Shree
Krishna Gyanoday Sugar Ltd. Vs. State of Bihar & Ors [1996] INSC 952 (14 August 1996)
Majmudar
S.B. (J) Majmudar S.B. (J) Bharucha S.P. (J) S.B. Majmudar, J.
CITATION:
JT 1996 (7) 322 1996 SCALE (6)17
ACT:
HEAD NOTE:
WITH CIVIL
APPEAL NO.4764 OF 1996
These
civil appeals, arising out of special leave to appeal granted against a common
judgment rendered by a Division Bench of the Patna High Court in three writ
petitions moved by the appellants, raise a common question as to whether Rule 9
of the Bihar & Orissa Excise Rules, 1919 (hereinafter referred to as `the
Rules') framed under Bihar Excise Act, 1915 (hereinafter referred to as `the
Act') is ultra vires the provisions of the said Act and in the alternative
whether the said rule covers appellants' distilleries which are manufacturing
not only denatured spirit but also potable liquor. The appellants' aforesaid
twin contentions have been repelled by the High Court and that is how they are
before us in these appeals.
Introductory
facts A few relevant facts leading to these proceedings may be noted at this
stage. Appellant in Civil Appeal Nos.4762- 63 of 1996 is the licencee in
respect of two distilleries, one situated at Lauriya and another at Mirganj in
the districts of West Champaran and Gopalganj respectively in Bihar State. It has been granted licences by the State of Bihar under the Act. The appellant's
distilleries are manufacturing liquor on the basis of licences granted in Form
No.19 for compounding and blending foreign liquor; in Form No.19-A for
manufacture of sacramental wine or alter wine or mass wine containing not more
than 42% of proof spirit; in Form No.25 for the manufacture of denatured
spirit; in Form No.27 for wholesale country spirit; in Form No.28 for
manufacture of spirit in a distillery issued to the grantee of the exclusive
privilege of supply of country spirit under Section 22 of the Act; and licence
issued in Form No.28-A for manufacture of spirit in distillery for use in the
manufacture of chemical, and for industrial, scientific and other purposes. The
licences in Form Nos.27 and 28 were withdrawn with effect from 1st April 1979. The Superintendent of Excise
directed the appellant to pay a sum of Rs.1,68,128.77 towards the establishment
charges said to have been incurred over the excise staff posted at the Lauriya
distillery from March 1973 till July 1979 and at Mirganj distillery for the
years 1975-76 to 1978-79. The said demand was raised as per impugned Rule 9 of
the Rules.
That
led to two writ petitions moved by the appellant before the High Court.
Appellant
in Civil Appeal No.4764 of 1996 challenged in its writ petition before the High
Court, an order dated 27th December 1979 passed by the Member, Board of
Revenue, an order dated 27th September 1978 passed by the Commissioner of
Excise and the demand made by Superintendent of Excise, Bhagalpur contained in
Memorandum dated 5th November 1976.
The
said appellant has a distillery in Sultanganj in the district of Bhagalpur in Bihar State. It manufactures country spirit and holds licences in Form
Nos.25, 27, 28 and 28-A. However, licences granted to it in Form Nos.27 and 28
were withdrawn with effect from 1st April 1979.
Both
the appellants contended before the High Court that their distilleries were
having composite licenses to manufacture not only denatured spirit and other
spirit for industrial use but were also manufacturing potable spirit or country
liquor and that for these distilleries the respondent-authorities had no power
or jurisdiction to invoke Rule 9 of the Rules demanding establishment cost and
cost of officers who were posted at these distilleries for the purpose of
supervision. Their main contention was also to the effect that Rule 9 being
ultra vires the provisions of the Act, the aforesaid demand of the respondents was
unauthorised.
As
noted earlier both these contentions were rejected by the High Court after
hearing the concerned parties. The High Court took the view that Rule 9 of the
Rules was not ultra vires the provisions of the Act. So far as the alterative
contention was concerned it was noted by the High Court but it appears that no
clear finding was rendered by the High Court thereon. However, ultimately all
the writ petitions were dismissed leading to the present proceedings before
this Court.
Rival
contentions Learned counsel appearing for the appellants submitted that Rule 9
of the Rules was beyond the scope of the Act and there was no statutory
provision in the said Act to sustain such a rule. It was alternatively
contended that as the appellants' distilleries were having licence to
manufacture liquor which was not only comprising of denatured spirit or other
type of industrial spirit but also potable liquor.
Rule 9
on its express language could not be pressed in service against the appellants'
distilleries.
On the
other hand Shri Sanyal, learned senior counsel appearing for the respondents,
submitted that impugned Rule 9 of the Rules was clearly sustainable under
Section 38 of the Act and it was enacted with a view to seeing that the
denatured spirit manufactured by the appellants' distilleries was not illegally
converted into potable liquor especially when such an activity itself would
invoke the penalty provisions of Section 49 of the Act. Consequently with a
view to subserving the public purpose and with a view to seeing that the
society does not suffer by such illegal activities on the part of the
distilleries, Rule 9 was enacted for fructifying the purposes of the Act and
could not be said to be de hors its provisions entitling the State authorities
to regulate and supervise the working of these distilleries. On the alternative
contention it was submitted by Shri Sanyal, learned senior counsel for the respondents,
that Rule 9 as framed entitled the Commissioner to impose costs on the
concerned distillery which was manufacturing denatured spirit or any other
commercial spirit which would include even potable spirit which was sold in the
market and, therefore, had commercial characteristics. Shri Sanyal also
submitted that the words, `denatured spirit or any other commercial spirit' as
found in the second part of the impugned rule could be read as `denatured
spirit and any other commercial spirit' and if so read they would include even
potable spirit manufactured by the distilleries for commercial purposes, namely,
for selling them at a price and for earning profit by the said exercise. That
consequently according to Shri Sanyal the distilleries run by the appellants
were squarely covered by the sweep of Rule 9 of the Rules and hence the High
Court was justified in dismissing the writ petitions.
Points
for determination In view of the aforesaid rival contentions the following
points arise for our determination:
1.
Whether Rule 9 of the Rules is ultra vires the provisions of the Act?
2. In
the alternative whether the second part of Rule 9 imposing establishment costs
on the distilleries, on its express language, applies to the distilleries run
by the appellants for manufacturing not only denatured spirit and spirit for
industrial use but also for manufacturing potable liquor for human consumption?
We shall deal with the points seriatim.
Point
No.1 The Act enacted in 1915 pertains to import, export, transport,
manufacture, possession and sale of certain kinds of liquor and intoxicating
drugs in the then provinces of Bihar and Orissa. Section 2 which is a
dictionary clause defines `Board' as per clause (2) to mean `Board of Revenue'.
`Excisable article' as per clause (6) means, `(a) any alcoholic liquor for
human consumption; or (b) any intoxicating drug. Clause (6a) of Section 2
refers to `excise duty' and `countervailing duty' which mean, `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'. Section 2(12a) defines,
`intoxicant' to mean, `
(i) any
liquor, or
(ii)
any substance from which liquor may be distilled and which is declared by the
State Government by notification in the official Gazette to be an intoxicant
for the purpose of this Act, or
(iii) intoxicating
drug, or
(iv) medicinal
preparation as defined under the Medicinal and Toilet Preparations (Excise
Duties) Act, 1955'.
The
term `liquor' is defined by Section 2(14) to include all liquids consisting of
or containing alcohol, such as spirits of wine, spirit, wine, fermented tari, pachwai
and beer, and also unfermented tari, and also any other substance which the
State Government may, by notification, declare to be liquor for the purposes of
this Act. The term `spirit' is defined by clause (19) of Section 2 to mean,
`any liquor containing alcohol obtained by distillation, whether it is
denatured or not'. The term `to denature' is defined by clause 5(b) to mean `to
mix spirit with one or more denaturants in such manner as may be prescribed by
rule made in this behalf under clause (3) of section 90, and "denatured
spirit" means spirit so mixed'.
Section
13 deals with `licence required for manufacturing intoxicants'. Section 15
deals with `establishment of distilleries, breweries or warehouses'. It lays
down that the Excise Commissioner may subject to any restrictions imposed by
the State Government, establish, or authorise the establishment of,
distilleries or breweries, in which liquor may be manufactured under a license
granted under section
13.
Thus under a licence granted under Section 13 a distillery can manufacture
liquor which would include not only potable liquor but even denatured spirit or
spirit for industrial use which is not potable. Section 22 deals with `grant of
exclusive privilege of manufacture and sale of country liquor or intoxicating
drugs or denatured spirit or any other intoxicants'. It is the case of the
appellants that they have not got any such exclusive privilege under the
aforesaid Section to manufacture country made liquor or intoxicating drugs or
denatured spirit. Section 27 deals with `power to impose duty on import,
export, transport and manufacture of any excisable article'. It is not the case
of either side that Rule 9 seeks to impose any excise duty or a countervailing
duty. The Section which is relevant for our purpose is Section 38 which reads
as under:
"38.
Fees for terms, conditions, and form of, and duration of, licences, permits and
passes. - (1) Every licence, permit o pass granted under this Act- (a) shall be
granted - (i) on payment of such fees (if any), and (ii) subject to such
restrictions and on such conditions, and (b) shall be in such form and contain
such particulars, as the Board may direct.
(2)
Every licence, permit or pass under this Act shall be granted for such period
(if any) as may be prescribed by rule made by the State Government under
section 89, clause (e)." A conjoint reading of Section 38 sub-Section
(1)(a)(ii) and Sections 15 and 13 of the Act leaves no room for doubt that licences
issued to the appellants' distilleries governed by the Act can be made subject
to such restrictions and conditions as the Board of Revenue may direct. Section
90 of the Act empowers the Board to make rules for regulating the manufacture,
supply or storage of any intoxicant and in particular, and without prejudice to
the generality of the provision, the Board is also authorised to make rules for
regulating the establishment, inspection, supervision, management and control
of any place for the manufacture, supply or storage of any intoxicant, and the
provision and maintenance of fittings, implements and apparatus therein. As per
sub-Section (9) of Section 90 the Board can also prescribe 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 or 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.
It is
in exercise of the aforesaid rule making powers available to the Board of
Revenue under Section 90 that the impugned Rule, amongst other rules, came to
be enacted. It is pertinent to note that Bihar
and Orissa Excise Rules of 1919 as initially framed contained Rule 9 which read
as under :
"The
Commissioner shall appoint such officers and establishment as he thinks fit to
the charge of a distillery." It was only on 23rd August 1930 that the concept of establishment cost to be borne by the
distilleries concerned got engrafted in the said Rule by way of second part.
The ruled consisting of both these parts is as under :
"9.
The Commissioner shall appoint such officers and establishment as he thinks fit
to the charge of a distillery.
In the
case of a distiller licensed solely for the purpose of the manufacture of
denatured spirit or any other commercial spirit, the distiller shall bear the
whole cost including leave and pension contributions and cost of uniform of
such excise staff and establishment as may be considered necessary by the
Excise Commissioner for proper supervision." The appellants contend that
said impugned Rule 9 cannot trace its origin to any of the statutory provisions
of the Act. It is difficult to agree with this contention. The aforesaid statutory
provisions clearly indicate that the authorities functioning under the Act can
supervise and regulate the working of the distilleries which are licensees
under the Act. Power to regulate and supervise these distilleries as engrafted
in the first part of Rule 9 and also to levy establishment cost from these
distilleries under second part of the Rule can squarely be traced to the
statutory provisions of Section 38(1)(a)(ii) which entitle the Board to impose
suitable restrictions and conditions on the licencees like appellants'
distilleries who have to manufacture liquor pursuant to such licences subject
to such restrictions and conditions as are imposed on them. Section 38
sub-section (1)(a)(ii) read with Section 90 sub-Section (1)(a) and sub-Section
9(i) and (ii) represents a well-knit statutory scheme authorising the Board to
promulgate rules for laying down restrictions and conditions on the licensees,
namely, the distilleries which could be validly subjected to such restrictions
on their manufacturing activities before they get clearance for such activities
under Section 15 read with Section 13 of the Act. It is, therefore, not
possible to agree with the contention of the learned counsel for the appellants
that Rule 9 is ultra vires the provisions of the Act or has no statutory
coverage for its existence. It has to be kept in view that if a distillery
which manufactures denatured spirit attempts to alter or alters any denatured
spirit with the intention that such spirit may be used for human consumption
whether as a beverage or internally as a medicine would be committing an
offence which is punishable under Section 49 of the Act. It is, therefore,
permissible for the excise authorities under the Act to supervise the working
of such distilleries so that they may not commit such offence sand to oversee
their manufacturing activities. It is axiomatic to state that prevention is
better than cure. If denatured spirit is illegally altered and made fit for
human consumption, it is likely to have devastating effect on the health of
consumers and may even result in fatal consequences or loss of vision and other
pernicious physical handicaps. In order to prevent such social calamities, if
supervision is provided at the cost of distilleries, it cannot be said that
such conditions are not germane to the requirements of the Act or do not flow
from the statutory scheme envisaged by the Act. If for this laudable purpose an
establishment is put up at the doorsteps of the distilleries themselves as per
the impugned rule and if cost of maintenance of such establishment is foisted
on the licensee distilleries it cannot be said that such a rule is de hors the
provisions of the Act. On the contrary such a provision squarely falls within
the regulatory powers of the Board for framing rules with a view to seeing that
the provisions of the Act are not stifled or tinkered with by such licencee
distilleries.
Reliance
placed by learned counsel for the appellants on a Constitution Bench judgment
of this Court in Indian Mica Micanite Industries v. The State of Bihar and
others 1971 (2) SCC 236 also cannot be of any avail as in that case this Court
was concerned with the question whether the appellant who was a consumer of
denatured spirit could be subject to a levy by way of fee under Rule 111 of the
Rules framed under Section 90 of the Act. In paragraph 17 of the Report the
Constitution Bench considered the nature of the service rendered by the
Government to the appellant, namely, consumer of denatured spirit. It was
observed in the said paragraph that so far as the manufacturing process was
concerned, the appellant or other similar licensees had nothing to do with it.
They were only the purchasers of manufactured denatured spirit. Hence the cost
of supervising the manufacturing process or any assistance rendered to the
manufacturers could not be recovered from the consumers like the appellant.
Further under Rule 9 of the Board's rules, the actual cost of supervision of
the manufacturing process by the Excise Department was required to be borne by
the manufacturer. There could not be a double levy in that regard. In this
connection, it was observed that the State was not rendering any service to the
consumer of denatured spirit when it was maintaining its own staff for
regulating the manufacturing process of such spirit. We fail to appreciate how
this decision can be of any assistance to the learned counsel for the
appellants for the simple reason that in this very judgment Rule 9 of the
Board's Rules which is impugned before us was referred to as a rule which was
operative qua manufacturers of spirit. It was only Rule 111 which was on the
anvil of scrutiny and in connection with the said Rule it was held that because
the State was not rendering any special service to the consumer of denatured
spirit the impugned levy under Rule 111 was not justified.
Such
is not the case before us. It is also pertinent to note that even though
constitutional validity of Rule 9 was not challenged in the aforesaid case it
was noted by the Court that the said Rule justifiably sought to recover actual
cost of supervision of the manufacturing process by the Excise Department from
the manufacturer distillery. Learned counsel for the appellants then placed for
our consideration decision of another Constitution Bench of this Court in
Synthetics and Chemicals Ltd. and others v. State of U.P. and others (1990) 1
SCC 109. In that case this Court was concerned with the constitutional validity
of the levy by way of vend fee imposed by the respondent-State on industrial alcohol.
It was held that such imposition by the State was beyond the legislative powers
conferred on the States concerned by any of the entries in List II or III of
the Constitution of India. Reliance was placed on the observations in paragraph
86 of the Report wherein by way of sub-para (d) it was observed.
"However,
in case State is rendering any service, as distinct from its claim of so-called
grant of privilege, it may charge fees based on quid pro quo. See in this
connection, the observations of Indian Mica case.
Even
these observations cannot be of any assistance to the appellants for supporting
their contention that impugned Rule 9 is de hors the provisions of the Act.
On the
other had learned senior counsel Shri Sanyal for the respondents heavily leaned
on two decisions of this Court in M/s Gujchem Distilleries India Ltd. v. State
of Gujarat and another (1992) 2 SCC 399 and Shri Bileshwar Khand Udyog Khedut Sahakari
Mandali Ltd. v. State of Gujarat and another (1992) 2 SCC 42 wherein this Court
has taken the view that levy of supervisory charges from manufactures of
industrial alcohol by a manufacturer in its own distillery governed by the
provisions of Bombay Prohibition Act, 1949 was perfectly valid. Learned counsel
for the appellants, however. contended that the aforesaid two decisions were
based on the express language of Section 58-A in the Bombay Prohibition Act,
1949 empowering the State Government by general or special order to direct that
the manufacture, import, export, transport, storage, sale, purchase, use,
collection or cultivation of any intoxicant, denatured spirituous preparations,
hemp, Mhowra flowers, or molasses shall be under the supervision of such
Prohibition and Excise or police Staff as it may deem proper to appoint, and
that the cost of such staff shall be paid to the State Government by person
manufacturing, importing, transporting, storing, selling, purchasing, using,
collecting or cultivating the intoxicant, denatured spirituous preparation,
hemp, Mhowra flowers or molasses. To that extent learned counsel for the
appellants is right. However, in the present Act with which we are concerned
even though there is no such express provision like Section 58-A of the Bombay
Prohibition Act, 1949 there is sufficient statutory provision in that behalf in
the shape of Section 38(1)(a)(ii) road with the relevant clauses of Section 90
noted by us earlier. It cannot, therefore, be said that the impugned Rule 9 is
ultra vires the provisions of the Act.
The
High Court was, therefore, justified in rejecting the said challenge. Point No.1
is accordingly answered inteh negative.
Point
No.2 This takes us to the consideration of Point No.2. So far as the contention
concerning this point goes, even though it was noted by the High Court in para
39 of the impugned common judgment that the principal question which arises for
consideration is as to whether the Commissioner has the power to appoint an
officer and create an establishment to the charge of distilleries only in a
case where a licence has been granted solely for the purpose of manufacture of
denatured spirit or any other commercial spirit and even though it observed
that the words `commercial spirits' have not been defined under the said Act
and the said words have, therefore, to be given their ordinary meaning, the
High Court has not dilated further on this aspect. Nor has it pronounced upon
the alternative contention whether said Rule 9 on its express language can
apply to the distilleries run by the appellants.
In
this connection learned counsel for the appellants vehemently contended that it
is not in dispute between the parties that the appellants are having licences
under Section 15 read with Section 13 not only to run distilleries for
manufacturing denatured spirit or other industrial alcohol but also have licences
to manufacture potable liquor, including country made liquor. In this
connection reliance was placed on averments made in paragraph 2(b) of the
Special Leave Petition which stated that the Hon'ble High Court on an incorrect
premise that "commercial spirit" included all kinds of spirits
including the one fit for human consumption (potable spirit) concluded that the
petitioner's distillery, even though it manufactured denatured and/or
commercial spirit only to the extent of about 10% of its total production, was
liable to pay the establishment charges. So far as this averment is concerned
in the counter affidavit on behalf of respondent no.1 has been stated in
paragraph 4 as under :
"4.
In reply to para 2(a) and (b) I say that it is stated that the Distillery
petitioner is bound to pay the costs of establishment including costs of leave
and pension, contribution and uniform of staff posted by the Excise
Commissioner for proper supervision, according to Rule 9 notified by Board's
Notification No.23-137-2 dated 29th April, 1919.
He
petitioner Distillery is holding excise licence in Form 25 and 28A.
The Licence
Form 25 is licence for manufacture of Denatured Spirit and licence Form 28A is
a License for manufacture of spirit for use in chemicals, industrial,
scientific and other purposes. Section 2(5) of Bihar Excise Act, 1915 (Act II
of 1915) defines "to denature" as meaning to mix spirit with one or
more denaturants in such a manner as may be prescribed by Rule made in this behalf
under clause (3) of Section 90 and denatured spirit means spirit so mixed.
The
commercial spirit is not defined in Excise Act. So it will have a liberal
meaning i.e. spirit for use of commercial purposes.
Petitioner
licencee has got license under Excise Act for manufacture of spirit for
commercial purposes including denatured spirit and is, therefore, undoubtedly
liable to pay the establishment costs as per Rule 9 framed by Board in exercise
of powers conferred under Section 90 of the Act." It, therefore, becomes clear
that the averment that appellants' distilleries manufacture, amongst others,
potable spirit to the extent of 90% of its total production as compared to 10%
of its production of denatured spirit or commercial spirit is not controverted
at all. Even that apart in paragraph 2 of the judgment of the High Court it has
been stated as a fact that the appellant in Civil Appeal Nos. 4763-63 of 1996
was having licence for compounding and blending foreign liquor amongst others.
Similarly in paragraph 9 of the judgment in appeal it has been noted that so
far as the appellant in Civil Appeal No.4764 of 1996 is concerned its
distillery at Sultanganj was having licence for manufacture of country spirit
in Forms 25, 27, 28 and 28-A. We must, therefore, proceed on the basis of
undisputed factual position on record of these cases that the concerned
distilleries of the appellants were having licences for manufacturing not only
denatured spirit or spirit which could be used for industrial purposes but were
also having licences for manufacturing potable liquor. In the background o this
well established factual position we have to consider the alternative
contention canvassed by learned counsel for the appellants. We have already
extracted Rule 9 earlier.
The
first part of the Rule prior to its amendment by which second part got added to
it, authorised the Commissioner to appoint such officers and establishment as
he thinks fit to the charge of a distillery. The words `to the charge of a
distillery' were interpreted by the High Court to mean, `at cost of the
distiller'. This interpretation was strongly relied upon by learned senior
counsel Shri Sanyal for the respondents. In our view the said interpretation
cannot be countenanced. The first part of Rule 9 contemplates appointment of
officers and establishment as thought fit by the Commissioner with a view to
taking charge of the distillery for supervisory purposes. The context in which
the said phraseology was employed by the rule making authority leaves no room
for doubt that the words `to the charge of a distillery' were meant to empower
such officers and establishment contemplated by Rule 9 to be in charge or
control of distillery for the purposes of supervision. The term `charge' can
obviously not mean the `cost' of the distillery as the aspect of cost of such
establishment and officers was taken care of by the rule making authority by
enacting the second part of the Rule. If the term `charge' included the cost of
such officers and establishment there would have been no need to enact the
second part of the Rule later on for imposing such costs on the concerned
distilleries. Even that apart if we see the first part of Rule 9 which employs
the words `to the charge of a distillery' in the context of succeeding rules
especially Rule 10 which deals with the duty of the distiller to provide
suitable quarters for the officer-in-charge and other establishment, Rule 11
which enjoins the officers in charge of the distillery in case of fire or
accident to immediately attend to the same, Rule 15 which requires the
distiller to keep accounts which should be made open at all times for
inspection by the Excise Officer in charge and also Rules 16 and 17 which deal
with the authority and power of Excise Officer in charge, no doubt is left that
the rule making authority contemplated the concerned officers and establishment
to be put in charge of the distillery when it employed the words `to the charge
of a distillery' in the first part of the Rule which got enacted simultaneously
with the succeeding rules, that is, Rule 10 onwards as noted by us above. An
officer cannot take charge of the distillery unless he is put in charge of such
distillery in exercise of powers of the Commissioner under Rule 9, first part.
Now we
come to the consideration of the moot question whether the second part of Rule
9 which is the main provision which is impugned in the present proceedings can
apply to distilleries run by the appellants which are having multiple licences
to manufacture not only denatured spirit or other industrial spirits but also
potable spirits or liquor fit for human consumption. The answer to this moot
question has to be found from the express wording employed by the rule making
authority in the second part of the said rule. Before the said part can be
pressed in service against any distillery the following conditions must be
shown to have existed in connection with such a distillery :
1. The
concerned distillery must have licence for the purpose of manufacturing
denatured spirit or any other commercial spirit.
2.
Such a licence must be solely for the aforesaid purpose and for no other
purpose.
If
those two conditions are satisfied then only the whole cost of such officers
and establishment can by required to be borne by such distillery. It is obvious
that the distilleries run by the appellants which are made to defray the cost
of officers and establishment under Rule 9 are not distilleries which are
manufacturing only denatured spirit or any other commercial spirit nor are they
having licences solely for the purpose. Shri Sanyal, learned senior counsel for
the respondents submitted that the words `any other commercial spirits' would
include even potable spirit or liquor fit for human consumption as it has also
commercial value and can be sold in the market. He further submitted that the
word `or' found in between the terms `denatured spirit' and `any other
commercial spirit' may be read as `and' and when so read it can be held that
second part of Rule 9 can apply to even those distilleries which have licences
for manufacturing denatured spirit and also other commercial spirits including
potable liquor. It is not possible to agree with this contention for the simple
reason that such a contention would ignore the term `solely' employed by the
rule making authority in its wisdom in the second part of Rule 9. It has to be
held that before it can be applied to any distillery it must be shown that such
distillery is licensed solely or wholly to manufacture either denatured spirit
or any other commercial spirit. If the word `or' is read as `or' then it must
be shown by the respondent that the appellants' distilleries are having licences
for either solely and wholly manufacturing denatured spirit or are having licences
for solely and wholly manufacturing any other commercial spirit which may be
even assumed to include potable liquor. If a distillery has the licence to
manufacture denatured spirit and also a licence to manufacture any other
commercial spirit, it cannot be said to be having a licence solely for the manufacture
of either of these two types of spirits. On the express language of the rule,
distilleries having multiple licences get excluded from its sweep. On the facts
of the present case, we have seen that the appellant's distilleries are having
multiple licences. None of the distilleries of the appellants are having licence
solely to manufacture denatured spirit or only to manufacture potable liquor
even assuming that it is cover by the term `commercial spirit'.
Having
realised this difficulty Shri Sanyal, learned senior counsel for respondents
submitted that the word `or' may be interpreted as `and'. Even if the said
submission is accepted it would not advance the case of the respondents for the
simple reason that the words `denatured spirit and any other commercial spirit'
if read as suggested by Shri Sanyal will result in the succeeding words `any
other commercial spirit' getting colour from the proceeding words `denatured
spirit' meaning thereby any other commercial spirit contemplated by the said
phrase must fall in the same category or class as denatured spirit which
precedes the class of such residuary commercial spirit as the succeeding words
refer to `any other commercial spirit' meaning thereby commercial spirits other
than denatured spirits.
Consequently
if the word `or' is read as `and' any other commercial spirit would fall in the
same category as denatured spirit meaning thereby those spirits which are not
fit for human consumption. They would not cover potable spirits even assuming
that they are commercial spirits as contended by Shri Sanyal. However, in our
view other commercial spirits as contemplated by the Rule are those spirits
which are unfit for human consumption and they do not cover potable liquor
which cannot fall in line with denatured spirit. In the context of denatured
spirit as mentioned in the Rule the succeeding words, `or any other commercial
spirit' must mean those spirits which fall in the category of spirits unfit for
human consumption like denatured spirits. In other words the term `other
commercial spirits' would take in its sweep only those spirits which are used
for industrial purposes or any other purpose other than for human consumption.
Consequently reading the word `or' as `or' or even reading it as `and' the
appellants' distilleries which are having multiple licences to manufacture not
only denatured spirit or other industrial spirit but also potable liquor would
get out of the sweep of the second part of Rule 9. On the express language of
Rule 9, second part, the alternative contention canvassed by the learned
counsel for appellants has got to be accepted. It must, therefore, be held that
second part of Rule 9 will apply to only those distilleries which are licensed
solely and wholly for the purpose of manufacturing either denatured spirit or
any other commercial spirit unfit for human consumption but would not include
those distilleries which are licensed for manufacturing along with denatured
spirit or other industrial spirits unfit for human consumption, also potable liquor
which is fit for human consumption. As the appellants' distilleries are not
having such sole and only licences for manufacturing denatured spirit or other
commercial spirit unfit for human consumption but are also having composite and
multiple licences to manufacture potable liquor which obviously yields large
revenue to the State by way of excise duties, they are outside the sweep of
second part of Rule 9. It is obvious that to such distilleries the first part
of the Rule may apply wherein the State will have to bear the cost of providing
supervisors and establishments for that purpose but the cost of such
establishment cannot be foisted on such distilleries. Point No.2 is, therefore,
answered in the negative.
In the
result the appeals partly succeed. The common judgment under appeal is set
aside. The writ petitions filed by the appellants in the High Court will stand
allowed in part by holding that even though Rule 9 is intra vires the
provisions of the Act the second part of Rule 9 regarding foisting of
establishments costs on the appellants' distilleries does not cover these
distilleries. However, it is clarified that first part of Rule 9 can be applied
to the appellants' distilleries but at the cost of the State exchequer only. By
an interim order dated 21st March 1996 the interim stay of the impugned demands
was continued subject to the condition that the appellants shall pay 50% of the
arrears of the demand within eight weeks and will continue to pay 50% of the
future demand. ..... ......
......
Even if the appellants succeeded they will be entitled to refund of the amount
paid by them with interest at the rate of 12%. In view of this interim order,
as the appellants have succeeded in these appeals as aforesaid in getting the
impugned demands quashed the respondents are directed to refund the amounts
collected by them from the appellants pursuant to the impugned demands pending
these appeals with 12% interest from the date of receipt of such amounts till
repayment. The amounts shall be refunded within eight weeks from the receipt of
the copy of this order by the respondents. The appeals accordingly are partly
allowed.
In the
facts and circumstances of the cases there will be no order as to costs all
throughout.
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