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Tuesday, August 18, 2015

Section 72(3) of the Andhra Pradesh Excise Act, 1968 specifically allows that – “Any rules under this Act may be made with retrospective effect and when such a rule is made the reason for making the rule shall be specified in a statement to be laid before both Houses of the State Legislature.” Regarding the latter contention, 7 paise was deemed to be reasonable on the facts of that case which does not in any way indicate that a larger amount would be excessive especially with the passage of time. We have discussed when administrative and service charges can be recovered along with the relevant case law in some detail in our judgment of even date in the Appeal titled as State of Tamil Nadu vs. Tvl. South Indian Sugar Mills, which should be adverted to in the interests of avoiding prolixity. We uphold the High Court’s finding that in light of Synthetics and Chemicals Limited and Vam Organics Chemicals Ltd., the subject Regulatory Fees intended to prevent the conversion of alcoholic liquor for industrial use to that for human consumption is legal, and need not be strictly quid pro quo as long as it is not excessive. We find no merit in these Appeals and they are accordingly dismissed.

                                                                  REPORTABLE
                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                     CIVIL APPEAL NOS. 5307-5308 OF 2005
KALYAN CHEMICALS                              … APPELLANT

                                   VERSUS

GOVERNMENT OF A.P. & ORS                           … RESPONDENTS


                               J U D G M E N T


VIKRAMAJIT SEN, J.


1     The Appellant before us assail the concurrent findings of the  learned
Single Judge and the Division Bench of the High Court of Andhra  Pradesh  at
Hyderabad, upholding the legality of the levy of an  Administrative  Fee  at
the rate of 50 paise per bulk litre or any other rate as  may  be  fixed  by
the Government from time to time  on  industrial  alcohol  obtained  from  a
distillery.

2     The Appellant is a  manufacturer  of  Ethyl  Acetate,  the  basic  raw
material for which is industrial alcohol. The Appellant has  been  receiving
allotments of denatured spirit from the Respondents since 1972.  By  way  of
an amendment to Rule 3 of the Andhra Pradesh Denatured Spirit and  Denatured
Spirituous  Preparations  Ruled,  1971  (1971  Rules   for   brevity),   the
collection of a gallonage fee, under the head  of  privilege  fees,  at  the
rate of [pic] 1 per bulk litre was introduced. The Appellant  filed  a  writ
petition in 1995 contending that the levy and collection of such  an  amount
without  rendering  any  service   is   illegal,   arbitrary   and   without
justification. The High Court vide its order dated  13.10.1997  disposed  of
the writ  petition,  directing  the  Appellant  to  approach  the  concerned
authorities seeking a refund and with a  direction  to  the  authorities  to
consider the same in accordance with the law. In  pursuance  of  G.O.M.  No.
147  dated  6.3.1998,  the   Government   introduced   the   collection   of
Administrative Fee of 50 paise per bulk  litre  in  lieu  of  withdrawal  of
collection of the abovementioned privilege fees as per  the  orders  of  the
Seven Judge Bench of this Court in Synthetics & Chemicals Limited vs.  State
of U.P. (1990) 1 SCC 109.  This Rule was  given  retrospective  effect  from
25.10.1989. The Government therefore responded to the Appellant  by  issuing
G.O.Rt. No. 313 dated 13.3.2000, whereby in accordance with G.O.M. No.  147,
the Commissioner of Prohibition and  Excise  was  permitted  to  adjust  the
excess amount of privilege fees paid with  effect  from  25.10.1989  towards
future allotments of alcohol for industrial purposes against  Administrative
Fee.     Since the Appellants had paid an amount of [pic]2,09,500,  it   was
 to  get a refund of    [pic]1,04,750  after  the  adjustment  of  an  equal
amount towards administrative fees. Aggrieved by this order,  the  Appellant
approached the High Court once again, seeking the  issuance  of  a  writ  of
Mandamus declaring that the amendment  of  Rule  3  of  the  1971  Rules  as
amended  by  G.O.M.  No.  147  is  arbitrary,  illegal,  ultra   vires   and
unenforceable, and a further declaration that the Appellant is  entitled  to
the refund of the entire amount collected as gallonage  fees  with  interest
at 18% per annum. The Appellant’s case was that the State  cannot  make  any
law in purported exercise of its legislative competence  with  reference  to
Entry 8 of List II to levy privilege fees or any other fees  in  respect  of
alcoholic liquors which are not meant or fit for human consumption.

3     The High Court placed reliance on Synthetics  and  Chemicals  Limited,
wherein this Court observed as follows:
“The State, in exercise of powers under Entry 8 of List II and by
appropriate law may, however, regulate and that regulation could be
to prevent the conversion of alcoholic liquors for industrial use to one
for human consumption and for the purpose of regulation, the regulatory
fees only could be justified. In fact, the regulation should be the main
purpose, the fee or earning out of it has to be incidental.”

The High Court also considered this  aspect  of  the  law  in  Vam  Organics
Chemicals Ltd. vs. State of U.P. (1997) 2 SC  715,  the  Appellants  wherein
were manufacturers of ‘vinyl acetate monomer’, for which industrial  alcohol
is the main stock. The Appellants therein were liable to pay a  denaturation
fee at the rate of 7 paise per litre. They challenged this, contending  that
the State of U.P. had no power to legislate or  levy  taxes  in  respect  of
industrial alcohol, and that the levy was bad as it was not based on a  quid
pro quo basis. The Supreme  Court  held  that  “so  long  as  any  alcoholic
preparation can be diverted to human consumption, the States shall have  the
power to legislate as also to impose taxes, etc.”   Ergo, the State has  the
competence and the obligation  to  supervise  the  denaturation  of  spirit.
Furthermore, this Court held that “in the case of regulatory fees, like  the
license fees, existence of quid pro quo is not necessary  although  the  fee
imposed must not be, in the circumstances of the case,  excessive.”  Keeping
in view the quantum and nature of work involved in supervising  the  process
of denaturation and the consequent expenses incurred by the State,  the  fee
of 7 paise per litre was held to be reasonable and proper.  The  High  Court
found that the decision of the Supreme Court in Vam Organics Chemicals  Ltd.
was a complete answer to the submissions of the Appellant. There  was  found
to be no reason to hold that the administrative fee at the rate of 50  paise
per bulk litre was excessive.

4     Furthermore, the Appellant’s plea that the Rule could  not  have  been
made efficacious with retrospective effect was dismissed  in  light  of  the
fact  that  the  competency  of  the  rule  making   authority   to   impart
retrospective effect was not in dispute and no other ground was made out  to
support this contention. The Single Judge  accordingly  dismissed  the  writ
petition on 21.10.2003. The Appellant’s Review Petition was  also  dismissed
on 2.7.2004.

5     The Appellant has now filed these Appeals before us,  contending  that
the abovementioned amendment cannot be given retrospective effect, and  that
the fees should be levied at the rate of  7  paise  per  litre,  since  this
amount was found to be “reasonable and proper”  in  Vam  Organics  Chemicals
Ltd. We find no force behind either of  these  contentions.  No  ground  has
been made out for the former contention, and Section  72(3)  of  the  Andhra
Pradesh Excise Act, 1968 specifically allows that – “Any  rules  under  this
Act may be made with retrospective effect and when such a rule is  made  the
reason for making the rule shall be specified in  a  statement  to  be  laid
before  both  Houses  of  the  State  Legislature.”  Regarding  the   latter
contention, 7 paise was deemed to be reasonable on the facts  of  that  case
which does not in any way indicate that a larger amount would  be  excessive
especially with the passage of time. We have discussed  when  administrative
and service charges can be recovered along with the  relevant  case  law  in
some detail in our judgment of even date in the Appeal titled  as  State  of
Tamil Nadu vs. Tvl. South Indian Sugar Mills, which should  be  adverted  to
in the interests  of  avoiding  prolixity.    We  uphold  the  High  Court’s
finding that in light of Synthetics and Chemicals Limited and  Vam  Organics
Chemicals  Ltd.,  the  subject  Regulatory  Fees  intended  to  prevent  the
conversion of  alcoholic  liquor  for  industrial  use  to  that  for  human
consumption is legal, and need not be strictly quid pro quo as  long  as  it
is  not  excessive.  We  find  no  merit  in  these  Appeals  and  they  are
accordingly dismissed.

…………………………….…J.
[VIKRAMAJIT SEN]



…………………………….…J.
[SHIVA KIRTI SINGH]
New Delhi,
August 12, 2015.

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