Back
PATNA HIGH COURT
D.P.Wadhwa and Aftab Alam JJ.
C.I.(India) Ltd.And Ann Etc
Versus
State Of Bihar
Civil Writ Jurisdiction Case No. 4458 of 1996 ;
Decided On : AUGUST 23, 1996
EXCISE DUTY - REVISION - WHOLESALE PRICE OF COUNTRY LIQUOR - REVISION - FACTORS TO BE CONSIDERED - INCREASE IN EXCISE DUTY - FALL IN COST OF RECTIFIED SPIRIT - BINDING NATURE OF CONTRACT - PROMISSORY ESTOPPEL - ARTICLE 14 OF THE CONSTITUTION OF INDIA.
Fact of the Case:
The petitioners were granted exclusive privilege for the wholesale supply of country liquor for a period from July 1, 1995 to March 31, 1999. The wholesale price of country liquor was agreed between the parties on the basis of negotiations and one of its factors, the cost of rectified spirit was taken to be Rs.107- per l. P. Litre. Subsequently, the State Government enhanced the excise duty on country spirit from Rs.26/- to Rs.35/- per L. P. litre. The petitioners challenged the enhancement of excise duty and sought a direction to the respondent authorities to revise the wholesale price of country liquor accordingly.
Finding of the Court:
The court held that the enhancement of excise duty should be logically followed by a corresponding increase in the wholesale price of country liquor. However, the court also held that it was not permissible to take into consideration the reported fall in the cost of rectified spirit, while redetermining the wholesale price of country liquor because of an upward revision in excise duty. The court further held that the action of the authorities in patent disregard of a binding contract was quite unreasonable and arbitrary and violative of the constitutional guarantee under Article 14.
Issues: 1. Whether the enhancement of excise duty should be followed by a corresponding increase in the wholesale price of country liquor? 2. Whether the fall in the cost of rectified spirit can be taken into consideration while redetermining the wholesale price of country liquor because of an upward revision in excise duty? 3. Whether the action of the authorities in patent disregard of a binding contract is violative of the constitutional guarantee under Article 14?
Ratio Decidendi: 1. The court held that the enhancement of excise duty should be logically followed by a corresponding increase in the wholesale price of country liquor because the duty of excise is permissible to pass on to the consumer and there is no provision of law or any term or condition of the grant of exclusive privilege, which would put the wholesale supplier under an obligation to personally bear the payment of excise duty on country liquor. 2. The court held that it was not permissible to take into consideration the reported fall in the cost of rectified spirit, while redetermining the wholesale price of country liquor because of an upward revision in excise duty because such a review of the agreed wholesale price merely on the basis of any change in the cost of rectified spirit has neither taken place in the past nor is a permissible in law. 3. The court held that the action of the authorities in patent disregard of a binding contract was quite unreasonable and arbitrary and violative of the constitutional guarantee under Article 14 because the wholesale price of country liquor was agreed between the parties on the basis of negotiations and one of its factors, the cost of rectified spirit was taken to be Rs.107- per l. P. Litre. The parties to the contract, therefore, are bound by that price and it is not open to the State to reduce it unilaterally and regardless of the protests made by the other contracting party.
Final Decision: The court allowed the petitions and directed the Member, Board of Revenue to re-determine the wholesale price of country liquor taking into account only to increase in the rate of excise duty and on the basis of the cost of rectified spirit being Rs.10/- Per L. P. litre.
D. P. Wadhwa, Aftab Alam and j. JJ.
1. What will be the effect of an upward revision of excise duty on the consolidated price (of which excise duty is admittedly a fraction) at which the suppliers are required to sell country liquor to the retail licencees under a four-year contract granted to them by the government. This is the common question which arises for consideration in the six writ-petitions in this batch, hence, these cases have been heard together and are being disposed of by this judgment.
2. The material facts are brief and without much controversy. A notice dated 3.6.1995 was published in the bihar Gazette (extra-ordinary) of the same date inviting tenders for the grant of exclusive privilege for the wholesale supply of country spirit in sachets/bottles for the period from July 1, 1995 to march 31, 1999. The tenderers were required to submit before the authorities of the Excise Department a project report in which, among other details, the price at which the tenderer was prepared to make the supply of country spirit to the retail licensees was also to be indicated. The quoted price was further to be reduced into its various elements, such as, sacheting/bottling expenses, cost of the sachet film, cost of spirit and the tax leviable thereon etc. The petitioners and several others submitted their tenders along with the required project report stating the rates at which they were willing to make the supplies to the different area mentioned in the tender notice. The Member, board of Revenue invited the tendereres for negotiations for fixing the rates at which country spirit would be supplied in sachets/bottles to the retail licences from the warehouses. Following detailed negotiations between tenderers on the one hand and the authorities of the Excise Department on the other, it was agreed that the wholesale supply of country spirit will be made to the retail licensees at the following unified rates:
2_459_PatLJR1_1997.htm
It is an admitted position that the aforesaid prices were inclusive of (i) Excise duty, (ii) Licence fee, (iii) all kinds of shortages/wastages and (iv) cost of spirit, etc. It is also admitted that at the time the aforesaid prices were determined, the excise duty leviable on country spirit was Rs.26/- per L. P. litre.
3 Following the finalisation of the price on the basis of the negotiations between the parties, 15 persons, including the writ petitioners received the grant of exclusive privilege for the wholesale supply of country liquor in terms of Sec.22 of the Excise Act. The grant was for a period from July 1, 1995 to March 31 1999 and was communicated to the grantees under letter nos.2379, 2387 all dated 23.6.1995 issued to the 15 tenderers. All the letters contained identical terms and conditions and clause 5 contained therein stipulated that the supply of country spirit would be made to the retail licen-cees at the rates mentioned here-in-above. Following the grant of exclusive privilege, licencees in form 27 were also issued in favour of the grantees are required under Sec.22 (2) of the Excise Act.
4. While the aforesaid grants made in favour of the petitioners were subsisting, the State Government in exercise of its power under Sec.27 of the Act, issued a notification on 3.3.1996 making an upward revision in the rate of the excise duty leviable on country spirit and enhanced the rate from Rs.26/- to Rs.35/- per L. P. litre. The enhancement of excise duty on country spirit was not simultaneously followed by revision of its wholesale price which was left fixed at the rates stipulated in clause 5 of the grant and this understandably caused resentment to the petitioners who came to this Court in these writ petitions. In these writ petitions, though the action of the State Government in issuing the notification dated 3.3.1996 enhancing the rate of excise duty was also challenged, the petitioners, realising the futility of such a challenge, focused mainly on the alternative relief claime
AI
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
