(LP.A, No. 4 v. The State of Chhattisgarh & Ors.

HON'BLE SHRI PRITINKER DIWAKER. J. ^ Sd/- ChiefJustice Prtri^T'3^ Judge POST FOR PRONOUNCEMENT OF THE JUDGEMENT 15/07/2013 Sd/- » ChiefJustice \S 10712013 [^ HIGH COURT OF CHHATTISGARH AT BILASPUR AFR CORAM: HON'BLE SHRI YATINDRA SINGH, C.J. HON'BLE SHRI PRITINKER DIWAKER, J. Writ Appeal No. 116 of 2007 Appellant : Kedia Castle Dellon Industries Limited, Kolkata VERSUS Respondents : The State of Chhattisgarh and others Appeal underClauseX ofthe letters patent Appearance: Shri AM Mathur, Senior Advocate with Shri Abhishek Sinha, Shri Ghanshyam Patel and Shri Abhinav D Dhannodkar, counsel for theAppellant. Shri Kishore Bhaduri, Additional Advocate General for the State/ Respondents. JUDGEMENT (l5*July,2013) 1. The main question involved in this case is: 'Whether the circular dated 23.05.2001 (the Circular) issued Commissioner, (the Chhattisgarh Excise Commissioner) directing affixing of holograms on the liquor bottles and charging of ?1,120/- per holograms is supportedby any statutory provision or not.' It arises in this writ appeal against the order of the single judge dated 19.07.2004 dismissing the Writ Petition-2503 of 2003 filed by M/s Kedia ten thousand Castle Dellon Industries Limited (the Appellant) for setting aside the Circular on the ground of alternative remedy offiling suit. THEFACTS 2. The Excise Commissioner, MP published a notice inviting tenders (the 2000-Tender) on 07.03.2000 for bottling and supplying of country made liquor in sealed bottles to retail se'tlers for the erstwhile State of Madhya Pradesh. ,

3. The Appellant as well as some others were the applicants in the 2000-Tender. The following three tenderers were successful to supply country madejiquor for the areas mentioned below: r'"^.. .•' sT^\. \^ (i) The Appellant for Raipur and Durg; (ii) Well Come Distillery Ltd. for Bilaspur, Raigarh and Korba; (iii) SOM Distillery Ltd. for Rajnandgaon and Bastar.

4. The State of Chhattisgarh was created on 01.1 1.2000. The aforesaid areas fell within the state of Chhattisgarh. The Commissioner issued the Circular requiring affixation of a hologram on the liquor bottles.

5. The Circular was applicable to the five districts namely, Raipur, Rajnandgaon, Durg, Dhamtari and Mahasamund only. The area of operation of the aforesaid three persons fell within the districts, where holograms were to be affixed.

6. The holograms were to be issued by the State Excise Department (the Department) at the cost of ?1,120/- per ten thousand or 11.2 paise per hologram.

7. The Appellant complied with the same and the period of the 2000- Tender came to an end on 31.03.2002 without any dispute being raised by the Appellant or any other successful tenderer.

8. A fresh notice inviting tenders for the period 01 .04.2002 to 31.03.2004 (the 2002-Tender) was published on 05.03.2002. The same three were again successful for the country madeliquor at the following places. (i) The Appellant for Raipur, Korba and Durg; (ii) Well Come Distillery forRaigarh; and (iii)SOM Distillery for Rajnandgaon, Bastarand Bilaspur. These areas fell within the districts, where holograms were to be affixed.

9. During the 2002-Tender, the Appellant initially complied with the Circular but after expiry of six months, flled the representations on

20.11.2002 and 24.01 .2003 before the Commissio.ner mentioning that the purchase of the holograms was a financial prayed that the representations be considered sympathetically and loss to the Appellant. It was \^ appropriate direction be issued in regard to purchase and affixing of holograms. •"s

10. The Appellant also gave a legal notice on 03.03.2003. Thereafter, a Writ Petition-909 of 2003 was filed challenging the Circular. In the said writ petition, prayer for interim relief was rejected by the single judgeon 07.04.2003.

11. Against the aforesaid order, the Appellant filed LPA-15 of 2003. This LPA and the writ petition were disposed of on 17.07.2003 granting liberty to the Appellant to file a representation before the State Government.

12. The Appellant filed its representation however, the State Government rejected it on 01.08.2003.

13. The Appellant filed Writ Petition-2503 of 2003 challenging the Circular as well as the order dated 01.08.2003 rejecting the representation. It was dismissed on 19.07.2004 on the ground of alternative remedy of filing a civil suit.

14. Against the aforesaid order, the Appellantfiled LPA-49 of 2004. It was dismissed as not maintainable on 29.04.2005. Against this order, The Appellant filed SLP number 19948-19949 of 2005 before the Supreme Court.

15. Duringpendency of the SLP, the Chhattisgarh High Court (Appeal to Division Bench) Act, 2006 (the 2006 Act) came into force providing appeal against the orders of the single judge in a writ petition under In view of the 2006-Act, the SLP was article 226 of the Constitution. allowed on 10.05.2007 and the case has been sent back to this Court for decision on merits in accordance with law. • \^

16. After remand from the Supreme Court, Appellant was numbered as Writ Appeal -116 of 2007. the writ appeal of It has come up for final hearing before us.

17. It is relevant to point out that no dispute regardingprice of holograms was raised by the other two successful tenderer namely SOM Distillery and Well-Come Distillery for any period. POINTS FOR DETERMINATION 18. We have heard counsel1 for the parties. The following points arise for determination in the case: (i) Whether the writ petition should be dismissed on the ground of alternative remedy; (ii) What is the nature ofthe Circular; (iii) Whether the Circular is supporiied by any statutory provision; (iv)Whether the Appellant js entitled to revision of rates because of the financial burden due to affixing of hologram; (v) Whether the Circular is valid; (vi) In case, the answer to the third point is in negative, then what relief may be granted to the Appellant.

19. 1st POINT: N0 DISMISSAL FOR ALTERNATIVE REMEDY It is admitted between the parties that decision on merits on the If claim made by the Appellant depends upon the validity of the Circular. the Circular is valid, then no relief ca'n be granted to the Appellant. But if the Circular is invalid then some relief has to be granted to the Appellant. The question whether the Circular is valid or not is a question of law and not a question offact.

20. The State had already realisedjhe amount at the rate of?1,120/- per ten thousand holograms. The number of holograms issued are also fixed and can be ascertained by the State. The amount paid on the holograms 1We are thankful for the parties for looking into part of the judgement under the heading 'THE FACTS', 'POINTS FOR DETERMINATION', 'l" POINT: N0 DISMISSAL FOR ALTERNATIVE REMEDY' and 'APPENDIX'. Even then, if there are any mistakes, then they are ours. to the counsel ^ft^S,,^^ •/'..^^^.^ ^ \^ is also fixed. There is no dispute on this amount. The dispute between the parties is about the validity of the Circular. And depending on its validity, the Appellant may get back the amount paid on the holograms. X.

21. In view of the above, there was no justiflcation to dismiss the writ petitionon the ground of altemative remedy and we proceed to decide the case on merits. 2nd POINT:REGULATORY IN NATURE

22. Entry 51 list 2 of schedule VII of the Constitution relates to duty of excise and countervailing duties on alcoholic liquors for human consumption as well as opium, Indian hemp, and other narcotic drugs and narcotics.

23. The aforesaid entry does not include the medicinal and toilet preparations containing alcohol, opium, drugs and narcotics. Nevertheless, the entry confers regulatory powers on the State Government for the items mentioned in it. This was so Indian hemp, and other narcotic explained in State of UP vs Saraya Industries {(2006) 11 SCC 129} (the Saraya case): the case strongly relied by the counsel for the Appellant.

24. The Saraya case related to the holograms, but the controversy involved in that case was entirely different from the controversy involved in the present case.

25. In the Saraya case, the circulars were issued requiring holograms to be affixed on the liquor bottle and the Excise Inspector was required to maintain the stock of the holograms issued. The following provision was made in respect of wasted holograms: • The wasted holograms were required to be produced for verification before a committee; > • \ if they were not produced then a presumption was to be drawn that they were misused; and \^ • The distiller was liable to deposit the excise duty on the quantity of liquor covered by those wasted holograms.

26. In the Saraya Case, some wasted holograms could not be produced before the committee. Thus, in terms of the circulars, penalty equivalent liquor covered by these wasted to excise duty on the quantity of holograms was imposed. This imposition along with the circulars were challenged.

27. The Supreme Court upheld the challenge. The court observed that: 'A provision which confers powers upon a statutory authority in terms whereof a penalty is to be imposed, damages are to be paid for non-payment of excise duty, which in our opinion, must be done through a valid subordinate legislation and not by way of issuance of a circular letter.'

28. Nonetheless, the court alsoobserved, 'The tegislative field in regard to levy of excise duty is covered by Entry 51, List II ofthe Seventh Schedule ofthe Constitution of India. It may be true that the resort to regulatory measures can be taken by the State, but the same must be done in the manner laid down under the Act.'

29. In the present case, neither penalty nor damages equivalent to the excise duty on the liquor covered by the wasted holograms is being recovered nor challenged. The respondents are charging the price of the hologram at the rate of 11.2 paise per hologram that is supplied to the Appellant. This aspect was not challenged in the Saraya Case.

30. The decision to affix holograms and charging price of 11.2 paise per hologram was taken by the State to stop smuggling of liquor and evasion of excise duty. Though, it was circulated by the Commissioner. This is ^H clear from reading of the Circular (see below for relevant part of the circular)2.

31. In our opinion, the Circular is merely a regulatory measure. However, it is still to be seen: • Whether such a direction could be issued under the taw or not; • Whether due to financial burden of affixing holograms at the rate of 11.2 paise per hologram, the Appellant could claim revision of rates or damages by way of return of the price paid. This will be discussed, while considering the 31d and 4th point. 3rd POINT: THERE 1S A STATUTORY PROVISION

32. The counsel for the Appellant relied upon the following cases: (i) The Saraya Case; (ii) M/s Gupta Modern Breweries vs State of Jammu & Kashmir {2007 (5) SCALE 842} (the Modern-Breweries case); (iii) Nagrik Upbhokta Manch vs Union of India & Others {(2002) 5 SCC 466} (the Nagrik-Upbhokta case); (iv) Indian Bank Association vs M/s Devkala Consultancy Service {JT 2004 (4) SC 587} (the Indian-Bank case); 2The relevantpart ofthe Circular dated 23.05.2001 is as follows: W3?T ?IRFT ?RT ^5 W?f ©^T'CT 11^5 ^Piy ^TOFT ^! 0^ ISRJf ^ qsn - WIg?, ^t, 'ii^'ii^iTci, EFRi^t, ^gi-yy-c; 4 ^?ft/ 1^?ft ^rter ^i^ qir sqq'FsniH Pri^Rr dl^'H ^T/ ^S^t 'iTmTfef yuiiofl ^ ggg 1i|5qT ^1 ^R5T R^d f^Ror T^T ^SS^ ^t IlRr 3TTqq5l' 'jMd&^ cRT ^f^ fl 'fSRRq ?^T yuilofl ^! SRpfcT gfter Titer cp y-cici-i ^R ^fap cRFt ? aiisiqii^ WSR^T 5. ^W ^t ^fe ^T fflW sH^T 1s[1DhT ^W IraT t f^! W^R 04 1^|?Tt ^t y,)ri4"i ^*ITfl ^ ?n^t ^?ft ^ ^^ Iftel, ^R ^5 H^R? t[T? ^! ^?R 3)|6|cp|^ 1^'qpT q? q?T gldlill^ cl'll^l uD^HTI ^ gldllll^ ^?ft ^S ^t 1^rf?T ^ 'RT 'qoSFIR ^R IR ^ ^sft qter/^R ^t 1^(Rr ^ ate oii^'ifl ip ^R TR ('?f?o 1^0 <io) CFTRT d^Ctl ^ g1dli)W ^T ^RT ?PT THM ?IT[T 1^! Iti^T ^T ^T ^HTH ^ li t sft? ^T tR31|E|+l'?l?^^rgTOHq5?felTIRfftl 8 (v) Commissioner of Central Excise vs Chhata Sugar Company Limited {(2004) 3 SCC 466} (the Chhata case) And submitted that: • The Appellant could not sell country liquor unless the bottles had holograms affixed upon them. It is a compulsory exaction of money and amounts to tax; • Article 265 of the Constitution prohibits any taxation without there being any law. No tax or fee can be imposed without being supported by any statutory provision. There is no statutory It is violative of article 265 of the provision for issuing the Circular. Constitution. Cases Cited by the Appellant's Counsel

33. At this stage, it would be relevant to consider the cases relied upon by the Appellant. The Saraya Case

34. This case has been considered, while discussing the previous point. Suffice to say that imposition of penalty by circulars was struck down as there was no statutory support for the same. .-/: TheChhata Case

35. The Chhata case was under the Central Excise Act (the Central-Act). the UP Sheera Niyantran' Adhiniyam, 1964 (the UP-Act) Under administrative charges of ?10/- per quintal were levied by the State Government. The question was whether it could be included in the assessable value of molasses under the Central-Act or not.

36. The Supreme Court held that: -^ • The cost of administrative charges did not fall within the normal price; • There was no question of deducting the same; and • It can not form a part of the normal price. However, the court also looked the problem from another point of view and bbserved that: • Under the administrative charges amounted to the UP-Act, tax; and • It could not be included in the assessable value under section 4(4)(d)(ii) ofthe Central Act. Other Cases

37. In the Modern-Breweries, and the Nagrik-Upbhokta cases, the court held that tax or fee cannot be levied without authority of law. In the Indian-bank case, the court held that a tax cannot be imposed without there being any authority of law. down as it was not supported by statutory provision, it was stuck down. In these cases, the tax/ fee was stuck

38. There is no dispute with the preposition that the tax cannot be levied without authority pf law. But the question is, is there any authority of law for issuing the Circular requiring affixing of holograms and charging 11.2 paise per hotogram or not ? Statutory Provision 39. Section 62 of the Act is titled 'Power to make rules'. Sub-section (1) of section 62 {62(1)} of the Act empowers the State Government to make rules for carrying out the provisions of the Act. Sub-section (2) of section 62 {62(2)} of the Act empowers the State Government to make rules onspecific aspects/ purposes without prejudice to the generality of section 62(1).

40. Clause (d) of section 62(2) {62(2)(d)} of the Act empowers the State to frame rules regulating the import, export, transport, Government manufacture, collection, possession, supply or storage. /.

41. Clause (h) of section 62(2) {62(2)(h)} of the Act empowers the State terms and Government to frame rules prescribing authority, condition and subject to which any licence, permif or pass shatl be the form, w 10 It further provides some specific matters in sub-clause (i) to (v) granted. of section 62(2)(h) {62(2)(h) (i to v)}.

42. The State Government has framed the Chhattisgarh Country Spirit Rules, 1995 (the Rules) in pursuance of the power conferred under section 62(1) read with section 62(2)(d) and 62(2)(h) ofthe Act.

43. Rule 4 of the Rules is titled 'Manufacture and Bottling'. Sub-rule (12) of rule 4 {4(12)} (see Appendix-1) provides that cleaning, corking, sealing, labelling, stocking and issuing of bottles shall be done to filling, the satisfaction of the Commissioner by the licensee under supervision and direction of the officer-in-charge of the warehouse in the manner prescribed therein and in Commissioner may direct from time to time. such other manner as

44. In case sealing or labelling is not done in accordance with directions of the Commissioner then under sub-rule 13 of rule 4 {rule 4(13)} (see Appendix-1), of the Rules, sealing charges as prescribed by the Commissioner, can be deducted and the decision of the Commissioner A is final.

45. Clause 17 of the both tenders (see below)3 provides that submission of tender form implies that the tenderer has read and understood the Act and the Rules made thereunder as well as the terms and conditions of the tender form. The Appellant cannot say that he had no knowledge of the Rules.

46. Holograms are affixed on the top of the cap of the liquor bottle and are broken on opening of the cap. This was done in pursuance of the "Clause 17 ofthe NIT is as follows: imply that he has read and 17. Submission of tender by a tenderer shall rules made understood the provision of the Madhya Pradesh Excise Act thereunder and in particular the detailed terms and conditions of the tender ahd the contents ofthe form oftenderwhich shall be legal binding on the tenderer.' 11 decision taken by the State Government to stop smuggling and evasion of excise duty (see discussion on the previous point).

47. The entire process of affixing holograms is nothing but a kind of sealing of the cap of the bottle by a kind of label ie hologram.

48. The affixation of holograms is merely a regulatory measure. This decision was taken by the State Government and direction in the form of the Circular was issued by the Commissioner to stop smuggling and evasion of excise duty under rule 4(12) of the Rules framed under the power conferred on the State Government under section 62 ofthe Act. is supported by a statutory provision. It

49. In the cases cited by the Appellant, the Supreme Court struck down the tax or fee as there was no statutory provision but it is not so in the present case; there is a statutory provision. 4th POINT: DAMAGES, RETURNOF PRICE—CANNOTBE CLAIMED

50. The direction to affix hologram at the rate of ?1,120/- per ten thousand or 11.2 paise per hologram is undoubtedly a financial burden on the Appellant. This was done during continuance of the 2000-Tender. The question is, whether the Appellant is entitled to ask for the revision of rates due to this financial burden.

51. In this regard, paragraphs 8 (b) of the conditions of the tender notice (see below)4 is relevant. It provides that: • The successful tenderer will have to supply plain and spiced spirit on the rate/ rates accepted/ sanctioned by the Government; and -^, 4 The relevant paragraph 8b ofthe NIT is as follows: ... •8. (b) The successful tenderer will have to supply plain and spiced spirit on the rate/rates accepted/sanctioned by the Government and shalt have no right to ask for revision of rates due to change in any levy, export, import fee or any other taxation in any exporting OF importing state during the currency ofthe contract period. , 9 \^ 12 • The successful tenderer shall have no right to ask for revision of rates due to change in any levy, export, import fee or any other taxation in any exporting or importing state during the currency of the contract period.

52. The case of the State Government is that the financial burden of 11.2 paise per hologram is the value of the hologram to be affixed on the bottle. However, it is the case of the Appellant that financial burden of 11.2 paise per hologram is a levy/ tax. Even if it is to be levy, the revision of rate cannot be asked. This can be seen from another angle.

53. It is relevant to point out the Circular was issued by the Commissioner on 23.05.2001 during continuance of the 2000-Tender. After issuance of the Circular, Appellant continued during this period without raising any objection; never claimed relief on this account: it was only after completion of this ten months period was still left. The 2000-Tender and expiry of six months of the 2002-Tender that Appellant started objecting to the price of the holograms. It is relevant to point out that initially hologram contained national litigation,

54. emblem. One Shri Rama Kant Mishra filed public interest namely Writ Petition- 1246 of 2001 restraining the respondents from misusing the national emblem. In this writ petition initially interim order was granted restraining the use of natfonal emblem butit was disposed ofwhen the use of national emblem was stopped; there was no challenge the present petitioner never to the price of the hologram. However, the hologram on any other ground during objected to the price of continuance of the 2000-Tender.

55. The second notice inviting tender was published on 05.03.2002. At that time, the circular was in existence. The Appellant knew very-well that it was to affix holograms on every bottle, which it was already doing from last ten months in the 2000-Tender. The Appellant undoubtedly gave its offer the second time after considering this aspect. [^ 13

56. After being successful in the 2002-Tender for the period 01.04.2002 initially did not object to the same. He to 31.03.2004, the Appellant objected it for the first time after expiry of six months on 20.11.2002. Both times, there were two other successful tenderers. It is relevant to point out that the other successful tenderers never claimed any relief on account of charging 11.2 paise per hologram.

57. The Circular has statutory support as held in the preceding point. the 2000-Tender, the Appellant never objected. In the 2002-Tender the In offer was after considering price of the hologram. in the price of the liquor. The Appellant is estopped from claiming It has already realised -^. damages by wayof refund ofthe price of hologram.

58. The counsel for the Appellant relied upon some decisions (see below)5 and submitted that: • There cannot be estoppel and acquiescence against constitutional and statutory provisions; • The claim of the Petitioner cannot be denied on this ground.

59. It is not necessary to consider the aforesaid submission or the cases cited by the counsel for the Appellant as we have already held that the Circular is supported by a statutory provision and has statutory force. 5'h& 6th POINT: CIRCULAR IS VALID

60. In view of our decision on point number three and four, not only the Circular is valid and is supported by statutory provision, but the Appellant 5The cases relied upon by the Appellant were as follow: • Hasham Abbas Sayyad vs Usman Abbas Sayyad {(2007) 2 SCC 355};