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2018 DIGILAW 994 (KER)

State of Kerala v. Chemplast Sanmar Limited

2018-12-04

ASHOK MENON, K.VINOD CHANDRAN

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JUDGMENT : ASHOK MENON, J. 1. Does the State of Kerala have authority to impose transit levy on vehicles transporting denatured spirit from the Port of Cochin to Tamilnadu, is the question that arises for determination in these appeals before us. 2. The facts in Writ Petition Nos.29716/2004 and 30239/2004 in brief are that the writ petitioners therein are public limited companies involved in the businesses of manufacture and sale of Polyvinyl Chloride Resins (PVC) and alcohol based chemicals, respectively. One of the raw- material for their products is denatured spirit/industrial alcohol. Necessary licences have been obtained from the Tamilnadu State Government to possess, store, transport and consume the denatured spirit for that purpose. 3. Due to acute shortage of the denatured spirit in the internal market, the writ petitioners obtained permission from the Tamilnadu Government for importing denatured spirit, through the Port of Cochin. The writ petitioners' factories are situated in Mettur and Thiruchirappally, respectively, and the transportation of the spirit from the Port of Cochin to Mettur and Thiruchirappally has to be by road via. Walayar. Permission was sought to transport the spirit through the State of Kerala. The Deputy Commissioner of Excise, Central Zone, Ernakulam granted transit permission, subject to the condition that the petitioners remit a permit fee of Rs.2,500/- per transit and to produce challan evidencing remittance of the fee. The transit permits were issued by the Deputy Commissioner of Excise in each of the cases under the provisions of Rule 5(3) of the Kerala Liquor Transit Rules, 1975 ('Transit Rules', for short). The contention of the writ petitioners was that the only Rules available for transporting denatured spirit through the State of Kerala is the Cochin Denatured Spirit and Methyl Alcohol Rules, 1975 issued under the provisions of the Cochin Abkari Act. The Rules do not contemplate levy of any transit fee on the transportation and export of denatured spirit in the State. Hence, the decision of the Deputy Commissioner imposing a permit fee of Rs.2,500/-per transit was challenged in three Writ Petitions, which were allowed by the learned Single Judge directing refund of the transit fee collected by the State. Writ Appeals are filed challenging the judgment in two of the petitions. 4. Sri. Hence, the decision of the Deputy Commissioner imposing a permit fee of Rs.2,500/-per transit was challenged in three Writ Petitions, which were allowed by the learned Single Judge directing refund of the transit fee collected by the State. Writ Appeals are filed challenging the judgment in two of the petitions. 4. Sri. C.E. Unnikrishnan, learned Special Government Pleader (Taxes), argues that as per Rule 3 of the Transit Rules, no liquor shall be allowed to be moved from one place in the State to another place in the State or to any other State through the territory of the State of Kerala, except under a permit issued by the Assistant Excise Commissioner of the Division through whose jurisdiction it is proposed to be moved, and as per Rule 3A, the person allowed to transit liquor under the Transit Rules shall produce the consignment to be transported with the original transit permit at the entry check post and two Excise Guards are to escort the liquor to the exit check post of the State. It is for that purpose that the State Government collects from the applicant a fee of Rs.2,500/- per transit. 5. The Transit Rules are made in exercise of powers conferred under Section 29 of the Abkari Act, 1 of 1077 (Abkari Act' for short) which empowers the State Government to make Rules for various purposes. 6. The learned counsel for the respondents/petitioners draws our attention to the Abkari Act, which relates to import, export, transport, manufacture, sale and possession of intoxicating liquor and intoxicating drugs in the State of Kerala. 'Spirits' is defined under Section 3(9) of the Abkari Act as 'any liquor containing alcohol and obtained by distillation'. It is pertinent to note here that earlier it also contained the words “whether it is denatured or not”. But by way of amendment to the Abkari Act, it was omitted by Act 4 of 1996. Similarly, the 'liquor' is defined under Section 3(10) of the Abkari Act as thus: “Liquor includes spirits of wine, arrack, spirits, wine, toddy, beer and all liquid consisting of or containing alcohol.” This Section too was amended by the Act 4 of 1996 and prior to the amendment, in place of the word 'arrack', it was 'methylated spirits'. Similarly, the 'liquor' is defined under Section 3(10) of the Abkari Act as thus: “Liquor includes spirits of wine, arrack, spirits, wine, toddy, beer and all liquid consisting of or containing alcohol.” This Section too was amended by the Act 4 of 1996 and prior to the amendment, in place of the word 'arrack', it was 'methylated spirits'. It is to be understood here that denatured spirit and methylated spirit, which are unfit for human consumption and does not come within the definition of 'liquor' under Section 3(10) of the Abkari Act, as of now. They have been purposefully omitted from the purview of the Abkari Act. The provisions under the Abkari Act would very clearly indicate that they do not relate to transport or transit of denatured spirit, methyl alcohol or methanol. The Transit Rules relied upon by the appellant-State is Kerala Liquor Transit Rules, which apparently indicates transit of 'liquor', the description of which has to be understood from the definition in the statute. Even Section 3 relied upon by the learned Special Government Pleader, refers to transit of liquor alone and going by the definition of 'liquor' under Section 3(10), it includes potable liquors alone. Applying the principles of ejusdem generis, it will not take in denatured spirit because, spirits included in Section 3(10) would indicate only the spirits mentioned in Section 3(9) from which, the words 'denatured spirit' have been purposefully omitted in 1996. 7. The next consideration would be, whether the provisions of Cochin Denatured Spirit and Methyl Alcohol Rules, 1965 would apply or not. Nowhere has the Government referred to this Rules for the purpose of transit in the instant case. The argument of the learned Special Government Pleader is that denatured spirit can be converted into potable liquor and during the transit from Cochin Port to the State of Tamilnadu, it could very well have been misused by converting the denatured spirit to potable liquor attracting the provisions of the Abkari Act. The apprehension of the learned Special Government Pleader is not misplaced. It is also true that the State of Kerala through which the spirit is transported, may have to see that it is not diverted in between for conversion as potable liquor. However reasonable these apprehensions may be, it requires Rules to empower the Government to impose a fee for transit of denatured spirits. It is also true that the State of Kerala through which the spirit is transported, may have to see that it is not diverted in between for conversion as potable liquor. However reasonable these apprehensions may be, it requires Rules to empower the Government to impose a fee for transit of denatured spirits. The Cochin Denatured Spirit and Methyl Alcohol Rules does not empower the State to impose fee for transit and therefore, the State cannot rely upon the Transit Rules for imposing a fee for that purpose even though the transit may require precautions to safely see such spirit out of the State borders. Fee under the Transit Rules is meant for transit of liquor defined under the Abkari Act and not of denatured spirit. Without a proper legislation, it may not be possible for the State Government to levy any such fee. 8. The learned Single Judge has relied upon three decisions to come to the conclusion that the State is not empowered to levy any such fee for transit of denatured spirits. In AIR 1990 SC 1927 [Synthetics & Chemicals Ltd. V. State of U.P.], (2004) 1 SCC 225 [State of U.P. v. Vam Organic Chemicals Ltd.] and 1979 (2) ILR Kerala 199 [Bombay Oil Mills Industries (P) Ltd. v. Excise Inspector, Angamaly], it has been held that the State has no power to levy tax on industrial alcohol, whether or not it has a potential to be used as alcoholic liquor. The State's power is thus limited to (i) regulation of non-potable alcohol for the limited purpose of preventing its use as alcoholic liquor and (ii) the charging of fees based on quid pro quo. 9. In Synthetics & Chemicals Ltd. (supra), the seven Judge Bench of the Honourable Supreme Court held that the State was not legislatively competent to levy tax on industrial alcohol. The subject matter of challenge in Synthetics & Chemicals Ltd. (supra) was the imposition of various levies by the State legislature on industrial alcohol. It is following the decision in Synthetics & Chemicals Ltd. (supra) that the Honourable Supreme Court has reiterated in Vam Organic Chemicals Ltd. (supra) that the State's power is limited to potable liquor alone. 10. The subject matter of challenge in Synthetics & Chemicals Ltd. (supra) was the imposition of various levies by the State legislature on industrial alcohol. It is following the decision in Synthetics & Chemicals Ltd. (supra) that the Honourable Supreme Court has reiterated in Vam Organic Chemicals Ltd. (supra) that the State's power is limited to potable liquor alone. 10. The learned Special Government Pleader refers to these decisions of the Honourable Supreme Court to argue that in spite of the finding that the State Government cannot levy any tax, in both the decisions, it has been held that the State Government is competent to levy fee for the purpose of ensuring that industrial liquor is not surreptitiously converted into potable liquor, so that the State is deprived of the revenue on the sale of such potable alcohol and the public is protected from consuming such illicit liquor. 11. Denatured spirit has been held by the Honourable Supreme Court to be outside the seisin of State legislature. Industrial alcohol or denatured spirit falls within the exclusive control of the Union. It is true that the Transit Rules so as to prevent misuse of such denatured spirit could be implemented on quid pro quo basis. But for that, there must be a subordinate legislation and the present Rules relied upon by the State Government is not sufficient to support the levy of transit fees on denatured spirit. We reiterate that the Transit Rules relied upon by the State is exclusively for potable liquor coming within the purview of Abkari Act, which has consciously omitted 'denatured spirit' from its purview. Hence, even though the purpose behind the imposition of fee by the State Government for transit of liquor is understandable, there is no statute or rules to support the levy of such fee. 12. In Bombay Oil Mills Industries (P) Ltd. (supra), it is held that methyl alcohol being unfit for human consumption, will not come within the purview of Abkari Act and therefore, in the nature of these provisions, it is not possible to understand that Abkari Act 1 of 1077 relates to or deals with methyl alcohol and its manufacture or production, transport, sale, import and possession of it. That being so, the Abkari Act has no application with regard to methyl alcohol or denatured spirit. That being so, the Abkari Act has no application with regard to methyl alcohol or denatured spirit. It has been made clear in the said decision that if the Abkari Act takes in methyl alcohol, to that extent the Act is ultra vires of the State legislature. 13. The learned Special Government Pleader also refers to the decision in (2007) 13 SCC 463 [State of Uttar Pradesh and Others v. Lalta Prasad Vaish], wherein, the three Judge Bench of the Honourable Supreme Court has observed that the decision in Synthetics & Chemicals Ltd. (supra) with regard to interpretation of Section 18G of the Industries (Development and Regulation) Act, 1951, if allowed to stand, would render the provisions of Entry 33(a) of List-III nugatory or otiose, and therefore, the Honourable Judges formulated six questions to be referred to a Larger Bench. The specific question dealt with by us, in these appeals, brooks no dispute. In view of the precedent on that other aspect which still holds the field, we have no option. 14. On consideration of the various precedents on the subject and considering the powers of the State, we are of the opinion that the learned Single Judge was justified in finding that the State Government had no authority to impose fee for transit of denatured spirits from Cochin Port to the State of Tamilnadu. There is absolutely no reason to interfere with that. These Writ Appeals fail and are, accordingly, dismissed. No costs.