BARAMATI GRAPE INDUSTRIES LTD Vs. STATE OF MAHARASHTRA

JUDGEMENT

(1.) IT is the contention of the petitioners that they are engaged in the manufacture, inter alia, of potable liquor and have their distilleries situated at various places. They manufacture the liquor under the licences issued to them under the provisions of the Bombay Prohibition Act, 1949 (hereinafter referred to as the 'prohibition Act') and carry on manufacturing activity. By filing the present petitions, they are challenging the legality and constitutional validity of (i) Maharashtra ordinance No. XII of 1996 dated 4th September 1996, (ii) Notification No. ARM/1096/21/2/exe. dated 13th September 1996, (iii) Maharashtra Potable Liquor (Fixation of Maximum Retail Prices) Rules, 1996 (M. R. P. Rules) and (iv) Circular No. CSE 1096/arm (96-97)I (E) dated 30th October 1996.

(2.) BY the impugned Ordinance, Explanation to Section 105 of the Prohibition Act is substituted. Section 105 and the substituted explanation reads as under : " 105 (1) An excise duty or countervailing duty, as the case may be, at such rate or rates as the State Government shall direct may be imposed either generally or for any specified local area on - (a) any alcoholic liquor for human consumption, (b) any intoxicating drug [or hemp], (c) opium, (d) any other excisable article, when imported, exported, transported, possessed, manufactured or sold (in or from the State as the case may be) : Provided that duty shall not be so imposed on any article which has been imported into the territory of India and was liable on such importation to duty under the Indian Tariff Act, 1934, or the Sea Customs Act, 1878 or on any medicinal or toilet preparation containing alcohol, opium, hemp or other narcotic drugs or narcotics. Explanation - Duty may be imposed under this section at different rates - (i) according to the places to which an excisable article is to be removed for consumption ; or (ii) according to the varying strengths or quality of such article; or (iii) according to the manufacturing cost of the excisable article, declared in writing, by the manufacturer or the exporter to the State, to the prescribed authority and authenticated by that authority. " BY this substitution of the Explanation, the legislature has only added clause (iii) which empowers that excise duty may be imposed according to the manufacturing cost of the excisable article declared by the manufacturer or exporter to the State, to the prescribed authority and authenticated by that authority. Main challenge is to addition of this clause.

(3.) IT has been pointed out that the maximum retail price is fixed on the basis of the power conferred under Sections 53 and 143 (2) (hl) of the Prohibition Act. The said Sections read as under :- 53.All licences, permits, passes or authorizations granted under this Act shall be in such form and shall, in addition to or in variation or substitution of any of the conditions provided by this Act, be subject to such conditions as may be prescribed and shall be granted on payment of the prescribed fee : Provided that every licence, permit, pass or authorization shall be granted only on the condition that the person applying undertakes, and in the opinion of the officer authorized to grant the licence, permit, pass or authorization is likely to abide by all the conditions of the licence, permit, pass or authorization and the provisions of this Act. " " 143 (2) In particular and without prejudice to the generality of the foregoing provisions, the State Government may make rules , -. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (hi) prescribing the restrictions under which and the conditions on which any licence, permit, pass or authorization may be granted including - (i ). . . . . . (ii)the fixing of the strength, price or quantity in excess of or below which any intoxicant or mhowra flowers shall not be sold or supplied, and the quantity in excess of which denatured spirit, denatured spirituous preparation or molasses shall not be possessed or sold and the prescription of a standard or quality for any intoxicant denatured spirituous preparation, mhowra flowers or molasses;" Re : contention that excise duty is levied beyond the legislative competence as duty is levied not only on manufacturing cost of alcoholic liquor but also on the other items such as bottling, packing and transporting (Manufacturing cost + other costs ). Hence, excise duty is levied on activity which is unrelatable to or which has no nexus with manufacture or production of alcohol. Hence, it is unconstitutional and ultra vires.--------------------------------------------------