R.L. Gulati, J. - (1.) The petitioner is limited company engaged in the manufacture of synthetic rubber in its factory at Bareilly in collaboration with M/s Firestone Tire and Rubber Company of U.S.A. The main raw material from which synthetic rubber is prepared is denatured spirit which is purchased from various distilleries and sugar factories arrayed as respondent Nos. 8 to 20.
(2.) By a notification dated January, 1937 issued by the Governor of United Provinces, sub-rule (2) was added to rule 17 of the U.P. Excise Rules, levying a vend fee of an as eight per bulk gallon on denatured spirit. The amended rule is as under: "17(2). In the case of issues from distillery a vend fee of annas eight per , bulk gallon will be payable in advance before the spirit is issued. This fee will not be charged on denatured spirit in the case of (i) issues to hospitals, dispensaries and other charitable and educational institutions upto a quantity allowed to be issued by the Excise Commissioner, provided the indent is counter-signed by the Collector; and (ii) issues for export cut of the province, provided the export is made under the authority of a permit granted by a responsible officer of the importing province." The vend fee was enhanced from time to time and finally by a notification dated December 1, 1962, it was fixed at 66 n. p. per bulk litre. In 1963 Rule 17(2) was again amended by a notification dated July 30, 1963 published in the U.P. Gazette Extraordinary dated 10th August, 1963. After clause (ii) in sub-rule (2), the following was added as new clause (iii): "(iii) Issues to industry engaged in the manufacture of synthetic rubber on terms and conditions as the State of Government may determine." Thus the industry engaged in the manufacture of synthetic rubber was granted exemption from the payment of vend fee. The petitioner company has enjoyed that exemption until 1972. Acting under Sec. 40(2) (d) of the U.P. Excise Act, 1910, an order called "The U.P. Excise (III Amendment) Rules, 1972" was issued. As a result of this amendment, vend fee on denatured spirit was raised to Rs. 1.10 per bulk litre and clause (iii) which authorised exemption to industry engaged in the manufacture of synthetic rubber was deleted, so that the petitioner company became liable to vend fee on denatured spirit at the rate of 1.10 per bulk litre with effect from November 3, 1972. The petitioner has challenged this law in this petition under Art. 226 of the Constitution.
(3.) The imposition of vend fee has been challenged on two grounds: (i) lack of competence, and (ii) estoppel. So far as the challenge based on estoppel is concerned, the same may be disposed of first.;