PETITIONER: BIMAL CHANDRA RANERJEE Vs. RESPONDENT: STATE OF MADHYA PRADESH DATE OF JUDGMENT: 19/08/1970 BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. SHAH, J.C. GROVER, A.N. CITATION: 1971 AIR 517 1971 SCR (1) 844 1970 SCC (2) 467 CITATOR INFO : D 1975 SC2008 (33) F 1976 SC 633 (2,6) D 1976 SC2020 (12) F 1976 SC2237 (14,15) RF 1980 SC2018 (16) RF 1987 SC 993 (10,13) RF 1991 SC 735 (8,9) R 1992 SC1393 (8,9) ACT: Madhya Pradesh Excise Act (M.P. 2 of 1915), ss. 25, 26, 27, 62(1) and 62(2) cls. (d) and (h)--Condition in licence prescribing minimum liquor to be purchased from the Government and payment of excise duty on liquor not taken delivery of--Validity. HEADNOTE: The appellants were excise contractors. In purported exercise of its powers under cls. (d) and (h) of s.62(2) of the Madhya Pradesh Excise Act 9 1915, which confers power on the State Government to make rules, the State Government introduced a condition in the licences of the appellants prescribing the minimum quantity of liquor which the appellants should purchase from the Government and the compulsory payment of excise duty on the quantity of liquor which they failed to take delivery of. The State Government issued notices demanding the duty. On the question of their validity, HELD : Assuming the power to tax can be delegated to the executive, no tax can be imposed by any bye-law or rule or regulation unless the statute under which the subordinate legislation is made specially authorises its imposition. [850 C-D] In the present case, the Legislature has levied excise duty or countervailing duty only on the excisable articles which have been either imported, exported, transported, manufactured, cultivated or collected under any licence granted under s.13, or manufactured in any distillery or brewery established or licensed under the Act; and the State Government has not been empowered to levy any duty on liquor which the contractors failed to lift. Therefore, the State Government was exercising a power which it did not possess and hence the rule imposing the, condition in the licences and the demand notices are invalid. [849 H; A-C] JUDGMENT:
CIVIL APPELLATE JURISDICTION Civil Appeals Nos. 2214
of 1969 and 308 of 1970.
Appeals from the judgments and orders dated April 9, 1965 of
the Madhya Pradesh High Court in Misc. Petitions Nos. 426
and 524 of 1964 respectively.
M. C. Chagla, R. A. Roman and S. S. Khanduja, for the
appellant (in C.A. No. 2214 of 1969).
R. A. Roman, S. S. Khanduja and N. K. Shejwalkar, for the
appellants (in C.A. No. 308 of 1970).
I. N. Shroff, for the respondents (in both appeals).
The Judgment of the Court was delivered by
Hegde, J. These appeals by certificates granted by the High
Court of Madhya Pradesh raise common questions of law.
Hence we propose to dispose them of by a common order.
845
The appellants herein are excise contractors. They are the
successful bidders for some of the shops in Madhya Pradesh
for the financial year 1964-65. The sale memorandum on the
strength of which auction was held intimated that the
successful bidders will have to sell a prescribed minimum
quantity of liquor in their shops and if they fail to take
delivery of the prescribed minimum quantity of liquor, they
will have to pay excise duty on the quantity of liquor which
they failed to take delivery. On March 20, 1964, the
Government in the purported exercise of its powers under
cls. (d) and (h) of s. 62 of the Madhya Pradesh Excise Act,
1915 (Act 11 of 1915) (the hereinafter referred to as the
Act) issued the notification No. 144401089/V-SR amending the
rules published on January 7, 1960. This notification
prescribed that the conditions mentioned therein should be
inserted in the licences to be issued to the successful
bidders. At present we are only concerned with cl. 2(C)
thereof. That clause reads
“The minimum quantity for taking issues from
the Warehouse for sale is fixed at 3213 p.
liters spiced spirit and 25940 p. liters 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 appellants are challenging the validity of this
notification.
An excise licensee in Madhya Pradesh as in other places has
to meet three charges namely (1) he has to pay the
prescribed licence fee for obtaining the privilege of
vending liquor in a shop (2) he has to pay the price of the
liquor purchased by him generally the Government has a
monopoly of liquor manufacture and (3) he has to pay excise
duty on the liquor purchased by him.
In this case there is no dispute that the appellants had
paid the prescribed licence fee, the price of the liquor
purchased by them and also the duty on the liquor taken
delivery of by them. The dispute centers round the, duty
required to be paid by them under the impugned clause in the
notification of March 20, 1964 referred to earlier. The
controversy is whether the said clause is valid in law.
The Government of Madhya Pradesh have issued demand notices
on the appellants demanding the duty said to be due from
them as per the impugned clause in the notification. The
appellants have challenged the validity of these notices as
well.
It is contended on behalf of the appellants that excise
duty is a tax. The same can be levied on the basis of a
valid law. No
846
tax can be levied on the basis of a contract nor can tax be
levied by executive orders. Tax can only be levied by the
legislature. Hence the fact that cl. 2(C) in the
notification of March 20, 1964 has been made a part of the
licence condition is immaterial. It was contended that the
question for decision is whether the Government of Madhya
Pradesh was entitled to amend its rules and add the impugned
clause as a part of the licence conditions.
The scheme of the Act is similar to the scheme of other
excise Acts in this country. In the Act Excise Duty’ and
“countervailing duty” have been defined [in s. 2(6-A)] as
meaning any, such excise duty or countervailing duty, as the
case may be, as is mentioned in Entry 51 of List II in the
Seventh Schedule to the Constitution, which entry reads
“Duties of excise on the following goods
manufactured or produced in the State and
countervailing duties at the same or lower
rates on similar goods manufactured or
produced elsewhere in India :-
(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic
drugs and narcotics;
but not including medicinal and toilet
preparations containing alcohol or any
substance included in subparagraph (b) of this
entry.”
In view of this entry the State is competent
to levy excise duty only on goods manufactured
or produced in the State. The expression
“export” is defined in s. 2(9) of the Act as
meaning to take out of the State otherwise
than across customs frontier as defined by the
Central Government. The term manufacture is
defined in s. 2 (14). It reads
manufacture’ includes every process whether
natural or artificial by which any intoxicant
is produced or prepared and also
redistillation and every process for the
rectification, flavouring, blending or
colouring of liquor.”
The word “transport” is defined in s. 2 (19) to mean to move
from one place to another within the State.
The excise duty is a duty on Manufacture or production and
countervailing duty is a tax imposed on excisable articles
brought into the State from other parts of the country.
Chapter V of the Act deals with Duties and Fees. That
Chapter contains four sections viz. ss. 25, 26, 27 and 27A.
Section 25 deals with duty on excisable articles. Section
26 prescribes the ways of levying
847
such duty. Section 27 provides for payment for grant of
leases licence fee. Section 27A saves the duties that were
being levied at commencement of the Constitution. Herein we
are not concerned with S. 27-A.
Section 25 reads
Duty on excisable articles :-(1) An excise
duty or a countervailing duty as the case may
be, shall, if the State Government so
direct, be levied on excisable articles-
(a) imported; or
(b) exported; or
(c) transported; or
(d) manufactured, cultivated or collected
under any
licence granted under s. 13; or
(e) manufactured in any distillery
established, or any distillery or brewery
licensed under this Act;
Provided that it shall be lawful for the State
Government to exempt any excisable article
from any duty to which the same may be liable
under this Act.
(2) Duty may be imposed under sub-section
(1) at different rates according to the places
to which any excisable article is to be
removed or according to the strength and
quality of such article.
(3) Notwithstanding anything contained in
subsection (1) duty shall not be imposed
thereunder on any article which has been
imported into India and was liable, on such
importation, to duty under the Sea Customs
Act, VIII of 1878 or the Indian Tariff Act,
VIII of 1894.”
Under this section excise duty or
countervailing duty can be imposed on
excisable article when they are either
imported or exported or transported or
manufactured or cultivated or collected and
not otherwise.
Section 26 deals with the manner of levying
the duty. It says
“Subject to such rules regulating the time,
place and manner as the State Government may
prescribe, such duty shall be levied ratably
on the quantity of exisable article imported,
exported, transported collected or
manufactured in or issued from a distillery,
brewery or warehouse.
848
Provided that
(1) duty may be levied-
(a) on intoxicating drugs by an acreage rate
levied on the cultivation of the hemp plant or
by a rate charged on the quantity collected;
(b) on spirit or bear manufactured in any
distillery established or any distillery or
brewery licensed- under this’ Act-
(i) in accordance with such scale of equi-
valents calculated on the quantity of
materials used, or by the degree of
attenuation of the wash or wort, as the case
may be, as the State Government may prescribe,
or
(ii) by rate charged directly on the mate-
rials used;
(c) on tari, by a tax on each tree from
which the tari is drawn.
(2) where payment is made upon the issue of
an excisable article for sale from a
warehouse, it shall be at the rate of duty in
force on the date of issue of such article
from the warehouse.”
‘Section 27 says
“Payment for grant of leases Instead of or in
addition to any duty leviable under this
chapter, the State Government may accept
payment of a sum in consideration of the grant
of any lease under section 18.”
Section 18 deals with power to grant I ease of
right to manufacture or right to sell
excisable articles.
The only other relevant section for our
present purpose is S. 62 which confers power
on the State Government to make rules. Clause
(1) of that section gays
“The State Government may make rules for the
purpose of carrying out the pro-visions of
this Act.”
In Clause 2 reliance was placed on sub-cls.
(d) and (h). Those sub-clauses read
“In particular, and without prejudice to the
generality of the foregoing provision, the
State Government may make rules.
849
(d) regulating the import, export,
transport, manufacture, collection,
possession, supply or storage of any
intoxicant, or the cultivation of the hemp
plant and may by such rules, among other
matters.-
(i) regulate the tapping of tari producing
trees, the drawing by tari from such trees,
the marking of the same and the maintenance of
such marks;
(ii) declare the process by which spirit
shall be denatured and the denaturation of
spirit ascertained’, and
(iii) cause spirit to be denatured through the
agency or under the supervision of its own
officers;
(d-1) regulating the import, export,
transport, collection possession, supply,
storage or sale of Mahua flowers prescribing
licences and permits therefore, throughout the
State or in any specified area or for any
specified period.”
(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 license, permit or pass.
(iii) prescribe amount of security to be
deposited by holder of any licence, permit or
pass for the performance of the conditions of
the same;
(iv) prescribe the account 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.”
Neither s. 25 or s. 26 or s. 27 or S. 62(1) or cls. (d) and
(h) of s. 62(2) empower the rule making authority viz. the
State Government to levy tax on excisable articles which
have not been either imported, exported, transported,
manufactured, cultivated or collected under any licence
granted under s. 13 or manufactured in any distillery
established or any distillery or brewery licensed under the
Act. The legislature has levied excise duty only on
Sup. Cl/71 (P)-71
850
those articles which come within the scope of S. 25. The
rule making authority has not been conferred with any power
to levy duty on any articles which do not fall within the
scope of S. 25. Therefore it is not necessary to consider
whether any such power can be conferred on that authority.
Quite clearly the State Government purported to levy duty on
liquor which the contractors failed to lift. In so doing it
was attempting to exercise a power which it did not possess.
No tax can be imposed by any bye-law or rule or regulation
unless the statute under which the subordinate legislation
is made specially authorises the imposition even if it is
assumed that the power to tax can be delegated to the
executive. The basis of the statutory power conferred by
the statute cannot be transgressed by the rule making
authority. A rule making authority has no plenary power.
It has to act within the limits of the power granted to it.
We are of the opinion that the impugned rule as well as’ the
demands are not authorised by law. Hence we allow these
appeals as well as the writ petitions from which these
appeals arise and quash the impugned notification as well as
the demand notices. The State of Madhya Pradesh shall pay
the costs of the :appellants in both these appeals-hearing
fee one set.
V.P.S. Appeals allowed.
851
