( 1. ) THE petitioner took an excise contract for sale of country liquor for a consideration of Rs. 4,81,000 in an auction for the year 1978-79. Under the terms of the licence granted to the petitioner it was required to lift 548 proof litres of Mesala liquor and 1608 proof litres of plain liquor in each quarter from the warehouse. The petitioner committed breach of this condition. Consequently the Collector imposed penalty amounting to Rs. 15,452 which is being recovered from the petitioner as arrears of land revenue. By this petition under Article 226 of the Constitution, the petitioner challenges the said demand.

( 2. ) SECTION 17 of the M. P. Excise Act, 1915 provides that no intoxicant shall be sold except under the authority and subject to the terms and conditions of licence granted in that behalf. Section 18 enables the State Government to lease to any person amongst others the right of selling by wholesale or by retail any liquor, intoxicating drug within any specified area. Section 27 empowers the State Government to accept payment of a sum in consideration of the grant of any lease under section 18. It is under these provisions that excise contracts for sale of liquor are auctioned by the Government. The person in whose favour the contract or lease is granted is given a licence under section 18 (2 ). In addition to the consideration payable under section 27, the Government realises duty under section 25. This section empowers the State Government to levy an excise duty or a countervailing duty on all excisable articles imported or exported or transported or manufactured, cultivated or collected under any licence or manufactured in any distillery established or any distillery or brewery licensed under the Act. Section 26 provides the mode of levying such duty. One of the modes of collecting duty on liquor is at the stage of issue from a warehouse. Subsection (1) of section 62 authorises the State Government to make rules for the purpose of carrying out the provisions of the Act. Clause (h) of subsection (2) of this section in particular enables the Government to make rules prescribing the authority by which and the form in which and the terms and conditions on and subject to which any licence, permit or pass shall be granted. This clause reads as follows:

" (h) prescribing the authority by, the form in which, and the terms and conditions on and subject to which any licence, permit or pass shall be granted, and may by such rules, among other matters,- (i) fix the period for which any licence, permit or pass shall continue in force, (ii) prescribe the scale of fees or the manner of fixing the fees payable in respect of any such licence permit or pass, (iii) prescribe the amount of security to be deposited by holders of any licence. permit or pass for the performance of the conditions of the same, (iv) prescribe the accounts to be maintained and the returns to be submitted by licence-holders, and (v) prohibit or regulate the partnership in, or the transfer of, licences;"

( 3. ) BY the rules made in 3960 under section 62 of the Act, the State government prescribed conditions to be inserted in the licences. Condition no. 2-C was then as follows:

"the minimum quantity for taking issues from the warehouse for sale is fixed at. . . . . . . . . . . . litres spiced spirit and. . . . . . . . . . . . litres plain spirit. You shall be liable to make good every month the deficit of monthly average of the total minimum duty on or before the 10th day of each month following the month to which the deficit duty relates. "

The validity of condition No. 2-C in the above shape came to be considered by the Supreme Court in Bimalchandra v. State of M. P. (1971 M PL J 168 ). It was held that sections 25 and 26 of the Excise Act did not authorise the State Government to charge any duty on the liquor which was not issued to the licensee and the condition was held to be invalid. Condition No. 2-C as prescribed by the rules was then amended