The main legal point established in the judgment is that the classification of distilleries into captive and non-captive units was based on a rational basis, and the distilleries could not demand a higher price than stipulated in the Government Order after making the supplies without protest.

( 1 ) THESE writ appeals arise out of an order passed by a learned Single judge of this Court whereby writ petitions filed by the petitioners- appellants have been dismissed and the demand raised against them upheld. The controversy arises in the following backdrop:

( 2 ) THE appellants are carrying on business in the manufacture of rectified Spirit in the distilleries established by them for that purpose. The spirit manufactured by the appellants is almost entirely used for the manufacture and bottling of arrack which is in turn regulated by the karnataka Excise (. Manufacture and Bottling of Arrack) Rules, 1987. Apart from the said Rules, the provisions of Karnataka Excise (Distillery and Warehouse) Rules, 1967 also makes several provisions regulating allotment of Rectified Spirit, its transportation, storage etc. , rule 31 of the said later set of Rules empowers the respondents to allot rectified Spirit to the arrack manufacturers who take the delivery of the allotted quantity from the distilleries and use the same for the manufacture and bottling of arrack. The State has also been exercising the power to fix the price of Rectified Spirit supplied to the arrack manufacturers. In order however to rationalise the fixation of price payable for the spirit supplied to the arrack manufacturers, the government engaged the services of Sri G. Sudhakar Rao, a Chartered accountant who was required to study the details and recommend an appropriate price structure for sale and purchase of Rectified Spirit and to submit a report in that regard. The Chartered Accountant appears to have selected three distilleries in the State which were according to him representative in character for purposes of determining the cost elements involved in the manufacture of Rectified Spirit. On the basis of the data collected by the Chartered Accountant, he submitted a report in which it was pointed out that the average cost of production of rectified spirit worked out to Rs. 6. 01/- which left plough margin of profit to the units. The report submitted by the Chartered Accountant accordingly recommended that in the case of sugar units with captive distilleries manufacturing Rectified Spirit where transportation cost of molasses and sales tax on the same was not incurred, the Government could fix the price of Rectified Spirit at Rs. 5 per litre. In cases where distilleries manufacturing Rectified Spirit had to depend on supply of molasses from other sugar mills involving additional cost of transportation and sales tax on the molasses purchased by them, the price could go upto Rs. 6/- per litre.

( 3 ) BASED on the above recommendations, the Government issued an order dated 12-5-1992 by which it fixed the price payable to captive and non-captive distilleries for the Rectified Spirit supplied by them from 1-3-1989 onwards. The relevant portion of the said order fixing the price for the period 1-7-1992 onwards reads as under: "iii. The price of Rectified Spirit is fixed uniformly at Rs. 6/- (Six only) per litre. The Bottling Units in the district shall pay Rs. 6/- (Six only) to the Non-captive distilleries towards the cost of spirit. In case of captive distilleries, the Bottling Units shall pay Rs. 5/- (Five only) per litre to the distilleries and the balance of Rs. 1/- (One only) per litre to the department, with effect from 1-7-1992, as per the report of the M/s. G. S. Rao and Company, Chartered Accountants and as recommended by the Excise Commissioner".

( 4 ) FOR the excise year 1993-94, the Government by its order dated 24-8-1998 on the representation made by Karnataka Breweries and distilleries Association, raised the price of Rectified Spirit used in the manufacture of arrack to Rs. 8. 50/- per litre uniformly for both captive and non-captive distilleries. It was in the above background, that a demand was raised against the appellant-Malaprabha Co-operative sugar Factory Limited, for payment of Rs. 13,32,000/- representing the amount c