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2019 DIGILAW 675 (ORI)

Mangalam Timber Products Ltd v. State Of Odisha

2019-12-19

K.R.MOHAPATRA, K.S.JHAVERI

body2019
JUDGMENT K.S. Jhaveri, C.J. - By way of the writ petition filed in the year 2008, the petitioner-company has challenged the demand notice dated 18.07.2008 (Annexure-15) issued by the Collector, Nabarangpur and letter dated 06.06.2008 (Annexure-14) issued by the Superintendent of Excise, Nabarangpur, whereby the petitioner was called upon to deposit Rs.3,10,31,180/- towards transportation of Menthanol for the years 2005-06 and 2006-07. In writ petition which was filed in the year 2007, the petitioner has challenged the demand notice dated 30.03.2006 (Annexure-3) issued by Collector, Nabarangpur and the subsequent letters dated 22.05.2006, 22.06.2006, 05.07.2006 and 19.07.2006 (Annexures-5, 7, 8 and 9) issued by the Superintendent of Excise, Nabarangpur, whereby the petitioner was called upon to deposit the arrear dues. The alternative prayer of the petitioner, in both the writ petitions, is to declare the Govt. Notification No.49749 Ext. dated 24.07.1965 ultra vires. 2. Since the issues involved in both the writ petitions are common, these are taken up together for final hearing and disposal on the consent of the parties. 3. Mr. S.P. Mishra, learned Senior Counsel for the petitioner concedes that in Section 90(7) of the Bihar and Orissa Excise Act, 1915 confers the power on the Board to make rules for the purpose of prescribing the scale of fees or the manner of fixing the fees payable in respect of any licence, permit or pass granted under the said Act or in respect of the storing any intoxicant. He, however, contended that the authorities taking shelter under Rule 116-A of the Board's Excise Rules, 1965, which came to be amended in the year 2005, called upon the petitioner to deposit the amount towards transportation of Menthanol for the pre-amendment period. 3.1. Learned Senior counsel for the petitioner relied upon Section 27(3) of the Bihar and Orissa Excise Act, 1915, which reads as under: "27. Power to impose duty on import, export, transport and manufacture xx xx xx (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; and" 3.2. He contended that in view of the aforesaid provision, there is restriction on the Government not to levy any duty. In support of the contention, Mr. Mishra, learned Senior Counsel relied upon the decision of the Hon'ble Supreme Court in the case of State of U.P. and others vs. Vam Organic Chemicals Ltd. and others, (2003) AIR SC 4650 , wherein the Hon'ble Court, in para-42, has held has under: "42. Considering the various authorities cited, we are of the view that the State Government is competent to levy fee for the purpose of ensuring that industrial alcohol is not surreptitiously converted into potable alcohol so that the State is deprived of revenue on the sale of such potable alcohol and the public is protected from consuming such illicit liquor. But this power stops with the denaturation of the industrial alcohol. Denatured spirit has been held in Vam Organics I, to be outside the seisin of the State Legislature. Assuming that denatured spirit may by whatever process be renatured. (a proposition which is seriously disputed by the respondents) and then converted into potable liquor this would not give the State the power to regulate it. Even according to the demarcation of the filed of legislative competence as envisaged in Bihar Distillery industrial alcohol for industrial purposes falls within the exclusive control of the Union and according to Bihar Distillery "denatured spirit, of course, is wholly and exclusively industrial alcohol". 3.3. He also relied upon the case of Mohan Meakin Limited vs. State of Himachal Pradesh and others, (2009) 3 SCC 157 , wherein the Hon'ble Supreme Court, in para-24, has held has under: "24. The State has to make distinction between a Malt Spirit of over proof strength and potable liquor. Entries 8, 51 and 66 of List II of the Seventh Schedule of the Constitution of India confer jurisdiction upon the State only to exercise its legislative control in respect of matters which are covered thereby. Industrial alcohol or spirit having regard to Entry 52 of List I of the Seventh Schedule of the Constitution of India cannot be subject matter of any regulation or control by the State; it being not alcoholic liquor for human consumption. The question is well-settled in view of the decision of a Seven-Judge Bench of this Court in wherein it was categorically held: "53. The question is well-settled in view of the decision of a Seven-Judge Bench of this Court in wherein it was categorically held: "53. It was further submitted by the State that the State has exclusive right to deal in liquor. This power according to the counsel for the State, is reserved by and/or derived under Articles 19(6) and 19(6)(ii) of the Constitution. For parting with that right a charge is levied. It was emphasised that in a series of decisions some of which have been referred to hereinbefore, it has been ruled that the charge is neither a fee nor a tax and termed it as privilege. The levy is on the manufacture, possession of alcohol. The rate of levy differs on its use, according to the State of U.P. The impost is also stipulated under the trading powers of the State under Article 298 and it was contended that the petitioners and/or appellants were bound by the terms of their licence. It was submitted that the Parliament has no power to legislate on industrial alcohol, since industrial alcohol was also alcoholic liquor for human consumption. Entry 84 in List I expressly excludes alcoholic liquor for human consumption; and due to express exclusion of alcoholic liquor for human consumption from List I, the residuary Entry 97 in List I will not operate as against its own legislative interest. These submissions have been made on the assumption that industrial liquor or ethyl alcohol is for human consumption. It is important to emphasise that the expression of a constitution must be understood in its common and normal sense. Industrial alcohol as it is, is incapable of being consumed by a normal human being. The expression 'consumption' must also be understood in the sense of direct physical intake by human beings in this context. It is true that utilisation in some form or the other is consumption for the benefit of human beings if industrial alcohol is utilised for production of rubber, tyres used. The utilisation of those tyres in the vehicle of man cannot in the context in which the expression has been used in the Constitution, be understood to mean that the alcohol has been for human consumption. 54. The utilisation of those tyres in the vehicle of man cannot in the context in which the expression has been used in the Constitution, be understood to mean that the alcohol has been for human consumption. 54. We have no doubt that the framers of the Constitution when they used the expression 'alcoholic liquor for human consumption' they meant at that time and still the expression means that liquor which as it is is consumable in the sense capable of being taken by human beings as such as beverage of drinks. Hence, the expression under Entry 84, List I must be understood in that light. We were taken through various dictionary and other meanings and also invited to the process of manufacture of alcohol in order to induce us to accept the position that denatured spirit can also be by appropriate cultivation or application or admixture with water or with others, be transformed into 'alcoholic liquor for human consumption' and as such transformation would not entail any process of manufacture as such. There will not be any organic or fundamental change in this transformation, we were told. We are, however, unable to enter into this examination. Constitutional provisions specially dealing with the delimitation of powers in a federal polity must be understood in a broad commonsense point of view as understood by common people for whom the Constitution is made. In terminology, as understood by the framers of the Constitution, and also as viewed at the relevant time of its interpretation, it is not possible to proceed otherwise; alcoholic or intoxicating liquors must be understood as these are, not what these are capable of or able to become. It is also not possible to accept the submission that vend fee in U.P. is a preConstitution imposition and would not be subject to Article 245 of the Constitution. The present extent of imposition of vend fee is not a pre-Constitution imposition, as we noticed from the change of rate from time to time." 3.4. He further contended that the transportation charges are not leviable on the petitioner. Moreover, such charge or levy is also disproportionate to the price of the goods transported. In that view of the matter, charging per bulk liter is on higher side. He further contended that the transportation charges are not leviable on the petitioner. Moreover, such charge or levy is also disproportionate to the price of the goods transported. In that view of the matter, charging per bulk liter is on higher side. It is his contention that assuming without admitting, even if it is to be regulated by the State Government, it should be the fees qua the service which is required to be rendered by the State Government on the principle of quid pro quo, and the fees which they are imposing must be justifiable. Mr. Mishra, learned Senior Counsel for the petitioner has taken us to the record and contended that the fees which are charged by the Government is disproportionate as in the impugned notice the charges are higher than the price of the material sought to be transported. Therefore, the fees, charged by the Government, is disproportionate to the value and is liable to be set aside. 4. Per contra, Mr. A.K. Parija, learned Advocate General appearing for the State has taken us to Section 2 (12-a), which reads as under: "2. Definitions- xx xx xx (12-a) "intoxicant" means any liquor or intoxicating drug or includes mohua flower [and molasses] 4.1. He also relied upon Sections 2(13)(iv), 12(1), 89(2)(d) read with Section 90 of the Bihar and Orissa Excise Act, 1915, which read as under: "2(13) "intoxicating drugs" means xx xx xx (iv) any other intoxicating or narcotic substance which the [State Government] may by notification declare to be an intoxicating drug, such substance not being opium, coca leaf or a manufactured drug, as defined in Section 12 of the Dangerous Drugs Act, II of 1930" xx xx xx "12. Passes for import, export or transport (1) No intoxicant exceeding such quantity as the State Government may prescribe by notification, either generally or for any specified local areas, shall be imported, exported or transported, except under a pass : Provided that in the case of duty-paid foreign liquor other than denatured spirit, such passes shall be dispensed with unless the State Government, by notification, otherwise directs with respect to any local area." "89. Power of State Government to make rules xx xx xx (2) In particular, and without prejudice to the generality of the foregoing provisions, the State Government may make rules- xx xx xx (d) for regulating the import, export of transport of any intoxicant." xx xx xx 90. Power of Board to make rules. Power of State Government to make rules xx xx xx (2) In particular, and without prejudice to the generality of the foregoing provisions, the State Government may make rules- xx xx xx (d) for regulating the import, export of transport of any intoxicant." xx xx xx 90. Power of Board to make rules. - The Board may make [rules]; (1) for regulating the manufacture, supply, or storage of any [intoxicant], and in particular, and with prejudice to the generality of this provision may make rules for regulating - (a) the establishment, inspection, supervision, management and control of any place for the manufacture, supply or storage of any [intoxicant], and the provision maintenance of fittings, implements and apparatus therein; (b) the bottling of liquor for purposes of sale; (c) the cultivation of the hemp plant; (d) the collection of portions of the hemp plant from which intoxicating drugs can be manufactured or produced, and the manufacture or production of intoxicating drugs therefrom; (e) the tapping of tari-producing trees and the drawing of tari from trees; (f) the making of tari-producing trees in areas notified under Section 14, Sub-section (1), and the maintenance of such marks; (2) for fixing the strength, price of quantity in excess of or below which any [intoxicant] shall not be supplied or sold, and the quantity in excess of which denatured spirit shall not be possessed, and for prescribing a standard of quality for any [intoxicant]; (3) for declaring how spirit manufactured in [India] shall be denatured; (4) for causing spirit manufactured to be denatured through the agency or under the supervision of [Government Officers]; (5) for ascertaining whether any spirit so manufactured has been denatured; (6) for regulating the deposit of any [intoxicant] in a warehouse established, authorised or continued under this Act, and the removal of any [intoxicant] from any such warehouse or from any distillery or brewery; (7) for prescribing the scale of fees or the manner of fixing the fees payable in respect of [* * *] any licence, permit or pass granted under this Act, or in respect of the storing of any [intoxicant]; (8) for regulating the time, place and manner of payment of such fees; (9) for prescribing the restrictions under which or the conditions on which any licence, permit or pass may be granted, and in particular, and without prejudice to the generality of this provision, may make rules for - (i) prohibiting the admixture with any [intoxicant] of any article deemed to be noxious or objectionable; (ii) regulating or prohibiting the reduction of liquor by a licensed manufacturer or licensed vendor from a higher to a lower strength; . (iii) prescribing the nature and regulating the arrangement of the premises in which any [intoxicant] may be sold, and prescribing the notices to be exposed at such premises; (iv) prohibiting or regulating the employment by the licensee or any person or class of persons to assist him in his business; (v) prohibiting the sale of any [intoxicant] except for cash; (vi) prescribing the days and hours during which any licensed premises mayor may not be kept open, and providing for closing of such premises on special occasions; (vii) prescribing the accounts to be maintained and the returns to be submitted by licensees; and (viii) regulating the transfer of licences; (10) for prescribing the particulars to be contained in licences, permits or passes granted under this Act; (11) for the payment of compensation to licensees whose premises are closed under Section 26 or under any rule made under Sub-clause (vi) of Clause (9) of this Section; (12) for prescribing the time, place .and manner of levying duty on [intoxicant]; (13) for providing for the destruction or other disposal of any [intoxicant] deemed to be unfit for use; and (14) for regulating the disposal of things confiscated under this Act." 4.2. He also referred to Rule 116-A of the Board's Excise Rules, which reads as under: "[116-A. The passes prescribed under Part VII of orders issued under Sub-section (1) of Section 12 of the B. & O. Excise Act, 1915 as published in the Govv. of Orissa Notification No.4975 O.R. Dated the 24th July, 1965 in the Extraordinary Orissa Gazette No.1776, dated the 7th August, 1965 for - (i) the export from Orissa; and (ii) the transport in Orissa to a Customs House, Customs bonded warehouse or land customs station of foreign liquor and spirit of the kind specified in Column (i) of the table below shall be granted on payment of fee at the rate specified in the corresponding entry in Column (ii) of the said table : TABLE Sl. No. Column I Column II Kind of liquor Rate per bulk litre (1) (2) (3) (I) Import fee on Rectified Spirit/ENA Rs.3 per B.L. (II) Export fees on Rectified Spirit.ENA Rs.5 per L.P.L. (III) Transport fee on Rectified Spirit/ENA for preparation of I.M.F.L. or C.S. Rs.2.50 per B.L. (iv) (i) The import fee on India Made Foreign Liquor shall be Rs. 19 (Rupees nineteen) per L.P.L. (ii) The import fee on beer shall be Rs. 9 (Rupees nine) per B.L.] (v) The import/Export fee on Denatured spirit Rs. [4] per bulk litre] (vi) (i) Import fee on Rectified spirit/ENA Rs.4.00 per B.L. (ii) Export fee on Rectified Spirit/ENA Rs.3.00 per B.L. (iii) Transport fee on Rectified spirit/ENA for preparation of I.M.F.L. or C.S. Rs.3.00 per B.L. (iv) Transport fee on Rectified Spirit/ENA for purposes other than preparation of I.M.F.L. or C.S. Rs.4.50 per B.L. (v) Import, export and Transport fee of Denatured Spirit/Methanol Rs.4.00 per B.L. (vi) Import fee on ethanol/power spirit for blending in petrol Rs.2.00 per B.L.] 4.3. Therefore, Mr. Parija, learned Advocate General contended that it is within the legislative competency to regulate the fee in view of the observations made by the Hon'ble Supreme court in the case of Shri Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. vs. State of Gujarat and another, (1992) 2 SCC 42 , wherein the Hon'ble Court, in para 4, has observed as under: "4. According to learned counsel since the entire judgment of the High Court proceeded on privilege theory it cannot withstand the principle laid down in Synthetic & Chemical's case. Levy as a fee under Entry 8 of List II of VIIth Schedule or excise duty under Entry 51 are different than cost of supervision charged under Section 58A. The former has to stand the test of levy being in accordance with law on power derived from one of the constitutional entries. Since Synthetic & Chemical's case finally brought down the curtain in respect of industrial alcohol by taking it out of the purview of either Entry 8 or 51 of List II of VIIth Schedule of the competency of the State to frame any legislation to levy any tax or duty is excluded. But by that a provision enacted by the State for supervision which is squarely covered under Entry 33 of the concurrent list which deals with production, supply and distribution which includes regulation cannot be assailed. The Bench in Synthetic & Chemical's case made it clear that even though the power to levy tax or duty on industrial alcohol vested in the Central Government the State was still left with power to lay down regulations to ensure that non-potable alcohol,that is, industrial alcohol, was not diverted and misused as substitute for potable alcohol. The Bench in Synthetic & Chemical's case made it clear that even though the power to levy tax or duty on industrial alcohol vested in the Central Government the State was still left with power to lay down regulations to ensure that non-potable alcohol,that is, industrial alcohol, was not diverted and misused as substitute for potable alcohol. This is enough to justify a provision like 58A. In paragraph 88 of the decision it was observed that in respect of industrial alcohol the States were not authorised to impose the impost as they have purported to do in that case but that did not effect any imposition of fee where there were circumstances to establish that there was quid pro quo for the fee nor it will affect any regulatory measure. This completely demolishes the argument on behalf of appellant." 4.4. He also relied upon the decision of the Hon'ble Supreme Court in case of State of Uttar Pradesh and others vs. Lalta Prasad Vaish, (2007) 13 SCC 463 , wherein, in para 37 and 39, the Hon'ble Court has held has under: "37. In our view, if the decision in the Synthetics and Chemicals case (supra) with regard to the interpretation of Section 18-G of the 1951 Act is allowed to stand, it would render the provisions of Entry 33 (a) of List III nugatory or otiose. xx xx xx 39. We, accordingly, formulate the following questions, which, in our view, may be referred to a larger Bench : Q.1 Does Section 2 of the Industries (Development and Regulation) Act, 1951, have any impact on the field covered by Section 18-G of the said Act or Entry 33 of List III of the Seventh Schedule of the Constitution? Q.2 Does Section 18G of the aforesaid Act fall under Entry 52 of List I of the Seventh Schedule of the Constitution, or is it covered by Entry 33 of List III thereof? Q.3 In the absence of any notified order by the Central Government under Section 18-G of the above Act, is the power of the State to legislate in respect of matters enumerated in Entry 33 of List III ousted? Q.3 In the absence of any notified order by the Central Government under Section 18-G of the above Act, is the power of the State to legislate in respect of matters enumerated in Entry 33 of List III ousted? Q.4 Does the mere enactment of Section 18-G of the above Act, give rise to a presumption that it was the intention of the Central Government to cover the entire field in respect of Entry 33 of List III so as to oust the States' competence to legislate in respect of matters relating thereto? Q.5 Does the mere presence of Section 18-G of the above Act, oust the State's power to legislate in regard to matters falling under Entry 33(a) of List III ?; Q.6 Does the interpretation given in Synthetics and Chemicals Case in respect of Section 18-G of the Industries (Development and Regulation) Act, 1951, correctly state the law regarding the States' power to regulate industrial alcohol as a product of the Scheduled industry under Entry 33 of List III of the Seventh Schedule of the Constitution in view of clause (a) thereof ?" 5. We have heard Mr. S.P. Mishra, learned Senior Counsel for the petitioner and Mr. A.K. Parija, learned Advocate General for the Stateopposite parties. 6. Taking into consideration the statutory provisions and the intention of the legislation, we are of the view that Methanol (Methyl alcohol) is a prohibited item, which is injurious to health of the human being, it will not desirable for this Court to hold that the State Government has no power to regulate the movement of the industrial alchol, even if it is intoxicated or poisonous. It has to be regulated by the State Government in view of the provision of Sections 27, 89 and 90(7) of the Bihar and Orissa Excise Act, 1915 read with Rule 116-A of the Board's Excise Rules. The State Government has power to issue pass for its transportation from one destination to another, but the fee fixed for that purpose on the bulk liter is not justified. The fees for transportation cannot exceed the price of the goods itself. 7. In that view of the matter, the price which has been fixed i.e. Rs.3/- per bulk liter is disproportionate and it is on higher side. The fees for transportation cannot exceed the price of the goods itself. 7. In that view of the matter, the price which has been fixed i.e. Rs.3/- per bulk liter is disproportionate and it is on higher side. Even if, the State Government has power to do, since the imposition of fees is not reasonable, we are reading down the provisions and we are of the opinion that the State Government will fix the reasonable price for the pass not exceeding 1% of the price. The demand regarding excise duty is without authority of law, therefore, the same is required to be quashed. Accordingly, the impugned orders , in the writ petitions, are quashed. 8. The writ petitions are allowed to the aforesaid extent. Connected Misc. Case/I.A., if any, also stands disposed of. 9. We make it clear that the amount will be refunded to the petitioner within eight weeks from today. If the amount is not refunded within the stipulated period, the petitioner will be entitled to 9% interest per annum from the date of filing of the writ petitions.