SUPREME COURT OF INDIA

(Large Bench)

Before:- C.J. K. Subba Rao, M. Hidayatullah, R.S. Bachawat, J.M. Shelat, C.A. Vaidialingam, JJ.

Civil Appeal No. 1415 of 1966. D/d. 10.4.1967.

Laxmikanta Sahu - Appellant

Versus

Superintendent of Excise, Berhampur and others - Respondents

For the Appellant :- A.K. Sen, Senior Advocate (L.D. Sharma and B.D. Sharma, Advocates, with him).

For the Respondent :- N.S. Bindra, Senior Advocate (R.N. Sachthey, Advocate with him).

Cases Referred :-

Kalyani Stores v. State of Orissa, 1966 AIR (SC) 1686 : 1966 (1) SCR 865.

JUDGMENT

Bachawat, J. The appellant held a licence for the retail off vend of foreign liquor at his shop at Berhampur in the State of Orissa. The licence was renewed since 1956 from year to year up to the year ending March 31, 1966. The fees for the licences for the retail on and off vend of foreign liquor were fixed from time to time by rules framed by the Board of Revenue, Orissa. Rule 105 of the Boards Excise Rules framed on August 14, 1965 prescribed that the fee for a licence granted for the retail on and off vend of foreign liquor shall not be less than Rs 600 perannum. The appellant duly paid the licence fee of Rs 600 for the year 1965-66. Rule 103(1) of the Boards Excise Rules framed on August 14, 1965 provided: "The fees for licences for the retail vend of country spirit, fermented Tari, Pachwai, Ganja and Bhang shall be fixed by auction, subject to a reserved fee sanctioned in each case by the Commissioner". It is to be noticed that this rule did not apply to licences for the retail vend of foreign liquor. By a notification dated January 28, 1966, the Board amended the 1965 rules. The amended Rule 103(1) is in these terms: "The fee for licences for the retail vend of country spirit, fermented Tari, Pachwai, Ganja and Bhang as well as for the retail sale (hereinafter referred to as off sale or off vend) of foreign liquor shall be fixed by auction subject to a reserved fee sanctioned in each by the Commissioner". In view of the amended Rule 103(1), the fees for licence for the retail off vend of foreign liquor had to be fixed by auction. The Additional District Magistrate, Ganjam, issued a notification fixing February 4, 1966 for auction-sale of foreign liquor off shops in the district for the year 1966-67. On February 1, 1966, the appellant filed a writ petition in the High Court of Orissa asking for writs quashing the sale notification and restraining the authorities from giving effect to it. Before the High Court, the appellant challenged the validity of the amended Rule 103(1) and the aforesaid sale notification. On May 4, 1966, the High Court dismissed the writ petition. The appellant filed this appeal on a certificate granted by the High Court. During the pendency of the appeal, the auctions were held and the licences for the foreign liquor off shops for 1966-67 were issued to the highest bidders.

2. The validity of the amended Rule 103(1) is challenged on the ground that the charge for the grant of a privilege for the retail off vend of foreign liquor under the system of auctioning introduced by the amended Rule 103 (1) is a tax and the imposition of such a tax is not authorised by the Bihar and Orissa Excise Act, 1915. The High Court held that Rule 103(1) is authorised by Section 90(7) of the Act. The correctness of this ruling is challenged by the appellant

3. The Bihar and Orissa Excise Act, 1915 is a pre-Constitution Act and is continued in force by virtue of Article 372 of the Constitution. Section 20 read with Section 2(12)(a) of the Act requires a licence for sale of any liquor, and Section 38 empowers the Board to prescribe the fees for such a licence. On behalf of the State of Orissa it is conceded that the charge for the grant of a privilege for the off vend of foreign liquor under the system of auctioning is a tax and not a fee. Section 38 does not empower the Board to levy a tax. It follows that the amended Rule 103(1) is not authorised by Section 38.

4. Section 22 of the Act empowers the State Government to make a grant of the exclusive privilege of selling retail any country liquor or intoxicating drug. Under Section 27, an excise duty or a counter-vailing duty as the case may be at such rate or rates as the State Government may direct, may be imposed on the import export transport and manufacture of any excisable article. Any duty imposed under Section 27 may be levied in any of the ways specified in Section 28. Section 29 provides: "Instead of or in addition to, any duty leviable under this Act the State Government may accept payment of a sum in consideration of the grant of any exclusive privilege under Section 22". A combined reading of Sections 22, 27, 28 and 29 shows that the State Government can levy duty in the form of a payment for the grant of exclusive privilege in respect of country liquor and intoxicating drugs only. Under the Act, the State Government has no power to levy duty in the form of a payment for the grant of a licence for retail, vend of foreign liquor. Section 90(7) empowers the Board to make rules for "prescribing the scale of fees or the manner of fixing the fees payable in respect of any exclusive privilege granted under Section 22 or any licence, permit or pass granted under this Act, or in respect of the storing of any intoxicant". Under Section 90(7) the Board could prescribe that the payment for the grant of the exclusive privilege for the sale of any country liquor or intoxicating drug should be fixed by auction under Section 22. But Section 90(7), read with Section 22 does not empower the Board to levy a tax in the form of a payment for the grant of a licence for the retail vend of foreign liquor or to direct that such duty should be fixed by auction. We therefore hold that the amended Rule 103(1) insofar as it directs that the fee for retail sale referred to as "off" sale or "off" vend) of foreign liquor shall be fixed by auction is beyond the Rule-making authority of the Board and is invalid. The High Court was in error in holding that Rule 103(1) was authorised by Section 90(7).

5. Counsel for the appellant argued that even the State Legislature could not impose a duty on foreign liquor in the manner prescribed by the amended Rule 103(1) as foreign liquor is neither produced nor manufactured in the State of Orissa. The point does not arise for decision as the State Legislature has not levied any duty on foreign liquor in the manner provided for by Rule 103(1). Rule 103(1) is not authorised by the Act and is beyond the Rule-making powers of the Board. Counsel for the appellant also argued that if the duty levied under Rule 103(1) is sought to be justified as counter-vailing duty on foreign liquor, it affects the freedom of trade, commerce and intercourse and is hit by Article 301 of the Constitution and is not saved by Articles 304 and 305 having regard to the decision in Kalyani Stores v. State of Orissa, 1966 AIR (SC) 1686 : 1966 (1) SCR 865. This point also does not arise for decision as counsel for the State did not contend, that the duty levied under Rule 103(1) is a counter-vailing duty on foreign liquor.

6. For the reasons given above, we declare that the amended Rule 103(1) is invalid insofar as it provides that the fee for licences for the retail sale (referred to as off sale or off vend) of foreign liquor shall be fixed by auction. In view of the fact that the auction-sale has been already held, no other relief can be granted to the appellant. Subject to the declaration mentioned above, the appeal is dismissed. There will be no order as to costs.

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