M/s Associated Alcohols And Breweries Limited having its v. Associated Alcohol and Breweries Limited, C/o District Excise

paid by the first day when storage charges becomes payable and in case excise duty is not paid within the stipulated time, the storage charge would become payable. In addition, certain more clarifications were issued under the same circular.

5. Further case of the petitioner is that goods can be removed from the distillery either on payment of duty or by executing a bond for payment of duty as and when goods are sold. As there is no necessity of paying excise duty at the time when the goods leave the distillery, the petitioner is required to execute a bond for payment of excise duty on the goods and such a bond has been executed by the petitioner. Under the terms of licence, the petitioner is required to deposit brand fees as per the rate specified per year for keeping stock in the bonded warehouse. The petitioner has also executed a bank guarantee for an amount of Rs.20,25,000/- which is valid upto 31.03.1998 i.e. the bank [2024:RJ-JP:52718-DB] (5 of 29) [CW-696/2002] guarantee, according to the petitioner, has been given as per the conditions laid down for establishment of bonded warehouse.

6. In implementation of notification dated 31.03.1997, the petitioner was issued demand letter on 09.06.1997 requiring him to deposit an amount of Rs.2,81,449/- as storage charges. Though the petitioner was resisting but because of the pressure exerted and coercive action taken without deciding his objections against imposition of storage fee, the petitioner had to ultimately pay the amount of Rs.2,57,398/- towards storage fee. The petitioner, in order to obviate the need for depositing the storage charges, had also deposited excise duty on part of the goods lying in the bonded warehouse and deposited amount of Rs.2,82,528/- as advance excise duty. Another demand letter was issued on

17.09.1997 requiring the petitioner to deposit an amount of Rs. 3,47,875/- as charges for the months of May, June, July and August, 1997. Yet another demand letter was issued on

28.10.1997 raising the total to Rs.3,76,225/-. Aggrieved by imposition of storage charges, the petitioner has filed this petition seeking reliefs, as mentioned hereinabove.

7. Learned Senior Counsel appearing for the petitioner made following submissions:

7.1 That the demand on storage charges is illegal and without the authority of law. As the petitioner is otherwise liable to pay excise duty or store liquor on a bond for payment of duty at the time of removal, there was no occasion for charging any storage fee/charges.

7.2 Neither the Rajasthan Excise Act nor the Rajasthan Excise Rules authorize charging storage fee/charges, therefore, issuance [2024:RJ-JP:52718-DB] (6 of 29) [CW-696/2002] of notification dated 31.03.1997, as amended from time to time, is without the authority of law.

7.3 It is Section 42 of the Excise Act which enables Excise Commissioner to make rules regulating deposit of article in warehouse and removal thereof from such warehouses or from distillery and prescribing the scale of fee or the manner of fixing the fee payable in respect of any licence, permit or pass or of storing of any excisable article. No rules, however, have been framed by the Excise Commissioner in exercise of powers conferred under Section 42. Therefore, in the absence of any such Rules framed, no storage charges are leviable under the law.

7.4 Section 17(d) of the Act does not authorize charging of any fees and, therefore, the authority conferred under Section 17(d) by prescribing conditions, does not constitute a source of authority to levy storage charges.

7.5 The fee which could be levied have been provided under the Act and the Rules, particularly, Rule 68 and 69 of the Rajasthan Excise Rules. It provides for fee to be charged for various licences including licence for construction of warehouse. Apart from licence fee, no other fee is authorized to be levied under Rule 68. Therefore, no storage fee could be levied under the garb of notification dated 31.03.1997.

7.6 In the absence of there being any authority under the law to levy storage charges, imposition is essentially in the nature of tax/ duty levied without the authority of law and, therefore, violative of Article 265 of the Constitution of India. Mere storage of liquor in the bonded warehouse does not amount to sale of liquor to wholesale licensee. Therefore, storage of goods in a bonded [2024:RJ-JP:52718-DB] (7 of 29) [CW-696/2002] warehouse could not be subjected to any fee other than those expressly provided under the Act and the Rules framed either by the State or by the Excise authority.

7.7 Levy of storage charges cannot be considered to be a fee as there is no semblance of quid pro quo. In the absence of any services rendered in respect of liquor stored in the bonded warehouse, which is otherwise in the ownership of the licensee, levy of storage fee is impermissible. The Government charges from the licensee, licence fee for grant of licence to store the goods in the bonded warehouse and also imposes security for grant of special licence. The State also levies supervision charges from the licensee as the State supervise the loading and unloading of the goods in the warehouse which are required to be examined and verified by the State authority, a regulatory power. Thus, where the State is already charging supervision charges, imposition of storage fee is unconstitutional and otherwise arbitrary, being violative of Article 14 of the Constitution of India.

7.8 The State has not only been imposing but enhancing periodically, the licence fee, supervision charges, brand fee etc. Thus, for all activities, the State is already charging fee and, therefore, there was no occasion for the State to impose a new fee in the name of storage charges as no additional service is being rendered by the State.

7.9 The storage charges are otherwise so high that it is confiscatory in nature. The goods deposited in the warehouse belongs to the licensee and under the conditions prescribed, the Government is not held responsible for destruction, loss or damage for any reason whatsoever occurring in liquor stored in [2024:RJ-JP:52718-DB] (8 of 29) [CW-696/2002] the warehouse. All loses are to be borne by the licensee. As far as storage is concerned, the State is not providing any separate services and, therefore, charging of storage fee has no co-relation to any services being rendered by the State. Therefore, storage charges are nothing but imposition of tax for which there is no authority under the Excise Act or the Rules made thereunder.

7.10 Levy of storage charges prior to 01.04.1997 amounts to giving retrospective effect in respect of goods which are already in store as on 31.03.1997. This amounts to imposing storage charges even prior to the date on which the notification dated

31.03.1997 has been brought into effect i.e. 01.04.1997. In the absence of there being express provision under the law to give retrospective effect, charging storage fee on the goods which were stored in bonded warehouse as on 31.03.1997 is without the authority of law.

7.11 Notification dated 25.06.1997 was neither published in the Rajasthan Official Gazette nor notified by any circular or otherwise amongst the bonded warehouse licensee. Therefore, the benefit which has been given has been taken away as many licensee including the petitioner did not know about the scheme of benefit which could be availed under the notification dated 25.06.1997, before 30.06.1997. In support of his submissions, learned counsel for the petitioner has placed reliance upon the decision of the Hon’ble Supreme Court in the cases of Gaurav Kumar Vs. Union of India & Ors. [2024 SCC Online SC 1841] and M/S. Gupta Modern Breweries vs State Of Jammu & Kashmir & Ors [2007 (6) SCC 317]. [2024:RJ-JP:52718-DB] (9 of 29) [CW-696/2002]

8. Per contra, learned counsel for the respondent-State opposes the relief sought by the writ petitioner on following submissions:

8.1 The State is empowered to prescribe conditions and restrictions in respect of establishment or licence of a bonded warehouse under Section 17 of the Rajasthan Excise Act, which deals with establishment. It has power to levy various fees not only for establishment, construction and licence to operate a bonded warehouse, but also while granting any permission or a pass, if within the period of storage of IMFL/FL, permissible, the warehouse licensee fails to remove the stock of IMFL/FL within that period. In exercise of powers under Section 17(d) of the Rajasthan Excise Act read with Rule 2 of the Rajasthan Excise Rules, the Government is competent and empowered under the law to prescribe the conditions and restrictions in respect of establishment or licence of a bonded warehouse for receipt and storage of liquor and other excisable articles. Notification dated

31.03.1997 has been issued in valid exercise of power conferred under Clause (d) of Section 17 of the Rajasthan Excise Act read with Rule 2 of the Rajasthan Excise Rules. Such authority is otherwise also available under Section 31 of the Act and, therefore even if the notification does not refer to Section 31, as there is authority under the law to levy fee for grant of permit for doing anything as a measure of regulatory power, levy of storage fee beyond permissible limits would be valid exercise of power under the law as. It is not the form but the substance relevant to trace the source of power.

8.2 Conditions incorporated in earlier notification issued on

22.01.1986 were amended vide notification dated 31.03.1997 [2024:RJ-JP:52718-DB] (10 of 29) [CW-696/2002] providing that if the importer fails to clear the whole consignment from the bonded warehouse upto the end of the next month of arrival of goods on payment of duty leviable at the relevant time, the storage fee over and above the delay beyond the next calendar month of the arrival month of the goods in the bond shall be charged at the prescribed rates. As, under the earlier notification dated 22.01.1986, there was no time limit prescribed for storage and the licensee could store the goods for an indefinite period without paying excise duty, resulting in great loses of excise duty, amendment was considered necessary to provide for levy of storage fee upon failure to remove the goods upto stipulated period. Therefore, levy of storage fee is a part of the condition regarding storage in a bonded warehouse and authority is available under Section 17(d) of the Rajasthan Excise Act and it is not as such a new fee prescribed. The amendment has been carried out prescribing new conditions with a view to save excise duty. Since the circular was clarificatory in the nature, the same would become applicable and storage fee would be payable in cases where the goods are not removed from the bonded warehouse within the stipulated period.

8.3 The scheme of payment of storage fee is only in the alternative. If the licensee removes the goods within the stipulated period prescribed by way of amended condition, there is no liability to pay storage fee and it is only in the event of failure that the storage fee becomes leviable. As the amendment in the condition requiring payment of storage fee beyond a particular limit in the event of failure to remove the goods in the bonded warehouse, all subsequent notifications issued from time to time [2024:RJ-JP:52718-DB] (11 of 29) [CW-696/2002] are perfectly in accordance with law and there is nothing illegal in issuing clarificatory circulars which includes various kinds of conditions for payment of excise duty and in the alternative, to pay storage fee. In support of his submissions, learned counsel for the respondents has placed reliance upon the decision of Hon’ble Supreme Court in the cases of Hindustan Petroleum Corporation Ltd. Vs. Okha Gram Panchayat & Ors. [1994 Supp (1) SCC 296] and M/s Inertia Industries Vs. State of Rajasthan & Ors. [2002 3 RLW(Raj) 1657].

9. We have perused the material available on record and considered submissions in extenso made by learned counsel for the respective parties.

10. Prior to enactment of the Rajasthan Excise Act, 1950, vide Act No. II of 1950, there were several laws relating to excise duty and control of prohibition, sale etc. of liquor in different princely State of Rajasthan. Hence, consolidation of law was felt necessary to amend and re-enact it according to the need of the new State of Rajasthan. Rajasthan Excise Act, 1950 was accordingly made by the Rajpramukh on 20th day of March, 1950. Its preamble states that it is an Act to enact for Rajasthan a Uniform Law relating to the import, transport, manufacture, sale and possession of intoxicating liquor and of intoxicating drugs. Without further going into the historical background of suspension of Rajasthan Excise Act, 1950 upon promulgation of Rajasthan Prohibition Act in 1969 and then re-enactment and revival under the Rajasthan Act No. 13 of 1981, the scheme of the Act entails two fold objectives: it is regulatory as well as prohibitory. It regulates the collection of [2024:RJ-JP:52718-DB] (12 of 29) [CW-696/2002] excise duty by means of issuing licences for manufacture, sale, supply, export, import, possession, consumption and transportation of intoxicating drugs and liquors. So also, it regulates the sale, consumption, opening, closure and retail liquor shops, wholesale dealers, manufactures, hotels and clubs under the licence. It prohibits manufacture, consumption, export, import, sale, supply and possession of illicit liquor and restricts their activities. It prevents offences and punishes the offender for which the regulatory machinery of officers in the Excise department has been created. While Chapter II and Chapter III provide for control and establishment as also import, export and transport, Chapter IV makes provisions with regard to manufacture, possession and sale. Duties and fees are regulated by provisions contained in Chapter V. licences, permits and passes, which includes form and conditions of licences etc., has been exhaustively provided under Chapter VI. Chapter VII contains general provisions including the power of Government and the Chief Excise Authority to make rules generally for the purposes of carrying out the provisions of the Act and in particular framing of the Rules on subjects enumerated therein.

11. Section 17 provides for establishment or licensing of distilleries and warehouses and it being relevant for adjudication of the controversy involved in the present case, is reproduced herein below: “17. Establishment or licensing of distilleries and ware houses.- Subject to such restrictions or conditions as the State Government may impose, the Excise Commissioner, may- [2024:RJ-JP:52718-DB] (13 of 29) [CW-696/2002] (a) establish a distillery or pot-still in which spirit may be manufactured under a licence granted under this Act; (b) discontinue any distillery or pot-skill so established; (c) licence the construction and working of a distillery or pot-still or brewery on such conditions as the State Government may impose; (d) establish or licence a warehouse wherein any excisable article may be deposited and kept without payment of duty; and (e) discontinue any warehouse so established.” Subject to such restrictions or conditions as the State Government may impose, the Excise Commissioner may, amongst other things, establish or licence a warehouse, wherein, any excisable article may be deposited and kept without payment of duty, as provided in Clause (d) thereof. Therefore, the power of the State Government to establish or licence a warehouse is traceable to provisions contained in Section 17, as aforesaid.

12. Section 28 provides for duty on excisable articles. Section 30 provides for payment for exclusive privilege and reads that instead of or in addition to any duty leviable under Chapter V, the Excise Commissioner may accept payment of a sum in consideration for grant of the licence for exclusive privilege under Section 24. Section 31 provides for forms and conditions of licences etc. and amongst other things, it provides that every licence, permit or pass granted under the Act shall be granted on payment of such fee, as may be prescribed.

13. Section 41 confers rule making power on the State Government and Section 42 confers power to make Rules on Chief Excise Authority. While Sub section (1) of Section 41 provides [2024:RJ-JP:52718-DB] (14 of 29) [CW-696/2002] generally for the power of the State Government to make Rules for the purposes of carrying out the provisions of the Act or other law for the time being in force relating to excise revenue, Sub- section (2) confers power in respect of subjects enumerated therein, without prejudice to the generality of the provisions contained in Sub-section (1) thereof.

14. In exercise of rule making power, the State of Rajasthan has enacted Rajasthan Excise Rules, 1956. The Rule contains detailed provisions dealing with all the aspects including the provisions with regard to bonded warehouse. Bonded warehouse has been defined in Section 2(a-1) as below: “2(a-1)-”Bonded Warehouse” means any warehouse or a part of a distillery licenced by the Excise Commissioner as a bonded warehouse for the receipt and storage of liquor or any other excisable article under bond, both bottled and bulk, of Indian manufactured, transported or imported into Rajasthan State, from any place within Indian Union as approved by the Excise Commissioner for its reduction, bottling, transport or export in bond, or on payment of duty within or outside the State.”

15. Rule 21 deals with application for permit for import for IMFL in bond. Clause (d) of Sub-section (1) thereof requires that a person desirous of importing foreign IMFL in bond has to specify the name of the bonded warehouse in Rajasthan to which the liquor is to be consigned.

15.1.Rule 22 further provides that on the arrival in Rajasthan, the consignment of IMFL shall be taken directly to the warehouse or distillery, as may be mentioned in the permit, where it shall be [2024:RJ-JP:52718-DB] (15 of 29) [CW-696/2002] tested and measured by the officer-in-charge of the warehouse and shall be taken into store and entered into importer’s account.

15.2.Rule 23 provides for clearance of consignment within the stipulated period and upon failure to clear the consignment within the stipulated period, the competent authority may charge storage fee at such rate, as it thinks reasonable for the period it remains in the warehouse in excess of 7 days. It further provides that if the consignment is not cleared within 3 months from the date of receipt at the warehouse, the District Excise Officer or the Assistant Excise Officer, as the case may be, may dispose it of in such manner as directed by the Deputy Commissioner at the risk of the importer and shall hand over the proceed of the disposal to the importer on application.

15.3.Rule 23 was, however, deleted vide Act No. 45 of 1987 dated

26.03.1987. Therefore, from the date of deletion of Rule 23, the provision relating to charging of storage fee beyond 7 days of storage in the warehouse no longer remained in force.

16. Chapter VIII of the Rules deals with licence and permit fees. Rule 68 provides for fees for certain licences which are enumerated therein. In the description of licence under Rule 68, Clause 6(a) provides for licence fee for construction and working of bonded warehouse for bottling plant.

17. The impugned notification dated 31.03.1997 was issued by the Government seeking to amend the earlier notification dated

22.01.1996, w.e.f. 01.04.1997. Since the entire case of the State [2024:RJ-JP:52718-DB] (16 of 29) [CW-696/2002] respondent rests on this particular notification as the source of authority which is under challenge in this petition, the same is reproduced hereinbelow for ready reference: GOVERNMENT OF RAJASTHAN FINANCE (EXCISE) DEPARTMENT No.F4(62)FD/EX/96 Jaipur, dated 31st March, 1997 In pursuance of clause (3) of Article 348 of the Constitution of India, the Governor is pleased to authorise the publication in the Rajasthan Gazette of the following translation in the English language of the Fiance (Excise) Department Notification No.F4(62)FD/EX/96 Dated 31.03.1997 By order of the Governor (S.R. PRATHAR) Dy. Secretary to the Govt. GOVERNMENT OF RAJASTHAN FINANCE (EXCISE) DEPARTMENT NOTIFICATION Jaipur, dated 31st March, 1997 In exercise of the powers conferred by clause (d) of Section 17 of the Rajasthan Excise Act, 1950 (Rajasthan Act No. 2 of 1950), read with rule 2 of the Rajasthan Excise Rules 1956, the State Government hereby makes the following amendment in this department Notification No. F1(7)FD/EX/32 dated 22.1.1986 published vide S.O. No.167 in Rajasthan Gazette Extra Ordinary part (C), sub-section (II) dated 23.1.1986, with effect from 1.4.1997, namely:- AMENDMENT In the said Notification:- After sub-condition No. (2) proceed on No.6, following new condition No. (3) to Condition No. 6, shall be added, namely:- (3) The importer shall have to clear whole consignment from the bonded warehouse upto the end of next month of arrival of goods & payment of duty leviable at relevant time, If he fails to do so, storage fees over and above the delay beyond next calendar month of arrival month of goods in bond shall be charged at the following rates till the clearance of whole of the consignment:- S.No.

2. Item Storage Fees Indian Made Foreign Liquor Re.1/- per B.L. per day Beer Re.1/- per B.L. per day No. F4(62)FD/EX/96 By order of the Governor (S.R. PRATHAR) Dy. Secretary to the Govt. [2024:RJ-JP:52718-DB] (17 of 29) [CW-696/2002]

18. In para 6 of the writ petition, it has been clearly averred and it is the case of the petitioner that earlier notification dated

22.01.1986, prescribing conditions and restrictions in respect of establishment or licence of a bonded warehouse for the receipt and storage of liquor or other excisable articles under a bond, did not contain any condition for making payment of any charges for storage of the goods in the warehouse.

19. In reply of the respondents also, this factual position has been clearly stated in para 6 to the effect that in the earlier notification dated 22.01.1986, there was no such time limit prescribed for storage and the licensee could store the goods for an indefinite period without paying the excise duty, which was causing loss to the Government. Though the averments made in para 6 of the writ petition have been denied, it is not the case of the respondent-State that such a provision was already existing in earlier notification dated 22.01.1986. The impugned notification clearly shows that the provision with regard to levy of storage charge/fee was introduced by way of addition of a new sub condition no. 3. Therefore, we have to proceed on this admitted position that prior to issuance of impugned notification amending a new condition no. 3, there did not exist any provision for levy of storage fee.

20. The impugned notification as also the stand of the respondent before this Court is that the power to levy storage fee is traceable to Section 17 Clause (d) of the Act of 1950. Section 17, which provides for establishment or licensing of distillery and warehouse, reproduced for ready reference hereinabove, confers power on the Excise Commissioner to establish or licence a [2024:RJ-JP:52718-DB] (18 of 29) [CW-696/2002] warehouse, wherein, any excisable article may be deposited and kept without payment of duty. This power is subject to such restrictions or conditions as the State Government may impose. The notification says that in exercise of powers conferred under Clause (d) of Section 17 of the Act of 1950 read with Rule 2 of the Rules of 1956, amendment is brought in earlier notification dated

22.01.1986. Therefore, the source of authority, according to the State, is the provision contained in Section 17 Clause (d) read with Rule 2 of the Rules of 1956. Rule 2 of the Rules of 1956 defines various terms, which includes definition of bonded warehouse. The definition of bonded warehouse was added by substituting earlier definition of bonded warehouse vide notification dated 22.01.1986. The definition of bonded warehouse cannot be said to be the authority for levy of storage fee by itself. It only means any warehouse or a part of distillery licenced by the Excise Commissioner as a bonded warehouse for the receipt and storage of liquor or any other excisable article under bond, both bottled and bulk, of Indian manufactured, transported or imported into Rajasthan State, from any place within the Indian Union as approved by the Excise Commissioner for its reduction, bottling, transport or export in bond or, on payment of duty within or outside the State.

21. It is not necessary for us to go in details of the other part of the scheme with regard to bonded warehouse as stated in the Rules, bonded warehouse is a place where goods, excisable articles are allowed to be stored till they are removed for the purposes of wholesale vend, on a bond for payment of duty at the appropriate stage specified under the Rules and the bond. The [2024:RJ-JP:52718-DB] (19 of 29) [CW-696/2002] aforesaid definition does not, in terms, provides for levy of storage fee.

22. It would be relevant to mention here that on the date when the earlier definition of bonded warehouse was substituted by a new definition thereof vide notification dated 22.01.1986, Rule 23 of the Rules of 1986 subsisted which provided for levy of storage fee in case of failure to remove consignment within a period of 7 days.

23. Prior to issuance of the impugned notification dated

31.03.1997, there was no provision contained in the Rules of 1956 providing for levy of storage fee. The provision relating to certain fee in connection with a warehouse, as contained in Rule 68, as already referred to hereinabove, does not deal with storage fee. Thus, after deletion of Rule 23, there did not exist any provision under the Rules authorizing levy of storage fee.

24. Section 17 provides for regulatory measures that may be taken for issuance of licence. Section 17(d) of the Act, read with Rule 68 of the Rules of 1956, authorizes levy of fees for certain licences for construction and working of bonded warehouse for bottling plant. Therefore, a licence fee for establishment of a warehouse, was leviable under the law. It has been clearly averred by the petitioner and not denied by the respondents that the petitioner has been subjected to levy of fee for obtaining licence for establishment of warehouse. Therefore, the aforesaid provision did not provide for levy of storage fee but only licence fee for establishment of a warehouse. Therefore, after deletion of Rule 23, the storage fee was not leviable under any of the provisions of [2024:RJ-JP:52718-DB] (20 of 29) [CW-696/2002] the Rules of 1956 framed by the State Government in exercise of power under Section 41 of the Act of 1950.

25. In addition to rule making power conferred on the State, under which, Rules have been framed by the State and which includes provisions with regard to levy of licence fee and other kind of fees, power has also been conferred on the Chief Excise authority under Section 42 to make the Rules. It provides that subject to the previous sanction of the State Government, the Excise Commissioner may make Rules, not only regulatory in nature but also fees which may be levied. Amongst other things, Clause (c) provides that the Excise Commissioner may, subject to previous sanction of the State Government, make Rules prescribing the scale of fees or the manner of fixing the fees payable in respect of any licence, permit or pass or the storing of any excisable article. All other provisions provide for regulatory mechanism. Moreover, a limited rule making power is available to Chief Excise authority to prescribe the scale of fees or the manner of fixing the fee payable and not to provide for levy of storage fee as such. The substantial power to levy the storage fee existed only in the Rules of 1956 framed by the State Government in exercise of powers under Section 41 of the Excise Act. That Rule was, however, deleted, as has been discussed hereinabove.

26. One of the submissions of learned State counsel is that even though the impugned notification dated 31.03.1997 does not expressly refer to Section 31 of the Act of 1950, the power to levy fee for grant of licence, permit or pass is conferred on the State Government under the enactment. On this aspect, the submission of learned Senior Counsel for the petitioner is that Section 31 of [2024:RJ-JP:52718-DB] (21 of 29) [CW-696/2002] the Act is not a source of power to levy storage fee, as there is no such provision contained in the Excise Rules of 1956 framed by the State in exercise of power under Section 41 of the Act nor has the Chief Excise authority provided by framing rules in that regard in exercise of powers under Section 42 of the Act.

27. In order to appreciate the submission of learned counsel for the parties, it would be appropriate to refer to the provisions contained in Section 31 of the Act, its ambit and scope to find out whether the power to levy storage fee is available under Section 31 of the Act. Section 31 of the Act, for ready reference, is reproduced hereinbelow: “31. Form and condition of licences etc.- Every licence, permit or pass granted under this Act, shall be granted - (a) by such authority, (b) on payment of such fees (if any), (c) subject to such restrictions and on such conditions, (d) in such form and containing such particulars, (e) for such periods. as the State Government may prescribe by rules either generally or for any class of licences, permits or passes or as the State Government may direct for any particular licence, permit or pass.”

28. The aforesaid provision confers extensive power on the State to prescribe by rules, either generally or for any class of licences, permits or passes, as regards the authority by whom such licence, permit or pass may be granted; fee payable (if any); restrictions and conditions subject to which such licence, permit or pass can be granted; the form and particulars thereof and; period for grant of such licence, permit or pass. It is also noticeable that the State Government has been empowered to make such prescriptions, not [2024:RJ-JP:52718-DB] (22 of 29) [CW-696/2002] only by rules either generally or in any class of licences, permits or passes, the State Government has also been empowered to issue direction for any particular licence, permit or pass. Therefore, the State is empowered to grant permit on payment of such fee as may be prescribed by it either under the rules or by way of a direction. The power is, thus, available to be invoked in both the ways and it cannot be said that except by way of rules, fee for licence, permit or pass cannot be prescribed.

29. Section 31 does not limit the power to any particular licence, permit or pass and is general in nature. Therefore, it is within the domain of power of the State to provide for any of the things as enumerated in clause (a) to (e). The power is not confined to ‘licence’ alone but to ‘permit’ or ‘pass’. The State, therefore, is fully competent to lay down, in exercise of powers under Section 17(d) read with Section 31 of the Act, as to what would be the maximum period of storage of liquor in a bonded warehouse. In fact, as has been referred to hereinabove, there existed provision contained in Rule 23 of the Rules of 1956 which provided that the maximum period of storage of liquor in the bonded warehouse shall be 7 days and beyond that period, storage fee would be leviable. The aforesaid provision being enabling in nature, was, later on, deleted in the year 1987 and from 1987 upto the date of issuance of the notification dated 31.09.1997, as a matter of policy, the State did not prescribe any maximum period of storage of liquor in a bonded warehouse.

30. The reply of the respondent, however, reveals that for want of an effective mechanism regarding maximum period during which liquor could be allowed to be stored in a bonded warehouse [2024:RJ-JP:52718-DB] (23 of 29) [CW-696/2002] before it is removed for the purposes of wholesale vend, the warehouse licensee were storing liquor in the bonded warehouse for a long period without removing the same for wholesale vend which was loss of excise duty which was payable only upon removal of liquor from the warehouse for wholesale vend. This was the background to re-introduce a provision prescribing maximum period of storage of liquor in a bonded warehouse and levy of storage fee upon failure to remove liquor beyond maximum period of storage. A reading of the impugned notification dated

31.03.1997 reveals the State policy reflected from notification, statutory in nature, seeking to amend earlier notification dated

22.01.1986 and now providing that the importer shall have to clear wholesale consignment from the bonded warehouse upto the end of next month of arrival of goods and payment of duty leviable at relevant time. It further provides that upon failure, storage fees over and above the delay beyond next calendar month of arrival month of goods in bond shall be charged at the rate prescribed therein.

31. It, thus, becomes clear that initially when the rules were framed, Rule 23 provided for maximum period of storage of liquor beyond which storage fee was payable. Later on, that provision was deleted. Earlier notification dated 22.01.1986 had no occasion to deal with such an eventuality because at the time when that notification was issued, Rule 23 was in force. Deletion of Rule 23 by the rule making authority clearly shows that in 1987, State, on its own policy considerations, did not continue a provision providing for maximum period of storage of liquor in bonded warehouse or payment of any storage fee. This was in a way, [2024:RJ-JP:52718-DB] (24 of 29) [CW-696/2002] beneficial to the bonded warehouse licensee because there was no limit to storage of imported liquor in the bonded warehouse nor he was liable to pay any excise duty as the excise duty was leviable only upon removal of liquor from the warehouse for wholesale vend. It appears that the State, based on its own experience, found that because of there being no provision of maximum period of storage, it was resulting in non-payment of excise duty due to unlimited period of storage available with the bonded warehouse licensee, therefore, decided to re-introduce the same. However, this time, the State, instead of re-introducing by way of amendment in the Rule, considered it feasible to provide it by way of an order. This was done by carrying out amendment in pre- existing notification dated 22.01.1986. Amongst other things, Section 31 of the Act empowers the State Government to grant licence, permit or pass on payment of such fee, if any, as may be prescribed by it. The word ‘permit’ has not been defined either under the Act or the Rules. Permit, in common parlance and generally understood, means permission to do something. In the context of Excise laws, it is something regulatory in nature. Any activity of manufacture, import, export, transport, storage, establishment and distillery, warehouses, retail shops, are regulated by requirement of permission to undertake the activity. There may be a policy provided either under the Rules or by way of a direction that storage of liquor in a bonded warehouse shall be limited to certain period of time. It is a regulatory mechanism. Storage of liquor beyond a period may invite payment of certain fee which otherwise the State Government did not intend to levy for a limited period of stay. Storage of liquor in a bonded [2024:RJ-JP:52718-DB] (25 of 29) [CW-696/2002] warehouse is allowed under a regulatory mechanism which requires the State authorities to carryout supervision, measurement, checking, etc. It would be perfectly fine for the State to decide, as a matter of policy, that though for a limited period of storage of liquor in a bonded warehouse, even though a fee which bears reasonable connection with the regulatory mechanism may not be imposed but if the storage is beyond a particular period, such fee would be payable. That is what is reflected from the impugned notification dated 31.03.1997. The notification re-introduces the earlier scheme of Rule 23 regarding maximum period of storage of liquor in a bonded warehouse and also levy of fee, if such storage continues beyond a particular period.

32. The mode and manner in which such prescription could be made by the State Government has also been provided under Section 31 of the Act. The expression “as the State Government may prescribe by rules either generally or for any class of licences, permits or passes or as the State Government may direct for any particular licence, permit or pass”, leaves no manner of doubt that such prescription could be by rules either generally or for any class of licences, permits or passes or it could be by way of a direction by the State Government. Therefore, in view of above consideration, we are unable to accept the submission of learned Senior Counsel that such prescription could be only by way of framing rules and not otherwise and once Rule 23 was deleted from the Rules of 1956, except by way of re-introducing the same provision by way of Rules, the scheme of maximum period of storage and levy of storage fee beyond maximum period could not [2024:RJ-JP:52718-DB] (26 of 29) [CW-696/2002] be re-introduced by any other mode. If we accept the contention of learned Senior Counsel, it would result in deleting or rendering otiose the expression “as the State Government may direct for any particular licence, permit or pass”. Such submission is against the cardinal principles of interpretation. There is no warrant for proposition that the aforesaid expression has to be ignored. Such interpretation would restrict the power of the State Government to prescribe fee while granting any permission by two different modes, otherwise provided under Section 31 of the Act.

33. True it is that the impugned notification dated 31.03.1997, in terms, does not refer to Section 31 of the Act as the source of power. It is, however, well settled that only on that ground, exercise of statutory power cannot be held to be bad in law. If the exercise of power for issuance of notification providing for maximum period of storage of liquor in a bonded warehouse and consequences beyond that would be levy of storage fee, is otherwise traceable to provisions contained in Section 31 of the Act, the notification could not be held bad in law only on that count.

34. One of the submissions made by learned Senior Counsel for the petitioner is that storage of liquor in a bonded warehouse does not involve any services rendered by the State Government and, therefore, in the absence of Quid pro quo, levy of storage fee would not be permissible. The answer to such submission lies in the decision of Hon’ble Supreme Court in the case of Gaurav Kumar(supra). It was held as below: “37. In Corporation of Calcutta v. Liberty Cinema, a Constitution Bench observed that licence fees are not [2024:RJ-JP:52718-DB] (27 of 29) [CW-696/2002] necessarily charged in return for services rendered. This Court referred to a Privy Council decision which inter alia held that licence fees could be charged to defray the cots of administering the local regulations. In Secunderabad Hyderabad Hotel Owners’ Association v. Hyderabad Municipal Corporation, this Court observed that licence fees could broadly be classified as either regulatory or compensatory. It was observed that licence fees are regulatory when the activities for which a licence is given are required to be regulated or controlled. It was further held that the fees charged for regulation of activities could be validly classified as fees although no service is rendered. A regulatory fee such as a licence fee enables authorities to supervise, regulate, and monitor the activity related to which the licence has been issued and to secure proper enforcement of the legal provisions.”

35. In the case of Secunderabad Hyderabad Hotel Owners Association & Ors. Vs. Hyderabad Municipal Corporation, Hyderabad & Another [(1999) 2 SCC 274], the Hon’ble Supreme Court observed that licence fee could broadly be classified as either regulatory or compensatory. It was further observed that licence fee are regulatory when the activities for which a licence is given require to be regulated or controlled. It was held that the fee which is charged for regulation for such activity would be validly classified as a fee and not a tax although no service is rendered.

36. The aforesaid proposition of law would apply equally in a case where certain activities, including storage in a bonded warehouse, required grant of permission beyond a particular period. Therefore, the scheme of the impugned notification that if storage continues beyond a prescribed period of time, storage fee will be levied, is clearly regulatory in nature and does not require to established a Quid pro quo relationship for a valid levy. Therefore, the contention of learned Senior Counsel for the [2024:RJ-JP:52718-DB] (28 of 29) [CW-696/2002] petitioner in this regard, is rejected. Reliance on decision of Hon’ble Supreme Court in the case of M/S. Gupta Modern Breweries vs State Of Jammu & Kashmir & Ors [2007 (6) SCC 317] is misconceived in law. Rule 17 of the J&K Distillery Rules, 1946 was held ultra vires the parent Act, unjust, unfair, impermissible and arbitrary so also violative of Article 265, as it was concluded therein that Rule 17 has no statutory backing. The impost was held to be a tax and not a fee. While settled principle of law was reiterated that the regulatory powers are generally to be widely construed but empowering the State Government to impose taxes, fees or duties and such demands must be authorized by the statute and must contain sufficient guidelines.

37. In the present case, however, as we have dealt with hereinabove, the power to levy storage fee is clearly traceable to Section 31 of the Act. A Division Bench of this Court in the case of M/s Intertia Industries Vs. State of Rajasthan & Ors.[2002 3 RLW(Raj) 1657] upheld validity and imposition of permit fee for import and export of IMFL or Indian Made Beer into and from the State as it was found to be within the framework of law and within the authority of the State. It was held that if the petitioner wants to avail the facility of importing IMFL/Beer, under the licence issued to it from outside State to within the State of Rajasthan, it must pay the consideration for it as provided under the rules in terms of the impugned communication. It was held as below: “(53). Upshot of the aforesaid discussion is that- (i) the activity of Manufacture, supply or sale of potable liquor which is excisable article is the exclusive privilege of the State in which no right much less fundamental right exits in any citizen to indulge in. [2024:RJ-JP:52718-DB] (29 of 29) [CW-696/2002] (ii) The State has necessary authority to raise its revenue, by Parting with its exclusive privilege in any of its aspects. (iii) If it parts with and allows any person to trade in intoxicating the procedure for parting with such exclusive privilege is inhibited by provisions of Article 14 and for that limited purpose the principles of acting reasonably and fairly in giving out the state largess or conferring any benefit in favour of a person are inherent. (iv) Otherwise, to permit a person to carry on an activity which is ex-commercium and not a part of right to trade therein, invites neither Article 19(1)(g) nor Article 301 which both are related to freedom of trade. (v) It is competent for the State to charge consideration to the maximum extent it can extract from the prospective candidates willing to secure the privilege to deal in excisable article. (vi) Apart from anything which is levied as tax on such dealer, all other amounts payable by way of licence fees or permit fees are, strictly speaking, neither tax nor fees but are part of consideration payable to the State for parting with its exclusive privilege in favour of the person paying for it. xxx...”

38. As an upshot of the above discussion, we are of the view that the notification impugned does not suffer from any illegality or invalidity nor can be said to be ultra vires enabling Act i.e. the Rajathan Excise Act, 1950 or inconsistent with the provisions contained in the Rajasthan Excise Rules, 1956.

39. The other submission with regard to validity of subsequent clarifications and circulars need not be gone into, once the validity of notification is upheld.

40. In the result, the petitions, being devoid of merit, are dismissed.

41. Interim orders, if any, stand vacated. (UMA SHANKER VYAS),J (MANINDRA MOHAN SHRIVASTAVA),CJ Jayesh/