The main legal point established in the judgment is the importance of correct interpretation of license conditions and the proper exercise of statutory powers by the Excise Commissioner and the State Government.

1. M/s Pernod Ricard India Pvt. Ltd. , a company incorporated under the Companies Act, 1956, engaged in the business of manufacturing and bottling alcoholic beverages in India under diverse brands and trade names, has filed this writ petition to call for the records of Revision No. 48 of 2007 decided by Principal Secretary, Excise, Government of Uttar Pradesh, and to quash the show cause notice dated 17. 8. 2006 and the order of the Secretary, Excise, Government of U. P. dated 7. 8. 2007, and all proceedings taken pursuant thereto. The company has also prayed for declaring that there is no violation of condition No. 2 of license in Form FL-3a by the petitioner; to hold and declare that the petitioner is not liable for payment of any purchase tax in respect of grain neutral spirit and concentrate of alcoholic beverages procured and imported by Seagram Manufacturing Pvt. Ltd. from outside the State of U. P. , during the years 1994 to 2006 and in the alternative to declare condition No. 2 in the license issued under the U. P. Bottling of Foreign Liquor Rules, 1969 to be ultra vires and to strike down the same. In the alternative the petitioner has also sought a declaration that the Grain Neutral Spirit (GNS) and Concentrate of Alcoholic Beverages (CAB) procured by the petitioner are not alcohol within the meaning of the U. P. Motor Spirit, Diesel Oil and Alcohol Taxation Act, 1939, and are not subject to levy of purchase tax under Section 3 (c) thereof, and to declare that the levy of import fee of Rs. 2/- per AL, on the import and procurement of GNS and CAB to be illegal and unconstitutional.

2. Heard Shri Sudhir Chandra, Senior Advocate assisted by Shri Vivek Chaudhary for the petitioner. Learned Standing Counsel appeared for the respondents.

3. Brief facts giving rise to this petition are that Seagram Company Ltd. , Montreal, Canada, a then leading transnational alcoholic and non-alcoholic beverage company was given approval by the Government of India vide letter dated 20. 7. 1993 to set up a wholly owned subsidiary in India to undertake a composite spirits/ wine/ fruit based products manufacturing/ blending/ upgrading, of locally manufactured liquor products, Indian Made Foreign Liquor, bottling, marketing and an inhouse Research and Development facility, in India subject to the condition that the proposed Indian subsidiary was to manufacture/ blend 25,000 KL per annum, of non-molasses based potable spirit with an existing license holder, and using existing licensed capacity. The approval took specific note of the fact that the project would involve import of scotch malt spirits to be used in upgrading locally manufactured liquor. Seagram India Private Ltd. , a company with its registered office at New Delhi changed its name to Pernod Ricard India Private Limited and promoted a new company, Seagram Manufacturing Pvt. Ltd. (SMPL), which is wholly owned subsidiary of Seagram India Private Ltd. A letter of intent dated 7. 10. 1993 was issued by Government of India to start its distillation activity with a capacity of 5000 KL per annum. The letter of intent was transferred to SMPL on 20. 5. 1994.

4. The SMPL identified Daurala Sugar Works, DCM Shriram Industries Ltd. , Daurala, Distt. Meerut, the holder of a licence in Form FL-3, at its plant at Daurala. SMPL entered into an agreement with Daurala Sugar Works (DSW) to assign to SMPL upto 5000 KL per annum bottling capacity under the license.

5. The DSW as the holder of licence in Form FL-3 by an application dated 30. 5. 1994 applied to the Excise Commissioner, U. P. for permission to assign a part of their privilege under the said licence in favour of SMPL and for grant of a licence in Form FL-3a in favour of SMPL. SMPL also applied separately for licence in Form BWFL 2. The Excise Commissioner, U. P. granted a license to SMPL in the printed Form FL- 3a for a period from 23. 9. 1994 to 31. 3. 1995 and which has been renewed from year to year under the U. P. Exci