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PETITIONER: STATE OF MADHYA PRADESH

       Vs.

RESPONDENT: FIRM GAPPULAL ETC.

DATE OF JUDGMENT17/12/1975

BENCH: RAY, A.N. (CJ) BENCH: RAY, A.N. (CJ) BEG, M. HAMEEDULLAH SARKARIA, RANJIT SINGH SHINGAL, P.N.

CITATION:  1976 AIR  633            1976 SCR  (2)1041  1976 SCC  (1) 791  CITATOR INFO :  RF         1980 SC2018  (21)  D          1981 SC1374  (6)  D          1987 SC 933  (11,13)  RF         1991 SC 735  (22)  RF         1992 SC1393  (8,9)

ACT:      Madhya Pradesh  Excise Act  Sections 25, 26 and 62-Levy of excise duty on liquor not lifted by the contractors under a contract  is neither  authorised by  s. 26 of the Act, nor such a  power to  levy excise duty vested in the State under s. 62  of the  Act-Meaning of  the  word  "pratikar"-Whether denotes "compensation or excise duty".

HEADNOTE:      Under the  provisions of the Madhya Pradesh Excise Act, an excise license has to pay the following:           (i)  The prescribed  licence  fee,  which  licence                gives  the  licensee  privileges  of  selling                liquor in a shop.           (ii) The price  of liquor  which he purchases from                the State Government; and           (iii) Excise on the liquor so purchased by him.      In all  the appeals,  the appellants  are  the  auction contractors to  sell liquor in the various shops. One of the terms of the sale memo was that the contractor would have to lift a prescribed minimum quantity of liquor and pay duty or consolidated duty  at the  prevalent  rate,  otherwise  they would have  to pay duty on the quantity short of the minimum prescribed.      In all  the appeals,  the appellants  were served  with various demand  notices demanding  a fourth item, viz., duty on liquor not lifted by the contractor who was bound to lift under the conditions prescribing minimum quantity. The vires of these  demands were  challenged under  Art.  226  of  the Constitution before  the Gwalior Bench of the Madhya Pradesh High Court and they were allowed.      Dismissing the appeals by certificate, the Court, ^      HELD : (1) "Pratikar" is excise duty. [1042 F]

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    (2) The  State confers  the right to require by farming out either  by auction  or by  private treaty. Rental is the consideration for  the privilege  granted by  the Government for  manufacturing   or  vending   liquor.  Rental   is  the consideration for  the agreement  for grant  of privilege by the Government. [1042 G]      Nashirwar v. State of Madhya Pradesh, [1975] (2) S.C.R. 861;  Hari   Shankar   v.   Deputy   Excise   and   Taxation Commissioner, [1975] (3) S.C.R. 254, discussed.      (3) These  appeals relate  to the demand of excise only in respect  of liquor. Levy of excise duty on undrawn liquor imposed by the State-respondent was exercise of powers which the State did not posses. [1042 H, 1043 E]      Bimal Chandra  Banerjee v.  State  of  Madhya  Pradesh, [1971] (1) S.C.R. 844, followed.      Panna Lal  & Ors.  v. State  of Rajasthan,  [1976]  (1) S.C.R. 220, not applicable.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION :  Civil Appeals Nos. (1) 1751, 1747-50  & 1752,  (2) 2041 & 2042 and (3) 1753-1756 of 1971.      [From the  judgment and  order dated the (1) 20-1-1971, (2) 17-2-1971,  (3) 21-8-1971  of the  Madhya  Pradesh  High Court 1042 (Gwalior Bench)  in (1) Miscellaneous Petitions Nos. 19/70 & 10, 109  and 111 of 1969 and 18 and 20 of 1970, (2) in 9 and 10 of 1971 and (3) 123-125 and 127 of 1970 respectively.]      I. N. Shroff for the appellant.      A. K. Sen (in CA 1751/71) for the respondents.      Hargobind   Misra   (in   CAs   2041-42/71)   for   the respondents.      A. Raman  (in CA 1751/71) and S. S. Khanduja in all the appeals with him for the respondents.      The Judgment of the Court was delivered by      RAY, C.J.  These appeals  by certificate  turn  on  the question whether the Government was right in making a demand of  excise   duty  on   liquor  not  lifted  by  the  liquor contractors.      The High Court relying on the decision of this Court in Bimal Chandra  Banerjee v.  State  of  Madhya  Pradesh  held against the Government.      There is  no dispute  that in  these appeals the demand notice is  in respect  of duty  on liquor which has not been lifted.      The liquor  contractors were  subject inter alia to the following conditions  at auction  which the Government wants to enforce:           "In case  the fixed  monthly quantity is not taken      in any month, the concerning contractor shall be liable      to pay  to the Government the amount of PRATIKAR at the      rate fixed  by the  Government for  spiced  spirit  and      plain spirit  to the  extent to  which it would be less      than the  fixed monthly minimum quantity and the amount      of such  PRATIKAR shall be paid within the tenth day of      the month  such shortage  is concerned. Security to the      extent of  one sixth  to one  tenth of the whole of the      amount of yearly PRATIKAR will have to be given".      Pratikar is excise duty.      This Court in the recent decision in Nashirwar v. State of Madhya  Pradesh(2); Hari  Shanker v.  Deputy  Excise  and Taxation Commissioner(3)  and Panna  Lal &  Ors. v. State of

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Rajasthan(4) held  that the  State has  exclusive  right  to manufacture and  sell liquor  and to  sell the said right in order to  raise revenue. The State confers the right to vend liquor by  farming out  either  by  auction  or  by  private treaty.  Rental  is  the  consideration  for  the  privilege granted by  the  Government  for  manufacturing  or  vending liquor. Rental  is the  consideration for  the agreement for grant of  privilege by  the  Government.  In  Bimal  Chandra Banerjee’s case  (supra) this  Court held  that  a  levy  of excise duty  on undrawn  liquor imposed  by  the  State  was exercise of powers which the State did not possess. 1043      In the  recent decision  of this  Court in  Panna Lal’s case (supra) this Court said that there is no levy of excise duty in  enforcing the  payment of the guaranteed sum or the stipulated lump  sum mentioned  in the licenses. It was also pointed out  in Panna  Lal’s case  (supra) that the lump sum amount stipulated  under the  agreement is not to be equated with issue  price. The  issue price is payable only when the contractors  take  delivery  of  a  particular  quantity  of specified value  of country  liquor. The issue price relates only to liquor drawn by the contractors and does not pertain to undrawn  liquor. This  Court in  Panna Lal’s case (supra) said that "no excise duty is and can be collected on undrawn liquor".  In  Panna  Lal’s  case  (supra)  the  excise  duty component of  the issue  price was  found to be a measure of the quantum  of or extent of the concession or the remission to be  given to the liquor contractor. The concession is not what is  paid by  the contractor  to the  State but  it is a remission or  a  reduction  in  the  stipulated  amount  for exclusive privilege  allowed by the State to the contractor. The lump  sum amount  payable for the exclusive privilege is not to be confused with the issue price. In essence what was sought to  be recovered from the liquor contractors in Panna Lal’s case  (supra) was  the shortfall occasioned on account of failure  on the  part of  liquor contractor to fulfil the terms of license.      It was  pointed out  in Panna  Lal’s  case  (supra)  as follows:-           "To  suggest   that  the   license   obliges   the      contractors to  pay excise  duty on  undrawn liquor  is      totally misreading  the conditions  of the license. The      excise duty  is  collected  only  in  relation  to  the      quantity and  quality of  the country  liquor which  is      drawn. No  excise duty  can be predicated in respect of      undrawn liquor".      These appeals  are, therefore, not of the type of Panna Lal’s case  (supra). These  appeals are of the type of Bimal Chandra Banerjee’s case (supra). These appeals relate to the demand of excise only in respect of undrawn liquor. The High Court  rightly   quashed  the   demands.  The  appeals  are, therefore, dismissed.  Each party  will pay and bear its own costs. S.R.                                      Appeals dismissed. 1044