A.M. Khanwilkar, J. - (1.) Leave granted.
(2.) This appeal takes exception to the impugned judgment and order of the High Court of Jharkhand at Ranchi in Writ Petition (T) No.7499 of 2012 dated 25th July, 2013, whereby the writ petition filed by the respondent to assail the notification dated 6th November, 2012, as published in the official gazette on 10th November, 2012, issued by the Board of Revenue, Jharkhand in exercise of powers conferred under Section 90 of the Jharkhand Excise Act, 1915 came to be allowed on the ground that the State had no legislative competence to levy tax/fee on the import of rectified spirit, as it is a non-potable liquor i.e. alcohol not fit for human consumption. Additionally, the High Court opined that the appellant-State had failed to justify the impugned levy on rectified spirit on the basis of services provided by the State in lieu thereof or being in the nature of quid pro quo. The original notification is in Hindi, the same reads thus: Free translation thereof has been filed by the appellant as annexure P-2. However, during the hearing as some doubt was raised about the accuracy of annexure P-2, we thought it appropriate to get the document (original in Hindi) translated from the official translator of this Court. That translated version, reads thus: JUDGEMENT_28_LAWS(SC)7_2019_1.htmlJUDGEMENT_28_LAWS(SC)7_2019_1.html
(3.) As aforesaid, the High Court accepted the challenge to the above-mentioned notification for the reasons noted hitherto. The relevant discussion in the impugned judgment in that behalf, reads thus: "13. The State under List-II is empowered to levy fee under Entry 66 in respect of any of the matters in the list but not including fees taken in any Court. Entry 66 read with entry 8 of List II therefore provides competence to the State to levy fee in respect of intoxicating liquor i.e. alcoholic liquor fit for human consumption i.e. to say on the production, manufacture, possession, transport, purchase and sale of intoxicating liquor. The present levy seeks to levy fee on the import of rectified spirit to be utilized for the purpose of, firstly for manufacture of ENA through re-distillation process and then for manufacture of IMFL. Rectified spirit is not fit for human consumption and it therefore does not come within the meaning of intoxicating liquor as contained in Entry 8 of List II. Levy on the import of rectified spirit is not a fee on intoxicating liquor i.e. fit for human consumption. By the impugned notification, the Board of Revenue in exercise of power conferred under section 90 of the Excise Act, 1915 has chosen to levy fee on the import of rectified spirit which is used for manufacture of ENA through re-distillation process and then for the purpose of manufacture of IMFL at the time before bottling @ Rs. 6.00 per LP Litre. Industrial alcohol/non-potable spirit i.e. rectified spirit being not alcoholic liquor fit for human consumption, cannot be the subject matter of any regulation or control by the State under Entry 8, 51 and 66 of List II of Seventh Schedule of the Constitution. The State has the power to levy fees under the garb of grant of privilege from those who deal in liquor or alcohol fit for human consumption i.e. potable liquor as distinct from non-potable liquor or alcoholic liquor unfit for human consumption. Under Entry 51 of List-II, State has been empowered to levy excise duty on alcoholic liquor fit for human consumption manufactured or produced in the State and countervailing duty at the same rate or lower rates on similar goods manufactured or produced elsewhere in India. Even under the instant Entry, the rectified spirit which is non potable liquor, does not come within the meaning of alcoholic liquor fit for human consumption on which the State can levy excise duty under Entry 51 of List-II. The levy of import fees on rectified spirit therefore by the State Legislature before bottling of IMFL by shifting the event of taxation, cannot be held to be justified as in pith and substance, the levy is on import of rectified spirit i.e. non-potable liquor i.e. alcohol not fit for human consumption. Levy of fee on non-potable liquor i.e. unfit for human consumption or industrial alcohol is permissible under Entry 52 of List-I of Seventh Schedule of the Constitution. Under Entry 84 of List-I, excise duty on tobacco and other goods manufactured or produced in India can be levied except on alcoholic liquor for human consumption; opium, Indian hemp and other narcotic drugs and narcotics. In the wake of such clear demarcation of legislative fields between Union and State Legislature, the impugned notification levying import fees on rectified spirit i.e. non potable liquor or alcoholic liquor unfit for human consumption by applying the rule of pith and substance, 18 cannot come within the legislative competence of the State Legislature. The impugned levy therefore is beyond the legislative competence of the State Legislature and consequentially also beyond the rule making power of the Board of Revenue."(emphasis supplied)And again................."16. The respondent State sought to justify the levy as a regulatory measure for supervision and control of potable liquor to protect public health and morality. However, there are no materials brought on record by the respondent State to justify that any services in lieu thereof are provided in the nature of quid pro quo to justify the imposition of such a levy. The petitioner is already having various licences granted by the Excise Department, Government of Jharkhand in Form- 19, 19(B), 20, 25 and 28(A) prescribed by the Board of Revenue and is paying the licence fee for grant of such licences. Under Form-19 a licence for compounding and blending of foreign liquor is given. In Form-19(B), petitioner has been granted licence for the manufacture of foreign liquor / beer as also for the sale of foreign liquor / beer through licencee distributors as also to import or transport the same under bond. The petitioner has a licence for bottling of potable foreign liquor under Form-20 for which it pays fees in advance of Rs. 50,000/- for the year. In Form-25 it has been granted licence to manufacture denatured spirit at its distillery / warehouse. The petitioner also has a licence under Form-28(A) to manufacture spirit in distillery not used in the manufacture of potable liquor for which it also pays a licence fees. It is the contention of the petitioner that it is paying establishment charges on the posting of excise official at its premises. Therefore, the respondent State have not been able to justify the impugned levy on rectified spirit on the basis of services provided in lieu thereof. Besides this, the petitioner has been paying licence fee for issuance of licence under different forms in the nature of a regulatory fee. The impugned levy therefore, is not justifiable on this account as well.17. In these circumstances, levy of import fee on rectified spirit which is impermissible for the State Legislature, also has the effect of impeding the inter-State trade and commerce as guaranteed under Article 301 of the Constitution of India. At the same time, it is within the exclusive legislative competence of Parliament to levy any duty or tax on rectified spirit i.e. industrial alcohol. Such action therefore, is in teeth of the Article 301 of the Constitution of India.18. In view of the aforesaid reasons and discussions and in view of the settled law laid down by the judgments of the Hon'ble Supreme Court referred to herein above, the notification dated 10th November 2012 issued by the Board of Revenue, Jharkhand in exercise of powers conferred under section 90 of the Jharkhand Excise Act, 1915, cannot be sustained in law and it is accordingly quashed. Consequentially, the demand raised vide notice dated 24th November 2012 (Annexure-4) for deposit of import fees on rectified spirit, is also quashed. Petitioner shall be entitled to refund of any such import fees deposited under the impugned notification.Writ petition is accordingly allowed."(emphasis supplied)The correctness of the view so taken by the High Court is the subject matter of challenge in this appeal, at the instance of the State. In defending the notification before the High Court, the appellant-State had asserted that the rule inserted by the subject notification being Rule 106 (Tha), is an impost and is merely described as an import fee. Because, it is reckoned on the basis of quantity of pure alcohol content of rectified spirit (which is known as "London Proof Liter"), imported for the purposes of manufacture of potable Foreign Liquor after the process of compounding, blending and reduction of strength of spirit from over proof strength to under proof strength is complete. Further, the unit for charging import fee is London Proof Liter (for short, "LPL") because, it does not change even after the spirit has undergone through the process of compounding, blending & reduction of strength. Indisputably, nothing can be nor will be charged in advance, so long as the imported rectified spirit is non-potable and till it is in the form of raw material. In other words, nothing is charged on industrial alcohol. Thus, it is neither a violation of provisions of the Constitution nor is it an arbitrary use of power under Section 90(7) by the Board of Revenue who was competent to issue the same towards levy of any kind of fee on potable liquor. In substance, the stand of the appellant-State is that the stated import fee is not on rectified spirit in its raw form as such, but on pure alcoholic liter "LPL" in the form of potable liquor. Further, it is a regulatory fee only for supervision and control of production of potable liquor to protect public health and morality. It was further asserted that no right inheres in any person for doing business in intoxicants. That right exclusively belongs to the State. Resultantly, it is open to the State to part with those rights for a consideration on conditions as may be deemed appropriate. There is no need for the State to establish commensurate services rendered by it to apply the doctrine of quid pro quo, in respect of impost of any kind of fee on potable liquors.;