State of Madhya Pradesh Vs. Firm
Gappulal  INSC 324 (17 December 1975)
RAY, A.N. (CJ) RAY, A.N. (CJ) BEG, M.
HAMEEDULLAH SARKARIA, RANJIT SINGH SHINGAL, P.N.
CITATION: 1976 AIR 633 1976 SCR (2)1041 1976
SCC (1) 791
CITATOR INFO :
RF 1980 SC2018 (21) D 1981 SC1374 (6) D 1987
SC 933 (11,13) RF 1991 SC 735 (22) RF 1992 SC1393 (8,9)
Madhya Pradesh Excise Act Sections 25, 26 and
62-Levy of excise duty on liquor not lifted by the contractors under a contract
is neither authorised by s. 26 of the Act, nor such a power to levy excise duty
vested in the State under s. 62 of the Act-Meaning of the word
"pratikar"-Whether denotes "compensation or excise duty".
Under the provisions of the Madhya Pradesh
Excise Act, an excise license has to pay the following:
(i) The prescribed licence fee, which licence
gives the licensee privileges of selling liquor in a shop.
(ii) The price of liquor which he purchases
from the State Government; and (iii) Excise on the liquor so purchased by him.
In all the appeals, the appellants are the
auction contractors to sell liquor in the various shops. One of the terms of
the sale memo was that the contractor would have to lift a prescribed minimum
quantity of liquor and pay duty or consolidated duty at the prevalent rate,
otherwise they would have to pay duty on the quantity short of the minimum
In all the appeals, the appellants were
served with various demand notices demanding a fourth item, viz., duty on
liquor not lifted by the contractor who was bound to lift under the conditions
prescribing minimum quantity. The vires of these demands were challenged under
Art. 226 of the Constitution before the Gwalior Bench of the Madhya Pradesh
High Court and they were allowed.
Dismissing the appeals by certificate, the
HELD : (1) "Pratikar" is excise
duty. [1042 F] (2) The State confers the right to require by farming out either
by auction or by private treaty. Rental is the consideration for the privilege
granted by the Government for manufacturing or vending liquor. Rental is the
consideration for the agreement for grant of privilege by the Government. [1042
G] Nashirwar v. State of Madhya Pradesh,  (2) S.C.R. 861; Hari Shankar v.
Deputy Excise and Taxation Commissioner,  (3) S.C.R. 254, discussed.
(3) These appeals relate to the demand of
excise only in respect of liquor. Levy of excise duty on undrawn liquor imposed
by the State-respondent was exercise of powers which the State did not posses.
[1042 H, 1043 E] Bimal Chandra Banerjee v. State of Madhya Pradesh,  (1)
S.C.R. 844, followed.
Panna Lal & Ors. v. State of Rajasthan,
 (1) S.C.R. 220, not applicable.
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos. (1) 1751, 1747-50 & 1752, (2) 2041 & 2042 and (3) 1753-1756 of 1971.
[From the judgment and order dated the (1)
20-1-1971, (2) 17-2-1971, (3) 21-8-1971 of the Madhya Pradesh High Court 1042
(Gwalior Bench) in (1) Miscellaneous Petitions Nos. 19/70 & 10, 109 and 111
of 1969 and 18 and 20 of 1970, (2) in 9 and 10 of 1971 and (3) 123-125 and 127
of 1970 respectively.] I. N. Shroff for the appellant.
A. K. Sen (in CA 1751/71) for the
Hargobind Misra (in CAs 2041-42/71) for the
A. Raman (in CA 1751/71) and S. S. Khanduja
in all the appeals with him for the respondents.
The Judgment of the Court was delivered by
RAY, C.J. These appeals by certificate turn on the question whether the
Government was right in making a demand of excise duty on liquor not lifted by
the liquor contractors.
The High Court relying on the decision of
this Court in Bimal Chandra Banerjee v. State of Madhya Pradesh held against
There is no dispute that in these appeals the
demand notice is in respect of duty on liquor which has not been lifted.
The liquor contractors were subject inter
alia to the following conditions at auction which the Government wants to
"In case the fixed monthly quantity is
not taken in any month, the concerning contractor shall be liable to pay to the
Government the amount of PRATIKAR at the rate fixed by the Government for
spiced spirit and plain spirit to the extent to which it would be less than the
fixed monthly minimum quantity and the amount of such PRATIKAR shall be paid
within the tenth day of the month such shortage is concerned. Security to the
extent of one sixth to one tenth of the whole of the amount of yearly PRATIKAR
will have to be given".
Pratikar is excise duty.
This Court in the recent decision in
Nashirwar v. State of Madhya Pradesh(2); Hari Shanker v. Deputy Excise and
Taxation Commissioner(3) and Panna Lal & Ors. v. State of Rajasthan(4) held
that the State has exclusive right to manufacture and sell liquor and to sell
the said right in order to raise revenue. The State confers the right to vend liquor
by farming out either by auction or by private treaty. Rental is the
consideration for the privilege granted by the Government for manufacturing or
vending liquor. Rental is the consideration for the agreement for grant of
privilege by the Government. In Bimal Chandra Banerjee's case (supra) this
Court held that a levy of excise duty on undrawn liquor imposed by the State
was exercise of powers which the State did not possess.
1043 In the recent decision of this Court in
Panna Lal's case (supra) this Court said that there is no levy of excise duty
in enforcing the payment of the guaranteed sum or the stipulated lump sum
mentioned in the licenses. It was also pointed out in Panna Lal's case (supra)
that the lump sum amount stipulated under the agreement is not to be equated
with issue price. The issue price is payable only when the contractors take
delivery of a particular quantity of specified value of country liquor. The
issue price relates only to liquor drawn by the contractors and does not
pertain to undrawn liquor. This Court in Panna Lal's case (supra) said that
"no excise duty is and can be collected on undrawn liquor". In Panna
Lal's case (supra) the excise duty component of the issue price was found to be
a measure of the quantum of or extent of the concession or the remission to be
given to the liquor contractor. The concession is not what is paid by the
contractor to the State but it is a remission or a reduction in the stipulated
amount for exclusive privilege allowed by the State to the contractor.
The lump sum amount payable for the exclusive
privilege is not to be confused with the issue price. In essence what was
sought to be recovered from the liquor contractors in Panna Lal's case (supra)
was the shortfall occasioned on account of failure on the part of liquor
contractor to fulfil the terms of license.
It was pointed out in Panna Lal's case
(supra) as follows:- "To suggest that the license obliges the contractors
to pay excise duty on undrawn liquor is totally misreading the conditions of
the license. The excise duty is collected only in relation to the quantity and
quality of the country liquor which is drawn. No excise duty can be predicated
in respect of undrawn liquor".
These appeals are, therefore, not of the type
of Panna Lal's case (supra). These appeals are of the type of Bimal Chandra
Banerjee's case (supra). These appeals relate to the demand of excise only in
respect of undrawn liquor. The High Court rightly quashed the demands. The
appeals are, therefore, dismissed. Each party will pay and bear its own costs.
S.R. Appeals dismissed.