1. Challenge to notification levying import fee on rectified spirit used for manufacturing potable liquor under the Jharkhand Excise Act, 1915. (Para 1 , 2 )
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2019 Supreme(SC) 717
SUPREME COURT OF INDIA
A.M. Khanwilkar, Ajay Rastogi, jj.
The State of Jharkhand & Ors. – Appellant(s)
Versus
M/S Ajanta Bottlers & Blenders Pvt. Ltd. – Respondent(s)
CIVIL APPEAL NO.5138 OF 2019 (Arising out of SLP (C) No.449 of 2014)
Decided On : 02-07-2019
Important Points
IMPORTANT POINT
Rule 106 (Tha) of Jharkhand Excise Rules, 2018 purports to empower State to levy charges on final processed product being foreign liquor (IMFL) manufactured by use of imported rectified spirit.
Rule 106 (Tha) of Jharkhand Excise Rules, 2018 purports to empower State to levy charges on final processed product being foreign liquor (IMFL) manufactured by use of imported rectified spirit.
Subject
Excise - DUTY
Act Referred
CONSTITUTION OF INDIA: Entry.6, Entry.8, List.ii
JHARKHAND EXCISE RULES: R.106(t)(h)(a)
JHARKHAND EXCISE RULES: R.106(t)(h)(a)
Headnote
(A) Jharkhand Excise Rules, 2018 – Rule 106 (Tha) – Notification dated 6th November, 2012, as published in official gazette on 10th November, 2012, issued by Board of Revenue – Validity of on touchstone of legislative competence of State to levy tax/fee on import of rectified spirit – Levy under impugned Rule 106 (Tha) ripens or fructifies only after original raw material (imported rectified spirit) has undergone distillation process at two different stages and transmute and mutate into an intoxicant or potable alcohol palatable to human consumption, but its (impost) collection is effected just before bottling it in that form (potable liquor) – Levy predicated in this rule is on total quantity of imported rectified spirit utilised for mutating it in form of IMFL, a new produce – Substance of provision is to levy charges on product IMFL produced or manufactured by use of imported rectified spirit – In that sense, levy is not on input (imported rectified spirit) of final product as such but is on manufactured or produced product being potable alcohol palatable to human consumption – Impost is not on imported rectified spirit as such but only on produced foreign liquor before it is bottled for sale in wholesale or retail market, as the case may be – Challenge to impugned rule is on assumption that it permits competent authority to levy charges on imported rectified spirit and not fit for human consumption but which has potency of being used for producing intoxicants or potable liquor though exclusively meant for industrial purposes – Once that assumption is discounted or disregarded, nothing more survives for consideration – If it is a case of excise duty on potable liquor produced by use of imported rectified spirit, State has jurisdiction to legislate in respect of duty on production or manufacture of such goods produced or manufactured within State – State need bear no quid pro quo to services rendered to licensee for production of foreign liquor (IMFA) – Impugned judgment and order of High Court set aside. (Paras 10, 11, 14, 15 and 18)
(B) Constitution of India – Entry 6 and 8 of List II – Legislative competence of State – State may pass any legislation in nature of prohibition of potable liquor referable to Entry 6 and 8 of List II and may also laydown regulations to ensure that non-potable alcohol is not diverted and misused as a substitute for potable alcohol – Had it been case of levy on non-potable alcohol (imported rectified spirit) per se, only then question about competency of State Legislature or justness of levy on doctrine of quid pro quo may become relevant – However, if it is a case of legislation in respect of potable alcohol, State would be competent to legislate in that regard and levy charges – be it for regulating the same or impost for parting with its rights regarding manufacture, storage, export, sale and possession thereof. (Para 11)
Facts of Case:
Seminal issue to be answered in this appeal is about purport of notification dated 6th November, 2010 as published on 10th November, 2012 and whether it is in nature of legislation by State on subject of industrial alcohol. High Court opined that appellant-State had failed to justify impugned levy on rectified spirit on the basis of services provided by State in lieu thereof or being in the nature of quid pro quo.
Findings of Court:
Fact that manufacturer-respondent has already obtained requisite licences for import of rectified spirit and production of foreign liquor (IMFA) on payment of fixed rates does not mean that State has surrendered all facets of its rights in respect of every form of activity in relation to potable liquor – its manufacture, storage, export, import, sale and possession. The amended provision is an enabling provision authorising the State to levy charges or impost for ceding its one or more of the activity in respect of foreign liquor (IMFL) produced by use of imported rectified spirit. Such impost can be in addition to the general power of the State to issue licence on payment of fees for production and sale of potable liquor.
Result : Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Whether the levy targets non-potable industrial alcohol beyond State competence or potable liquor as a regulatory measure not requiring quid pro quo. (Para 3 , 4 , 5 , 6 )
3. The levy fructifies only after conversion of rectified spirit into potable liquor, characterizing it as a charge on the final product rather than industrial alcohol. (Para 8 , 9 , 10 , 11 , 14 , 15 , 16 )
4. State has legislative competence to levy regulatory charges on potable liquor, and such charges for intoxicants do not necessitate a commensurate quid pro quo. (Para 11 , 12 , 14 )
5. Appeal allowed; High Court judgment set aside and writ petition dismissed. (Para 17 , 18 )
6. Does the State have legislative competence to levy fees on rectified spirit?
The State cannot levy excise duty or fees on rectified spirit as industrial alcohol. However, it possesses legislative competence to levy charges on potable liquor fit for human consumption produced using such spirit. (Para 11 , 13 )
7. Is a commensurate quid pro quo required for fees levied on the production of potable liquor?
No. Fees for parting with the State's exclusive rights to manufacture or sell intoxicants are considered prices of privilege and do not require a reasonable relationship with services rendered to the licensee. (Para 12 , 14 , 15 )
8. How does the timing of a levy affect its legal characterization as a tax on industrial alcohol?
If a levy is deferred until the raw material is converted into a potable product, the substance of the levy is on the final manufactured product, not the industrial input. (Para 10 , 11 )
JUDGMENT
A.M. Khanwilkar, J.
1. Leave granted.
2. This appeal takes exception to the impugned judgment and order of the High Court of Jharkhand at Ranchi in Writ Petition (T) No.7499 of 2012 dated 25th July, 2013, whereby the writ petition filed by the respondent to assail the notification dated 6th November, 2012, as published in the official gazette on 10th November, 2012, issued by the Board of Revenue, Jharkhand in exercise of powers conferred under Section 90 of the Jharkhand Excise Act, 1915 came to be allowed on the ground that the State had no legislative competence to levy tax/fee on the import of rectified spirit, as it is a non-potable liquor i.e. alcohol not fit for human consumption. Additionally, the High Court opined that the appellant-State had failed to justify the impugned levy on rectified spirit on the basis of services provided by the State in lieu thereof or being in the nature of quid pro quo. The original notification is in Hindi, the same reads thus:
“ANNEXURE-3
>kj[k.M xtV
vlk/kkj.k vad
>kj[k.M ljdkj }kjk izdkf'kr
la[;k 680 19 dkfrZd] 1934 kdkCn
jkaph] 'kfuokj 10 uoEcj] 2012
jktLo i"kZn
vf/klwpuk
8 uoEcj] 2012
la[;k&1@uhfr&40&21@2012&926@jk0i0&>kj[k.M mRikn vf/kfu;e 1915 ¼vf/kfu;e&2] 1915½ dh /kkjk&90 }kjk iznRr 'kfDr;ksa dk iz;ksx djrs gq,] jktLo i"kZn] >kj[k.M] i"kZn vf/klwpuk la[;k&23&137&2] fnukad 29 vizSy] 1919 ds vUrxZr cukbZ xbZ fu;ekoyh fu;e&106¼V½ ds ckn ,d u;k fu;e&106¼B½ fuEu izdkj tksM+rh gS%&
fu;e&106 ¼B½%&^^vf/klwpuk la[;k&470 ,Q- fnukad 15 tuojh] 1915 ds dafMdk&3 ds 'kh”kZ ^fons'kh 'kjkc^ dk mi 'kh”kZ (d) ds vUrxZr mn~?kksf"kr fons'kh 'kjkc ftldk fofuekZ.k mRikn vf/kfu;e dh /kkjk&2 ¼15½ (iii) ds vuq:i fd;k tk,xk ds mRiknu gsrq vk;kfrr lq"ko@la'kksf/kr lq"ko] ftldk mi;ksx loZizFke iqujklou fof/k ls bZ-,u-,- ds fofuekZ.k esa fd;k tk,xk] ds fons'kh efnjk esa is; iz;kstukFkZ ifjorZu ds le; ijUrq efnjk ds cksrycanh ds iwoZ] bl mn~ns'; ls vk;kr dh x;h lq"ko@la'kksf/kr lq"ko dh dqy ek=k ij 6@& : izfr ,y-ih- yhVj dh nj ls vk;kr 'kqYd tek fd;k tk,xkA**
;g vf/klwpuk jktdh; xtV esa izdk'ku dh frfFk ls izHkkoh gksXkkA
la[;k&1@uhfr&40&21@2012&927@jk-i-&>kj[k.M mRikn vf/kfu;e] 1915 ¼vf/kfu;e&2] 1915½ dh /kkjk&90 }kjk iznRr 'kfDr;ksa dk iz;ksx djrs gq,] jktLo i"kZn] >kj[k.M] i"kZnh; vf/klwpuk la[;k&23&137&2] fnukad 29 vizSy] 1919 ds vUrxZr cukbZ xbZ fu;ekoyh fu;e&106 ¼B½ ds ckn ,d u;k fu;e&106¼M½ fuEu izdkj tksM+rh gS%&
fu;e&106 ¼M½ %& ^>kj[k.M jkT; esa ns'kh efnjk@elkysnkj ns'kh efnjk ds is; iz;kstukFkZ mRiknu ds mn~ns'; ls] vk;kfrr lq"ko@la'kksf/kr lq"ko ds ns'kh efnjk ,oa elkysnkj ns'kh efnjk esa ifjorZu ds le; ijUrq efnjk ds cksrycanh vFkok lSpsfVax iwoZ] of.kZr mn~ns'; ls] vk;kr dh xbZ lq”ko@la'kksf/kr lq”ko dh dqy ek=k ij 0-25 :- ¼iPphl iSlk½ izfr cYd yhVj dh nj ls vk;kr 'kqYd tek fd;k tk,xkA**
;g vf/klwpuk jktdh; xtV esa izdk'ku dh frfFk ls izHkkoh gksxkA
la[;k&1@uhfr&40&21@2012&928@jk-i-&>kj[k.M mRikn vf/kfu;e] 1915 ¼vf/kfu;e&2] 1915½ dh /kkjk&90 }kjk iznRr 'kfDr;ksa dk iz;ksx djrs gq,] jktLo i"kZn] >kj[k.M] i"kZnh; vf/klwpuk la[;k&23&137&2] fnukad 29 vizSy] 1919 ds }kjk cukbZ xbZ fu;ekoyh ds vUrxZr vf/klwfpr vf/klwpuk la[;k&1@uhfr&10&33@ 2008&583] fnukad 15 ebZ] 2008 }kjk cuk;s x;s fu;e&106 ¼t½ esa fuEu izdkj la'kks/ku djrh gS%&
fu;e&106 ¼t½ %& ^^>kj[k.M jkT; ds ckgj fdlh Hkh LFkku@{ks= ls lq"ko@la'kksf/kr lq"ko@bZ-,u-,- dk] is; iz;kstukFkZ vk;kr fd;s tkus ij] vk;kr dh tkusokyh ek=k ij 0-25 :- ¼iPphl iSlk½ izfr cYd yhVj dh nj ls ikjd 'kqYd ¼ijfeV Qh½ >kj[k.M jkT; esa ns; gksxkA**
;g vf/klwpuk jktdh; xtV esa izdk'ku dh frfFk ls izHkkoh gksxkA
jktLo i"kZn] >kj[k.M ds vkns'kkuqlkj]
¼g-@&½
vLi"V]
mi lfpo]
jktLo i"kZn] >kj[k.M] jkaphA^^
Free translation thereof has been filed by the appellant as annexure P-2. However, during the hearing as some doubt was raised about the accuracy of annexure P-2, we thought it appropriate to get the document (original in Hindi) translated from the official translator of this Court. That translated version, reads thus:
“Translated version of Gazette by the Official Tran
