1. Dispute over recovery of establishment costs for excise supervision from composite distilleries under Rule 9 of the Bihar & Orissa Excise Rules, 1919. (Para 1 , 2 , 3 , 4 )
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1996 Supreme(SC) 1255
1996(6) Supreme 718
SUPREME COURT OF INDIA
S.P. Bharucha and S.B. Majmudar, JJ.
Shree Krishna Gyanoday Sugar Ltd. etc. -Appellants
versus
State of Bihar & Ors. -Respondents
Civil Appeal Nos. 4762-63 of 1996
with
Civil Appeal No. 4764 of 1996
Decided on 14-8-1996
Counsel for the Parties :
For the Appellants : Y.V. Giri, Sr. Advocate, Jyoti Saran, Praveen Kumar and Ms. Vijay Lakshmi Menon, Advocates.
For the Respondents : S.B. Sanyal, Sr. Advocate and B.B. Singh, Advocate.
Important Points
IMPORTANT POINT
Rule 9 of the Bihar & Orissa Excise Rules, 1919, framed under Bihar Excise Act, 1915, is not ultra vires the provisions of the Act and the distilleries which are manufacturing not only denatured spirit but also potable liquor are governed by first part of the Rule.
Rule 9 of the Bihar & Orissa Excise Rules, 1919, framed under Bihar Excise Act, 1915, is not ultra vires the provisions of the Act and the distilleries which are manufacturing not only denatured spirit but also potable liquor are governed by first part of the Rule.
Subject
Excise - Rule 9 of Bihar & Orissa Excise Rules, 1919
Act Referred
Bihar Excise Act, 1915: S.2, S.13, S.15, S.22, S.27, S.38, S.49, S.90
Bihar & Orissa Excise Rules, 1919: R.9, R.10, R.11, R.15, R.16, R.17, R.111
Medicinal and Toilet Preparations (Excise Duties) Act, 1955
Bombay Prohibition Act, 1949: S.58-A
Bihar & Orissa Excise Rules, 1919: R.9, R.10, R.11, R.15, R.16, R.17, R.111
Medicinal and Toilet Preparations (Excise Duties) Act, 1955
Bombay Prohibition Act, 1949: S.58-A
Headnote
(i) Bihar Excise Act, 1915-Bihar & Orissa Excise Rules 1919-Rule 9-Legality of-Challenged-Whether Rule 9 is ultra vires the provisions of the Act ?-(No).
Held : Section 38 sub-section (1) (a) (ii) read with Section 90 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. (Para 9)
(ii) Bihar Excise Act, 1915-Bihar & Orissa Excise Rules 1919-Rule 9-Applicability-Second part of Rule 9 will apply to only those distilleries which are licensed solely and wholly for manufacturing either denatured spirit or commercial spirit-Appellants distilleries having composite and multiple licences to manufacture potable liquor-They are outside the sweep of second part of Rule 9-To such distilleries first part of Rule may apply - State to bear cost of providing supervisors and establishments for that purpose. (Para 15)
Legal Category Hierarchy
Table of Contents
2. Whether Rule 9 is ultra vires the Bihar Excise Act, 1915, and whether it applies to distilleries manufacturing both denatured and potable spirits. (Para 4 , 6 , 7 )
3. Rule 9 is sustainable under Section 38 and 90 for regulatory supervision; however, the term solely excludes distilleries with multiple licenses for different spirit types. (Para 9 , 10 , 11 , 13 , 14 , 15 )
4. Rule 9's cost-recovery provision applies only to distilleries licensed solely for denatured or non-potable commercial spirits, excluding those with composite licenses for potable liquor. (Para 14 , 15 )
5. Appeals partly allowed; Rule 9 held intra vires, but establishment cost demands against composite distilleries quashed with directions for refund. (Para 16 )
6. Is Rule 9 of the Bihar & Orissa Excise Rules, 1919, ultra vires the Bihar Excise Act, 1915?
No. The rule is sustainable under Section 38(1)(a)(ii) and Section 90, which empower the Board to impose restrictions and conditions on licenses to regulate and supervise the manufacture of intoxicants to prevent illegal conversion of spirits. (Para 9 , 11 )
7. Does the cost-recovery provision of Rule 9 apply to distilleries manufacturing both denatured spirit and potable liquor?
No. The rule applies only to distilleries licensed solely for the manufacture of denatured or other commercial spirits. Distilleries holding multiple licenses, including those for potable liquor, are excluded from the requirement to bear establishment costs. (Para 14 , 15 )
8. Does the term other commercial spirit in Rule 9 include potable liquor?
No. In the context of denatured spirit, other commercial spirit refers to spirits unfit for human consumption used for industrial or other non-human purposes, and does not encompass potable liquor. (Para 15 )
JUDGMENT
S.B. Majmudar, J.-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
2. A few relevant facts leading to these proceedings may be noted at this stage. Appellant 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 altar 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 No. 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.
3. 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.
4. Both the appellants contended before the High Court that their distilleries were having composite licences 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.
5. 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 alternative contention was concerned it was noted by the High Court but it appears that no clear finding was rendered by the High Co
