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2013 DIGILAW 819 (UTT)

India Glycols v. State of Uttarakhand

2013-12-20

SUDHANSHU DHULIA

body2013
Judgment Sudhanshu Dhulia, J. The petitioner, before this Court, is a Company which is engaged, interalia, in the manufacture of chemicals. One of the essential raw materials or ingredients for manufacture of these chemicals is “Molasses”, which is a by product in the manufacture of “sugar”, by Sugar Industries. The petitioner is, presently, challenging the order dated 20th June, 2013 (Annexure No. 2 to the writ petition), by which the Additional Secretary to the Government of Uttarakhand has passed an order, declaring State’s policy, regarding distribution of “Molasses” such as what percentage has to go for the manufacturing of country made liquor, what percentage has to go to industrial and chemical units and the remaining for free sale, for different years 2012-13, 2013-14, 2014-15 and 2015-16. Apart from this, they have imposed a charge on the “Molasses” in the form of “Administrative Charge” @ Rs. 11.00 per quintal on import of Molasses from other States, Rs. 15.00 per quintal on such Molasses which is imported from other countries. There is also a charge of Rs. 20.00 per quintal on the export of “Molasses” outside the State and Rs. 15.00 per quintal on the sale of “Molasses” reserved for country made liquor, Molasses based chemical and industrial units and Rs. 20.00 per quintal administrative charge on the free sale of “Molasses”. 2. The petitioner has challenged the said order on various grounds. Initially, the learned counsel for the petitioner, has argued that the only “Statute” under which State Government can levy charge is known as “U.P. Sheera Niyantran Adhiniyam, 1964 (from herein after referred to as the “1964 Act”). Under the provisions of Section 86/88 of the U.P. Reorganization Act, 2000, said Act is applicable in the State of Uttarakhand. The relevant provisions for our purpose will be Section 7-A and Section 8 which reads as under:- “7-A. Application for molasses- (1) Any person who requires molasses for his distillery or for any purpose of industrial development may apply in the prescribed manner to the Controller specifying the purpose for which it is required. (2) On receipt of an application under sub-section (1) and after making such inquiries in the matter as he may think fit, the Controller may make an order under Section 8. (2) On receipt of an application under sub-section (1) and after making such inquiries in the matter as he may think fit, the Controller may make an order under Section 8. (3) In disposing of an application under sub-section (1) the Controller shall consider:- (a) the general availability of molasses; (b) various requirements of molasses; (c) the better utilization to which molasses may be put in the public interest; (d) the extent to which the requirements of the applicant are genuine; (e) reasonable likelihood or otherwise of the molasses that may be obtained by the applicant being diverted to purposes other than those specified in the application and where the application is rejected in whole or in part, he shall record reasons therefor. 8. Sale and supply of molasses.- (1) The Controller with the prior approval of the State Government by order require may be occupier of any sugar factory to sell or supply in the prescribed manner such quantity of molasses to such person, as may be specified in the order, and the occupier shall, notwithstanding any contract, comply with the order: “(1-a) Notwithstanding anything contained in sub-section (1) the occupier of a sugar factory shall sell or supply forty per cent of the molasses produced in each quarter of a molasses year in the sugar factory to such chemical industries which are actual users of molasses and are granted licence under the United Provinces Excise Act, 1910: Provided that such quantum of molasses as is not required by the said chemical industries may be sold or supplied by the occupier of the sugar factory to any other unit which is actual users of molasses with the prior approval of the Controller.” (2) The order under sub-section (1): (a) Shall require supply to be made only to a person who requires it for his distillery or for any purpose of industrial development: (aa) may require the person referred to in Clause (a) to utilise the molasses supplied to him under an order made under this section for the purpose specified in the application made by him under sub-section (1) of Section 7-A and to observe all such restrictions and conditions as may be prescribed. (b) may be for the entire quantity of molasses in stock or to be produced during the year or for any portion thereof; but the proportion of molasses to be supplied from each sugar factory to its estimated total produce of molasses during the year shall be the same throughout the State save where, in the opinion of the Controller, a variation is necessitated by any of the following factors: (i) the requirements of distilleries within the area in which molasses may be transported from the sugar factory at a reasonable cost; (ii) the requirements for other purposes of industrial development within such area; and (iii) the availability of transport facilities in the area. (3) The Controller may make such modifications in the order under sub-section (1) as may be necessary to correct any error or omission or to meet a subsequent change in any of the factors mentioned in Clause (b) of sub-section (2). (4) The occupier of a sugar factory shall be liable to pay to the State Government in the manner prescribed, administrative charges at such rate, not exceeding five rupees per quintal as the State Government from time to time notify, on the molasses sold or supplied by him. (5) The occupier shall be entitled to receive from the person to whom the molasses is sold or supplied an amount equivalent to the amount of such administrative charges, in addition to the price of molasses.” 3. The main argument of the petitioner is that “Administrative Charges” on molasses have to be fixed by the Controller. This exercise is undertaken by the Controller on the aid and advice of an “Advisory Committee”. Under the 1964 Act, Advisory and Administrative Machinery has been created under Section 3 which is known as “Advisory Committee”. Section 3 of 1964 Act reads as under:- “3. Constitution of Advisory Committee.-(1) The State Government may, by notification in the Gazette, constitute an Advisory Committee to advise on matters relating to the control of storage, preservation, gradation, price, supply and disposal of molasses. (2) The committee shall consist of such number of persons and shall be constituted on such terms and conditions as may be prescribed.” 4. Further under Section 4 of the 1964 Act, the State Government appoints a Controller of Molasses. Section 4 of 1964 Act reads as under:- “4. (2) The committee shall consist of such number of persons and shall be constituted on such terms and conditions as may be prescribed.” 4. Further under Section 4 of the 1964 Act, the State Government appoints a Controller of Molasses. Section 4 of 1964 Act reads as under:- “4. Appointment of Controller of Molasses.- The State Government may, by notification in the Gazette, appoint a person to be the Controller of Molasses for the purposes of exercising the powers and performing the duties of Controller of Molasses under this Act or the rules made thereunder.” 5. Under the 1964 Act, there is a provision for framing of rules i.e. under Section 22 of the Act 1964. Consequently, rules have been framed in the erstwhile State of U.P. which are also applicable in the State of Uttarakhand and these rules are known as “U.P. Sheera Niyantaran Niyamavali, 1974”. Under Rule 12 of the aforesaid rules, estimates of molasses to be produced in sugar factory has been given. Rule 12 of the U.P. Sheera Niyantaran Niyamavali, 1974 reads as under:- “12.Estimates of molasses to be produced in sugar factory [Sections 8 and 17 (b)].- The occupier of every sugar factory shall submit to the Controller by August 31st each molasses year a statement in Form M.F.9 specifying an approximate estimate of the quantity of molasses to be produced in a sugar factory during the molasses year following, along with such order information as is required under that Form. 6. Thereafter, under Rule 13 of the aforesaid rules, estimate of molasses for distillation and industrial purposes is given. Rule 13 of the U.P. Sheera Niyantaran Niyamavali, 1974 reads as under:- “13.Estimate of requirement of molasses for distillation and industrial purposes.- (2) Likewise the estimated requirement of molasses for industrial purposes within the State relating to the molasses year following shall be furnished to the Controller by the Director of Industries by August 31st each year. 7. Thereafter, a consolidated statement on the basis of the availability of molasses has to be prepared under Rule 14. Rule 14 of the U.P. Sheera Niyantaran Niyamavali, 1974 reads as under:- “14. 7. Thereafter, a consolidated statement on the basis of the availability of molasses has to be prepared under Rule 14. Rule 14 of the U.P. Sheera Niyantaran Niyamavali, 1974 reads as under:- “14. Orders regarding sale or supply of molasses.- A consolidated statement of the estimated availability of molasses will be drawn up and placed before the Advisory Committee, constituted under Section 3 (1) of the Act, by the Controller who may make orders regarding the sale or supply of molasses in accordance with the provisions of Section 8 of the Act.” 8. The role of Advisory Committee becomes crucial here, as it is this Advisory Committee which is required to do whole exercise for examining the total production of molasses in the State, requirement of molasses in the State and the manner in which it has to be supplied to various consumers of molasses. It is for this reason that separate rules regarding “Advisory Committee” have been framed which are known as “the U.P. Molasses Advisory Committee Rules, 1965”. Under Rule 3 of the said rules, constitution of the Advisory Committee is given. Rule 3 of the U.P. Molasses Advisory Committee Rules, 1965 reads as under:- “3. It is for this reason that separate rules regarding “Advisory Committee” have been framed which are known as “the U.P. Molasses Advisory Committee Rules, 1965”. Under Rule 3 of the said rules, constitution of the Advisory Committee is given. Rule 3 of the U.P. Molasses Advisory Committee Rules, 1965 reads as under:- “3. Constitution.- (1) The Advisory Committee to be constituted under Section 3 of the Act shall consist of: (i) the Controller who shall be ex officio Chairman; (ii) the Assistant Excise Commissioner, Incharge of Molasses at the Headquarters of the Excise Commissioner, Uttar Pradesh who shall be ex officio Secretary; (iii) the Director of Industries, Uttar Pradesh or his representative not below the rank of Deputy Director of Industries; (iv) the Cane Commissioner, Uttar Pradesh, or his representative not below the rank of Deputy Cane Commissioner; (v) three representatives of sugar factories in Uttar Pradesh to be nominated by the Indian Sugar Mills’ Association (U.P. Branch); (vi) three representatives of distilleries in Uttar Pradesh to be nominated by the Uttar Pradesh Distillers’ Association; (vii) one representative of the alcohol based industries in Uttar Pradesh to be nominated by the Uttar Pradesh Alcohol Based Industries Development Association; (viii) one representative of Moulding and Foundry Industry in Uttar Pradesh to be nominated by the Excise Commissioner, Uttar Pradesh; and (ix) Managing Director, the Uttar Pradesh Co-operative Sugar Factories Federation Ltd. (2) If a representative is not nominated by the concerned Association under Clause (v), (vi) or (vii) of sub-rule (1) within the time specified in that behalf by the State Government, it shall be lawful for the State Government to nominate the representative or representatives, as the case may be, under that clause. 9. Further the appointment of the Members of the Committee including the Chairman has to be notified by the State Government in the Gazette under Rule 5 of the U.P. Molasses Advisory Committee Rules, 1965. Rule 5 reads as under:- “5.Appointment to be notified.- The appointment of the members of the committee including that of the Chairman shall be notified by the State Government in the Gazette.” 10. Rule 5 reads as under:- “5.Appointment to be notified.- The appointment of the members of the committee including that of the Chairman shall be notified by the State Government in the Gazette.” 10. Learned counsel for the petitioner would argue that no Advisory Committee has been constituted in the State of Uttarakhand and it is only the Advisory Committee which could have looked into the matter and thereafter considering the production, requirement and the distribution of molasses in the state would have given its advice to the Controller, who could have then passed an order. This exercise has never been undertaken. 11. The counsel, therefore, argues that this exercise has not been done by the State and there has been no application of mind as regards the requirement of molasses in the State or regarding its total production. Moreover, not even the basics were in place as there was no “Advisory Committee” as visualized under the 1964 Act or the Rules. It is only the Advisory Committee which could have gone through this aspect. 12. To this learned Advocate General has argued that the Rules, which were framed in the State of U.P. were framed when there were a large number of sugar factories including cooperative and private factories and for that purpose there was a certain relevance of an Advisory Committee, whereas in the State of Uttarakhand most of the Sugar Factories are either Government Factory or Cooperative Factories. He would, therefore, argue that the elaborate “Advisory Committee” as visualized under the Act and the Rules is not a practical option in the State of Uttarakhand. Moreover, the impugned order dated 20.06.2013 was passed only after it was considered by a “Committee”, though it admits that it is not an “Advisory Committee” as visualized under the law. 13. In short, the argument of the learned Advocate General is that the kind of Advisory Committee under the Act and Rules (such as referred above in the present matter) is not required in Uttarakhand. The impugned order dated 20th June, 2013 is an order which has been passed on the direction of a Committee which consists of the Chief Secretary, Principal Secretary, Industrial Development, Secretary, Sugar Cane Development, Principal Secretary, Finance, Excise and Additional Secretary, Excise. Therefore, he would argue that even though not wholly, yet substantially the requirement of law has been made. 14. Therefore, he would argue that even though not wholly, yet substantially the requirement of law has been made. 14. The learned Senior Counsel for the petitioner Mr. Dinesh Dwivedi, on the other hand, rebuts this contention of the learned Advocate General and submits that such a submission of the learned Advocate General runs contrary to the law as laid down by the Hon’ble Apex Court in Dhampur Sugar Mills Ltd. v. State of U.P. and others (2007) 8 Supreme Court Cases 338. The Hon’ble Apex Court had an occasion to examine the provisions of law which are also relevant for our purpose and on which great reliance has been placed by the petitioner such as the Act and Rules referred above. The Hon’ble Apex Court in para 52 of the judgment has stated this:- “52. In the case on hand, considering the legislative scheme as also the Rules and particularly the Rules relating to constitution of Committee, namely, the U.P. Molasses Advisory Committee Rules, 1965, in our opinion, investment of power in the State Government is not merely enabling or discretionary. It is obligatory on the Government to constitute a Committee to carry out the purpose and object of the Act. The Committee has to perform an important role of advising the State Government “on matters relating to the control of storage, preservation, gradation, price, supply and disposal of molasses”. The constitution of the Committee, as envisaged by Rule 3 of the 1965 Rules clearly shows the representation of various groups and interests likely to be affected. Rule 11 requires the Chairman (Controller of Molasses) to “give due consideration to the resolutions passed by the Committee and forward it to the State Government for orders together with a copy of the proceedings and his recommendations”. In our considered opinion, it is not open to the State Government to ignore this salutary provision taking specious plea that the provision relating to constitution of Committee is enabling, directory or discretionary and the State, therefore, is not obliged to constitute such Committee. In our judgment, the High Court was not right in upholding the argument of the respondents. We, therefore, hold that in accordance with the provisions of the 1964 Act, the Rules framed thereunder as also under the 1965 Rules, it is the duty of the State Government to constitute Advisory Committee. In our judgment, the High Court was not right in upholding the argument of the respondents. We, therefore, hold that in accordance with the provisions of the 1964 Act, the Rules framed thereunder as also under the 1965 Rules, it is the duty of the State Government to constitute Advisory Committee. We accordingly direct the State of Uttar Pradesh to constitute Advisory Committee as expeditiously as possible.” 15. The question is simple. If the law requires a particular manner in which a decision has to be arrived at then that manner has to be followed. When a procedure is bypassed and a decision is taken in a manner contrary to the procedure established by law it can always be challenged on the ground of arbitrariness. 16. The argument of the learned Advocate General, therefore, does not seem to be reasonable nor does it reflect the correct position of law. The order dated 20.06.2013 has been passed without a proper application of mind and without following the due process of law and to that extent the impugned order is liable to be quashed. It is, however, being done subject to the following clarification. No interference is being made on the allotments already made for the year 2012-13 and 2013-14 as it has already been done and cannot be undone now. But it shall not be applicable for the year 2014-15 and 2015-16. 17. There were other questions raised by the petitioner such as that “Administrative Charge” is in fact in nature of a “Tax”, on which he relies upon a judgment of the Apex Court (Commissioner of Central Excise, Lucknow, U.P. Vs. Chhata Sugar Co. Ltd, reported in (2004) 3 SCC 466 ) and further that the State does not have a legislative competence to levy this ‘tax’ on which he again relies upon a Division Bench Judgment of Allahabad High Court (M/s Triveni Engineering and Industries Ltd. and another Vs. State of U.P. and another, 2011 (4) ADJ 436 ). But presently since the “Administrative Charge” has already been held not to be a validly made Charge, and therefore invalid, the learned Senior Counsel Sri Dinesh Dwivedi does not press the above two points. Consequently, no determination is presently being made on these issues. 18. The only question now remains is regarding the refund of Administrative Charge. But presently since the “Administrative Charge” has already been held not to be a validly made Charge, and therefore invalid, the learned Senior Counsel Sri Dinesh Dwivedi does not press the above two points. Consequently, no determination is presently being made on these issues. 18. The only question now remains is regarding the refund of Administrative Charge. According to the petitioner, since July, 2013 they have already paid a substantial amount as “Administrative Charge” in view of the order dated 20.06.2013 to the Government, which has now to be refunded back to them. On this question, the presumption would be that the petitioner has already passed on the burden on the consumers and therefore, this amount cannot be refunded to the petitioner, as it would amount to unjust enrichment, unless petitioner is able to establish that he has not passed on this burden to the consumers. For this a Committee is constituted which shall consist of the Chief Secretary, Government of Uttarakhand, Finance Secretary, Excise Secretary and the Controller of the Molasses, which shall look into this aspect. It is made clear that a very heavy burden lies on the petitioner to prove otherwise, as the presumption is that he already passed on this burden on the consumers. It is also made clear that in case the petitioner fails to prove his case to the satisfaction of the Committee, it would be deemed that petitioner has passed on this burden in which case he will not be liable for any refund. 19. In view of the above, writ petition stands disposed of. No orders as to costs.