BENCH AT JAIPUR v. For

Order

2. Heard. The short issue arising for consideration in this case is whether rectified spirit is exigible to export fee under Rule 69B of the Rajasthan Excise Rules, 1956 (for short ‘the Rules of 1956’).

3. The brief factual matrix giving rise to controversy in this case is that for the purposes of processing denatured spirit, the petitioner imported rectified spirit for preparations into the State of Rajasthan on which the petitioner paid import fee. It, however, so happened that when it was checked in the State of Rajasthan by the Excise Authorities, it was declared unfit for human consumption. This eventually led to sending the rectified spirit [2025:RJ-JP:19541-DB] (2 of 7) [CW-699/2002] again out of State of Rajasthan. However, as this amounted to export of the rectified spirit, the respondent authorities required the petitioner to pay permit fee in terms of provisions contained in Rule 69B of the Rules of 1956. This impost is under challenge in this petition.

4. Learned counsel for the petitioner has made following two submissions: (A) The first submission of learned counsel for the petitioner is that the nature of impose is not fee, but excise duty which is constitutionally impermissible as the spirit is unfit for human consumption. (B) Even if it is assumed that it is levy of fee, in view of provisions contained in Rule 69B of the Rules of 1956, rectified spirit is not included in the category/class of spirits/alcohol preparations which is exigible to permit fee.

5. On the other hand, learned counsel for the respondents would submit that what is sought to be levied is not excise duty, but permit fee as a measure of regulatory exercise in the matter of import, export, transportation of liquor/spirit/alcoholic substances. It is submitted that such a power to levy permit fee is available under the scheme of provisions contained in Rule 69B of the Rules of 1956.

6. As far as the first submission of learned counsel for the petitioner is concerned, the same does not impress us. The respondents have denied and they have asserted that what they are levying is not excise duty, but fee levied on the activity of export. If we look into the provisions contained in Rule 69B of the Rules of 1956, the stand taken by the respondents becomes clear. [2025:RJ-JP:19541-DB] (3 of 7) [CW-699/2002]

7. Rule 69B of the Rules of 1956 reads as under: “69B. Fees for certain permits- The under mentioned fees are prescribed for a permit for [bringing] into, [sending] outside or transport with in the State of Rajasthan of the following excisable articles.- S. No. 1

13. Name of Excisable Articles Permit fee per Bulk Litre/ per kilogram for (in Rs.) 2 Absolute Alcohol, methylated alcohol, and preparations of denatured spirit 3 4

6.00

10.00 Denatured spirit

6.00

3. Rectified spirit for manufacture of country liquor

5.00 (including RSGSM)

2.00

2.00 5

4.00

4.00

0.00

6. Extra Neutral Alcohol, High Bouquet Spirit and like Spirits/Alcohol for liquor manufacture Rectified spirit for other purposes Extra neutral alcohol, High Bouquet Spirit and like Spirits/Alcohol for other purposes

7. Foreign Liquor (Excluding Beer) (A) Bottled (B) Bulk Beer Country Liquor

7.00

4.00

0.00

15.00

2.00

5.00

6.00

4.00

5.00

5.00 3.00

2.00

0.00

4.00 0.00

2.00 Rs.500/- permit

1.50

4.00 Rs.500/- permit 50/- per permit Bhang

10.00 0 Heritage Liquor LPH Molasses (per Qtl.): -

5.00

1.50

10.00

3.00 Rs.500/- permit

5.00

4.00

4.00 Rs.100/- per permit Explanation- Fee mentioned against [S.No.4 to 9] below column No.5 above shall be charged at the stage when retailer purchases goods and same shall be paid by the retailer/purchaser. (a) [deleted] (b) manufactures of [country liquor] shall pay in addition to fee calculated at the rates indicated in the table about a [2025:RJ-JP:19541-DB] (4 of 7) [CW-699/2002] sum of Rs.500/- for each permit or pass (irrespective of the quantity involved) obtained for sending out the liquor; and (C) every retail licensee of country liquor shall pay Rs.1.00 per Bulk litre for the transportation of counting liquor including RML from RSGSM depot to his retail vend place.]"

8. Therefore, it is clear that it is permissible under the Rules of 1956 to levy fee on grant of permit for import, export, transportation, etc.

9. The distinction between tax/duty and fee has been considered by this Court in a recent judicial pronouncement in the case of Shyam Prakash Meena & Ors. Vs. Union of India & Ors. (D.B. Civil Writ Petition No.14258/2024 and other connected matters, decided on 19.12.2024). Following pertinent observations were made by this Court in the aforesaid case: “25. It is also settled principle that the fee imposed under the authority of law may include (i) fee for licence and (ii) fee for service. In case of levy of fee for licence, the Government simply grants a permission or privilege to a person to do something, which otherwise that person would not be competent to do and extracts fees either heavy or moderate from that person in return for the privilege that is conferred. Levy of fee for issuance of licence for motor vehicles is an incidence of such regulatory fee. The costs incurred by the Government in maintaining an office or bureau for the granting of licences may be very small and in case the amount of imposition that is levied is based really not upon the costs incurred by the Government but upon the benefit that the individual receives, in such cases, the tax element is predominant, and if the money paid by the licence-holders goes for the upkeep of roads and other matters of general public utility, the licence fee cannot but be regarded as a tax. (as held in the case of Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt). In was held in the aforesaid case that a fee is money taken by the Government “as the return for the work done or services rendered.” Therefore, a fee was [2025:RJ-JP:19541-DB] (5 of 7) [CW-699/2002] characterised by an element of quid pro quo between the payer and the public authority.

26. However, in several decisions, the evolution of principle with regard to quid pro quo as the feature characteristic of fee, it has been held that a levy can be regarded as a fee if it has a “reasonable relationship” with services rendered by the public authority. The traditional view that there must be an actual quid pro quo for a fee has not been applied in the strict sense in subsequent decisions of the Hon’ble Supreme Court and it has been held that the relationship between the levy of a fee and services rendered is one of general character and not of mathematical exactitude. Further, in the case of H H Sudhindra Thirtha Swamiar v. Commissioner for Hindu Religious and Charitable Endowments, it was observed that a levy in the nature of a fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual services rendered by the authority to each individual who obtains the benefit of service. If with a view to provide a specific service, levy is imposed by law and expenses for maintaining the service are met out of the amounts collected there being a reasonable relation between the levy and the expenses incurred for rendering the service, the levy would be in the nature of a fee and not in the nature of a tax.

27. In another Constitution Bench judgment of the Hon’ble Supreme Court in the case of Corporation of Calcutta Vs. Liberty Cinema, it was observed that licence fees are not necessarily charged in return for services rendered and licence fees could be charged to defray the costs of administering the local regulations.

28. In the case of Secunderabad Hyderabad Hotel Owners’ Association & Others Vs. Hyderabad Municipal Corporation, Hyderabad & Another (supra), the Hon’ble Supreme Court observed that licence fees could broadly be classified as either regulatory or compensatory. It was further observed that licence fees are regulatory when the activities for which a licence is given are required to be regulated or controlled. It was also held that the fees charged for regulation of activities could be validly classified as fees although no service is rendered.” [2025:RJ-JP:19541-DB] (6 of 7) [CW-699/2002]

10. Therefore, the legal position in this regard is that levy of regulatory fee is permissible under the head of fees and it cannot be termed as tax or duty.

11. Therefore, the first submission of learned counsel for the petitioner must fail.

12. The second submission of learned counsel for the petitioner is essentially based on an assertion that rectified spirit has not been mentioned in Rule 69B of the Rules of 1956. If we look into the relevant provisions contained in Rule 69B of the Rules of 1956, we find that following expressions have been used: “Absolute Alcohol, Methylated Alcohol, denatured spirit and preparations thereof.”

13. The petitioner intended to export rectified spirit. As it is in common knowledge and understood, in the matter of use and preparation of alcoholic substances, rectified spirit is a purest form or absolute form of spirit. The process of denaturing has to be understood as defined in sub-sections (3) and (3-A) of Section 3 of the Rajasthan Excise Act, 1950 (for short ‘the Act of 1950’), which read as under: “Section 3. Definitions.-In this Act unless there is something repugnant in the subject or context- (1) ……… (2) …….. (3) “Denatured” means mixed with such substance and such process as may be prescribed under Section 42 in order to render any spirit unfit for human consumption whether as a beverage or as medicine or in any other way whatsoever; (3-A) “Denatured spirituous preparation” means any preparation of denatured spirit or alcohol and includes lacquers, French polish and varnish prepared out of such spirit or alcohol:” [2025:RJ-JP:19541-DB] (7 of 7) [CW-699/2002]

14. If we look into the definition of ‘denatured’, it means mixing process. Such mixing is done with such substance and by such process, as may be prescribed under Section 42 in order to render any spirit which is otherwise unfit for human consumption whether as beverage or as medicine or in any other way whatsoever, for the purpose stated therein. ‘Denatured spirituous preparation’ means any preparation of denatured spirit or alcohol and includes lacquers, French polish and varnish prepared out of such spirit or alcohol.

15. Therefore, once rectified spirit undergoes the process of dilution/denaturing, it can be said by the process of aforesaid logic and reasoning that it may be classified and included as preparations of denatured spirit. Therefore, it is not correct to say that denatured spirit and rectified spirit have no connection whatsoever in the matter of certain preparations into another form of spirit/alcohol to make it fit for human consumption.

16. Therefore, in view of above conclusion, the second submission that the rectified spirit could not be subjected to export fee is also not maintainable.

17. In the result, the writ petition being devoid of merit fails and is hereby dismissed. Interim order stands vacated. (MUKESH RAJPUROHIT),J (MANINDRA MOHAN SHRIVASTAVA),CJ RAJAT/ANAND TANWAR/S-249