- (1.) The Appellants before us have laid siege to the concurrent conclusions of the learned Single Judge, as well as the Division Bench of the High Court of Judicature at Madras in a matter where the writ petitioners, i.e. the Respondents before us, have assailed the legality of a demand of Rs. .1/- per bulk litre of industrial alcohol manufactured by them. Earlier, the Respondents had unsuccessfully assailed the impost of 50 paise per bulk litre of industrial alcohol but that challenge was primarily predicated on the legislative competence of the State of Tamil Nadu to make that demand. In the said writ petitions, the ten petitioners therein had prayed for a declaration that Rule 5-A of the Tamil Nadu Distillery Rules introduced by G.O.M. No.662 issued by Home, Prohibition and Excise(III) Department, dated 4.6.1990, and the amendment to the said Rule brought into effect by G.O.M. No.64, Home Prohibition and Excise (XIII) Department, dated 12.04.2000, are unconstitutional, illegal and void. The learned Single Judge noted that the decision of a Seven-Judge Bench of this Court in the case of Synthetics and Chemicals Ltd. v. State of U. P., 1990 1 SCC 109; concluded the conundrum. In that case it was held that the sundry States of the Union of India are not competent to impose taxes/levies on industrial alcohol or rectified spirit. This Court, however, clarified that the States are empowered under Entry 8 of List II of the Seventh Schedule to the Constitution of India to regulate this business and ensure that industrial alcohol is not diverted as potable alcohol, and in carrying out this exercise, States would be fully competent to collect administrative/regulating service fee. The writ petitioners' first foray in the Writ Court did not meet with success. Accordingly, the State of Tamil Nadu appears to have collected 50 paise per bulk litre towards its administrative fees for almost a decade.
(2.) By G.O.M. No.64, dated 12.04.2000, Home Prohibition and Excise (XIII) Department, the Appellant State Government has amended Rule 5-A and thereby increased administrative service fees to Rs. .1/- per bulk litre for industrial alcohol produced by the sundry distilleries located in that State. The stance of the State Government was that administrative fees related strictly to the establishment charges occurred in the distilleries themselves together with other expenses incurred by the State to enforce the Regulation. In their second salvo, the Petitioners have not challenged the power of the State to recover administrative fees, but have contended that this exercise had to be meticulously calculated on the premise of quid pro quo. Relying on Synthetics and Chemicals Ltd. the learned Single Judge came to the conclusion that the subject impost was, in pith and substance, an endeavour to raise revenues for the State. The Writ Court also applied the ratios of Shri Bileshwar Khand Udyog Khedut Sahakari Mandali Ltd. v. State of Gujarat, 1992 2 SCC 42, Gujchem Distillers India Ltd. v. State of Gujarat, 1992 2 SCC 399 and Bihar Distillery v. Union of India, 1997 AIR(SC) 1208 It opined that the State had the power to comprehensively regulate and monitor the production of industrial alcohol in order to ensure that there was no misuse or diversion of this product for its conversion to potable alcohol. The Writ Court then went on to consider the second question, viz. whether the levy or fees impost must per force be confined and founded on the rule of quid pro quo. Relying on the decision of this Court in Sreenivasa General Traders v. State of Andhra Pradesh, 1983 4 SCC 353, it was reiterated that by and large the principle of quid pro quo governs the quantification of the service rendered, but not necessarily with mathematical exactitude; it is necessary that a reasonable relationship between the collection and the services rendered must be evident. It was also reiterated that the test of correlation is to be reckoned at the aggregate level and not at the individual level as was clarified in P. M. Ashwathanarayana v. State of Karnataka, 1989 Supp1 SCC 696. In this conspectus of the law, the learned Single Judge reached the conclusion that the State was competent and justified in recovering expenses for ensuring the prevention of illegal diversion of industrial alcohol within the premises of the distilleries themselves, as also expenses incurred for supervising the transit of industrial alcohol from the distilleries to the trader. The Writ Court then adverted to the decision in Vam Organic Chemicals Ltd. v. State of UP, 1997 2 SCC 715, as well as Secunderabad Hyderabad Hotel Owners Association v. Hyderabad Municipal Corporation,1992 2 SCC 274. It is important to note that the learned Single Judge, after carrying out the said analysis of the law, pithly observed that the Appellant State had not furnished the relevant and requisite particulars and material to establish that the impost indeed had the character of quid pro quo. Referring to the quantum of recoveries made on the basis of 50 paise per bulk litre for almost one decade, it was noted that this collection roughly corresponded to one-third of the total expenses incurred by the Excise Department, which per se was not excessive; and that there can be no cavil that in regulating the trade of potable liquor the State is gathering considerable income. So far as the increased demand of Rs. 1/- per bulk litre of industrial alcohol is concerned, the learned Single Judge concluded that it would amount to effecting an increase in recovery from 1/3rd to 2/3rd of total expenses incurred by the Excise Department which, therefore, ceased to be based on the principle of quid pro quo. By this directive, the writ petitions were dismissed, making it legal for the State to impose and collect only 50 paise per bulk litre. G.O.M. No.64 Home Prohibition and Excise (XIII) Department dated 12.4.2000 was quashed. It appears that despite this ruling the State has coerced the writ petitioners into paying the so called administrative regulatory charges at Rs. 1/- per bulk litre.
(3.) The Appellant State thereupon assailed the decision of the learned Single Judge in W.A. Nos.1566 to 1571 of 2001, but in the event, with continued failure. The Division Bench again analysed the numerous judgments of this Court, the foremost being of the Seven-Judge Bench in Synthetics and Chemicals Ltd., and noted that the State Governments are empowered to levy excise duty or tax on alcoholic liquor fit for human consumption, but so far as industrial alcohol is concerned, that power is reposed in the Union Government alone. However, this does not mean that the State Government was powerless to regulate the production of industrial alcohol so long as that activity was calculated to circumvent the diversion of industrial alcohol into potable alcohol. The Division Bench, however, noted that Rule 5-A came to be introduced as this Court in Seven-Judge ruling in Synthetics and Chemicals Ltd. had approved the collection of administrative service fee, as indubitably and avowedly the State Government through its Excise Department was incurring expenses for the purpose of blocking any attempt to divert industrial alcohol as potable alcohol. Quite correctly, the Division Bench also posited on the strength of the decision of this Court in Vam Organic Chemicals Ltd. that the Excise Department was effectively conducting recovery measures and was not providing corresponding services to these distilleries. Significantly, the Division Bench concluded that the collections made by the State by way of administrative service fee recovered even at the rate of 50 paise per bulk litre corresponded to approximately 60 per cent of the total expenditure of the Excise Department. The Division Bench was of the opinion that there was only an expenditure of Rs. 93.2 lakhs against which there was an estimated collection of administrative fee aggregating Rs. 11.73 crores which collection, therefore, was excessive. Whilst it seems to us that there is no scope for our interference in the impugned Judgment, we must hasten to clarify that the charges should not be restricted only to those establishment expenses incurred by the State in the distilleries alone, or that any collection over and above those expenses would ipso facto tantamount to unjust enrichment. However, the fact remains that the figures noted by the Division Bench were Rs. 93.20 lakhs whereas the collections even at the rate of 50 paise per bulk litre aggregated Rs. 11.73 crore, which since it was not interfered with, would undoubtedly cover expenses over and above those incurred by the State only on its establishments/office in the respective distilleries. The Division Bench also underscored the fact that details of expenses incurred by the State in connection with the supervision or regulation of production of industrial alcohol, with a view to ensure that there is no diversion thereof for the purpose of or reconversion to potable alcohol, had not been provided in this regard. We are in no manner of doubt that the State has woefully failed to furnish credible details of expenditure which, according to it, related to administrative or regulatory or service expenses.;