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 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.

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.