JUDGMENT : D.P.Choudhury, J. Challenge has been made to the illegal and arbitrary action of the opposite parties 1 and 5 in imposing/demanding the license fees irrespective of the fact that license fees has been deposited as per required norms. FACTS 2. The unshorn details of the facts of the case are that the petitioner is a company registered under the Companies Act with an object to establish grain based distilleries in Odisha. It is further stated that such company has established a grain based distilleries of 30 KLPD capacity at village Barapada in the district of Cuttack. The petitioner prepared the detailed project report seeking finance from the bank and have procured license from the concerned authorities wherein the petitioner has made a project cost arrived at Rs.76.25 crores. The petitioner under the provisions of Bihar and Orissa Excise Act, (in short called ‘the Act’), applied before the opposite party no.1 for grant of license in favour of the petitioner-company for bottling of IMFL and to start commercial production for remaining period of 2012-13 on 6.3.2013. It is also stated in the application that they have planned to produce 12000 cases per month and the exact production capacity would be assessed after the commercial production. The opposite party no.1, under the provision of the Act, granted license vide license registration No.1/2013-14 in the name of the said petitioner-company for the period from 6.6.2013 to 31.3.2014 for wholesale blend of foreign liquor and for bottling such liquor only at the premises of the petitioner. It is also stated that the authorities have categorically made condition that the licensee shall pay in advance the Government fees of Rs.12,66,301/- for the year 2013-14 for the period from 23.5.2013 to 31.3.2014 and it was vide Challan No.320 dated 31.5.2013 after which it was authorized to carry the operation of the compounding and blending only at the premises of petitioner. 3. It is stated that the opposite party no.2, Excise Commissioner, sent a letter to the Collector, Cuttack informing that the petitioner-company has been granted license for compounding and blending of IMFL at Village-Barapada whereunder the petitioner-company has deposited license fees per annum but as per Memo No.860 dated 27.6.2013, the Collector, Cuttack issued letter dated 18.7.2013 to the opposite party no.5 asking for a clarification about license fees from the Excise Commissioner. The Excise Commissioner asked the Collector, Cuttack to inform the petitioner to deposit license fees of Rs.75,00,000.00 per annum instead of Rs.15,00,000.00 per annum and the petitioner should produce the certificate from the District Industries Centre. In the meantime, the Collector, Cuttack asked the petitioner to deposit Rs.51,45,206.00, i.e., rest of the amount towards grant of license for bottling (compounding and blending) in favour of the petitioner-company. When the petitioner approached the General Manager, District Industries Centre to certify the production of the petitioner-company, the District Industries Centre made inquiry and found that the tentative capacity of production would be 10200 cases per month. Accordingly, the General Manager, District Industries Centre requested the Director of Industries to certify the tentative production capacity of the bottling plant of the proposed beverage enterprise of the petitioner-company. This tentative production capacity of the bottling plant of the proposed beverage enterprise of the petitioner has been annexed to the writ petition. Since the petitioner-company is a large scale enterprise, the Director of Industries is to certify the tentative production capacity of the bottling plant of the petitioner. Along with such letter of the General Manager, District Industries Centre, Cuttack, representation was made by the petitioner-company to the Collector, Cuttack, opposite party no.1 stating that in view of the production of the capacity of 10000 cases per month, the license fees has been deposited to the tune of RS.12,86,301/- for remaining period of 2013-14 and accordingly the petitioner requested that the opposite party no.1 to waive out the differential amount of Rs.51,45,206.00. 4. It is stated that when the petitioner has made representation to opposite party no.6 to allow to operate the present installed capacity of 810000 proof liter per annum and the District Industries Centre has again certified about the present installed capacity of the bottling plant to the tune of 10000 cases per month and 810000 proof liter per annum to the Director of Industries, the demand of license fee of Rs.75 lakhs by the opposite party no.2 is neither correct nor proper. So, the petitioner should be allowed to pay the license fees according to the production capacity of 10000 cases per month and allowed to pay license fees proportionately for the period of 2012-13 and 2013-14 and the demand of differential amount of Rs.51,45,206/- for the period 2013-14 per annum for the purpose of performing business, being unjustified, should be set aside. 5. It is further stated that the letter of the District Excise Officer for depositing balance amount of Rs.51,45,206.00 within a period of two days is contrary to law as spelt out in the Government of Orissa notification made by the Excise Department vide No.1964/Ex dated 23.3.2013 with regard to the duty, fees structure and guideline for the year 2013-14. Since the opposite party no.2-Excise Commissioner demanded the amount to be paid by the petitioner, the present writ petition is filed challenging the action of the opposite parties. 6. Per contra, the opposite parties 1 and 5 have filed counter affidavit refuting the allegations made by the petitioner. It is stated that the petitioner’s contention that it having deposited Rs.12,66,301/- towards proportionate annual license fees for blending and compounding according to the production capacity determined @ 10000 cases per month and the deposit of rest of the differential amount is not necessary and is not correct. It is further averred inter alia that Board of Revenue in exercise of their powers under Section 90(7) of the Act had issued a notification on 31.3.2013 wherein the annual license fee for blending and compounding by the bottling units has been specified as follows: Sl. No. Production capacity (In proof Liters) Annual license fee (Rs. In lakhs) 1. Upto 10,00,000 Rs.15.00 2. 10,00,001 to 30,00,000 Rs.33.00 3. 30,00,001 to 60,00,000 Rs.45.00 4. 60,00,000 to 1 Crore Rs.57.00 5. 1 Crore one and above Rs.75.00 7. The petitioner-company filed the project report wherein it has been mentioned that the unit will produce 24,00,000 cases of IMFL per annum which on calculation comes to 1,62,00,000 proof liters of IMFL. The petitioner has also mentioned in the project report that the Inspector of Factories has assessed the production capacity of petitioner’s unit as 8000 cases per day and as such the license fee of Rs.75.00 lakhs per annum has been rightly computed. 8. The petitioner has also mentioned in the project report that the Inspector of Factories has assessed the production capacity of petitioner’s unit as 8000 cases per day and as such the license fee of Rs.75.00 lakhs per annum has been rightly computed. 8. It is stated that the petitioner’s bottling unit for blending and compounding was issued for realizing Rs.12,66,301/- basing on the production capacity of 12000 cases per month as mentioned in the sanctioned letter of the Government in Excise Department. Since the production capacity mentioned in the letter of the Government was found different from the project report, a clarification was sought for from the Government in Excise Department and the Excise Commissioner has clarified that annual license fee of unit would be Rs.75 lakhs per annum. Basing on such clarification letter, the petitioner was asked to deposit balance license fee of Rs.51,45,206.00. Therefore, the differential amount demanded being within the ambit of the excise duty followed by the notification is based on production capacity of the unit and accordingly the demand of annual license fee of Rs.75,00,000.00 per annum is proper and legal. Therefore, there is no merit in the writ petition and the same should be dismissed. 9. The petitioner has filed a rejoinder to the counter affidavit filed by the opposite parties 1 and 5. With regard to the production of 24,00,000 cases of IMFL per annum, it is stated by the petitioner that the same can be achieved in phase manner on long term but at present the assessment made at initial stage should be taken into account for depositing the license fee amount. The assessment by the Inspector of the Factories as mentioned in the project report is only a guess work because his report is only responsible for verifying the safety and maintenance of factory. When the petitioner’s unit was granted NOC vide letter dated 6813 dated 27.12.2012 and was permitted by the appropriate authority to establish both the unit i.e., distillery and bottling plant over the schedule plot by 31.3.2013, the petitioner-company took work expeditiously and the bottling plant got ready to be operational within time, but the distillery plant could not be completed. When the petitioner’s unit was granted NOC vide letter dated 6813 dated 27.12.2012 and was permitted by the appropriate authority to establish both the unit i.e., distillery and bottling plant over the schedule plot by 31.3.2013, the petitioner-company took work expeditiously and the bottling plant got ready to be operational within time, but the distillery plant could not be completed. Basing on the plan of the present petitioner, the opposite party no.1 recommended for grant of license and consequently with the approval of the Excise Commissioner, license was issued to the petitioner-unit to produce 12000 cases per month, i.e., 1,44,000 per annum. Accordingly, license fee was assessed at Rs.18,91,301/- and the petitioner has already deposited the same as condition precedent for obtaining license. Without the actual commencement of the production of the petitioner, the order of depositing the differential amount is arbitrary and against the principle of natural justice. So, it is prayed to allow the writ petition. 10. The opposite parties 1 and 5 have also filed an affidavit to the rejoinder of the petitioner stating therein that the project report submitted by the petitioner shows the annual production capacity to be 24,00,000 proof of liters of IMFL per annum which comes to 1,62,00,000 proof liter of IMFL and considering such feasibility of the project, the Government accorded NOC in favour of the petitioner. At the same time, the assessment made by the Director of Industries would be ignored but the petitioner has to stand on its own project report. When the plant of the petitioner has the capacity to produce 24,00,000 proof of liters of IMFL per annum, the demand of license fee of Rs.75,00,000.00 as per duty and fee structure guideline is for the year 2013-14 is correct and proper. It is further revealed from the aforesaid affidavit that the report of the opposite party no.4 should not be taken into consideration because the petitioner-industry is a large scale industry and the certificate determining production capacity can only be issued by the Industrial Entrepreneurs Memorandum (IEM) under the Ministry of Commerce and Industries of Government of India. 11. It is further revealed from the aforesaid affidavit that the report of the opposite party no.4 should not be taken into consideration because the petitioner-industry is a large scale industry and the certificate determining production capacity can only be issued by the Industrial Entrepreneurs Memorandum (IEM) under the Ministry of Commerce and Industries of Government of India. 11. The petitioner also filed an additional rejoinder affidavit to the counter affidavit of opposite parties 1 and 5 by stating that under the Right to Information Act, the petitioner has obtained the note-sheet dated 23.5.2013 wherein it is clearly stated that the license fee was assessed to be Rs.18,91,301/- which the petitioner has already paid. The opposite parties have ignored the report of the General Manager, District Industries Centre which is based on the actual capacity and law is well settled that the license fee is to be assessed on the actual production capacity of the unit and not on the basis of the project capacity which has not seen the day. So, the action of the opposite parties is wholly illegal, mala fide and unconstitutional, hence liable to be set aside. 12. The Excise Commissioner, who is opposite party no.2, has filed affidavit stating therein that the petitioner, in his project report, has informed that the capacity of the bottling plant is 2,00,000 cases per month. The State Pollution Control Board, in its office Memorandum No.21803 dated 26.12.2011, has indicated that the petitioner-company would produce 1,86,025 cases of liquor per month. The Collector, Cuttack, on 27.6.2013, has also recommended to fix the capacity of 24.00 lakhs per annum. Accordingly, the opposite party no.2, the Excise Commissioner asked the petitioner-company for payment of Rs.75.00 lakhs towards license fee per annum considering the production capacity, i.e., 24.00 lakhs cases per annum. Accordingly, the license fee is collected on basis of production capacity as per guidelines for the year 2013-14 for excise duty issued on 23.3.2013. The license fee is not collected on the basis of amount of production or quantity of production. So, the reduction of license fee from Rs.75.00 lakhs to Rs.15.00 lakhs is not tenable and should be rejected. 13. The opposite parties 3 and 4 filed joint affidavit stating that the opposite party no.4, on 5.8.2013, had visited the unit of the petitioner and it was found that all works relating to bottling plant were not fully completed. So, the reduction of license fee from Rs.75.00 lakhs to Rs.15.00 lakhs is not tenable and should be rejected. 13. The opposite parties 3 and 4 filed joint affidavit stating that the opposite party no.4, on 5.8.2013, had visited the unit of the petitioner and it was found that all works relating to bottling plant were not fully completed. So, the plea of the petitioner regarding completion of bottling plant is not correct. At the time of inspection by the officers of the DIC, it was found that two lines of bottling were ready for operation and a tentative production capacity was assessed physically by the officers of the DIC and accordingly, it was observed to be 10000 cases per month. The Government in Excise Department constituted a committee consisting of five members where Sri B.K.Das, Joint Director of Industries is a member as the representative of the Director of Industries. The committee made a joint inspection and submitted the report on the basis of average production capacity. The Joint Director, vide Annexure-D/4, has submitted the revised assessment report to the Collector, Cuttack stating therein that the production capacity of the unit in liters has been converted into Line Proof Liter (LPL). The said revised assessment report of the Joint Director shows that production capacity of the petitioner’s bottling plant is 1,30,000 cases per year which is above 1,20,000 cases per year assessed under the assessment report of General Manager, DIC, Cuttack. In spite of the revised assessment report of the Joint Director of Industries, Odisha, the annual license fee of Rs.75.00 lakhs was directed to be deposited by the petitioner illegally. 14. Reply filed by the opposite party to the rejoinder filed by the petitioner has not given any new facts but repetition of earlier facts stated in the counter. SUBMISSIONS 15. Mr.Mohapatra, learned Senior Advocate for the petitioner submitted that the order of the Excise Commissioner is against the provisions of law and against the guidelines issued by the Excise Department inasmuch as the license fee is to be paid in accordance with the actual production capacity. In the instant case, the production capacity being declared after due inquiry by the District Industries Centre and endorsed by the Director of Industries should not have been thrown out from the zone of consideration by the concerned authorities. In the instant case, the production capacity being declared after due inquiry by the District Industries Centre and endorsed by the Director of Industries should not have been thrown out from the zone of consideration by the concerned authorities. According to him, the project cost mentioned in the application is not a criteria for demanding the license fee but it is only to be decided as per the actual production capacity of every year. He further submitted that the latest joint inquiry report of the Joint Director should have been taken into consideration while asking for the license fee. So he submitted that the demand of license fee of Rs.75.00 lakhs instead of Rs.15.00 lakhs by the authorities is illegal, improper and should be set aside on due interference by this Court. 16. Learned Additional Government Advocate submitted that the demand of license fee is as per the provisions of law because the Excise Commissioner is the authority to calculate the license fee and he has calculated the same basing on the project report submitted by the petitioner. He further submitted that with regard to the guidelines issued by the Excise Department, the license fee is to be computed as per production capacity and it has got production capacity of 24.00 lakhs cases per year which amounts to more than 1.00 crore proof liters for which the demand of license fee made by the Excise Commissioner is correct. He further submitted that the report of the authorities is superseded by the Excise Commissioner who is to decide the license fee and direct for payment of the same. He further submitted that the license fee demanded by the Excise Commissioner is in accordance with the guidelines and there is no error in it. So he submitted to dismiss the writ petition and the petitioner should be directed to pay the differential license fee. POINT FOR CONSIDERATION 17. The main point for consideration is as to whether the license fee is to be paid on actual production capacity or the project report submitted which would be achieved in long run. DISCUSSION 18. It is admitted fact that the petitioner-company has applied for distillery and bottling plant. It is not in dispute that in the application itself, the petitioner has mentioned about the project cost which is Rs.76.25 crores. DISCUSSION 18. It is admitted fact that the petitioner-company has applied for distillery and bottling plant. It is not in dispute that in the application itself, the petitioner has mentioned about the project cost which is Rs.76.25 crores. It is also admitted fact that the petitioner got his plant inspected by the District Industries Centre where it is opined that the petitioner’s bottling plant has got the capacity of 12000 cases of IMFL in a month. It is not in dispute that the Inspector of Factories has submitted his report that it has got the capacity of 8000 cases per day. It is admitted fact that at the initial stage, the petitioner was asked to deposit Rs.18,91,301/- lakhs as license fee including warehouse and user fee per year. It is not in dispute that the petitioner was asked to deposit the differential amount as per the clarification made by the Excise Commissioner. 19. From Annexure-A/2 to the counter affidavit of opposite party no.2, which is the technical proposal for grain and molasses based distillery project of the petitioner, it appears that the project capacity has been maintained as 8000 cases per day and it comes to 24.00 lakhs per annum. No doubt, the license vide Annexure-2 series has already been granted to the petitioner for bottling of portable foreign vide License No.1/2013-2014. Annexure-8 series show that the General Manager, District Industries, Cuttack has informed the Director of Industries, Cuttack vide letter no.2982 dated 6.8.2013 that two lines of bottling plants were ready for operational. Further, on physical assessment of production capacity, it came to be 10200 cases per month or say 10000 cases per month. In that letter, the General Manager, District Industries Centre, has requested the Director of Industries to certify the tentative production capacity. It is a fact that since the petitioner is a large scale entrepreneur, it is for the Director to make approval of the report of the General Manager, District Industries Centre. Under Annexure-12, the Principal Secretary to Government in Excise Department has issued letter dated 23.3.2013 to the Excise Commissioner showing the Government decision to adopt the excise duty, fee structure and guidelines for settlement of excise shops established for the year 2013-14. There it has been instructed that license fee for distilleries and bottling units are to be collected in the following manner: Sl. There it has been instructed that license fee for distilleries and bottling units are to be collected in the following manner: Sl. No. Production capacity (In proof Liters) Annual license fee (Rs. In lakhs) 1. Upto 10,00,000 Rs.15.00 2. 10,00,001 to 30,00,000 Rs.33.00 3. 30,00,001 to 60,00,000 Rs.45.00 4. 60,00,000 to 1 Crore Rs.57.00 5. 1 Crore one and above Rs.75.00 20. From the aforesaid table, it appears that if there is production capacity of 10,00,000 proof liters, there will be only license fee of Rs.15.00 lakhs but when there is production capacity is above 1.00 croreproof liters, there would be a license fee of Rs.75.00 lakhs. So the license fee is to be demanded only on production capacity of the concerned organization. When the license fee is claimed with reference to the production capacity, the project cost, as submitted by the petitioner, cannot be a ground to claim the annual license fee when Clause-3 of the aforesaid letter dated 23.3.2013 specifically issued under Government instructions for collection of annual license fee and the license can only be demanded according to the prescribed Government instructions, but not otherwise. The claim of the opposite parties that the license fee is to be collected as per the project cost mentioned in the form, is contrary to the Government instruction issued by the Department to comply with the same. On the other hand, no license fee can be assessed following the project cost. Project cost is understood as cost maintained by the applicant so as to give picture of cost of all materials like building, production and human resources materials. On the other hand, the production capacity is to be only calculated by actual physical capacity. But, in the instant case, as per the physical visit by the General Manager, District Industries Centre, the production capacity has been ascertained as 10000 cases per month. Same fact is available from the counter of opposite parties 1 and 5 but opposite parties 3 and 4 claim that there is another report submitted by the Joint Director on joint inspection vide Annexure-D/4. 21. Same fact is available from the counter of opposite parties 1 and 5 but opposite parties 3 and 4 claim that there is another report submitted by the Joint Director on joint inspection vide Annexure-D/4. 21. On perusal of Annexure-D/4, it appears that the joint inspection of the petitioner-company was conducted on 19.2.2014 by the Additional District Magistrate, Cuttack, Joint Director, Director of Industries, Cuttack, Excise Superintendent, Cuttack, Regional Officer, Pollution Control Board, Cuttack and Deputy Superintendent of Excise, Cuttack and extract of their observation is produced in the following manner: “Production Capacity: (8 hrs Bottling per day for 300 working days in a year) The production capacity of Plot = Two product lines X (24x60x4x750) ml = 3916800 ml / day=1175040 liters or 881280 Proof Ltr./annum i.e. 130560 cases per year or say 130000 cases per year.” The aforesaid report has already been conveyed vide letter no.3912 dated 15.4.2014 by the Joint Director of Industries to the Collector, Cuttack. From the said letter, it appears that the actual production capacity of the petitioner-company is 130000 cases per year instead of 120000 cases per year as submitted by the inspection report by the District Industries Centre, Cuttack annexed to the application for license made by the petitioner. Be that as it may, this is the latest report which is submitted by the opposite parties to show the actual production capacity of the petitioner-company to grant license. 22. Not only this but also basing on the report of the General Manager, District Industries Centre, the petitioner was asked to deposit Rs.18,91,301/- as license fee and the petitioner has complied the same as per Annexure-13 because in the note-sheet, it appears that Rs.12,86,301.00 was estimated as license fee, Rs.6.00 lakhs as ware house license fee and Rs.5,000/- as user fee and altogether the amount is counted as license fee. The claim of the opposite parties to pay the license fee later on by enhancing the same to the slab of Rs.75.00 lakhs is untenable and based on no material. 23. When the actual production capacity of the petitioner-company is 130000 cases per year as per latest joint inspection undertaken by all the concerned Department, the same has to be the basis to demand the annual license fee. It is, therefore, the differential amount of Rs.51,45,206.00 cannot be made as demand to be paid for the grant of license. 23. When the actual production capacity of the petitioner-company is 130000 cases per year as per latest joint inspection undertaken by all the concerned Department, the same has to be the basis to demand the annual license fee. It is, therefore, the differential amount of Rs.51,45,206.00 cannot be made as demand to be paid for the grant of license. So the demand of annual license fee under the slab of Rs.75.00 lakhs is unjustified at present. Point no.(1) is answered accordingly. CONCLUSION 24. In view of our finding in the above paragraphs, we have to find out as to what are the materials that gave rise to enhance the license fee to be paid for the year 2013-14. The opposite party no.2 on whose letter the differential amount of Rs.51,45,206/- was asked to be paid by the petitioner has mentioned that by virtue of the guideline as discussed above issued on 23.3.2013, the license fee has been demanded against the petitioner. It has been already held by us in the above paragraphs that the license fee is to be charged on the production capacity and that production can be based on physical production and not mere on the ground of production cost as submitted in the application. The petitioner has taken a plea that the production capacity is to be only computed after completion of the entire production. When on factual basis two plants have been completed, the actual production capacity has already been computed by physical verification as mentioned in the application by the petitioner, the license fee cannot be computed as per the counter of opposite party no.2, but it should be computed only according to the guidelines issued by the State Government on 23.3.2013 and latest joint inspection report dated 15.4.2014. Annexure-6, the letter of the Excise Commissioner does not disclose any reason for realization of license fee of Rs.75,00,000.00 per annum. It has also not been taken into consideration in the physical joint inspection report about the actual production capacity. 25. Considering the above aspect and submissions of the respective counsels as discussed above, we are of the considered view that the letters dated 31.7.2013 and 8.8.2013 under Annexures-7 and 11 respectively directing the petitioner to pay the differential license fee of Rs.51,45,206.00 are illegal and liable to be quashed and we do so. 25. Considering the above aspect and submissions of the respective counsels as discussed above, we are of the considered view that the letters dated 31.7.2013 and 8.8.2013 under Annexures-7 and 11 respectively directing the petitioner to pay the differential license fee of Rs.51,45,206.00 are illegal and liable to be quashed and we do so. We further direct to compute the annual license fee as per actual production capacity as per the joint inspection report dated 15.4.2014(Annexure-D/4) for the year 2013-14 within a period of four weeks and the petitioner would pay the balance amount, if required, within a week from the date of demand. The writ petition is disposed of accordingly.