IMPORTANT POINT
The condition empowering the State Govt. to recover the actual cost of Supervisory Staff posted at the premises of respondent company cannot be said to be in any way illegal or ultra vires.

JUDGMENT

Shah, J.-The respondent - company having a D-2 licence for manufacture of Indian Made Foreign Liquor from rectified spirit by blending, reducing and compounding Indian Made Foreign Liquor concentrate, challenged the levy of full costs of supervision and establishments of excise staff posted at its factory premises by filing M.P. No. 1456 of 1993 in the High Court of Madhya Pradesh at Jabalpur. By judgment and order dated 4.5.1993, the High Court quashed the levy of expenses incurred on supervision and establishment cost on the ground that Rule 22 of M.P. Breweries Rules, 1970 was struck down as ultra vires by this Court in case of M/s Lilasons Breweries (Pvt.) Ltd. v. State of Madhya Pradesh [(1992) 3 SCC 293]. In M/s Lilasons Breweries (Pvt.) Ltd. s case, this Court arrived at the conclusion that Rule 22 to the extent it permits raising a demand, which in sum and substance is additional excise duty, without its being actually due, is ultra vires the Act and beyond the rule making power of the State.

2. Impugned judgment and order passed by the High Court is challenged by filing this appeal.

3. It has been pointed out that the High Court proceeded on a misconception that D-2 licences were issued under Rule 22 of the M.P. Breweries Rules, 1970. As a matter of fact, licences were issued under Rules (IV) and (V) of the Distillery & Warehouse Rules. It is pointed out that Brewery Rules are not applicable to the unit of the respondent as it is not a brewery.

4. In support of the aforesaid contention, learned counsel for the appellants has drawn our attention to the Rules applicable to all distilleries and warehouse in Madhya Pradesh. Relevant Rules (IV) & (V) for the grant of licence are as under: --

IV. The Collector may issue, on payment of a fee of Rs.1000/- a licence in Form D-2 for the construction and working of a distillery to any person to whom a wholesale supply licence has been issued.

V. Subject to sanction of the State Government the Excise Commissioner may issue a licence in Form D-2 for the construction and working of a distillery on payment of a fee of Rs. 1000/-.

5. These Rules are framed by the State Government in exercise of powers conferred under Section 18 read with Section 62(2)(e)(g) and (h) of the M.P. Excise Act, 1915. Section 62(2)(h) empowers the State Government to make Rules prescribing the scale of fees or the manner of fixing the fees payable in respect of any licence, permit or pass. Section 18 empowers the State Government to lease to any person the right of manufacturing or of supplying or of selling liquor or intoxicating drug within any specified area, which is under:-

"18. Power to grant lease of right to manufacture, etc.-The State Government may lease to any person, on such conditions and for such period as it may think fit, the right:-

(a) of manufacturing, or of supplying by wholesale, or of both, or

(b) of selling by wholesale or by retail, or

(c) of manufacturing or of supplying by wholesale, or of both, and selling by retail,

any liquor or intoxicating drug within any specified area.

2. The licensing authority may grant to a lessee under sub-section (1) a licence in the terms of his lease; and when there is no condition in the lease which prohibits sub-letting, may, on the application of the lessee, grant a licence to any sub-lessee approved by such authority."

6. Section 27 also empowers the State Government to accept the payment of a sum in consideration of grant of any lease under Section 18, which is as under:-

"27. Payment for grant of leases. (1) 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.

(2) Nothing contained in sub-section (1) shall be construed to preclude the State Government from enhancing or reducing the sum received in consideration of a grant of any lease unde