M/s Varalakshmi Chemind Private Ltd. v. State of Tamil Nadu

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 06.07.2009CORAMTHE HONOURABLE MR.JUSTICE S.J.MUKHOPADHAYAANDTHE HONOURABLE MR.JUSTICE RAJA ELANGOW.A.Nos.2916 to 2918 of 2001M/s Varalakshmi Chemind Private Ltd.,rep. by its Managing DirectorT.Panneerselvam, Serkaud Appellant in all theVellore District..writ appeals/Petition-Vs-1. State of Tamil Nadu rep.by its Secretary to Government Prohibition & Excise Department Fort St.George, Chennai 600 0092. The Commissioner Prohibition & Excise DepartmentRespondents 1 & 2 in Chepauk, Chennai 600 005..W.A.Nos.2916 to 2918/013. South Indian Sugar Mills Association of Tamil Nadu rep. by its Secretary 498, Anna Salai Karumuthu Centre Respondent no.3 in Chennai-35 .. W.A.No.2916 of 2001Appeals filed under Clause 15 of the Letters Patent against theorders dated 30.1.2001 made in W.P.Nos.19419, 19425 & 5712 of 2000.Prayer in W.P.No.19419/00: Writ Petition filed under Article 226 ofthe Constitution of India praying to issue a writ of declaration ofdeclare the levy of Administrative fee on rectified spirit/industrial alcohol/ethyl alcohol is illegal, an constitution and thecollection of the same from the purchasers of rectified spirit isalso violative of rule 5.A of Tamil Nadu Distillery Rulese 1981.Prayer in W.P.No.19425/00: Writ petition filed under Article 226 ofthe constitution of India Praying to issue a writ of Declaration todeclare that levy of establishment charges of the Excise SupervisoryOffice and his Assistant Vide G.O.(D) N.118 dt.21.7.94 of the 1strespondent is illegal in view of the administrative service thehaving already been collected under rule 5-A of Tamil NaduDistillery Rules 1981 from the manufacturers of rectified Spirit.Prayer in WP.No.5212/00 Writ petition filed under Article 226 of theconstitution of India praying to issue a writ of Certioranified https://hcservices.ecourts.gov.in/hcservices/ Mandamus to call for the records of the 2nd respondent dt 14.2.2000 isletter No.01/36117/99 and quash the same and consequently direct the2nd respondent is issue proper clarification as to whether theAdministrative service fee levied according to rule 5A of T.NDistilleries Rules 1981 has to be paid by the dealers out of thenpocket or can be passed to the purchases who purchases rectifiedsprit.For Appellant::Mr.N.Muralikumaran forM/s Mc Gan Law FirmFor Respondents::Mr.D.SreenivasanAddl. Government Pleader forR1 & R2 in all the writ appealsMr.V.Ayyadurai for R3 inW.A.No.2916 of 2001JUDGMENT(Judgment of the Court was delivered by S.J.MUKHOPADHAYA, J.) The respondent-South Indian Sugar Mills Association (for short,"the association") is an association of manufacturers of rectifiedspirit, whereas the appellant/writ petitioner-M/s Varalakshmi ChemindPrivate Limited is its customer manufacturing chemicals. Theassociation of South Indian Sugar Mills, which manufactures rectifiedspirit, does under the supervision of the officials of the StateGovernment who are posted in their respective factories. Similarly,the petitioner, which manufactures chemicals out of rectifiedspirit, does under the supervision of an Excise Supervisory Officerin the cadre of Deputy Tahsildar of the State. With a view torecover the expenditure borne by the State government towards salary,allowances, pension, etc., of the employees so posted in theassociation's manufacturing unit, the Governor of Tamil Nadu, inexercise of powers conferred by Sections 17-B, 17-C, 17-D, 18-B, 18-Cand 54 of the Tamil Nadu Prohibition Act, 1937, amended Rule 5-A ofthe Tamil Nadu Distillery Rules, 1981, gazetted vide G.O.Ms.No.662,Home, Prohibition and Excise (III) Department dated 4th June, 1990,which reads as follows:-"5-A. Payment of Administrative Service Fee:Every licensee shall pay fifty paise per bulklitre of spirit produced in the distillery,towards administrative service fee, before thespirit is issued from the distillery."By the aforesaid rule, it was ordered to pay fifty paise per bulklitre of spirit produced in the distillery towards administrativeservice fee before the spirit is issued from the distillery.2. The Governor of Tamil Nadu also issued one executiveinstruction by G.O.(D) No.118, Prohibition and Excise Departmentdated 21st July, 1994, whereby similar administrative fee was leviedon the petitioner (appellant herein). https://hcservices.ecourts.gov.in/hcservices/

3. The association of manufacturers of rectified spirit passedon the liability of administrative fee on the petitioner and othersimilarly situated persons. As the petitioner was paying separateadministrative fee with regard to the supervision by an ExciseSupervisory Officer in its own unit, the petitioner represented thematter with the authorities on 21st August, 1999 and raised thequestion whether the manufacturers of rectified spirit can pass onthe liability of administrative service fee on the purchaser of therectified spirit like the petitioner. Having received no reply, thepetitioner moved before this Court in Writ Petition No.16656 of 1999and pursuant to the order of this Court dated 11th October, 1999, theCommissioner of Prohibition and Excise disposed of the representationby the Letter No.D1/36117/99 dated 14th February, 2000 and made thefollowing clarification:".....I am to inform you that liability to payadministrative service fee for the spirit producedis on the distilleries and there is no provision topass on the burden to the purchaser like sales taxand reimburse themselves by collecting theadministrative service fee from the purchaser ofthe rectified spirit, but there is no legalprohibition to pass this on to the buyers."4. The petitioner was not happy with the last portion of theclarification letter dated 14th February, 2000, whereby it wasinformed that there is no legal prohibition to pass such liability onthe buyers, though it was accepted that there was no provision topass on the burden to the purchaser like sales tax. This was thereason the petitioner challenged the said letter by filing WritPetition No.5712 of 2000.5. Further, as the manufacturers of rectified spirit werepassing on such liability of administrative service fee on thepetitioner and a separate administrative fee was also levied on thepetitioner by G.O.(D) No.118 dated 21st July, 1994, the petitionerquestioned the legality and propriety of the levy of administrativeservice fee on the rectified spirit / industrial alcohol / ethylalcohol as imposed vide amended Rule 5-A by filing Writ PetitionNo.19419 of 2000 and also the levy of separate administrative feevide G.O.(D) No.118 dated 21st July, 1994 by filing Writ PetitionNo.19425 of 2000 respectively. Subsequently, fifty paise ofadministrative service fee, as was prescribed by amended Rule 5-A,was raised to one rupee per bulk litre by G.O.Ms.No.64, Prohibitionand Excise (XIII) Department dated 12.4.2000. 6. The association of manufacturers of rectified spirit alsopreferred Writ Petition No.9707 of 2000 challenging the levy ofadministrative service fee on the rectified spirit. Certain otherchemical units also preferred writ petitions challenging theenhancement of administrative fee by 100% from 50 paise to one rupeeper bulk litre. Writ Petition No.19419 of 2000 preferred by thepetitioner challenging the amended Rule 5-A was heard along with thewrit petitions preferred by the association of manufacturers ofrectified spirit and other chemical units and by common order dated https://hcservices.ecourts.gov.in/hcservices/ 30th January, 2001, the Court, while upholding the validity of theamended Rule 5-A, held that the enhancement of administrative servicefee from 50 paise to one rupee was arbitrary and unjustified.7. It is informed that the State Government preferred WritAppeal Nos.1566 to 1575 of 2001 against the common order dated 30thJanuary, 2001 passed in Writ Petition No.9707 of 2000 and analogouscases, and those appeals having been dismissed by this Courtaffirming the order passed by the learned single Judge, the State hasmoved Special Leave Petitions before the Supreme Court in S.L.P.(Civil) Nos.8743 to 8752 of 2004. The matter is stated to be pendingbefore the Supreme Court. The learned single Judge, by two separateorders dated 30th January, 2001, dismissed the Writ Petition No.5712of 2000 and Writ Petition No.19425 of 2000 preferred by thepetitioner.8. We have heard the learned counsel for the parties and noticedtheir submissions.9. The question of legality and propriety of the amended Rule 5-A has been considered by the Division Bench of this Court in WritAppeal Nos.1566 to 1575 of 2001. The aforesaid appeals have beendismissed on 16th March, 2004 affirming the order dated 30th January,2001 passed in Writ Petition No.9707 of 2000 and analogous cases. Thesaid judgment is pending for consideration before the Supreme Court.In view of the finding of the Division Bench of this Court, we haveno other option but to dismiss the writ appeal preferred by thepetitioner against the common order dated 30th January 2001 in WritPetition No.19419 of 2000, but the parties will be guided by thedecision as may be rendered by the Supreme Court in the Special LeavePetitions which are pending as referred to above.10. So far as the levy of separate administrative fee on thepetitioner vide G.O.(D) No.118 dated 21st July, 1994 is concerned, weuphold the order passed by the learned single Judge in view of thefact that similar provision, as made by amended Rule 5-A, has beenupheld by the Division Bench of this Court as noticed above and thereasons given by the Court are also applicable in the present case.11. So far as the clarification Letter No.D1/36117/99 dated 14thFebruary, 2000 is concerned, as evident from the said letter andquoted above that the Commissioner of Prohibition and Excise hasmerely informed that the liability to pay administrative service feefor the spirit produced is on the distilleries. This is alsoaccepted by the learned counsel for the petitioner. There is noprovision to pass on the burden to the purchaser like sales tax andreimburse themselves by collecting the administrative fee from thepurchaser of the rectified spirit is also accepted by the petitioner,which is one of the ground taken to challenge the said letter. So faras there is no legal prohibition to pass on such liability to thebuyer is concerned, we are not expressing any opinion with regard tothe same. If there is no provision to pass on the burden to thepurchaser like sales tax and reimburse themselves by collecting theadministrative fee from the purchaser, how such burden ofadministrative fee can be passed on to the purchaser is a matterwhich requires determination by a Court of competent jurisdiction. https://hcservices.ecourts.gov.in/hcservices/ As it is a dispute between two private parties i.e., between themanufacturers of rectified spirit and the petitioner or those who aresimilarly situated, we are not inclined to express any opinion withregard to the same, though it will be open to the petitioner to movebefore the appropriate forum for recovery of any amount fromdistilleries on such ground, if otherwise not barred by limitation.In such case, the Court will decide the matter independently withoutbeing influenced by the order passed by the learned single Judge inW.P.No.5712 of 2000.13. In view of the above, while we dismiss Writ Appeal Nos.2916and 2917 of 2001, Writ Appeal No.2918 of 2001 stands disposed of withthe aforesaid observation. There shall be no order as to costs.ssSd/Asst. Registrar/true copy/Sub Asst.RegistrarTo1. The Secretary to Government of Tamil Nadu Prohibition & Excise Department Fort St.George Chennai 600 009.2. The Commissioner Prohibition & Excise Department Chepauk Chennai 600 005.Copy to:- The Section Officer, E.R. Section, High Court, Madras 104.+ 1 cc to No. V. Annadurai Advocate SRNo.29548•+ 1 cc to MCGANLAN FIRM SR.29228••• W.A.Nos.2916 to 2918 of 2001BKY (CO)EU 20.7.2009.