Bimal Chandra Ranerjee Vs. State of
Madhya Pradesh  INSC 166 (19 August 1970)
19/08/1970 HEGDE, K.S.
CITATION: 1971 AIR 517 1971 SCR (1) 844 1970
SCC (2) 467
D 1975 SC2008 (33) F 1976 SC 633 (2,6) D 1976
SC2020 (12) F 1976 SC2237 (14,15) RF 1980 SC2018 (16) RF 1987 SC 993 (10,13) RF
1991 SC 735 (8,9) R 1992 SC1393 (8,9)
Madhya Pradesh Excise Act (M.P. 2 of 1915),
ss. 25, 26, 27, 62(1) and 62(2) cls. (d) and (h)--Condition in licence
prescribing minimum liquor to be purchased from the Government and payment of
excise duty on liquor not taken delivery of--Validity.
The appellants were excise contractors. In
purported exercise of its powers under cls. (d) and (h) of s.62(2) of the
Madhya Pradesh Excise Act 9 1915, which confers power on the State Government
to make rules, the State Government introduced a condition in the licences of
the appellants prescribing the minimum quantity of liquor which the appellants
should purchase from the Government and the compulsory payment of excise duty
on the quantity of liquor which they failed to take delivery of. The State
Government issued notices demanding the duty.
On the question of their validity,
HELD : Assuming the power to tax can be
delegated to the executive, no tax can be imposed by any bye-law or rule or
regulation unless the statute under which the subordinate legislation is made
specially authorises its imposition.
[850 C-D] In the present case, the
Legislature has levied excise duty or countervailing duty only on the excisable
articles which have been either imported, exported, transported, manufactured,
cultivated or collected under any licence granted under s.13, or manufactured
in any distillery or brewery established or licensed under the Act; and the
State Government has not been empowered to levy any duty on liquor which the
contractors failed to lift. Therefore, the State Government was exercising a
power which it did not possess and hence the rule imposing the, condition in
the licences and the demand notices are invalid. [849 H; A-C]
CIVIL APPELLATE JURISDICTION Civil Appeals
Nos. 2214 of 1969 and 308 of 1970.
Appeals from the judgments and orders dated
April 9, 1965 of the Madhya Pradesh High Court in Misc. Petitions Nos. 426 and
524 of 1964 respectively.
M. C. Chagla, R. A. Roman and S. S. Khanduja,
for the appellant (in C.A. No. 2214 of 1969).
R. A. Roman, S. S. Khanduja and N. K.
Shejwalkar, for the appellants (in C.A. No. 308 of 1970).
I. N. Shroff, for the respondents (in both
The Judgment of the Court was delivered by
Hegde, J. These appeals by certificates granted by the High Court of Madhya
Pradesh raise common questions of law.
Hence we propose to dispose them of by a
845 The appellants herein are excise
contractors. They are the successful bidders for some of the shops in Madhya
Pradesh for the financial year 1964-65. The sale memorandum on the strength of
which auction was held intimated that the successful bidders will have to sell
a prescribed minimum quantity of liquor in their shops and if they fail to take
delivery of the prescribed minimum quantity of liquor, they will have to pay
excise duty on the quantity of liquor which they failed to take delivery. On
March 20, 1964, the Government in the purported exercise of its powers under
cls. (d) and (h) of s. 62 of the Madhya Pradesh Excise Act, 1915 (Act 11 of
1915) (the hereinafter referred to as the Act) issued the notification No.
144401089/V-SR amending the rules published on January 7, 1960. This
notification prescribed that the conditions mentioned therein should be
inserted in the licences to be issued to the successful bidders. At present we
are only concerned with cl. 2(C) thereof. That clause reads "The minimum
quantity for taking issues from the Warehouse for sale is fixed at 3213 p.
liters spiced spirit and 25940 p. liters
plain spirit. You shall be liable to make good every month the deficit of
monthly average of the total minimum duty on or before the 10th day of each
month following the month to which the deficit duty relates." The
appellants are challenging the validity of this notification.
An excise licensee in Madhya Pradesh as in
other places has to meet three charges namely (1) he has to pay the prescribed
licence fee for obtaining the privilege of vending liquor in a shop (2) he has
to pay the price of the liquor purchased by him generally the Government has a
monopoly of liquor manufacture and (3) he has to pay excise duty on the liquor
purchased by him.
In this case there is no dispute that the
appellants had paid the prescribed licence fee, the price of the liquor
purchased by them and also the duty on the liquor taken delivery of by them.
The dispute centers round the, duty required to be paid by them under the
impugned clause in the notification of March 20, 1964 referred to earlier. The
controversy is whether the said clause is valid in law.
The Government of Madhya Pradesh have issued
demand notices on the appellants demanding the duty said to be due from them as
per the impugned clause in the notification. The appellants have challenged the
validity of these notices as well.
It is contended on behalf of the appellants
that excise duty is a tax. The same can be levied on the basis of a valid law.
No 846 tax can be levied on the basis of a contract nor can tax be levied by
executive orders. Tax can only be levied by the legislature. Hence the fact
that cl. 2(C) in the notification of March 20, 1964 has been made a part of the
licence condition is immaterial. It was contended that the question for
decision is whether the Government of Madhya Pradesh was entitled to amend its
rules and add the impugned clause as a part of the licence conditions.
The scheme of the Act is similar to the
scheme of other excise Acts in this country. In the Act Excise Duty' and
"countervailing duty" have been defined [in s. 2(6-A)] as meaning
any, such excise duty or countervailing duty, as the case may be, as is
mentioned in Entry 51 of List II in the Seventh Schedule to the Constitution,
which entry reads "Duties of excise on the following goods manufactured or
produced in the State and countervailing duties at the same or lower rates on
similar goods manufactured or produced elsewhere in India :(a) alcoholic
liquors for human consumption;
(b) opium, Indian hemp and other narcotic
drugs and narcotics;
but not including medicinal and toilet
preparations containing alcohol or any substance included in subparagraph (b)
of this entry." In view of this entry the State is competent to levy
excise duty only on goods manufactured or produced in the State. The expression
"export" is defined in s. 2(9) of the Act as meaning to take out of
the State otherwise than across customs frontier as defined by the Central
Government. The term manufacture is defined in s. 2 (14). It reads manufacture'
includes every process whether natural or artificial by which any intoxicant is
produced or prepared and also re distillation and every process for the
rectification, flavouring, blending or coloring of liquor." The word
"transport" is defined in s. 2 (19) to mean to move from one place to
another within the State.
The excise duty is a duty on Manufacture or
production and countervailing duty is a tax imposed on excisable articles
brought into the State from other parts of the country.
Chapter V of the Act deals with Duties and
Fees. That Chapter contains four sections viz. ss. 25, 26, 27 and 27A.
Section 25 deals with duty on excisable
articles. Section 26 prescribes the ways of levying 847 such duty. Section 27
provides for payment for grant of leases licence fee. Section 27A saves the
duties that were being levied at commencement of the Constitution. Herein we
are not concerned with S. 27-A.
Section 25 reads Duty on excisable articles
:-(1) An excise duty or a countervailing duty as the case may be, shall, if the
State Government so direct, be levied on excisable articles(a) imported; or (b)
exported; or (c) transported; or (d) manufactured, cultivated or collected
under any licence granted under s. 13; or (e) manufactured in any distillery
established, or any distillery or brewery licensed under this Act;
Provided that it shall be lawful for the
State Government to exempt any excisable article from any duty to which the
same may be liable under this Act.
(2) Duty may be imposed under sub-section (1)
at different rates according to the places to which any excisable article is to
be removed or according to the strength and quality of such article.
(3) Notwithstanding anything contained in
subsection (1) duty shall not be imposed there under on any article which has
been imported into India and was liable, on such importation, to duty under the
Sea Customs Act, VIII of 1878 or the Indian Tariff Act, VIII of 1894."
Under this section excise duty or countervailing duty can be imposed on
excisable article when they are either imported or exported or transported or
manufactured or cultivated or collected and not otherwise.
Section 26 deals with the manner of levying
the duty. It says "Subject to such rules regulating the time, place and manner
as the State Government may prescribe, such duty shall be levied ratably on the
quantity of exisable article imported, exported, transported collected or
manufactured in or issued from a distillery, brewery or warehouse.
848 Provided that (1) duty may be levied(a)
on intoxicating drugs by an acreage rate levied on the cultivation of the hemp
plant or by a rate charged on the quantity collected;
(b) on spirit or bear manufactured in any
distillery established or any distillery or brewery license dander this' Act(i)
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, or (ii) by rate charged
directly on the materials used;
(c) on tari, by a tax on each tree from which
the tari is drawn.
(2) 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 the warehouse."
'Section 27 says "Payment for grant of leases Instead of or in addition to
any duty leviable under this chapter, the State Government may accept payment
of a sum in consideration of the grant of any lease under section 18."
Section 18 deals with power to grant I ease of right to manufacture or right to
sell excisable articles.
The only other relevant section for our
present purpose is S. 62 which confers power on the State Government to make
rules. Clause (1) of that section gays "The State Government may make
rules for the purpose of carrying out the pro-visions of this Act." In
Clause 2 reliance was placed on sub-cls.
(d) and (h). Those sub-clauses read "In
particular, and without prejudice to the generality of the foregoing provision,
the State Government may make rules.
849 (d) regulating the import, export,
transport, manufacture, collection, possession, supply or storage of any
intoxicant, or the cultivation of the hemp plant and may by such rules, among
other matters.(i) regulate the tapping of tari producing trees, the drawing by
tari from such trees, the marking of the same and the maintenance of such
(ii) declare the process by which spirit
shall be denatured and the denaturation of spirit ascertained', and (iii) cause
spirit to be denatured through the agency or under the supervision of its own
(d-1) regulating the import, export,
transport, collection possession, supply, storage or sale of Mahua flowers
prescribing licences and permits therefore, throughout the State or in any
specified area or for any specified period." (h) prescribing the authority
by the form in which and the terms and conditions on and subject to which any
licence, permit or pass shall be granted, and may by such rules among other matters(i)
fix the period for which any licence, permit or pass shall continue in force,
(ii) prescribe the scale of fees or the manner of fixing the fees payable in
respect of any such license, permit or pass.
(iii) prescribe amount of security to be
deposited by holder of any licence, permit or pass for the performance of the
conditions of the same;
(iv) prescribe the account to be maintained
and the returns to be submitted by licence holders, and (v) prohibit or
regulate the partnership in, or the transfer of, licences." Neither s. 25
or s. 26 or s. 27 or S. 62(1) or cls. (d) and (h) of s. 62(2) empower the rule
making authority viz. the State Government to levy tax on excisable articles
which have not been either imported, exported, transported, manufactured,
cultivated or collected under any licence granted under s. 13 or manufactured
in any distillery established or any distillery or brewery licensed under the
Act. The legislature has levied excise duty only on Sup. Cl/71 (P)-71 850 those
articles which come within the scope of S. 25. The rule making authority has
not been conferred with any power to levy duty on any articles which do not
fall within the scope of S. 25. Therefore it is not necessary to consider
whether any such power can be conferred on that authority.
Quite clearly the State Government purported
to levy duty on liquor which the contractors failed to lift. In so doing it was
attempting to exercise a power which it did not possess.
No tax can be imposed by any bye-law or rule
or regulation unless the statute under which the subordinate legislation is
made specially authorises the imposition even if it is assumed that the power
to tax can be delegated to the executive. The basis of the statutory power
conferred by the statute cannot be transgressed by the rule making authority. A
rule making authority has no plenary power.
It has to act within the limits of the power
granted to it.
We are of the opinion that the impugned rule
as well as' the demands are not authorised by law. Hence we allow these appeals
as well as the writ petitions from which these appeals arise and quash the
impugned notification as well as the demand notices. The State of Madhya Pradesh shall pay the costs of the :appellants in both these appeals-hearing fee one
V.P.S. Appeals allowed.