Madras High Court
M/S.Mohan Breweries And ... vs State Of Tamil Nadu on 28 June, 2022
WP Nos.21180 of 2009 & batch
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 28.06.2022
CORAM
THE HONOURABLE DR. JUSTICE ANITA SUMANTH
WP Nos.21180, 18903, 25891, 19414, 19474, 19456, 25627, 19415,
26091 of 2009 & 13550, 13559, 13577 & 2839 of 2010 and
WMP.Nos.38339, 20669 & 20670 of 2017 & 1344 of 2018 and
MP.Nos.2, 3, 1, 2, 3, 2, 3, 2 to 2, 3 to 3, 2, 3, 1, 2, 3, 4, 2, 3, 3 of 2009 &
MP.Nos.1, 1 to 1, 1, 2, 3, 2, 3, 1, 2, 2, 3 & 4 of 2010
WP.No.21180 of 2009:
M/s.Mohan Breweries and Distilleries Limited,
No.7, Selva Street, M.M.Nagar,
Valasarawalkam, Chennai – 600 087.
Rep. by its Senior Vice President (Finance),
And Company Secretary. ...Petitioner
Vs
1.State of Tamil Nadu,
Rep. by the Secretary to Government,
Excise & Prohibition Department,
Secretariat, Fort St George,
Chennai – 600 009.
2.The Commissioner of Prohibition & Excise,
Chepauk, Chennai – 600 005.
3.The Excise Supervisory Officer,
M/s.Mohan Breweries and Distilleries Limited,
No.7, Selva Street, M.M.Nagar,
Valasarawalkam,
Chennai – 600 087.
4.The Accountant General,
Audit (C & RA),
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WP Nos.21180 of 2009 & batch
Lekha Pariksha Bhawan,
361, Anna Salai, Chennai-600 018. ... Respondents
Prayer: Writ Petition filed under Article 226 of the Constitution of India, for
the issuance of a Writ of Certiorarified Mandamus, calling for the records of
the third respondent comprised in its letter in Rc.No.28/2009/IMFS dated
15.9.2009 and quash the same as being arbitrary, illegal and violative of the
provisions of the Tamil Nadu Indian Made Foreign Spirits (Manufacture)
Rules, 1981 and consequently direct the respondents to continue to levy and
collect import fee of Re.1/- per bulk litre of spirits in respect of import of spirits
and to refund a sum of Rs.80,000/- which has been paid by the petitioner to the
respondents under protest for issuance of permit consequent upon the impugned
demand.
For Petitioner : Mr.R.Parthasarathy &
Mr.Rahul Balaji (In all WPs)
For Respondents : Mr.Haja Nazrudeen
Additional Advocate General
Assisted by Mrs.C.Sangamithirai,
Special Government Pleader
and Mr.P.Haribabu
Government Advocate
(For all the Respondents in
WP.Nos.18903, 19414, 19474, 19456,
25267, 19415 & 26091 of 2009,
13577 of 2010 and
For R1 to R3 in WP.No.21180 of 2009 &
For R1 & R2 in WP.No.25891 of 2009
&WP.Nos.13550 & 13559 of 2010
Mr.T.Ravikumar,
Senior Standing Counsel
(for R4 in WP.No.21180 of 2009 &
for R3 in WP.No.25891 of 2009)
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WP Nos.21180 of 2009 & batch
COMMON ORDER
This batch of 13 Writ Petitions has been filed by different distilleries.
Petitioner in W.P.No.13577 of 2010 seeks a Writ of Declaration challenging
Clause 2(3) of Notification in G.O.Ms.No.112, Prohibition and Excise (III)
Department, dated 03.06.2003 and clause 2(4) of Notification in
G.O.Ms.No.23, Home, Prohibition & Excise (III) Department, dated
18.05.2010. A consequential direction is sought for refund of sums collected
prior to impugned Notification dated 18.05.2010.
2. The other Writ Petitions filed by the Distilleries seek Writs of
Certiorari challenging orders of recovery on the ground that there is a short
payment of fee paid by the petitioners. If the Writ of Declaration is answered,
there would be, as a consequence, an effective disposal of Writs of Certiorari as
well.
3. The facts in brief, as necessary to decide these Writ Petitions, are as
follows:
(i) The Government of Tamil Nadu / R1 had issued G.O.Ms.No.112
dated 03.06.2003 (in short ‘Notification I’) causing certain amendments to the
Tamil Nadu Indian Made Foreign Spirits (Manufacture) Rules, 1981. The
amendment as relevant to these matters is Rule 22, where under a new sub-rule
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(4) had been inserted in substitution of the existing sub-rule (4), reading as
follows:
“(d) An import fee of rupees five per bulk litre shall be paid by the
licensee on the stocks of concentrates imported for the
manufacture of 'Indian Made Foreign Spirit'.”
(ii) The Notification stopped there as far as the levy of the import fee was
concerned and did not proceed to define what a ‘Concentrate’ would be for the
purposes of said levy.
(iii) This was followed by G.O.(D).No.272, Home, Prohibition and
Excise (VI) Department, dated 23.10.2009 (in short ‘Notification II’) according
approval to the Commissioner of Prohibition and Excise to permit seven Indian
Made Foreign Spirit (IMFS) manufacturing units in the State, to import special
spirits of the stated quantities for quarter ending dated 31.12.2009 for the use in
the manufacture of IMFS.
(iv) This portion of the Government order is not relevant, per se, and
what is relevant is the direction at clause (2) of Notification II, whereunder, the
Commissioner of Prohibition and Excise was requested to collect Import Permit
Fee that had been imposed under Notification I at the rate of Rs.5 per bulk litre
as Import Permit Fee.
(v) Then came G.O.Ms.No.23 dated 18.05.2010 (‘in short Notification
III’) when finally wisdom donned upon the State and realisation that
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‘Concentrates’ and ‘Special Spirits’ had not been defined anywhere in the
Tamil Nadu Prohibition Act, 1937 (in short ‘Act’) and must hence be defined in
order to render the levy of import fee under Notification I, viable and
enforceable.
(vi) The definitions, as inserted by amendments to Rule 2 are as follows:
“.......
In the said Rules:
(1) In rule 2:
(i) After clause (c), the following clause shall be inserted
namely:
“(cc) “Concentrate” means any spirit which can be consumed
by diluting it directly except rectified spirit, extra neutral
alcohol and denatured spirit.”
(ii) After clause (1), the following clause shall be added,
namely:
“(m) “Special Spirit” means all spirits which are used as an
essence or flavouring agent except rectified spirit, extra neutral
alcohol and denatured spirit”.
(2) .............
(3) The amendment hereby made shall deemed to have come
into force on 03.06.03.”
(vii) There is no dispute on the position that post 2010, all petitioners
have been compliant with the Rules and have been remitting import fee, as
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introduced in 2003. Their challenge is only in respect of the demands raised
prior to 18.05.2010.
4. Their submissions may be briefly summarised as under.
(i) The Act does not envisage the levy of tax or duty but only regulates
the manufacture and sale of liquor. The thrust of the Act is to control the
licensing of such activities and consider the era of prohibition.
(ii) Though Sections 18A, 18B and 18BB authorize levy of excise duty
or countervailing duty (CVD) on rigorous and intoxicated drugs, excise duty or
CVD on excisable articles and special fee on import of excisable articles, and
Section 18C talks of the manner in which the excise duty or the CVD may be
levied, there is no provision providing for the levy of import fee and no
mechanism under the Act to enable such levy. Thus, they argue that the levy is
itself bad in law.
5. This submission is not liable to be accepted for the simple reason that
the petitioners have succumbed to such levy from the year 2010 onwards and
thus, the scope of the challenge before me is really not to levy itself but only to
whether such levy will be sustained even prior to the terms ‘Concentrates’ and
‘Special Spirits’ being defined.
6. The petitioners point out that neither the Act nor the Tamil Nadu
Distillery Rules, 1981 defines the two terms. Thus, the levy of import fee
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WP Nos.21180 of 2009 & batch
cannot be complied with by the petitioners in the absence of any clarity on what
a ‘Concentrate’ or ‘Special Spirit’ is and till 2010, when the terms were
defined.
7. That apart and without prejudice to the aforesaid submission, even on
the merits, the petitioners would argue that they use only rectified spirit, extra
neutral alcohol and denatured spirit which have been specifically exempted in
both the definitions of ‘Concentrate’ and ‘Special Spirit’ under Notification III.
8. Per contra, the respondents point out that in paragraph 4 of the
affidavit that the petitioner submits that their products are manufactured using
spirits such as, malt spirit, grape spirit, raisin blended spirit, high bouquet
spirit, matured grape spirits along with other spirits and blended for the
manufacture of IMFS. This position would apply to all the petitioners equally.
Thus, the ingredients of the IMFS manufacture include ‘Special Spirits’, that
would be amenable to the impugned levy, respondents argue.
9. Again, in light of the fact that it is only the retrospectivity of the 2010
Notification that is being argued and in light of the admitted position that the
petitioners are paying the import fee from 2010, there is no necessity for me to
advert to this argument at all. In any event, the levy of the import fee would
depend upon the ingredients imported/used by the petitioner, which details
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WP Nos.21180 of 2009 & batch
would be available with the authority. There is nothing more to be said on this
aspect of the matter.
10. Mr.Haja Nazruddin, learned Additional Advocate General assisted
by Mrs.C.Sangamithirai, learned Special Government Pleader for the
respondents has advanced detailed arguments on the challenge to the
Government Order referring to Section 54(2-A) of the Act which enables the
Government sufficiently to make Rules for the purpose of carrying into effect
the provisions of the Act, including with retrospective effect. Section 54(2-A)
reads thus:
“54. Power to make rules. (1) The State Government may make
rules for the purpose of carrying into effect the provisions of
this Act.
…………..
(2-A) A rule or notification under this Act may be made or
issued so as to have retrospective effect on and from a dote not
earlier than, -
(i) the 1st September, 1973, insofar as it relates to toddy; and
(ii) the 1st September, 1974, insofar as it relates to any liquor
other than toddy;
(iii) the 1st May 1981, insofar as it relates to the matters dealt
with in sections 17-B, 17-C, 17-D, 17-E, 18-B and 18-C.”
In light of the fact that the Statute specifically enables the State to enact a
Rule with retrospective operation, there is no merit in the challenge put forth by
the petitioners.
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11. He further draws attention to G.O.Ms.No.82, dated 03.10.2007 which
refers to an Audit Report of the office of the Accountant General on the basis of
which the impugned levy of import fee has been made. The recommendations
of the Audit Committee and the acceptance of the State on the
recommendations are extracted below for completion of this order:
Home, Prohibition & Excise (III) Department
G.O.(Ms).No.82 Dated
03.10.2007
ORDER:
In the Government Order first read above, orders have been
issued amending rule 22(4) of the Tamil Nadu Indian Made
Foreign Spirits (Manufacture) Rules, 1981 where vend fee has
been substituted by import fee and Rs.5/- per bulk litre shall be
paid by the licensee on the stock of concentrates imported.
Subsequently, it was amended by deleting the words, “Foreign
Countries”. Removal of the word, “Foreign Countries” further
facilitated to collect rupees five for the Concentrates imported
either from Foreign Countries or other states. But at any stage,
i.e. While making original rule and then during the subsequent
amendment, no definition has been given for “Concentrates”.
2. In Audit para No.9 of the Accountant General's audit report on
the accounts of the Commissioner of Prohibition and Excise, it
has been pointed out that it was noticed by Audit in six Indian
Made Foreign Liquor units that though 3.75 lakh bulk litres of
various types of special spirits used as Concentrates / flavourings
agents in the manufacture of Indian Made Foreign Spirits, which
were imported during 2003-2004 to 2005-2006, import fee of
Rs.1.89 crore was not levied.
3.As it is not clear that the special spirits imported from other
States are being used as concentrates in the manufacture of
Indian Made Foreign Spirits, the Commissioner ofProhibition and
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WP Nos.21180 of 2009 & batch
Excise after consulting the Director of Forensic Science
Department in the matter has requested the Government to accord
permission to form a Technical Committee with the same members
as that of the Technical Committee constituted for the grant of
RL4 licence, to arrive at a final conclusion whether concentrates
and other special spirits imported are one and the same and
whether an import fee of Rs.5/- for bulk litre, be collected for all
Special Spirits imported.
4.The Government after careful examination, accept the proposal
of the Commissioner of Prohibition and Excise and direct that a
Technical Committee be constituted with the following members
to arrive at a final conclusion whether Concentrates and other
Special Spirits imported are one and the same and whether an
import fee of Rs.5/- per bulk litre, be collected for all Special
Spirits imported.”
12. A committee had been formed and report issued on 16.04.2008 on the
definitions to be adopted of 'Concentrates’ and ‘Special Spirits'. Prior to the
formulation of the report, all Distillery units in the State of Tamil Nadu were
heard and thus, it is the contention of the State that all the petitioners have been
solicited and have participated in the deliberations leading to the passing of
Notification III.
13. The Technical Report goes into the details of the ingredients utilised
in the manufacture of IMFS and ultimately concludes as follows:
“..............
5. To arrive at a final conclusion in the above, the Technical
Committee meeting again held on 30-1-2008 as decided by the
other Members.
6. During the meeting held on 30-1-2008, the Joint Director
(Chemicals), Chennai has stated that all special spirits
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WP Nos.21180 of 2009 & batch
irrespective of Alcoholic strength are blended with spirits to give
flavour and Aroma and as such based on end use, all the special
spirits are classified as one and the same and hence an import fee
of Rs.5/- to be collected for all special spirits used for blending
with spirits to give Aroma and flavour. The Professor, Head of
Department, Chemistry, Presidency College hast also reiterated
the same.
7. The Deputy Director of Drugs, Chennai-6 has stated that since
Special Spirits like Grape Spirit, Malt Spirit, Rum Spirit etc. are
used for the purpose of flavour and aroma, these Spirits are to be
considered as Concentrate. The concentrates and other special
spirits imported are one and the same an import fee of Rs.5/- per
bulk litre be collected for all special spirits, since they are used
for the purpose of flavour aroma, in the manufacture of IMFS
units.
8.1. The Assistant Director (Excise Division), Forensic Science
Department, Chennai-4 by whom all the special spirits are
analysed has stated that in this regard, the former Commissioner
(P&E), Thiru P.V. Venkatakrishnan, in his Proceedings
Rc.No.D1/33902/88 dated 12-12-88 while fixing the norms for the
manufacture/import of Grape and Malt Spirit, has stated that
Malt and Grape Spirit should have a strength of 10° OP to 50°
OP, and Malt and Grape Spirit with a strength below 10" OP will
be designated as concentrates and duty will be levied on this. But
careful study of the special spirits imported for flavoring by all
the IMFS units, reveals that 41% of the special spirits imported
were below 10° OP and around 54% of the special spirit
imported were between 10° OP to30° OP during the years 2003-
2006. However to accommodate all the possible way of importing
special spirits, the following definition may be given for
concentrates and duty may be levied on this concentrates.
8.2. All Special spirits which are used us flavoring agents in the
manufacture of IMFS and which are either manufactured or
imported, having strength upto 30" OP shall be considered as
'Concentrates' (which is also supported by the literature
available, stated in para 4.3 above).
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WP Nos.21180 of 2009 & batch
8.3. The above definition may be incorporated in the Tamil Nadu
Indian Made Foreign Spirit (Manufacture) Rules, 1981 so as
enable all the IMFS manufacturing units to understand the term
concentrates imported by them and also to have a definite rule for
levying duty for concentrates.
9. The Joint Commissioner-I, Prohibition and Excise Department,
Chepauk, Chennai-5 who is the Chairman of the Technical
Committee is also the same views of the Director of Forensic
Science Department, Chennai-4 and Special Spirits which are
either manufactured or imported having strength upto 30° OP
used as flavouring agents in the manufacture of Indian Made
Foreign Spirit shall be considered as "Concentrate" and duty
may be levied on this concentrates.”
14. The report would itself has no bearing on either the issue to be
decided or my decision, except to state that it is now very clear that the
Technical Committee's Report has been received in April, 2008, on the basis of
which, the impugned Government Notification has been issued in the year
2010. This is critical to decide on the validity of the retrospective operation of
Notification III.
15.Mr.Haja Nazruddin has relied on the following judgments, all in the
context of the constitutionality of the Notification itself, which I see no reason
to deal with the details seeing as the question of constitutionality is not really in
challenge.
i) State of Jharkand & Ors. Vs M/s.Ajanta Bottlers & Blenders Pvt. Ltd.
(Civil Appeal No.5138 of 2019 dated 02.07.2019).
ii) Khoday Distilleries Ltd. Vs State of Karnataka reported in (1995 SCC
(1) 574)
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WP Nos.21180 of 2009 & batch
iii) Arun Kumar Agrawal Vs Union of India and Others reported in
((2013) 7 SCC 1) and
iv) Godrej Properties Limited Vs Accountant General (A & E), Tamil
Nadu and Others (W.P.Nos.29304 of 2019 dated 08.12.2020)
16.As far as the retrospectivity is concerned, it is an oft settled position
that a taxing provision must have clarity in order to be enforceable, both in
terms of the various components of the provision itself as well as in terms of
the machinery to enforce the same.
17.In the present case, the levy of the import fee is on ‘Concentrates’ and
‘Special Spirits’. Thus, I fail to understand how such a fee may be levied and
demanded unless there is clarity on what ‘Concentrates’ or ‘Special Spirits’
constitute. It would have been a different matter altogether had the terms been
defined in the relevant Act or Rules, but admittedly, neither the Prohibition Act
nor the Distillery Rules define the terms and, in fact, it is only the Technical
Committee which has, at para No.8.2 defined the terms ‘Special Spirits’ and
'Concentrates'. Prior thereto, neither of the parties had any clarity whatsoever
on what the terms connoted.
18.In light of the above discussion, I am of the categoric view that while
there is no infirmity whatsoever in the levy of import fee, such levy and
demand shall run only from the date of Notification III, being dated
18.05.2010, onwards. Any amounts collected on this account prior to the
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WP Nos.21180 of 2009 & batch
aforesaid date are liable to be quantified and returned to the petitioners
forthwith and not more than four (4) weeks from date of issuance of this order.
19.In fine, W.P.No.13577 of 2010 stands ordered. As a consequence,
Writ Petitions seeking Writs of Certiorari also stand ordered in the aforesaid
terms. No costs. Consequently, connected Miscellaneous Petitions are closed.
28.06.2022
Index : Yes/No
Speaking Order/Non speaking Order
sl
To
1.State of Tamil Nadu,
Rep. by the Secretary to Government,
Excise & Prohibition Department,
Secretariat, Fort St George,
Chennai – 600 009.
2.The Commissioner of Prohibition & Excise,
Chepauk, Chennai – 600 005.
3.The Excise Supervisory Officer,
M/s.Mohan Breweries and Distilleries Limited,
No.7, Selva Street, M.M.Nagar,
Valasarawalkam,
Chennai – 600 087.
4.The Accountant General,
Audit (C & RA),
Lekha Pariksha Bhawan,
361, Anna Salai, Chennai-600 018.
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WP Nos.21180 of 2009 & batch
Dr.ANITA SUMANTH, J.
sl
WP Nos.21180, 18903, 25891, 19414, 19474, 19456, 25627, 19415,
26091 of 2009 & 13550, 13559, 13577 & 2839 of 2010 and
WMP.Nos.38339, 20669 & 20670 of 2017 & 1344 of 2018 and
MP.Nos.2, 3, 1, 2, 3, 2, 3, 2 to 2, 3 to 3, 2, 3, 1, 2, 3, 4, 2, 3, 3 of 2009 &
MP.Nos.1, 1 to 1, 1, 2, 3, 2, 3, 1, 2, 2, 3 & 4 of 2010
28.06.2022
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