, 1997 was introduced in the year 1997 with effect from 1.11.1997. Before the introduction of the said Rule 6C there is no reference to any installed capacity and therefore when licence was issued on 5.4.1997 and the DIC Certificate issued on 29.11.1995, there could not be any reference to any installed capacity which has been for the first time introduced under Rule 6C with effect from 1.11.1997. Therefore, there could not be any reference to any installed capacity either in the DIC Certificate or in the licence. The State Government by notification dated 4.10.2000 inserted Section 20A of the Bihar and Orissa Excise Act, 1915 which provides for taking over wholesale trade in foreign liquor and country liquor by setting up of State Beverage Corporation established and incorporated under the Companies Act, which is wholly owned and controlled by the State Government. The said Corporation will have the exclusive right and privilege of importing, exporting and carrying on wholesale trade and distribution of foreign liquor in the state on behalf of State Government for whole of the State and supplying or selling of Indian made Foreign Liquor or country liquor is not allowed to be made by any private party. The impugned demand notice has been fixed at Rs. 1,36,69,672/- on the Petitioner, on the basis of computation made in the audit report. In the said computation, the MGQ to be sold for the year 2001-2002 amounting to Rs. 44,65,730/- has been taken into account. Therefore, even assuming though not admitting, the said demand notice can be given effect to at least for the year 2001-2002, since there is no requirement of MGQ to be sold. As such, at least the demand notice to the extent of Rs. 44,65,730/- is to be quashed. Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor (Amendment) Rules, 1997 framed by the State Government u/s 89(1) of the Bihar and Orissa Excise Act, 1915 has no application to the Petitioner's case. As such, at least the demand notice to the extent of Rs. 44,65,730/- is to be quashed. Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor (Amendment) Rules, 1997 framed by the State Government u/s 89(1) of the Bihar and Orissa Excise Act, 1915 has no application to the Petitioner's case. The said Rule 6C appears under the heading Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 which provides that all the licences of IMFL bottling plant shall guarantee for bottling of 50% of the installed capacity of their bottling plants in a year, as the MGQ. Rule 6C applies only when the licensee of the bottling plant is given by way of exclusive privilege. Section 22 of the Orissa Excise Act provides for grant of exclusive privilege for manufacture and sale of country liquor. As per Section 22(1-a) the State Government may grant to any person, on such conditions and for such period as it may think fit, the exclusive privilege for manufacturing or supplying wholesale of foreign liquor within any specified place. The proviso to Section 22(1-a) lays down that the public notice shall be given of the intention to grant any such exclusive privilege and that any objection made by any person residing within the area affected shall be considered before an exclusive privilege is granted. Reference also be made to Rule 3 of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 which provides that a public notice shall be issued by the Collector on behalf of the State Government in the form and in the manner specified hereinafter before granting any exclusive privilege to one person for retaining sale of foreign liquor. Rule 3(2) provides for the detailed procedure as to how such public notice is to be given and any objection received are to be considered by the Government under Rule 4 of the aforesaid Rules and then after receipt of the order of the Government the Collector shall proceed with the settlement of the privileges. The Petitioner has been granted bottling licence and it has not been given any exclusive privilege for bottling of the foreign liquor. Exclusive privilege is allowed only to the retailers as provided u/s 22(1-a) and such exclusive privilege can be granted within a specified area and after inviting public objection as required under the proviso to Section 22(1-a) read with Rule 3. Exclusive privilege is allowed only to the retailers as provided u/s 22(1-a) and such exclusive privilege can be granted within a specified area and after inviting public objection as required under the proviso to Section 22(1-a) read with Rule 3. In the present case no such exclusive privilege for retail sale of foreign liquor has been allowed and therefore, the requirement of public notice and requirement of any specified area within which such exclusive privilege can be allowed has not been stated. In support of all his contentions, Dr. Pal relied upon the decision of this Court in the case of Sarat Kumar Sahoo v. Collector Cuttack reported in 73 (1992) CLT 834. It is submitted by the learned Counsel that if no exclusive privilege has been granted to the Petitioner with regard to the bottling licence, Rule 6C shall not be applicable to the case of the Petitioner. If Rule 6C does not apply to the Petitioner's case, the requirement of MGQ to be sold on the installed capacity does not have any application. Rule 6C, which has been framed by the State Government on purported exercise of its power u/s 89(1) of the Bihar and Orissa Excise Act, 1915, is clearly in excess of the statutory provision and is ultra vires. Under Section 89(1) of the said Act, the State Government may make Rule and carry out the objectives of the Act or any other law for the time being in force relating to the Excise Revenue. Section 89(2)(e) gives the power to the State Government to frame Rules for regulating the periods for which licence for the wholesale or retail vend of any intoxicant may be granted and the number of such licenses which may be granted for any local area. The State Government has not given any power u/s 89 of the Act to lay down any provision for sale of the MGQ of foreign liquor on the basis of the installed capacity in respect of the bottling plant. Such power may be exercised only by the Board u/s 90 of the Bihar and Orissa Excise Act. Section 90 provides that the Board may make rules for regulating the manufacturer, supply or storage of any intoxicant in particular and without prejudice to the generality of this provision, may make rules for regulating the bottling of liquor for the purpose of sale. Section 90 provides that the Board may make rules for regulating the manufacturer, supply or storage of any intoxicant in particular and without prejudice to the generality of this provision, may make rules for regulating the bottling of liquor for the purpose of sale. Requirement of MGQ to be sold in the case of bottling of liquor can be laid down only by the Board exercising its power u/s 90(1)(b) of the Act. The State Government has no power to impose such a condition as has been sought to be laid down in Rule 6C. Therefore, Rule 6C which has been framed by the State Government purporting to exercise its power u/s 89(1) is clearly in excess of the statutory provision and hence is ultra vires. It is well settled that no tax can be imposed by any bye laws or rule or regulation unless the statute, under which the subordinate legislation is made, specially authorizes the imposition. The basis of the statutory power conferred by the Statute cannot be transgressed by the Rule making authority and in view of above, the opposite parties are directed to refund the amount of Rs. 1,15,00,000/- deposited by the Petitioner without prejudice to its rights and contentions. 4. On the other hand, Mr. J. Mohanty, learned Government Advocate appearing on behalf of the State submits that in this writ petition, the Petitioner has prayed to quash the Demand Notice dated 30.3.2006 issued by the Superintendent of Excise, Sambalpur (Annexure-5) and to declare Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 as ultra vires and without any authority. Entry 51 of List II of Schedule of the Constitution of India gives power to the State Government to impose duty of excise on alcoholic liquors where goods were manufactured in the State. Section 27 of the Bihar and Orissa Excise Act gives power to the State Government to impose duty on import, export, transport and manufacture of liquor. The ways of levying such duty has been prescribed u/s 28 of the Bihar and Orissa Excise Act. Sub-section (12) of Section 90 of the Bihar and Orissa Excise Act gives power to the Board of Revenue to prescribe the time, place and manner of payment of duty on intoxicants. The ways of levying such duty has been prescribed u/s 28 of the Bihar and Orissa Excise Act. Sub-section (12) of Section 90 of the Bihar and Orissa Excise Act gives power to the Board of Revenue to prescribe the time, place and manner of payment of duty on intoxicants. Accordingly, the Board in its Excise Rules, 1965 has made Rules 131 and 132 prescribing the time and place and for payment of duty. The State Government is the exclusive privilege holder and for parting with the exclusive privilege, made the Orissa Excise Exclusive Privilege Rules. Rule 6C is a part of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989. As such, Rule 6C is valid and cannot be said to be excessive and also it cannot be said that as the power has been delegated to the Board of Revenue and after delegation of such power, the State Government has no right to include Rule 6C in the Rules. The delegator cannot be denuded of the power, which has been delegated by it. Rule 6C, which is regulatory in nature, has already been upheld by this Court in a batch of writ petitions in a common Judgment passed in O.J.C. No. 296 of 1998 and other cases. The installation capacity with regard to fixation of MGQ, has been indicated in the DIC registration certificate itself. The installation capacity has been indicated in column 6 under Serial No. 6 to Appendix-A to the Registration certificate issued by the District Industries Centre (Annexure-1 to the counter affidavit) as well as letter of the D.I.C. dated 30.6.2006/1.7.2006, to be 15,00,000 litres i.e. 1500 kilo litres. In his letter-dated 1.7.2006 the Petitioner has indicated the installation capacity in conformity with Annexure-1 series, Annexure B/2 series and Annexure C/2. In Annexure B/2 series of the counter affidavit, the installation capacity has been increased from time to time i.e. from 15 lakhs to 28 lakhs and by now it has gone up to 38.82 kilolitres. As such, the contention of the Petitioner that there is no indication of installation capacity, is completely against the materials available on record. In Annexure B/2 series of the counter affidavit, the installation capacity has been increased from time to time i.e. from 15 lakhs to 28 lakhs and by now it has gone up to 38.82 kilolitres. As such, the contention of the Petitioner that there is no indication of installation capacity, is completely against the materials available on record. The submissions made by the learned Counsel for the Petitioner are that compounding blending and bottling are three different items, the intake capacity of 16 lakhs should be divided into three for the purpose of fixation of M.G.Q. and as such the total intake capacity should not be taken into account for fixation of M.G.Q. is not at all correct, in view of the fact that for preparation of IMFL, there are three stages i.e. compounding, blending and bottling. Compounding means artificial preparation of foreign liquor by addition to import or local spirit flavouring colours. Blending of spirit means mixing together with two or more spirit of different strength. After compounding and blending, the bottling is made. All the above three stages are of one complete process. As such the M.G.Q. has to be fixed on the total process of Compounding, Blending and Bottling. So far as the allegation of not following the principle of natural justice with regard to audit report is concerned, the same is not sustainable in the facts and circumstances of the case. The audit party has gone to the premises of the Petitioner where the books of account and other relevant papers were duly audited in presence of personnel of the Petitioner's company. During the course of the said audit report, where doubt arose memos were issued by the audit party to the employees of the Petitioner for its clarification. During the audit, whatever memos were issued by the audit party, the same were not complied with by the Petitioner. As such due opportunity has been given to the Petitioner by the Audit Party before arriving at a conclusion. As such, the allegation of the Petitioner that the audit has been made behind the Petitioner without giving an opportunity is not acceptable and is not a correct stand. The other arguments advanced by the learned Counsel for the Petitioner is that due to formation of the Orissa State Beverage Corporation, the MGQ cannot be made applicable to the Petitioner's unit from 1.2.2001. The other arguments advanced by the learned Counsel for the Petitioner is that due to formation of the Orissa State Beverage Corporation, the MGQ cannot be made applicable to the Petitioner's unit from 1.2.2001. In this regard, it may be clarified that even though the decision was taken to this effect on 1.2.2001 but the same notified only on 30.5.2002. The above fact makes it clear that the submissions advanced by the learned Counsel for the Petitioner in this regard is not in conformity with law as well as the facts and circumstances of the case. Rule 6C was deleted with effect from 30.5.2002 and it was not given effect to from 1.4.2002 i.e. after end of March 2002. In view of the above, the demand made by the Department covering the period from December 1997 upto 2001-2002 is in conformity with the provisions of law. So far as the letter of the Collector addressed to the Accountant-General, Orissa with regard to drop the audit objection, it will not be out of place to state here that all licensees of India made foreign liquor shall guarantee for bottling of 50% of the installed capacity of their bottling plants in a year, as the Minimum Guarantee Quantity as per notification dated 25.11.1997. The communication made by the Collector is contrary to the notification dated 25.11.1997. In view of such communication by the Collector and the Excise Superintendent (Annexure-6 and 10), since suspicion arose the matter has already been handed over to the Vigilance Department for enquiry and the matter is under investigation by the Vigilance Department. In the said case, the Petitioner is an accused and has obtained anticipatory bail. After the vigilance investigation/case is over, the conclusion can be arrived at as to whether the communications made vide Annexure 6 and 10 are genuine or not and, therefore, no reliance can be placed on those communications. Rule 6C of the Rules being within competence of the State Government/Board of Revenue. The MGQ has been fixed as per the installed capacity. The demand notice (Annexure-5) issued basing upon the audit report, is in accordance with law. The installed capacity fixed cannot be challenged and as such the audit report is in accordance with law. Rule 6C of the Rules being within competence of the State Government/Board of Revenue. The MGQ has been fixed as per the installed capacity. The demand notice (Annexure-5) issued basing upon the audit report, is in accordance with law. The installed capacity fixed cannot be challenged and as such the audit report is in accordance with law. The DIC from time to time has also intimated the Petitioner that the installed capacity from 1.1.1995 to 1.1.2005 was 15,00,000 B.L., which is evident from letter dated 29.11.2005. So far as fixation of minimum guarantee quota (MGQ) of Indian Made Foreign Liquor and the Beer in respect all retail outlets of the State i.e. Foreign Liquor 'OFF' and 'ON' shops are concerned, the same was introduced in the year 1997 as per the Excise Policy 1997-98 of the Government and it was given effect from 1.12.1997. As per Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989, as amended in November 1997, all the licensees of IMFL/Beer bottling plants shall guarantee for bottling of 50% of the installed capacity in their bottling plants in year, as the Minimum Guarantee Quantity. The MGQ in respect of the bottling plant was fixed with a view to ensure an uninterrupted supply of IMFL/Beer as per the requirements of Indian Made Foreign Liquor to 'OFF' and 'ON' shops. Instead of 100%, only 50% of the installed capacity was fixed as the Minimum Guaranteed Quantity for production by the bottling plants so that there would be no undue hardship for bottling plants owners to achieve the target of production. As such, the fixation of MGQ of the bottling plants is in no way unreasonable and it is within the capacity of each of such unit. During the year 1996-97 i.e. prior to introduction of MGQ from 1.12.1997, the Petitioner' company had produced 83,742 LPL of Indian made foreign liquor i.e. equal to 1,39,570 litres of 60 proof. As per the declaration of the Petitioner at the time of submission of application seeking licence for a bottling plant in the State, the installed capacity of the plant was 15 lakh litres and accordingly the DIC, Sambalpur issued registration certificate in favour of the Petitioner's plant fixing the installed capacity of 15,00,000 litres per annum. The said capacity was enhanced to 28,00,000 litres from 1.1.2005 and again to 38,82,000 litres per annum from 10.2.2006. The said capacity was enhanced to 28,00,000 litres from 1.1.2005 and again to 38,82,000 litres per annum from 10.2.2006. As such on the date of introduction of MGQ in 1997, the installed capacity of the Petitioner's plant was 15,00,000 litres per annum and accordingly as per Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989, the MGQ of the Petitioner's bottling plant was 7,50,000 litres which is equal to 4,50,000 LPL at 60% proof strength. In view of the above, the MGQ fixed for the Petitioner's bottling plant was at 7.5 lakhs litres is in no way illegal and unjust. The Petitioner was all along aware of the MGQ fixed in respect of his production unit in accordance with law. The Petitioner went on making short production each year. Between the periods from December 1997 to March 2002 the short production was 12,83,295 LPL in toto. As such, the Petitioner is liable to pay Rs. 1,36,792/- towards short fall duty and fine thereof under the provisions of Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 as amended in 1997. Accordingly, the Accountant General, Orissa in his inspection report No. 26/2002-2003 .pointed out about the non-realization of the aforesaid, amount towards the shortfall production of the Petitioner's plant for which demand was raised against the Petitioner. In 1997, when the MGQ was introduced, all the bottling plant owners including the Petitioner were asked in letter No. 8855 dated 18.12.1997 of the Excise Commissioner to furnish copy of permanent registration certificate issued by the DIC for verification of installation capacity and fixation of MGQ as per Rule 6-C of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989. The Petitioner had also furnished DIC certificate vide his letter dated 23.12.1997 before the Excise Commissioner wherein the installed capacity of the plant was clearly/categorically mentioned as 15,00,000 litres. So far as the Petitioner's unit is concerned the MGQ was accordingly fixed at 7,50,000 litres, which is 50% of the installed capacity. Mr. Mohanty, learned Counsel further submits that while submitting proposal to the Government for fixation of MGQ in respect of the bottling plants of the State, the Excise Commissioner in his letter dated 11.2.1998 proposed for fixation of 50% of installed capacity of all the bottling plants. Mr. Mohanty, learned Counsel further submits that while submitting proposal to the Government for fixation of MGQ in respect of the bottling plants of the State, the Excise Commissioner in his letter dated 11.2.1998 proposed for fixation of 50% of installed capacity of all the bottling plants. As against the installed capacity of 15,00,000 BL, the MGQ being 7.5 lakhs B.L. or equal to 4,50,000 LPL, it was wrongly shown to be only 1,00,000 LPL and accordingly the MGQ was proposed to be fixed at 50,000 LPL in respect of the Petitioner's unit. The above proposal of the Excise Commissioner was also approved by the Government in the Excise Department by its letter dated 3.3.1998 on the basis of such wrong reporting on the production capacity i.e. one lakh LPL and MGQ was 50,000 LPL. So far as all other bottling plants are concerned, the production capacity was reported correctly on the basis of the registration certificate issued in their favour and accordingly 50% of the installed capacity was fixed at MGQ pursuant to Rule 6C of the Rules. When this matter came to the knowledge of the concerned authority that instead of fixing 7,50,000 LPL, by mistake 50,000 LPL has been fixed as MGQ of the Petitioner's unit, the matter was enquired into and appropriate proceeding has also been initiated against the persons who have intentionally indulged themselves in furnishing wrong report with regard to fixation of MGQ in respect of the Petitioner's unit. Presently also the matter is also under the active consideration of the Vigilance Department and the Petitioner himself has gone on anticipatory bail apprehending his arrest. The Petitioner cannot take any advantage of such a wrong order, which has been done, may be at his instance. Be that as it may, the Petitioner was all along well aware of the installed capacity mentioned in the registration certificate and accordingly, it is liable to pay the excise duty on the short fall production of MGQ. As such, the Petitioner is liable to pay Rs. 1,36,69,672/- towards short fall duty and fine thereof under the provisions of Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 relating to the period from 1.12.1997 to 31.3.2002. The provisions relating to MGQ in respect of bottling plants have been deleted with effect from 1.4.2002 as per Government of Orissa, Excise Department Notification dated 30.5.2002. 1,36,69,672/- towards short fall duty and fine thereof under the provisions of Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 relating to the period from 1.12.1997 to 31.3.2002. The provisions relating to MGQ in respect of bottling plants have been deleted with effect from 1.4.2002 as per Government of Orissa, Excise Department Notification dated 30.5.2002. So far as fixation of excise duty on short fall of MGQ of IMFL is concerned, the same was fixed at Rs. 100 per LPL in respect of 'OFF shops" and 'ON shops, where it was fixed at Rs. 10 per LPL in respect of bottling plants. As such the amount fixed is very nominal and the Petitioner cannot say that the fixation of MGQ at 50% of installed capacity is arbitrary. The Petitioner cannot claim the benefit of a wrong order, which might have been done, may be at the instance of the Petitioner, for which the matter is being investigated and the Petitioner is likely to face a vigilance case. The Petitioner has also applied to the competent authority for reduction of the production capacity of his plant. So far as Rule 6C of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 as amended in 1997 is concerned, the fixation of MGQ in respect of 'ON' and 'OFF' shops (Rule 6-A) has already been upheld to be valid by this Court in OJC No. 296 of 1998 decided on 14.7.2000. As such, the Petitioner is liable to pay Rs. 1,36,69,62/- on the basis of actual MGQ, which is half of the production capacity in respect of the Petitioner's unit. At this stage, the Petitioner cannot challenge the validity of Rule 6C. Since all other bottling plants who have made default in production as against 50% of the installed capacity have already paid the excise duty on the short fall production. As such, the Petitioner has not been discriminated in any manner and he shall have to pay the amount due. It is also submitted by Mr. Mohanty, learned Counsel that law is well settled in this regard. Since no one can acquire any right or interest on a fraud or on the basis of clerical error or error committed, the Petitioner cannot take advantage of it. It is also submitted by Mr. Mohanty, learned Counsel that law is well settled in this regard. Since no one can acquire any right or interest on a fraud or on the basis of clerical error or error committed, the Petitioner cannot take advantage of it. In support of his contention, learned Government Advocate has relied upon a decision of the Supreme Court reported in AIR 1997 SC 1943 State of Orissa v. Narayan Prasad wherein it has been held that the licensee cannot wriggle out the agreement by virtue of the licence taken and subsequently the licensee cannot be allowed to challenge the validity of the rules. As per the licensing conditions and the provisions of the Rules, the Petitioner's unit cannot claim less MGQ than fixed as per the Rules and cannot be allowed to manufacture less than the 50% of the installed capacity. The installed capacity is very much known to the Petitioner and as such he cannot avoid to pay excise duty on the short fall of the production. The MGQ rule is one of the regulatory measure and such rule is valid and lawful as has been held by this Court in earlier case (s) and as such the Petitioner is bound by the provisions of the Rules, which has already been upheld by the Court and cannot challenge the same at this stage, only with a motive to evade payment of duty on the basis of a wrong done, to which the Petitioner itself was a party. In several cases the Supreme Court has also held that power to allow establishment of any industry engaged in manufacturing of liquor and other intoxicant drinks are vested with the State and the State Government has the power to regulate the same by way of making Rules for the purpose. In view of the above, there is no infirmity in the demand notice (Annexure-5) and the Petitioner is liable to pay the excise duty as per the said Demand and the Petitioner also at this stage cannot challenge Rule 6C as ultra vires and accordingly the writ petition is devoid of any merit and the same may be liable to be dismissed. 5. 5. Keeping in view the arguments advanced by the learned Counsel for both the parties, the main contention of the learned Counsel for the Petitioner in this writ petition is that Annexure-5 dated 30.3.2006, which is a Demand Notice for payment of Rs. 13,69,672/- towards Excise Duty due to shortfall production of IMFL in Hi-Tech Bottling Plant, as the installed capacity of the unit was 15,00,000 Litres as assessed by the District Industries Centres, Sambalpur, is completely unjust and illegal on the ground that Rule 6C is not applicable, there are no fixation of installed, capacity, audit has been made without giving any opportunity to the Petitioner, there was no communication of installed capacity in the DIC certificate and the Petitioner is not liable to pay the demanded amount since Rule 6C has already been deleted with effect from 1.2.2001. 6. In this regard the contention of the opposite party is that Section 27 of the Bihar and Orissa Excise Act gives power to the State Government to impose duty on import, export, transport and manufacture of liquor. The way of levying such duty has been prescribed u/s 28 of the Act. Sub-section (12) of Section 90 of the Act gives power to the Board of Revenue to prescribe the duty on intoxicants. Accordingly, the Board in its Excise Rules, 1965 has made Rules 131 and 132 prescribing the time, place and payment of duty. The State Government as the Exclusively Privilege Holder and for parting with its exclusive privilege the State has made the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989. Rule 6-C is a part of that Rules. As such, Rule 6-C is valid and can never be said that since power has been delegated to the Board of Revenue, the State Government has no right to include Rule 6-C under Rule 89. Rules 6-A, 6-B and 6-C were introduced in the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 vide SRO dated 29.11.1997. Rule 6-A deals with fixation of Minimum Guaratneed Quantity of Indian made Foreign Liquor. The said Rule was challenged before this Court in OJC No. 296 of 1998 and in many other cases. Rules 6-A, 6-B and 6-C were introduced in the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989 vide SRO dated 29.11.1997. Rule 6-A deals with fixation of Minimum Guaratneed Quantity of Indian made Foreign Liquor. The said Rule was challenged before this Court in OJC No. 296 of 1998 and in many other cases. Those cases were disposed of by this Court vide jugment dated 14.7.2000 and it was held by this Court that the impugned Rule i.e. Rule 6-A of the Orissa Excise (Exclusive Privilege) Foreign Liquor Rules, 1989, which has been incorporated by way of amendment in 1997 is not ultra vires the Constitution nor the Act. Clause (xv) of the licence is also not illegal and the State has the power to prescribe such condition for parting with the privilege. The circular issued by the Excise commissioner is in consonance with the impugned rules validly made and is enforceable. There is no legal lacuna in issuing such circular by the Excise Commissioner. 7. Considering the submissions made by the learned Counsel for both the parties, it would be appropriate to quote Sections 27, 28, 89 and Sub-section (12) of Section 90 of the Biar and Orissa Excise Act at this state for better appreciation of the case: 27. Power to impose duty on import, export, transport and manufacture: 1. An excise duty of contravailing duty, as the case may be, at such rate or rates as the State Government may direct, may be impsoed either generally or for any specified local area, on (a) any excisable article imported; or (b) any excisable article exported; or (c) any excisable article transported; or (d) any excisable article (other than tari) manufactured unde any licence granted in respect of Clause (a) of Section 13; or (e) any hemp plant cultivated, or any portion of such plant collected, under any licence granted in respect of Clause (b) or Clause (c) of Section 13; or (f) any excisable article manufactured in any distillery or brewery licensed, established, authorised or continued under this Act. Explanation - Duty may be imposed on any article under this sub-section at different rates according to the places to which such article is to be removed for consumption, or according to the varying strengths and quality of such article. Explanation - Duty may be imposed on any article under this sub-section at different rates according to the places to which such article is to be removed for consumption, or according to the varying strengths and quality of such article. (2) An excise duty or countervailing duty, as the case may be, at such rate or rates as the State Government may direct, may be imposed, either generally or for any specified local area, on any tari drawn under any licence granted u/s 14, Sub-section (1). (3) Notwithstanding anything contained in Sub-section (1) (i)duty shall not be imposed thereunder on any article which has been imported into India and was liable, on such importation, to duty under the Indian Tariff Act, VIII of 1894, or the Sea Customs Act, VIII of 1878, if (a) the duty as aforesaid has been already paid; or (b) a bond has been executed for the payment of such duty. 28. 28. Way of levying such duty - Subject to any Rules made u/s 90, Clause (12), any duty imposed u/s 27 may be levied in any of the following ways: (a) on any excisable article imported, (i) by payment (upon or before importation), in the State or in the State or territory from which the article is brought, or (ii) by payment upon issue for sale from a warehouse established, authorised or continued under this Act; (b) on an excisable article exported by payment in the State or in the State or territory to which the article is sent; (c) on an excisable article transported, (i) by payment in the district from which the article is sent, or (ii) by payment upon issue for sale from a warehouse established, authorised or continued under this Act; (d) on intoxicating, drugs manufactured, cultivated or collected, (i) by a rate charged upon the quantity manufactured under a licence granted in respect of the provisions of Section 13, Clause (a), or issued for sale from a warehouse established, authorised or continued under this Act, or (ii) by a rate assessed on the area covered by, or on the quantity or outturn of, the crop cultivated or collected under a licence granted in respect of the provisions of Section 13 Clause (b) or Clause (c); (e) on spirit or beer manufactured in any distillery or brewery licensed, established, authorised or continued under this Act: (i) by a rate charged upon the quantity produced in or issued from the distillery or brewery, as the case may be, or issued for sale from a warehouse established, authorised or continued under this Act, or (ii) in accordance with such scale of equivalents, calculated on the quantity of materials used, or by the degree of attenuation of the wash or worth, as the case may be, as the State Government may prescribe; and (f) on tari drawn under a licence granted u/s 14, Sub-section (1) by a tax on each tree from which the drawing of tari is permitted: Provided that, where payment is made upon the issue of an excisable article for sale from a warehouse, it shall be at the rate of duty in force on the date of issue of such article from such warehouse: Provided also that no tax shall be levied in respect of any tree from which tari is drawn only for the manufacture of gur or molasses and under such special conditions as the Board may prescribe. 89. Power of State Government to make rules - (1) The State Government may make rules to carry out the objects; of this Act or any other law for time being in force relating to the excise-revenue. (2) In particular, and without prejudice to the generality of the foregoing provisions, the State Government may make rules: (a) for prescribing the powers and duties of officers of the Excise Department; (b) for regulating the delegation of any powers by the Board, the Commissioner of a Division, the Excise Commissioner or Collectors u/s 7, Clause (g); (c) for declaring in what cases or classes of cases and to what authorities appeal shall lie from orders; whether original or appellate passed under this Act or under any rule made hereunder, and for prescribing the time and manner for presenting and the procedure for dealing with, such appeals; (d) for regulating the import, export of transport of any intoxicant; (e) for regulating the periods for which licences for the wholesale or retail vend of any intoxicant may be granted, and the number of such licence which may be granted for any local area; (f) for prohibiting the grant of licences for the retail sale of any intoxicant at any place or within any local area described in the rules or for defining the places in the vicinity of which shops for the retail sale of any intoxicant shall not ordinarily be licensed; (g) for prohibiting the grant to specified classes of persons of licences for the retail sale of any intoxicant. (h) for declaring, either generally, or in respect of areas described in the rules, the persons or classes of persons to whom any intoxicant may or may not be sold; (i) (I) for regulating the procedure to be followed and prescribing the matters to be a ascertained before any licence for the wholesale or retail vend or any intoxicant is granted for any locality; . (II) for regulating the time, place and manner of payment of the sum payable u/s 29; (j) for restricting the exercise of any of the powers conferred by Clause (a) of Sub-section (1) of Section 68 and by Sections 69 and 70.; (k) for declaring the Excise Officer to whom, and the manner in which information or aid should be given u/s 75; (I) for the grant of expenses to witnesses; (m) for the grant of compensation for loss of time to persons released by any Excise Officer under this Act on the ground that they have been improperly arrested, and to persons charged before a Magistrate with offences punishable under this Act and subsequently acquitted; and (n) for prescribing restriction or modifications in the applications to Excise Officer of the provisions of the Code of Criminal Procedure, V of 1898, relating to powers of Police Officers which are referred to in Section 78, Sub-section (1) of this Act. (3) The powers conferred by this Section for making rules are subject to the condition that the rules be made after previous publication; Provided that any such rules may be made without previous publication if the State Government considers that they should be brought into force at once. 90. Power of Board to make rules - The Board may make rules for regulating the manufacture, supply, or storage of any intoxicant, and in particular, and with prejudice to the generality of this provisions may make rules for regulating. xxx xxx xxx xxx xxx (12) for prescribing the time, place and manner of levying duty on intoxicants. 8. Rules 6-A and 6-C of the Orissa Excise Exclusive Privilege (Foreign Liquor) Rules, 1989 are enacted in exercise of the power vested with the State Government as amended from time to time. Rule 6-C which is related to bottling plants introduced as per SRO dated 29.11.1997 runs as follows : 6-C. Minimum guaranteed quality of Bottling Plant. (1) All the licensees of IMFL/BEER Bottling Plants shall guarantee for bottling of 50% of the installed capacity of their bottling plants in a year, as the minimum guaranteed quantity. Rule 6-C which is related to bottling plants introduced as per SRO dated 29.11.1997 runs as follows : 6-C. Minimum guaranteed quality of Bottling Plant. (1) All the licensees of IMFL/BEER Bottling Plants shall guarantee for bottling of 50% of the installed capacity of their bottling plants in a year, as the minimum guaranteed quantity. In case any short fall in the minimum guaranteed quantity fixed for the plant by the Excise Commissioner the licensee of the bottling plant shall be liable to make payment of the duty for the shortfall quantity and the amount will be recovered as arrear dues from the licensee. (2) The licence of the Bottling Plant shall stand cancelled on default to make payment of arrear dues towards minimum guaranteed quantity by 31st March i.e. by end of the financial year: Provided that Government may allow renewal of licence on payment of arrear dues outstanding towards the MGQ along with the fine equivalent to an amount 10% of the shortfall revenue collectable. 9. This Rule 6-C has been deleted vide Notification dated 30.5.2002. As such, the period relating to payment of the amount as per Demand Notice (Annexure-5) is for the period beginning from December 1997 to March 2002. 10. So far as the Statute is concerned, Section 27 of the Bihar and Orissa Excise Act gives power to the State Government to impose duty on import, export, transport and manufacture of liquor. The was of levying of such duty has been prescribed u/s 28 of the Act. Accordingly, the Board of Revenue in its Excise Rules, 1965 has made Rules 131 to 132 prescribing time and place for payment of duty respectively. 11. Rules 131 and 132 of the Board's Excise Rules, 1965 are quoted hereunder: 131. Time for payment of duty - The duty imposed on spirit whether imported under bond. Accordingly, the Board of Revenue in its Excise Rules, 1965 has made Rules 131 to 132 prescribing time and place for payment of duty respectively. 11. Rules 131 and 132 of the Board's Excise Rules, 1965 are quoted hereunder: 131. Time for payment of duty - The duty imposed on spirit whether imported under bond. (1) foreign liquor or country or manufactured in a distillery and stored in a distillery or excise or excise warehouses; and (2) except as otherwise stated in Sub-rule (3), Ganja or Bhang whether imported under bond, or stood in an excise warehouse; shall be paid before removal of the foreign liquor, country spirit, Ganja or Bhang from the distillery or excise warehouse, as the case may be, unless a bond has been executed for such payment; (3) duty imposed on Ganja or Bhang exported to any place outside India shall be paid before issue of such Ganja or Bhang from the excise warehouse where it is stored. 132. Place of payment of duty - When the duty on an intoxicant is to be paid before removal from a distillery or excise warehouse, the payment shall be made, subject to any special provision in these rules, into the local treasury either by direct payment or by money order and advance deposits on account of such duty may also be made with permission of the Collector. 12. The State Government is the exclusive privilege holder and for parting with the exclusive privilege, has made the Orissa Excise Exclusive Privilege (Foreign Liquor) Rules, 1989. Rules 6-A, 6-B and 6-C are part of that Rules. Earlier Rule 6-A as amended from time to time, which is relating to a Minimum Guaranteed Quantity of Indian Made Foreign Liquor, was challenged before this Court in OJC No. 296 of 1998 and many other cases by different persons. The said cases were disposed of vide Judgment dated 14.7.2000. This Court considering the submissions made by the learned Counsel for the respective parties and after a thorough discussions relating to different provisions of the Bihar and Orissa Excise Act, the Board's Excise Rules, 1965 and the Orissa Excise Exclusive Privilege (Foreign Liquor) Rules, 1989, finally held that the impugned Rule i.e. 6-A of the Orissa Excise Exclusive Privilege (Foreign Liquor) Rules, 1989 which has been incorporated by way of amendment is not ultra vires the Constitution nor the Act. Since the above decision has not been set aside, modified or reviewed by any other forum, still holds good and as such, the State Government has the power to fix the minimum guaranteed quantity of Indian Made Foreign Liquor. So far as Rule 6-C is concerned, it prescribed the power of the State Government for fixation of Minimum Guaranteed Quantity in respect of bottling plants. Once Rule 6-A of the Orissa Excise Exclusive Privilege (Foreign Liquor) Rules, 1989 which is relating to minimum guaranteed quantity of Indian Made Foreign Liquor in respect of 'OFF' and 'ON' shops has already been declared as not ultra vires the Constitution nor the Act, Rule 6-C relating to fixation of MGQ in respect of bottling plants cannot be said to be ultra vires the Constitution nor the Act. As such, the State Government has power to make rules for fixation of MGQ in respect of the bottling plants. 13. So far as the submissions advanced by the learned Counsel for the Petitioner relating to fixation of MGQ in respect of bottling plants on the basis of installation capacity is concerned, it was submitted by Dr. Pal, learned Counsel, that there is no indication of installation capacity any where in the Registration certificate issued by the District Industries Centre in respect of the Petitioner company. A bare perusal of Annexure-1 to the writ petition (at page-44) clearly indicates that the installation capacity has been mentioned in Col. 6 under Serial No. 6, which is also equal to Annexure C/2 to the affidavit dated 20.3.2007 filed on 27.3.2007. Annexure-1 and Annexure C/2 i.e. letter dated 30.6.2006/1.7.2006 of the District Industries Centre, Sambalpur addressed to the Officer-in-charge of the Petitioner-company, clearly indicate that the installation capacity in respect of the Petitioner's company was fixed at 1500 Kilo Litres i.e. 15,00,000 B.L. The Petitioner in his letter-dated 1.7.2006 also indicated the installation capacity, which is in conformity with Annexure-1, Annexure A/1 and Annexure C/2. Annexure B/2 of the affidavit dated 20.3.2007 also indicates that the installation capacity has been enhanced from 15,00,000 B.L. to 28,00,000 B.L. with effect from 1.1.2005 and It was again enhanced to 38,82,000 B.L. per annum with effect from 10.2.2006. As such, the discussions made above clearly indicate that the Petitioner was well aware of the initial installation capacity, which was enhanced from time to time. 14. As such, the discussions made above clearly indicate that the Petitioner was well aware of the initial installation capacity, which was enhanced from time to time. 14. So far as the allegation relating to not giving reasonable opportunity by the audit party in fixing the shortfall quantity is concerned, the said allegation can never be accepted to be correct, in view of the fact that the audit party had gone to the premises of the Petitioner where the books of account and other things were audited in presence of an officer of the Department as well as the concerned employee of the Petitioner-Company. Where doubt arose by the audit party, memos were issued to the employee of the Petitioner for clarification but the same was not clarified by the concerned employee. Since the memos issued to the Petitioner's company remained unanswered, it cannot be said that reasonable opportunity has not been afforded to the Petitioner and as such rules of natural justice has not been followed and the allegation made by the Petitioner that audit has been made behind the Petitioner without giving any opportunity, cannot be accepted. 15. So far as the Demand Notice (Annexure-5) is concerned, it has been contended by the learned Counsel for the Petitioner that due to formation of Orissa State Beverage Corporation, the MGQ in respect of the Petitioner's bottling plant is not applicable from 1.2.2001, but as it appears from record, the Orissa State Beverage Corporation was formed with effect from 1.2.2001. Rule 6-C was deleted vide Notification dated 30.5.2002. The Demand Notice under Annexure-5 which is under challenge in this writ petition is for the period from 1997 to 2001 on the basis of the installation capacity of 15,00,000 B.L. As such, no demand has been raised on the basis of MGQ after formation of the Orissa State Beverage Corporation. 16. In the case of Bihar Distillery and Another Vs. Union of India (UOI) and Others it has been held by the Hon'ble Supreme Court: The power of the States in the case of such an industry is only to see and ensure that rectified spirit, whether in the course of its manufacture or after its manufacture, is not diverted or misused for potable purposes. Union of India (UOI) and Others it has been held by the Hon'ble Supreme Court: The power of the States in the case of such an industry is only to see and ensure that rectified spirit, whether in the course of its manufacture or after its manufacture, is not diverted or misused for potable purposes. They can make necessary regulations requiring the industry to submit periodical statements or raw material and the finished product (rectified spirit) and are entitled to verify their correctness. For this purpose, the States will also be entitled to post their staff in the distilleries and levy reasonable regulatory fees to defray the cost of such staff as held by this Court in Shri Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. v. State of Gujarat and Gujchem Distillers India Ltd. v. State of Gujarat. So far as industries engaged in the manufacture of rectified spirit exclusively for the purpose of obtaining or manufacturing potable liquors - or supplying the same to the State Government or its nominees for the said purpose - are concerned, they shall be under the total and exclusive control of the States in all respects and at all stages including the establishment of the distillery. In other words, where the entire rectified spirit produced is supplied for potable purposes - or to the extent it is so supplied, as the cases may be, the levy of excise duties and all other control shall be that of the States. According to the State Governments, most of the distilleries fall under this category. The power to permit the establishment of any industry engaged in the manufacture of potable liquors including IMFLs, beer, country liquor and other intoxicating drinks is exclusively vested in the States. The power to prohibit and/or regulate the manufacture, production, sale, transport or consumption of such intoxicating liquors is equally that of the States, as held in McDowell. 17. The above decision of the Supreme Court clearly indicates that the State Government has exclusive power for permitting the establishment of any industry engaged in the manufacture of liquor and other intoxicating drinks and as such the State Government has also power to regulate the same. 18. 17. The above decision of the Supreme Court clearly indicates that the State Government has exclusive power for permitting the establishment of any industry engaged in the manufacture of liquor and other intoxicating drinks and as such the State Government has also power to regulate the same. 18. The Minimum Guaranteed Quantity Rule (6-C) is one of the regulatory measures and it has already been upheld by this Court in the case of Subarna Keshari Jena and others in OJC No. 296 of 1998 and other cases that fixation of MGQ in respect of "ON" and "OFF" shops by the State Government is not ultra vires the Constitution nor the Act. 19. In view of the above, the Demand Notice dated 30.3.2006 (Annexure-5) cannot be said to be unjust and/or illegal and ultra vires the Constitution or the Act. Accordingly, we are not inclined to interfere in the matter and the writ petition is accordingly dismissed. No order as to costs. A.K. Ganguly, C.J. 20. I agree. Final Result : Dismissed