CHINNAPPA REDDY, J. - (1.) THE primary question involved in those appeals and petitions is whether under the Excise Law prevailing in the State of Andhra Pradesh. the Government is entitled to claim from the Excise Contractors who have failed to lift the 'Minimum Guaranteed Quantity of liquor the amount said to represent the excise duty component' in the issue price of liquor relating to such unlifted quantity of liquor. A Full Bench of three judges of the High Court of Andhra Pradesh, in V. Narasimha Rao v. Superintendent of Excise AIR 1974 Andh Pra 157, held that the Government could but this view was overruled by a Full Bench of Five Judges of the same High Court in Atluri Brahmanandam v. Tahsildar of Gannavaram AIR 1977 Andh Pra 196 where it was held that the Government could not. It is the judgment of the Full Bench of Five Judges which is in question in the appeals and petitions filed by the Government. With a view to cure the defects pointed out by the Full Bench of Five Judges and to validate the demands raised by the Government, the Andhra Pradesh Legislature enacted the Andhra Pradesh Excise Amendment Act X of 1984. Demands raised pursuant to the Amending Act were upheld by the High Court by a latter judgment. The aggrieved Excise Contractors have filed appeals and they are also before us. In some cases the contractors who had originally succeeded because of the decision of the Five Judge Full Bench were again called upon to make good the deficit after the Amending Act was passed. They questioned the fresh demands but failed in the High Court. Their petitions for Special Leave to Appeal are also before us.
(2.) ENTRY 51 of List II of the seventh schedule to the Constitution empowers the State to levy duties of excise on 'alcoholic liquors for human consumption (not including medicinal and toilet preparations containing alcohol) manufactured or produced in the State' and countervailing duties on such alcoholic liquors manufactured or produced elsewhere in India. An excise duty levied by the State on alcoholic liquors is, therefore, primarily a duty on the manufacture or production of such alcoholic liquors. Section 2(10). Andhra Pradesh Excise Act, 1968 defines "Excise Duty" or "Countervailing duty" to mean "the duty of excise or countervailing duty, as the case may be mentioned in entry 51 in List II of the Seventh Schedule to the Constitution." 'Excise -Revenue' is defined by S. 2(12) to mean Revenue derived or derivable from any duty, fee, tax, rent, fine, penalty or confiscation levied, imposed or ordered under the provisions of this Act or other law for time being in force relating to intoxicating drugs'. Section 17 of the Act, before and after the amendment was and is as follows: JUDGEMENT_136_2_1987Html1.htm Sections 21 and 22 which remained unchanged are as follows : "Section 21. Excise duty or countervailing duty on excisable articles : (1) The Govt. may, by notification levy an excise duty on any excisable article manufactured or produced in the State at such rate, not exceeding the rates mentioned in the Schedule, as may be specified in the notification. (2) The Govt. may by notification, levy a countervailing duty on any excisable article manufactured or produced elsewhere in India and imported into the State at such rate as may be specified in the notification which may not exceed the rates of excise duty on similar excisable articles levied under sub-s.(1). (3) Different rates may be specified in sub-ss. (1) and (2) for different kinds of excisable articles and different modes of levying duties under S. 22. Section 22. Modes of levying duties : The excise duty and the countervailing duty under S. 21 shall be levied in one or more of the following modes: (a) rateably, on the quantity of any excisable article produced or manufactured in or issued from a distillery, brewery or manufactory or warehouse or imported into the State; (b) in the case of spirits or other liquors produced in any distillery, brewery or manufactory in accordance with its quality or strength or in accordance with such scale of equivalents calculated on the quantity of materials used, or by the degree or attenuation of the wash or wort as the case may be, prescribed;ibed; (c) in the case of toddy, in the form of a tax on each variety of excise tree from which toddy is drawn having due regard to the period during which such tree is capable of yielding toddy; (d) by fees on licences for the manufacture, supply or sale of any excisable article." Section 23 before and after amendment was as follows : JUDGEMENT_136_2_1987Html2.htm The first entry in the Schedule to the Act is as follows : JUDGEMENT_136_2_1987Html3.htm We mentioned earlier that the Andhra Pradesh Legislature amended the Andhra Pradesh Excise Act to nullify the effect of the Full Bench judgment in Atluri Brahmanandam v. Tahsildar of Gannavaram (AIR 1977 Andh Pra 196) (supra). We may refer to the provisions of the amending Act. Section 2 of the Amending Act provides for the substitution of a new S. 17 for the old S. 17. We have already extracted both the old and the new sections. Section 3 of the amending Act provides for the substitution of old S. 23 by a new S. 23. We have already extracted both the old and the new sections. Section 4 of the amending Act provides for the validation of earlier demands made in respect of issue price of short-drawn minimum guaranteed quantity of liquor. It is necessary to set out the whole of this provision. It is as follows :- "4. Validation - Where, before the commencement of this Act, any issue price (which includes excise duty also) has been collected or recovered from the lincensee in respect of short-drawn or undrawn minimum guaranteed quantity of arrack in pursuance of R. 15 Andhra Pradesh Excise (Arrack Retail, Vend and Special Conditions of Licences) Rules. 1969, by deducting such price from the advance money paid by the licensee, then. notwithstanding anything contained in any judgment, decree or order of any court, tribunal or other authority to the contrary, the price so collected or recovered shall be deemed to be and shall be deemed always to have been validly collected or recovered as consideration for the grant of lease or licence or both to the lessee or licensee for the exclusive privilege in respect of sale of liquor in accordance with the provisions of the principal Act as amended by this Act as if the amendment made to the principal Act by Ss. 2 and 3 of this Act had been in force at all material times and accordingly. (a) all acts. proceedings or things done or taken by the State Government or by any officer of the State Government or by any other authority in connection with the collection of such price shall for all purposes be deemed to be and to have always been done or taken in accordance with law: (b) no suit or other proceeding shall be maintained or continued in any court or before any authority for the refund of, and no enforcement shall be made by any Court or other authority of any decree or order directing the refund of, any such price which has been collected and which would have been validly collected as if the provisions of the principal Act as amended by the Act had been in force at all material times." The Andhra Pradesh (Arrack, Retail Vend Special Conditions of Licences) Rules, 1969 were made by the Government of Andhra Pradesh in exercise of the powers conferred by various provisions of the Andhra Pradesh Excise Act. Rule 7 obliges the licensee to buy arrack from a recognised distillery, warehouse or depot as may be allotted by the department at the issue price as notified by the Commissioner from time to time. Rule 11 provides for remittances of duty, etc. into the Government treasury. Rule 15 deals with minimum guaranteed quantity of liquor. It is necessary to extract the first two clauses of R. 15 and they are as follows :- "15. Minimum guaranteed quantity of arrack - (1) No licensee shall purchase arrack less than the specified minimum guaranteed quantity in any month. If in any month, quantity less than the minimum guaranteed quantity fixed for that month is drawn. at the end of that month issue price to the extent of deficit purchase shall be deducted from the advance money paid by the licensee under the minimum quantity of arrack guaranteed by him and the licensee shall be called upon to indemnify the amount so adjusted by the end of the succeeding month in which short drawn quantity had occurred. Provided that the Excise Superintendents may permit the licensee to lift the short drawn minimum guaranteed quantity of the previous month in the succeeding month for special reasons except for the month of September, unless the licensee has committed default in lifting the minimum guaranteed quantity for two successive months: Provided further that where the Commissioner deems it necessary to permit a shop keeper to draw the deficit quantity short drawn in any month in the subsequent months, he shall obtain the prior approval of the Government for granting such permission. (2) Where a licensee fails to lift the arrack as permitted by the Excise Superintendent or to indemnify the advance amount so adjusted by the end of the succeeding month in which the short drawal of quantity had occurred, the right acquired by the defaulting licensee shall be reauctioned forthwith." Rule 17 prescribes "every licensee shall be bound by the provisions of Andhra Pradesh Excise Act, 1968, and the rules and orders made thereunder from time to time."
(3.) THE Andhra Pradesh Excise (Lease of Right to Sell Liquor in Retail) Rules, 1969, are another set of rules made under the various provisions of Andhra Pradesh Excise Act. Rule 2(ix) defines "rental" to mean 'the rent payable in respect of a shop or group of shops in consideration of the grant of lease for sale of liquor'. Rule 3 provides for the lease of the right to sell liquor in retail. Clause 1 of Rule 3 may be usefully extracted here and it is as follows : "3. Lease to right to sell 'liquor in retail : (1) Subject to the provisions of these rules, every lease of right to sell liquor in retail shall be granted by auction. The law shall ordinarily be for a period of one excise year-, Provided that where the Commissioner considers it necessary to grant the lease of right to sell liquor in retail in any other manner he shall do so with the prior approval of the Government" THE rest of the rules relate to the procedure to be followed at the auction and thereafter. Rule 16 requires the auction purchaser to pay 2 per cent of the annual rental as earnest money together with one month's rental on the day of auction immediately after the acceptance of tender or bid as the case may be, The earnest money and one month's rental are to be in addition to the deposit of rental prescribed by R. 18. Rule 18(1) provides for the deposit by auction purchaser within fifteen days from the date of auction, two months' rental in cash or in fixed deposit certificates. Rule 21 provides for execution of counterpart agreement by the licensee in form 42. This is required to be done before taking out a licence in respect of lease granted to him for the sale of liquor. Rule 22 provides that the lease shall not take effect until the auction purchaser obtains a licence. Rule 24 prescribes that every auction purchaser shall be bound by all the provisions of the Excise Laws which are in force or which may come into force and of the rules or orders made from time to time by the Government or Commissioner or by the competent authority. The prescribed form for the counterpart agreement provides among other things for an undertaking that the licensee shall abide by all the provisions of the Andhra Pradesh Excise Act and the Rules and Orders thereunder existing and also those that would be issued from time to time in that respect. The Andhra Pradesh Excise (Lease of Right to Sell Liquor in Retail) Rules, 1969, and the Andhra Pradesh Excise (Arrack, Retail Vend Special Conditions for Licences) Rules were duly amended in 1984. It is to be mentioned here that the issue price of arrack is notified well in advance of the excise year and the minimum guaranteed quantity of liquor is also fixed in regard to each shop well in advance of the auction. The issue price is always a definite sum per bulk litre of liquor. The notification specifying the issue price does not attempt to split up the issue price into various components such as cost price, excise duty, transport charges, etc Cost price, excise duty and transport charges are not separately and individually charged. Issue price is the sum total of whatever has gone into the price of liquor at the time it is issued and it is a single pre-determined definite sum and not the total of separate sums representing so many specified components. For example, the issue price of arrack for the year 1979-80 was notified in the following manner :- "In exercise of the powers conferred by R. 7(1), Andhra Pradesh Excise- (Arrack, Retail Sale Special Conditions for Licences) Rules, 1969, the Commissioner of Excise, Andhra Pradesh, hereby notifies the issue price of arrack for the Excise Year 1979-80 at Rs. 5.10 per bulk liter of 300 U.P. strength and Rs. 3.00 per bulk liter of 600 U.P. strength." It is however not disputed that excise duty does enter the determination of the issue price but that has. nothing to do with the excise contractor whose obligation is to pay the whole of the issue price. As we said the issue price as well as minimum guaranteed quantity are both fixed well in advance and it is with full knowledge of the issue price and the minimum guaranteed quantity that every bidder participates in the auction. We wish to emphasise here that the 'issue price' is that which is notified as issue price and not its components, if any. These components which have come together to become 'issue price' are not to be separated again. To borrow the analogy of Chemistry it is a chemical compound and not a mechanical mixture. Excise duty loses its identity, as it were, and becomes an inseparable part of 'issue price. The learned counsel for the contractors, however, argued that excise duty was admittedly a part of issue price and that the legislature, while amending the excise Act in 1984, had also recognised the distinctive duty element in issue price. He also invited our attention to Narasimha Rao v. Superintendent of Excise (AIR 1974 Andh Pra 157) (FB) (supra). It is true that it is not disputed that the element of excise duty has entered the issue price but that does not mean that it continues to retain its character as excise duty. In V. Narasimha Rao v. Superintendent of Excise (supra), the High Court of Andhra Pradesh, after referring to R. 11 of the Retail Vend Rules, observed that it could be safely taken that the three items, namely, duty, cost and sales tax constituted the issue price. It is one thing to say that several elements enter into the determination of issue price but it is altogether a different thing to say that these erstwhile constituent elements retain their character and individuality as such even after determination of issue price. In the statement of objects and reasons of the amending Act there is reference to 'issue price' together with excise duty' and 'issue price including excise duty'. In S. 4 of the amending Act also there is a reference to 'issue price (which includes excise duty also)'. These references to issue price and excise duty are made in the context of the judgment of the Five Judge Full Bench of the Andhra Pradesh High Court which had treated excise duty as a severable element of issue price, the effect of which was sought to be got rid of by the amending Act. It was in that context that there was a reference to the excise duty element of issue price. We do not think that it is permissible for us to hold that the element of excise duty which has gone into the determination of issue price continues to retain its individual character so as to be capable of being severed and dealt with separately. ;