{"id":186552,"date":"1975-08-01T00:00:00","date_gmt":"1975-07-31T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/panna-lal-and-ors-etc-etc-vs-state-of-rajasthan-and-ors-on-1-august-1975"},"modified":"2016-10-30T13:45:46","modified_gmt":"2016-10-30T08:15:46","slug":"panna-lal-and-ors-etc-etc-vs-state-of-rajasthan-and-ors-on-1-august-1975","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/panna-lal-and-ors-etc-etc-vs-state-of-rajasthan-and-ors-on-1-august-1975","title":{"rendered":"Panna Lal And Ors. Etc. Etc vs State Of Rajasthan And Ors on 1 August, 1975"},"content":{"rendered":"<div class=\"docsource_main\">Supreme Court of India<\/div>\n<div class=\"doc_title\">Panna Lal And Ors. Etc. Etc vs State Of Rajasthan And Ors on 1 August, 1975<\/div>\n<div class=\"doc_citations\">Equivalent citations: 1975 AIR 2008, \t\t  1976 SCR  (1) 219<\/div>\n<div class=\"doc_author\">Author: A Ray<\/div>\n<div class=\"doc_bench\">Bench: Ray, A.N. (Cj)<\/div>\n<pre>           PETITIONER:\nPANNA LAL AND ORS. ETC. ETC.\n\n\tVs.\n\nRESPONDENT:\nSTATE OF RAJASTHAN AND ORS.\n\nDATE OF JUDGMENT01\/08\/1975\n\nBENCH:\nRAY, A.N. (CJ)\nBENCH:\nRAY, A.N. (CJ)\nBEG, M. HAMEEDULLAH\nCHANDRACHUD, Y.V.\n\nCITATION:\n 1975 AIR 2008\t\t  1976 SCR  (1) 219\n 1975 SCC  (2) 633\n CITATOR INFO :\n E\t    1976 SC 633\t (9)\n D\t    1976 SC2237\t (17)\n F\t    1980 SC2018\t (20)\n E\t    1987 SC 993\t (7,11,14,15)\n RF\t    1992 SC1393\t (8)\n\n\nACT:\n     Rajasthan Excise  Act, 1950  Sections 24, 28, 29 and 30\nand Rajasthan  Excise Rules,  1956, rules 67A. 67I, 67J, 67K\nand 67L-Excise\tlicense for  sale of  country  liquor  under\nsystems of  Guarantee and  Exclusive  Privilege\t Failure  of\ncontractor to  pay stipulated  sum-Recovery  of\t unfulfilled\nguarantee amount  if amounts  to levy and recovery of excise\nduty.\n\n\n\nHEADNOTE:\n     The licenses  for sale  of country\t liquor were granted\nunder the  Rajasthan Excise Act, 1950. For the years 1962-63\nand 1963-64  licenses for  sale of country liquor were given\nto contractors\tunder a guaranteed system. There was a total\nGuarantee amount. Where the contractors failed to fulfil the\nguaranteed amount and there was a short-fall, demand notices\nwere issued  for the  total short-fall. There was no levy of\nexcise duty  prior to  6 March, 1964. For the years 1967-68,\n1968-69 and 1969-70 the liquor contractors obtained licences\nfor sale  of country liquor at a specified amount of licence\nfee  under   the  exclusive   privilege\t system.  Where\t the\ncontractors failed  to pay the guaranteed amount there was a\ndemand for  a shortfall.  The appellants who were the liquor\ncontractors challenged\tthe demand  for\t short-fall  of\t the\nguaranteed amount  by way  of writ  petitions  in  the\tHigh\nCourt. Their  contention was that what was being demanded as\nshort-fall amounted  to levy  of excise\t duty. 'the State on\nthe other  hand, contended that what was being realised from\nthe liquor  contractors was  the guaranteed  amount  in\t the\nlicence for  the  exclusive  privilege\tof  selling  country\nliquor. The  State further  contended that  what  was  being\ndemanded for  the year\t1967-68 and thereafter as short-fall\nwas  the   stipulate  guaranteed  amount  which\t was  excise\nrevenue. The  High Court  accepted the\tcontentions  of\t the\nState and  dismissed the  writ petitions. These appeals have\nbeen preferred\ton the\tbasis of  the certificate granted by\nthe High Court.\n     It was  contended for  the appellants:  (i)  The  issue\nprices in  the licence\tare exclusive of prices of container\nbut inclusive  of excise  duty levied  under the. Government\nnotification and  therefore, enforcement  of the  guaranteed\namount meant  realisation of  excise duty. (ii) A promise to\ngive income  to the  Government\t by  purchasing\t a.  minimum\nquantity of  liquor from  the Government  were house was not\nequivalent to  the Payment  of sum of money in consideration\nof grant  of such  privilege  within the meaning of s. 30 of\nthe Act;  (iii) 'The amounts of money sought to be recovered\nfrom the  licensee  under  the\texclusive  privilege  system\nintroduced from the year 1968 as well as under the guarantee\nsystem. prevalent  prior to  the year  1968 are\t nothing but\ndemands for  excise duty  on uplifted liquor; (iv) 'the word\n'issue price'  occurring in  the conditions  attached to the\nlicences granted upto the year. 1967-68 was a composite name\nfor  'cost  price  of  liquor'\tand  'excise  duty  leviable\nthereon' and  therefore an  agreement by the licensees under\nthe guarantee  system to pay 'issue price' was tantamount to\nan agreement  to pay  'cost  price'  and  'excise  duty'  as\ndistinct items\tthough described  as issue  price; (v)\t'the\nlicences  under\t both  system  of  Guarantee  and  Exclusive\nPrivilege contain a term about the payment and adjustment of\nexcise duty  and under\tboth  systems  'excise\tduty'  ii  a\ndistinct item  agreed to  be paid  as such  in terms  of the\nlicences.\n     Rejecting the  contentions and  dismissing the  appeals\n(except C.A. No. 1433. of 1974 and C.A. No. 1871 of 1974).\n^\n     HELD: (1)\tProvisions of  section 24,  28, 29 and 30 of\nthe Act\t and rules  67-A,  67-I,  67-S,\t 67-K  and  67-L  of\nRajasthan Excise  Rules, 1956,\tclearly established that the\nlicence fee  stipulated to  be paid by the appellants is the\nprice  or  consideration  or  rental  which  the  Government\ncharges from the licensees for parting with its privilege in\nstipulated lump\t sum payment  and is  a normal\tincident  of\ntrading or business transaction. [225A-B]\n220\n     <a href=\"\/doc\/1203112\/\">Nashirwar and  Ors. v. State of Madhya Pradesh and ors.<\/a>\n[1975] Vol.  I\tS.C.C. 29, Hari Shanker V. Deputy Excise and\nTaxation Commissioner  decided on  21 January, ]975 in Civil\nAppeal\tNo.  365  of  1969,  Madhavan  V.  Assistant  Excise\nCommissioner. Palghat  and ors.s.  1969 I.L.R.\t2 Kerala 71,\nCentral Province  Barer sale  of Motor Spirit and Lubricants\nTaxatation Act 1938. case reported in 11939] F.C.R. 18, M\/s.\nGuruswaamy &amp; Co. etc. v. State of Mysore &amp; ors,.... [1967] 1\nS.C.R. 548,  <a href=\"\/doc\/1605374\/\">State of Orissa and  ors. v. Harinarayan Jaswal\nand ors.<\/a> [1972]3 S.C.R. 784 and Coverjee B. Bharuchua v. The\nExcise Commissioner  and the  Chief Commissioner, Ajmer. and\nors. [1954] S.C.R. 873, referred to.\n     (2) The  licences in  the present\tcase  are  contracts\nbetween the  parties. The  licensees voluntary\taccepted the\ncontracts. They\t fully\texploited  to  their  advantage\t the\ncontracts to the exclusion of others. The High Court rightly\nsaid that  it was  not open to the appellants to resile from\nthe contracts  on the  ground that the terms of payment were\nonerous. [225D]\n     (3) There is no levy. Of excise duty in enforcing the\npayment of the guaranteed sum or the stipulated sum\nmentioned in the licenses. Because, (1) The licences were\ngranted to the appellants after offer and acceptance or by\naccepting their lenders or auction bid. The appellants\nstipulated to pay lump sum amount. as the price for the\nexclusive privilege of vending country liquor. they agreed\nto pay that they considered to be equivalent of the right;\n(ii) The liability for excise is on the distillery and the\nliquor contractors are not concerned with it. Before: 1965;\nthere was no excise duty. After the imposition of excise\nduly: the position is not altered because the privilege of\nselling is granted 'by auction or by. Offer and acceptance\nbefore the goods came into existence. and (iii) 'The\nstipulation, amounts payable by the appellants have relation\nonly to what they foresaw they could recoup by the sale of\ncountry liquor from the liquor shops licensed  to them.\nThere are several varieties of country liquor and rates of\nexcise levy on these varieties are different. The appellants\nare not bound to take any particular quantity or any\nparticular quality of any variety. Without reference to any\nquantity or quality, it is impossible to predicate the\nalleged levy of excise duty.  [226G-227-E]\n     (4) The  lump sum amount stipulated under the agreement\nis not\tto 'be\tequated with issue price. The issue price is\npayable\t only  when  the  contractors  take  delivery  of  a\nparticular quantity  of specified  value of  country liquor.\nthe  issue  price  relates  only  to  liquor  drawn  by\t the\ncontractors and\t does not  pertain  to\tundrawn\t liquor.  No\nexcise duty  is or  can be  collected on undrawn liquor. The\nissue price  is the price at which country liquor is sold to\nthe liquor contractors. So far as the liquor contractors are\nconcerned, they\t pay the price of the liquor even though the\nprice may include the component of excise duty in respect of\nwhich they have no direct liability. [228B-D]\n     (5) In  the present  case, the State Government has not\nimposed any  excise duty  On the  licensee. On the contrary,\nthe  license   only  takes  into  account  the\texcise\tduty\ncomponent of  the issue\t price for  the purpose\t of giving a\nconcession or  remission to  the contractors.  The scheme of\nremission is  that is the liquor contractor purchased liquor\nof the\tvalue, the excise duty whereof equalled the price of\nthe exclusive  privilege, the  liquor contractor  is  to  be\ngiven credit  therefore. The  question. Of adjustment arises\nonly  when   liquor  is\t drawn,\t otherwise  the\t formula  of\nremission does\tnot come into the picture at all. In essence\nwhat is sought to be recovered from the liquor contractor is\nthe shortfall  occasioned on  account of failure on the part\nof liquor contractor to fulfill the terms of license.\n\t\t\t\t\t   [228G;229BC, F-H]\n     Bimal Chandra  Banerjee  v.  State\t of  Madhya  Pradesh\n[1971] 1 S.C.R. 844, referred to.\n\n\n\nJUDGMENT:\n<\/pre>\n<p>     CIVIL APPELLANT  JURISDICTION: Civil Appeals Nos. 1213-<br \/>\n1220. 1353,  1354, 1385-1386,  1387-1388,  1564,  1566-1567,<br \/>\n1579-1581. 1608,  1622, 1623-1624,  1626, 1630,\t 1647, 1764,<br \/>\n1862, 1432, 1433 &amp; 1871 of 1974.\n<\/p>\n<p>     from the  judgment and  Order dated  the 9th day of May<br \/>\n1974 of\t the Rajasthan\tHigh Court  in W.P. Nos. 1497-1503 &amp;<br \/>\n1505\/1971.\n<\/p>\n<p><span class=\"hidden_text\">221<\/span><\/p>\n<p>     A. K.  Sen and  B. D. Sharma, for the appellts (In C.A.<br \/>\nNos. 1213-1220 &amp; 1862).\n<\/p>\n<p>     B. D.  Sharma, for\t the appellants\t (In C.A. Nos. 1353,<br \/>\n1354 and 1647) .\n<\/p>\n<p>     Badri  Das\t  Sharma  and  S.  R.  Srivastava,  for\t the<br \/>\nappellants (In C.A. Nos. 1623, 1432, 1433 and 1871).\n<\/p>\n<p>     D. V.  Patel and  S. S. Khanduja for the appellants (In<br \/>\nC.A.No. 1385) .\n<\/p>\n<p>     S.S. Khanduja,  for the  appellants (In C.A. Nos. 1386-<br \/>\n1388, 1530,  1564, 1566, 1567, 1579, 1580, 1581, 1606, 1622,<br \/>\n1624, 1626, 1630 &amp; 1764).\n<\/p>\n<p>     L. M.  Singhvi and\t S. M. Jain, for the respondents (In<br \/>\nall the appeals).\n<\/p>\n<p>     The Judgment of the Court was delivered by<br \/>\n     RAY C.J.  These appeals  by  certificate  turn  on\t the<br \/>\nquestion as  whether  the  excise  license  granted  to\t the<br \/>\nappellants rendered them lube to pay the stipulated lump sum<br \/>\nmentioned in the licence.\n<\/p>\n<p>     These appeals relate to country liquor licences (a) for<br \/>\nthe years 1962-63 and 1963-64; (b) for the years 1967-68 and\n<\/p>\n<p>(c) for the years 1968-69, 1469-70 and 1970-71.\n<\/p>\n<p>     For the  years 1962-63 and 1963-64 licences for sale of<br \/>\ncountry liquor\twere given to contractors under a guaranteed<br \/>\nsystem. There  was a  total  guaranteed\t amount.  Where\t the<br \/>\ncontractors failed to fulfil the guaranteed amount and there<br \/>\nwas a  short-fall,, demand notices were issued for the total<br \/>\nshort-fall.\n<\/p>\n<p>     For the  years 1967-68,  1968-69 and 1969-70 the liquor<br \/>\ncontractors obtained  licences for sale of country liquor at<br \/>\na stipulated  amount of\t license  fee  under  the  exclusive<br \/>\nprivilege system.  Where the  contractors failed  to pay the<br \/>\nguaranteed amount there was a demand for a short-fall.\n<\/p>\n<p>     The  appellants   who  were   the\tliquor\t contractors<br \/>\nchallenged the\tdemand\tfor  short-fall\t of  the  guaranteed<br \/>\namount. The liquor contractors contended that what was being<br \/>\ndemanded as  short-fall amounted to levy of excise duty. The<br \/>\nState, on  the other  hand, contended  that what  was  being<br \/>\nrealized from  the liquor  contractors\twas  the  guaranteed<br \/>\namount in the licence for the exclusive privilege of selling<br \/>\ncountry liquor.\n<\/p>\n<p>     It may  be stated here that there was no levy of excise<br \/>\nduty prior  to 6 March, 1964. After the imposition of excise<br \/>\nduty, the  licences during  the year  1967-68 and thereafter<br \/>\nwere issued for guaranteed sum under the exclusive privilege<br \/>\nsystem. The  State contended that what was being demanded as<br \/>\nshort-fall was\tthe stipulated\tguaranteed amount  which was<br \/>\nexcise revenue.\n<\/p>\n<p><span class=\"hidden_text\">222<\/span><\/p>\n<p>     The licenses  granted upto\t the year  1967-68 contained<br \/>\nthe following principal conditions<br \/>\n\t  (1)  The licensee  guarantees to  the Governor  of<br \/>\n\t       Rajasthan  State\t  that\the,   in  the\tyear<br \/>\n\t       concluding on&#8230;.March &#8230;.shall receive from<br \/>\n\t       the Government and sell such quantity of wine<br \/>\n\t       of which\t issue price  shall not be less than<br \/>\n\t       Rs. &#8230;\t(hereinafter known as the guaranteed<br \/>\n\t       price which are prevailing on &#8230;. March..)<br \/>\n\t  (2)  The liquor  shall be supplied to the licensee<br \/>\n\t       at  the\t prevailing  issue  price,  but\t the<br \/>\n\t       difference between  such issue  price and the<br \/>\n\t       issue price calculated at the prevailing rate<br \/>\n\t       on 31  March&#8230; shall  not be included in the<br \/>\n\t       guarantee amount.\n<\/p>\n<p>\t  (3)  The licensee  will have to pay the shortfall,<br \/>\n\t       if any,\tbetween\t the  price  of\t the  liquor<br \/>\n\t       obtained by  him upto the end of any month at<br \/>\n\t       the issue  price\t of  31\t March\t&#8230;.and\t the<br \/>\n\t       amount of  guarantee multiplied by the months<br \/>\n\t       which have  passed and  divided by  eleven at<br \/>\n\t       the godown by the tenth of the next month.\n<\/p>\n<p>\t  (4)  In case\tof non-payment,\t the licence will be<br \/>\n\t       cancelled and  when cancelled  this way,\t the<br \/>\n\t       above mentioned difference shall be recovered<br \/>\n\t       from security, cash deposits and remanant, if<br \/>\n\t       any, shall be recovered from the licensee and<br \/>\n\t       surety jointly and severally.\n<\/p>\n<p>     From 1968-69  the licences\t contained, inter  alia, the<br \/>\nfollowing principal conditions:-\n<\/p>\n<blockquote><p>\t  (1)  The licensee  will have\tto deposit  Rs..  as<br \/>\n\t       licence fee under section 24 of the Rajasthan<br \/>\n\t       Excise Act  1950 for  his exclusive privilege<br \/>\n\t       as fixed\t by the Excise Commissioner. From it<br \/>\n\t       the amount  of excise  duty  will be adjusted<br \/>\n\t       towards the  payment of\tthe amount  for\t the<br \/>\n\t       exclusive privilege  but this adjustment will<br \/>\n\t       be limited  to the  payment of the amount for<br \/>\n\t       the exclusive  privilege. The  licensee\twill<br \/>\n\t       have to\tdeposit the  aforesaid amount  in 12<br \/>\n\t       equal instalments  and will  have to  deposit<br \/>\n\t       the monthly  instalments by  the 10th  of the<br \/>\n\t       next month  in Government Treasury. The\tfees<br \/>\n\t       deposited by the license-holder in that month<br \/>\n\t       in the  form of\tthe component  of the  issue<br \/>\n\t       price will  be treated  as excise  duty under<br \/>\n\t       the instalment of the license-fee.<br \/>\n\t  (2)  If the licence-holder does not deposit the<br \/>\n\t       instalments for any two months as laid down<br \/>\n\t       in the aforesaid condition within the<br \/>\n\t       prescribed period then the officer issuing<br \/>\n\t       the license will have the right to realise<br \/>\n\t       the<br \/>\n<span class=\"hidden_text\">223<\/span><br \/>\n\t       amount  of  that\t instalment  from  the\tcash<br \/>\n\t       security of  the licence-holder\tor from\t his<br \/>\n\t       surety. In  addition to\tthis, he  will\talso<br \/>\n\t       have the\t right to  cancel the licence of the<br \/>\n\t       licensee.<\/p><\/blockquote>\n<p>     The appellants  repeated the  contention which had been<br \/>\nadvanced  before   the\tHigh   Court  that  when  the  State<br \/>\nGovernment wanted  to enforce the guaranteed sum it amounted<br \/>\nto recovery  of\t excise\t duty  by  licence.  The  appellants<br \/>\ncontended that the issue prices in the licence are exclusive<br \/>\nof prices  of container\t but inclusive of excise duty levied<br \/>\nunder the Government notification and therefore, enforcement<br \/>\nof the guaranteed amount meant realisation of excise duty.\n<\/p>\n<p>     The appellants  contended\tthat  unfulfilled  guarantee<br \/>\namount which  is sought\t to be recovered from the appellants<br \/>\nis not\tbalance of  lump sum  payment as  price of exclusive<br \/>\nprivilege  because   the  Government   licence\t sanctioning<br \/>\nguarantee system  stated &#8220;that\tthe licensee shall guarantee<br \/>\nin respect of the year.. income to the Government on account<br \/>\nof the\tissue price of country liquor issued for sale at his<br \/>\nshop during  the year..\t &#8221; It  was, therefore,\tsaid by\t the<br \/>\nappellants that\t a promise  to give income to the Government<br \/>\nby  purchasing\t a  minimum  quantity  of  liquor  from\t the<br \/>\nGovernment ware\t house was  not equivalent to the payment o<br \/>\nsum of\tmoney in  consideration of  grant of  such privilege<br \/>\nwithin the  meaning of\tsection 30  of the  Rajasthan Excise<br \/>\nAct.\n<\/p>\n<p>     The appellants  contended that  the  amounts  of  money<br \/>\nsought to he recovered from the licensee under the exclusive<br \/>\nprivilege system  introduced from  the year  1968 as well as<br \/>\nunder the  guarantee system prevalent prior to the year 1968<br \/>\nare nothing  but demands for excise duty on unlifted liquor.<br \/>\nThe reasons  advanced by  the appellants  are that under the<br \/>\nexclusive privilege  system of\tlicensing introduced in 1968<br \/>\nthe amount  was agreed to be paid and deposited specifically<br \/>\ntowards excise\tduty given as a component of the issue price<br \/>\nfor the\t supply of  country liquor  and\t was  agreed  to  be<br \/>\nadjusted in the amount of the exclusive privilege.\n<\/p>\n<p>     The appellants  also submitted  that  the\tword  &#8216;issue<br \/>\nprice&#8217; was  a composite\t name for &#8216;cost price of liquor&#8217; and<br \/>\n&#8216;excise duty  leviable thereon&#8217;\t and therefore, an agreement<br \/>\nby the\tlicensees under\t the guarantee\tsystem to pay &#8216;issue<br \/>\nprice&#8217; was  tantamount to  an agree not pay &#8216;cost price&#8217; and<br \/>\n&#8216;excise duty&#8217;  as distinct  items though  described as issue<br \/>\nprice.\n<\/p>\n<p>     The  appellants  contended\t that  licences\t under\tboth<br \/>\nsystems of  Guarantee and Exclusive Privilege contain a term<br \/>\nabout the  payment and\tadjustment of  excise duty and under<br \/>\nboth systems  &#8216;excise duty&#8217;  is a distinct item agreed to be<br \/>\npaid as such in terms of the licences.\n<\/p>\n<p>     The licences  were granted\t under the  Rajasthan Excise<br \/>\nAct, 1950 (referred to as the Act.)<br \/>\n     Section 24\t of the\t Act confers  power  on\t the  Excise<br \/>\nCommissioner to grant any person a license for the exclusive<br \/>\nprivilege.\n<\/p>\n<p><span class=\"hidden_text\">224<\/span><\/p>\n<p>     (1)  of manufacturing  or supply  by wholesale,  or  of<br \/>\n\t  both, or<br \/>\n     (2)  of selling by wholesale, or by retail, or<br \/>\n     (3)  of manufacturing or of supplying by wholesale, or<br \/>\n\t  of both, and of selling by retail, any country<br \/>\n\t  liquor or intoxicating drug within any local area<br \/>\n\t  of those parts of the State of Rajasthan to which<br \/>\n\t  the Act extends.\n<\/p>\n<p>     Section 28 of the Act provides that an excise duty or a<br \/>\ncountervailing duty,  as the  case may\tbe, at\tsuch rate or<br \/>\nrates as  the State  Government shall direct, may be imposed<br \/>\neither generally or for any specified area, on any excisable<br \/>\narticle\t  imported    or   exported,   or   transported\t  or<br \/>\nmanufactured, cultivated  or  collected\t under\tany  licence<br \/>\ngranted under  the Act,\t or manufactured  in any distillery,<br \/>\npot-still or  brewery established or licensed under the Act.<br \/>\nThe Explanation\t to section  28 provides  that duty  may  be<br \/>\nimposed under  this section  at different rates according to<br \/>\nthe places  to which  any excisable  article or intoxicating<br \/>\ndrug is\t to be\tremoved for  consumption or according to the<br \/>\nvarying strength and quality of such article.\n<\/p>\n<p>     Section 29\t of the\t Act provides  that subject  to such<br \/>\nrules regulating  the time,  place and manner of payment, as<br \/>\nthe State  Government may-prescribe  such duty may be levied<br \/>\nin such\t one or\t more ways  as the  State Government  may by<br \/>\nnotification in the official Gazette direct.\n<\/p>\n<p>     Section 30\t of the\t Act provides  that instead of or in<br \/>\naddition to  any  duty\tleviable  under\t Chapter  V    which<br \/>\ncontains Sections  28, 29 and L 30), the Excise Commissioner<br \/>\nmay accept  payment of\ta sum in consideration of` the grant<br \/>\nof the licence for exclusive privilege under section<br \/>\n     The Rajasthan  Excise Rules, 1956 provide in rule 67 I,<br \/>\n67 J,  67 K  and 67  L the  different forms of procedure for<br \/>\ngrant of exclusive privilege Rule 67 I provides that licence<br \/>\nfor exclusive  privilege of  selling by\t retail\t of  country<br \/>\nliquor within any local area under section 24 of the Act may<br \/>\nbe granted  on condition of payment of such lump sum instead<br \/>\nof or  in addition  to excise  duty, as may be determined by<br \/>\nthe Excise  Commissioner and subject to such other terms and<br \/>\nconditions as  may be  laid down  by him. Rule 67 J provides<br \/>\nthat a\tlicence under  rule 67\tI may  be granted  by way of<br \/>\nallotment by  negotiation in  accordance with  the procedure<br \/>\nlaid down  in sub-rules\t 2 to  4 of  rule 67  J. Rule  67  K<br \/>\nprovides that  subject to such general or special directions<br \/>\nas may\tbe issued  by the  Excise Commissioner\tfrom time to<br \/>\ntime, the  District Excise officer may put the licence under<br \/>\nRule 67\t I to  action for  any area.  In such an auction the<br \/>\nPresiding officer  shall call  upon for lump sum payment for<br \/>\nexclusive privilege  payable instead  of or  in addition  to<br \/>\nexcise duty  as may  be directed by the Excise Commissioner.<br \/>\nRule 67\t L provides  that the Excise Commissioner may at his<br \/>\ndiscretion grant  licence under\t rule 67  I for\t any area by<br \/>\nnegotiation with  any third  party. There  is a proviso that<br \/>\nhighest<br \/>\n<span class=\"hidden_text\">225<\/span><br \/>\nbidder or highest tenderer if any shall be given a chance to<br \/>\nmake higher  offer unless  he has been debarred from holding<br \/>\nlicence or has rejected the offer under Rule 67(2).\n<\/p>\n<p>     The license fee stipulated to be paid by the appellants<br \/>\nis the price or consideration or rental which the Government<br \/>\ncharges from the licensees for parting with its privilege in<br \/>\nstipulated lump\t sum payment  and is  a normal incident of a<br \/>\ntrading or  business transaction.  This Court  in the recent<br \/>\ndecision in  <a href=\"\/doc\/1203112\/\">Nashirwar and  Ors. v.  State of Madhya Pradesh<br \/>\nand ors.<\/a>(1)  and in  the unreported decision Hari Shanker v.<br \/>\nDeputy Excise  and Taxation  Commissioner(2) held  that\t the<br \/>\nState has exclusive right to manufacture and sell liquor and<br \/>\nto sell the said right in order to raise revenue. The nature<br \/>\nof the\ttrade is  such that  the State\tconfers the right to<br \/>\nvend liquor  by farming\t out either by auction or by private<br \/>\ntreaty.\t Rental\t is  the  consideration\t for  the  privilege<br \/>\ngranted by  the\t Government  for  manufacturing\t or  vending<br \/>\nliquor. Rental\tis neither  a tax nor an excise duty. Rental<br \/>\nis  the\t  consideration\t for  the  agreement  for  grant  of<br \/>\nprivilege by the Government.\n<\/p>\n<p>     The licences  in the present case are contracts between<br \/>\nthe  parties.\tThe  licensees\t voluntarily  accepted\t the<br \/>\ncontracts. They\t fully\texploited  to  their  advantage\t the<br \/>\ncontracts to the exclusion of others. The High Court rightly<br \/>\nsaid that  it was  not open to the appellants to resile from<br \/>\nthe contracts  on the  ground that the terms of payment were<br \/>\nonerous. The  reasons given  by the High Court were that the<br \/>\nlicensees  accepted   the   licence   by   excluding   their<br \/>\ncompetitors and\t it would  not be  open to  the licences  to<br \/>\nchallenge the  terms either  on the  ground of\tinconvenient<br \/>\nconsequence of terms or of harshness of terms.\n<\/p>\n<p>     The legal position is also correctly stated in Madhavan<br \/>\nv. Assistant  Excise Commissioner, Palghat and ors.(3) where<br \/>\nit is said that the rental charged by the State for licences<br \/>\nis the\tconsideration for  the privilege  of vending liquor.<br \/>\nThe licenses  in the  present appeals voluntarily contracted<br \/>\nto pay the guaranteed sum of the stipulated lump sum for the<br \/>\nexclusive privilege to vend liquor.\n<\/p>\n<p>     In the  Central Provinces\tand  Berar  Sales  of  Motor<br \/>\nSpirit and Lubricants Taxation Act 1938 case,(4) it has been<br \/>\nsaid that in several Acts by which excise duties are imposed<br \/>\nit is  provided that duty is able articles from the place of<br \/>\nmanufacture or\tproduction and there is no provision for the<br \/>\nimposition of  an excise  duty on  retail sales.  Many\tActs<br \/>\nprovide\t for   lump  sum   payments  in\t  certain  cases  by<br \/>\nmanufacturers and retailers, which may be described payments<br \/>\neither for  privilege or  as consideration for the temporary<br \/>\ngrant of a monopoly, but these are clearly not excise duties<br \/>\nor anything  like them.\t (Sec 1939  F.C.R. 18  at pp. 53 and\n<\/p>\n<p>54).\n<\/p>\n<p>     This Court\t in M\/s.  Guruswamy &amp;  Co. etc.\t v. State of<br \/>\nMysore &amp; ors.(5) considered the question whether the payment<br \/>\nof shop rent<br \/>\n<span class=\"hidden_text\">226<\/span><br \/>\nfor the exclusive privilege of sale of liquor in a specified<br \/>\nshop is\t an   excise duty.  In Guruswami&#8217;s  case (supra) the<br \/>\npetitioners paid  shop rent  or the  &#8216;kist&#8217; for\t a group  of<br \/>\ntoddy shops  amounting to Rs. 3,61,116\ta month. This &#8216;kist&#8217;<br \/>\namount was  determined at  the\tauction\t sale  of  exclusive<br \/>\nprivilege of  vending toddy  in the  shops. The notification<br \/>\nfor auction  mentioned rates of duty, price, etcetera on the<br \/>\nseveral kinds  of excisable  articles. The notification also<br \/>\nmentioned that\thealth cess  at a certain rate shall also be<br \/>\npayable on  the shop  rent and\ttree tax  on toddy and other<br \/>\nduties of  excise levied.  The\tpetitioners  challenged\t the<br \/>\nauthority of  the State to levy and collect health cess. The<br \/>\nmain ground  was that  the health  cess was hl reality a tax<br \/>\nand not a mere cess. This Court said that the true character<br \/>\nor nature  of levy  in Guruswami&#8217;s  case (supra) was that it<br \/>\nwas a  payment for the exclusive privilege of selling toddy.<br \/>\nThe payment  had no  close relation  to\t the  production  or<br \/>\nmanufacture of\ttoddy. The  only relation  the levy  had  to<br \/>\nproduction or  manufacture was\tthat it enabled the licensee<br \/>\nto sell\t it. The excise duty is paid on toddy in the form of<br \/>\ntree tax. He who keeps toddy pays tree tax. The privilege of<br \/>\nselling toddy  was auctioned well before the goods came into<br \/>\nexistence. In  view of these characteristics the health cess<br \/>\nwas found not to be excise duty. The taxable event in regard<br \/>\nto the\thealth cess was not the manufacture or production of<br \/>\ngoods but the acceptance of the licence to sell the goods.\n<\/p>\n<p>     A Bench  decision of  this Court in State of Orissa and<br \/>\nors v. Harinarayan Jaiswal and ors. (1) considered the grant<br \/>\nof exclusive  privilege of  manufacture and  sale of country<br \/>\nliquor by licensees. This Court held that the power given to<br \/>\nthe Government\tto sell\t the  exclusive\t privilege  in\tsuch<br \/>\nmanner as it thinks fit is a very wide power. <a href=\"\/doc\/1029264\/\">In Coverjee B.<br \/>\nBharucha  v.   The  Excise   Commissioner  and\t the   Chief<br \/>\nCommissioner, Ajmer  and ors.<\/a>(2)  this Court  held  that  an<br \/>\nimportant purpose  of selling  the exclusive  right to\tsell<br \/>\nliquor in  wholesale or\t retail is  to raise revenue. Excise<br \/>\nrevenue forms  an important  part of&#8217;  State  revenues.\t The<br \/>\npower of  the Government  to sell the exclusive privilege is<br \/>\nby public  auction or  by negotiation.\tThe fact that the 1.<br \/>\nprice fetched  by the  sale of\tcountry liquor\tis an excise<br \/>\nrevenue does not change the nature of the right. The sale is<br \/>\na mode of raising revenue.\n<\/p>\n<p>     The decisions of this Court establish that the lump sum<br \/>\namount voluntarily agreed to by the appellants to pay to the<br \/>\nState are not levies of excise duty but are in the nature of<br \/>\nlease money  or rental\tor lump sum amount for the exclusive<br \/>\nprivilege of  retail sales  granted   by the  States to\t the<br \/>\nappellants.\n<\/p>\n<p>     There is  no levy\tof  excise  duty  in  enforcing\t the<br \/>\npayment of  the guaranteed  sum or  the stipulated  lump sum<br \/>\nmentioned in  the licences,  for these\treasons. First,\t the<br \/>\nlicenses were  granted to  the appellants  after  offer\t and<br \/>\nacceptance or by accepting their tenders or auction bid. I<br \/>\n<span class=\"hidden_text\">227<\/span><br \/>\nThe appellants\tstipulated to  pay lump\t sum amounts  as the<br \/>\nprice for the exclusive privilege of vending country liquor.<br \/>\nThe appellants\tagreed to  pay what  they considered  to  be<br \/>\nequivalent to the value of the right. Second, the stipulated<br \/>\npayment has  no relation to the production or manufacture of<br \/>\ncountry liquor\texcept hat  it enables\tthe licensee to sell<br \/>\nit. The\t country liquor\t is produced  by  the  distilleries.<br \/>\nUnder section  28 of  the Act  and under  the relevant\tduty<br \/>\nnotifications he  excise levy  is on the manufacture and not<br \/>\non  the\t  sale\tor   retail  of\t  liquor.  Under   the\tduty<br \/>\nnotifications no excise duty is levied or collected from the<br \/>\nliquor contractors  who are  liable only to pay the price of<br \/>\nliquor. The  taxable event  is not the sale of liquor to the<br \/>\ncontractors but\t the manufacture  of liquor. What the liquor<br \/>\ncontractors pay in consideration of the license is a payment<br \/>\nfor the\t exclusive privilege for selling country liquor. The<br \/>\nliability for  excise is  on the  distillery and  the liquor<br \/>\ncontractors are not concerned with it. Before 1965 there was<br \/>\nno excise  duty. The  appellants were  required to  pay\t the<br \/>\nguaranteed amount.  After the  imposition of excise duty the<br \/>\nposition is  not altered because the privilege of selling is<br \/>\ngranted by  section or\tby offer  and acceptance  before the<br \/>\ngoods came  into existence.  Excise contracts are settled in<br \/>\nthe preceding year. Third, the stipulated 1) amounts payable<br \/>\nby the\tappellants have relation only to what the appellants<br \/>\nforesaw they could recoup by the sale of country liquor from<br \/>\nthe  liquor  shops  licensed  to  them.\t There\tare  several<br \/>\nvarieties of  country liquor  and rates\t of excise  levy  on<br \/>\nthese varieties\t are different. The appellants are not bound<br \/>\nto take any particular quaintly or any particular quality of<br \/>\nany variety.  Without reference\t to any quantity or quality,<br \/>\nit is  impossible to  predicate the  alleged levy  of excise<br \/>\nduty.\n<\/p>\n<p>     Before imposition\tof excise  duty in  1965, the  issue<br \/>\nprice did  not have even a notional component of excise duty<br \/>\nunder Issue  Price Rules. Therefore, no excise duty could be<br \/>\nattributed  to\t the  contractual  amounts  payable  by\t the<br \/>\nappellants. The\t references to excise duty in licences under<br \/>\nthe guarantee system or exclusive privilege system prevalent<br \/>\nsubsequent to  the year\t 1965 are  only for  the purposes of<br \/>\nadjustment or concession as a unit of measure. It is not all<br \/>\nexcise duty  currently imposed\tor levied in the year of the<br \/>\nlicence that  is being\tcollected  with\t regard\t to  undrawn<br \/>\nliquor\tbecause\t the  adjustment  of  issue  price  is\twith<br \/>\nreference to  the issue\t price prevailing  in the  preceding<br \/>\nyear. Rule  67-A of the Rajasthan Excise Rules, 1966 defines<br \/>\nvalue as  the price current on the 1st January preceding the<br \/>\nfinancial ye`ar\t to which  the guarantee relates. Under Rule<br \/>\n67-A licences  for retail  shops of country liquor under the<br \/>\nguarantee system  may be  granted to persons guaranteeing to<br \/>\ndraw from  a Government\t warehouse and\tsell-in a  financial<br \/>\nyear or\t part thereof,\tcountry liquor of a specified value,<br \/>\ncalled the  `&#8217;amount of\t guarantee.&#8217; The explanation to Rule<br \/>\n67-A is\t that &#8216;value&#8217;  for the purpose of that rule shall be<br \/>\nthe total  issue price at Government warehouse calculated at<br \/>\nthe rate  of such  price current  on. the  I  first  day  of<br \/>\nJanuary preceding  the financial year to which the guarantee<br \/>\nrelates. The licences under the guarantee system are granted<br \/>\neither by  inviting tenders or by auction or by negotiation.<br \/>\nThe amount of<br \/>\n<span class=\"hidden_text\">228<\/span><br \/>\nguarantee under\t Rule 67-A be (a) where a licence is granted<br \/>\nby   invitng tenders  the amount  of the tender accepted for<br \/>\nthe grant  of the licence; (b) where a licence is granted by<br \/>\nauction the  amount of the bid accepted for the grant of the<br \/>\nlicence; and  (c) where\t a Licence  is granted by auction or<br \/>\nnegotiation, the  amount of  guarantee shall  be the  amount<br \/>\ndetermined by  the Excise  Commissioner and  accepted by the<br \/>\nlicensee.\n<\/p>\n<p>     The lump  sum amount  stipulated under the agreement is<br \/>\nnot to\tbe equated  with issue\tprice. The  issue  price  is<br \/>\npayable\t only  when  the  contractors  take  delivery  of  a<br \/>\nparticular quantity  of specified  value of  country liquor.<br \/>\nThe  issue  price  relates  only  to  liquor  drawn  by\t the<br \/>\ncontractors and\t does not  pertain  to\tundrawn\t liquor.  No<br \/>\nexcise duty  is or  can be  collected on undrawn liquor. The<br \/>\nissue price  is the price at which country liquor is sold to<br \/>\nthe liquor contractors. So far as the liquor contractors are<br \/>\nconcerned, they\t pay the price of the liquor even though the<br \/>\nprice may include the component of excise duty in respect of<br \/>\nwhich they  have no  direct liability.\tIllustrations may be<br \/>\nfound in  case of a person buying a match-box or a motor car<br \/>\nor a  refrigerator. When  the purchaser\t pays the  price  of<br \/>\nmatch-box, or  a motor\tcar  or\t a  refrigerator  the  price<br \/>\nincludes excise duty Levied and collected on the manufacture<br \/>\nof these  goods. The  price of\tgoods  necessarily  includes<br \/>\ndifferent components but the price a buyer pays is different<br \/>\nfrom duties  and taxes paid or payable by the manufacturers.<br \/>\nThe incidence  of all  the components  of cost\tand taxes is<br \/>\ninevitably passed on to the consumer. What the consumer pays<br \/>\nis the\tprice of the goods and not the antecedent components<br \/>\nas such.\n<\/p>\n<p>     The licences  after stipulating  an agreed sum of money<br \/>\nwhich is  payable by The licences under the licences provide<br \/>\na scheme  of remission.\t The liquor  contractor is  given  a<br \/>\nremission in  the  matter  of  his  obligation\tto  pay\t the<br \/>\nstipulated amount to the extent of the excise duty component<br \/>\nof The issue price paid by him. The excise duty component of<br \/>\nthe issue price is, therefore, only a measure of the quantum<br \/>\nor extent  of the concession or the remission to be given to<br \/>\nthe liquor contractor. The concession is not what is paid by<br \/>\nthe contractor\tto the\tState but  it is  a remission  or  a<br \/>\nreduction in  the stipulated  amount for exclusive privilege<br \/>\nallowed by  the State to the contractor. The lump sum amount<br \/>\npayable for  the exclusive  privilege is  not to be confused<br \/>\nwith the  issue price.\tIn essence  what  is  sought  to  be<br \/>\nrecovered from\tthe  liquor  contractors  is  the  shortfall<br \/>\noccasioned on  account of  failure on  the  part  of  liquor<br \/>\ncontractor to fulfil the terms of licence.\n<\/p>\n<p>     The contractual obligation of the appellants to pay the<br \/>\nstipulated amounts is Not dependent on the quantum of liquor<br \/>\nsold by\t them which  is relevant  only for  the\t purpose  of<br \/>\nremission to  be earned by them under the licence. No excise<br \/>\nduty is\t charged or  chargeable on  undrawn liquor under the<br \/>\nlicence. To suggest that the licence obliges the contractors<br \/>\nto pay excise duty on undrawn liquor is totally mis-\n<\/p>\n<p><span class=\"hidden_text\">229<\/span><\/p>\n<p>reading the  conditions of  the licence.  The excise duty is<br \/>\ncollected only\tin relation  to the  quantity and quality of<br \/>\nthe country  liquor which  is drawn.  No excise\t duty can be<br \/>\npredicated in respect of undrawn liquor.\n<\/p>\n<p>     Adjustment by  way\t of  reduction\tin  the\t contractual<br \/>\nliability of  the appellants to the extent of a specific and<br \/>\nquantified portion of the issue price is purely a measure of<br \/>\nconcession or  remission and is a method of calculation. The<br \/>\nquestion of  adjustment arises\tonly when   liquor is drawn,<br \/>\notherwise the  formula of  remission does  not come into the<br \/>\npicture at all.\n<\/p>\n<p>     The appellants  relied on the decision of this Court in<br \/>\nBimal Chandra  Banerjee v.  State of  Madhya  Pradesh(1)  in<br \/>\nsupport of  the contention  that the  attempt on the part of<br \/>\nthe  State   to\t enforce   the\tfull  guaranteed  amount  or<br \/>\nstipulated sum\tis collecting  excise duty. In Bimal Chandra<br \/>\nBanerjee&#8217;s case\t (supra) a  levy of  excise duty  on undrawn<br \/>\nliquor was  imposed in\tterms by  the State  Government by a<br \/>\nnotification amending the Rules and by\tan alteration in the<br \/>\nconditions of  the license.  It was  provided  that  certain<br \/>\nminimum quantity  of liquor  would have\t to be\twithdrawn by<br \/>\neach contractor\t who was  to be\t liable to  make good  every<br \/>\nmonth the  deficit monthly average of the total minimum duty<br \/>\non or  before the 10th of each month following the months to<br \/>\nwhich the  deficit duty relates. The decision there was that<br \/>\nin imposing  the  excise  duty\ton  undrawn  liquor  by\t the<br \/>\nimpugned notification,\tthe State  Government was exercising<br \/>\npowers which  it did  not possess.  In the present case, the<br \/>\nState Government  has not  imposed any\texcise duty  on\t the<br \/>\nlicensee. On  the contrary,  the  licence  only\t takes\tinto<br \/>\naccount the excise duty component of the issue price for the<br \/>\npurposes  of   giving  a  concession  or  remission  to\t the<br \/>\ncontractors. In\t Bimal Chandra\tBanerjee&#8217;s case (supra), the<br \/>\nimpugned notification  was assailed  on the  ground that  it<br \/>\nexceeded the  Legislative competence  of the  State. No such<br \/>\nquestion arises here. The scheme or remission in the present<br \/>\ncase is\t that if  the liquor  contractor purchased liquor of<br \/>\nthe value, the excise duty whereof equalled the price of the<br \/>\nexclusive privilege,  the; liquor con tractor is to be given<br \/>\ncredit therefor.\n<\/p>\n<p>     The agreements give the liquor contractors an exclusive<br \/>\nprivilege   to sell  country liquor  in a specified area for<br \/>\nthe period  fixed for a stipulated sum of money for enjoying<br \/>\nthe privilege.\tIf the\tcontractors do\tnot sell  any liquor<br \/>\nthey arc  yet bound  to pay the stipulated sum. IF they sell<br \/>\nliquor they  are given the benefit of remission in the price<br \/>\nof the\texclusive privilege.  The measure for this remission<br \/>\nis the\texcise duty  leviable to  the extent that the liquor<br \/>\ncontractors can\t neutralise the\t entire amount\tof exclusive<br \/>\nprivilege in  the  excise  duty\t payable  by  them.  If\t the<br \/>\ncontractors fail  to lift  adequate quantity  of liquor\t and<br \/>\nthereby fail  in neutralising  the entire price of exclusive<br \/>\nprivilege the  contractors are not called upon to pay excise<br \/>\nduty.\n<\/p>\n<p>     For these\treasons the  contentions of  the  appellants<br \/>\nfail.  The   ap\t peals\t arc  dismissed\t save  what  follows<br \/>\nhereinafter in Civil Appeal No.<br \/>\n<span class=\"hidden_text\">230<\/span><br \/>\n1433 of\t 1974 and  Civil Appal\tNo. 1871 of 1974. Parties to<br \/>\npay and bear their own costs as they did in the High Court.\n<\/p>\n<p>     In Civil  Appeal No.  1433 of  1974 there\tis  a  short<br \/>\nsupply of  liquor in  respect of  the year 1963-64. In Civil<br \/>\nAppeal No. 1871 of 1974 there is a short supply of liquor in<br \/>\nrespect of  the year 1967-68. In these appeals for these two<br \/>\nyears, the  order will be the same as order dated 29 August,<br \/>\n1974 in\t Civil Appeals No. l 170, 1171 and 117 of 1974, with<br \/>\nthe modification  that if there has been any interim stay in<br \/>\nthese matters, the interim stay will stand vacated.\n<\/p>\n<pre>V.M.K.\t\t\t\t\t  Appeals dismissed.\n<span class=\"hidden_text\">231<\/span>\n\n\n\n<\/pre>\n","protected":false},"excerpt":{"rendered":"<p>Supreme Court of India Panna Lal And Ors. Etc. Etc vs State Of Rajasthan And Ors on 1 August, 1975 Equivalent citations: 1975 AIR 2008, 1976 SCR (1) 219 Author: A Ray Bench: Ray, A.N. (Cj) PETITIONER: PANNA LAL AND ORS. ETC. ETC. Vs. RESPONDENT: STATE OF RAJASTHAN AND ORS. DATE OF JUDGMENT01\/08\/1975 BENCH: RAY, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-186552","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Panna Lal And Ors. Etc. 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