R.M. Sahai, J. - (1.) THE petitioners who hold licences for retail vend of country liquor for excise year 1986 -87 filed the petitions against demand of issue price for unlifted quantity of liquor principally because clause (g) in U.P. Settlement of country liquor licence (Tender cum Auction) Rule, 1985 empowering Excise Commissioner to fix the price was invalid in absence of any guideline for its determination. Before adverting to specific challenges it may be worthwhile mentioning that Section 24 of U.P. Excise Act empowers excise commissioner to grant any person a licence for the exclusive privilege, amongst others, for selling by retail any country liquor within any local area. And Section 30 deals with payment for exclusive privilege. It provides that instead of or in addition to any duty leviable under the chapter the State Government or on its behalf the Excise commissioner may accept payment of a sum in consideration of licence for any exclusive privilege under Section 24. It further provides that the sum payable may either be fixed by auction or inviting tenders or otherwise or be assured on the basis of sales of quota lifted under the licence or partly fixed and partly assessed. Rules under Excise Act were framed in 1910. In 1984 U.P. Excise (First amendment) Rules were framed superseding the rules under heading of 'Fees' published on 26th September, 1910. They provide for the procedure of settlement of retail vend by auction system and the manner in which bid shall be accepted and finalised. In 1985 the above mentioned rules were framed to apply to grant of exclusive privilege of selling country liquor by retail where Excise Commissioner decides to grant licence by tender -cum auction system. Licence fee according to these rules is a sum payable in consideration of grant of licence for exclusive privilege under Section 2 and is besides the issue price payable for the minimum guaranteed quantity for the shops or group of shops. What is minimum guaranteed quantity is defined in clause (f) as, quantity of liquor fixed by the Excise Commissioner guaranteed by auction purchaser to be lifted by him from the country liquor Bonded warehouse situated in the district. And issue price is the price calculated by Excise Commissioner for the minimum guaranteed quantity. Rule 3 empowers commissioner to fix number of shops or group of shops, their location and minimum guaranteed quantity for such shop. Rules 6 and 7 provide for the submission of tender and acceptance of tender bid. Rule 8 requires the auction purchaser to submit to licensing authority before obtaining the licence a monthly statement of distribution of country liquor to be lifted by him. The rule further requires the licensee to lift the monthly approved quantity till last day of month. And the unlifted quantity is liable to be forfeited unless permitted by Excise officer to be lifted in subsequent month but not beyond 31st December. Rule 9 requires licensee to deposit issue price on the quantity approved in Rule 8 by 5th of every month. It further empowers authorities to deduct from security deposit the price if it is not remitted as provided and requires licensee to make good security by 20th of the month. Rule 10 provides consequences of failure to make good deficiency and Rule 11 requires the licensee to sell entire minimum guaranteed quantity before expiration of term of licence.
(2.) SRI R.R. Agarwal, who led the argument on behalf of petitioner urged that clause (f) of the rules which defines issue price being without any guideline was liable to be struck down - He submitted that the fixation of issue price which under the order of commissioner is identical with excise duty leviable under the Act is illegal as the licensee are required to pay over and above this the auction money thus resulting in payments which are much in excess of duty. It was also argued that excise duty under sub -section (3) of Section 28 cannot exceed Rs. 20 per litre on country spirit but the Excise commissioner in violation of statutory provision fixed the issue price which indirectly increased the duty leviable much in excess of Rs. 20. Learned counsel explained that Rs. 20 per litre provided by the Act could be per alcoholic litre which is equal to 100 V.V. But the strength of alcoholic content in the country spirit has been raised to 36% V.V. on which issue price of Rs. 11 equivalent to excise duty was imposed. If the duty on 100 V.V. is calculated 20/x 100 it would come to about Rs. 30.60 which was much in excess of Rs. 20. Reliance was also placed on certain letters sent by excise officer Lucknow to Excise Commissioner and Excise Secretary for reduction of minimum quantity for Lucknow district as there was loss in earlier year and the bidders were not forthcoming. Sri K.D. Misra accepted the arguments of Sri Agarwal and urged that decision of the Supreme Court in State of Andhra Pradesh v. P. Reddy : A.I.R. 1987 S.C. 933 was applicable as arrack in Andhra Pradesh was different from country liquor. He invited attention to paragraphs 480 and 418 of Excise Manual and urged that price can be charged only when state either owns or is selling for distillation. The learned counsel submitted that issue price could be charged from licensee only if they were liable to pay duty and not otherwise But the payment of duty under Act and Rules is made by distillers and not retailers. Reliance was placed on paragraph 418 of Excise Manual and it was urged that since duty was payable at time of removal of country liquor from Bonded Warehouse to wholesale depots from where sale is made to retailers no amounts could be charged from them either as duty or instead of duty. It was also urged that fixation of minimum guarantee was contrary to Section 24, therefore, no issue price could be charged for it. Learned Counsel submitted that CL -3 -A or CL -5 -A in the two types of licence which are prescribed for retail sale of country spirit cannot be deemed to be licences for parting of exclusive privilege . Learned counsel submitted that Section 19 requires payment of duty on intoxicants at the point of removal from distillery warehouse etc. but the Excise Commissioner in fixing issue price instead of duty even before removal has acted contrary to law. It was also urged that licensees were not contractors but guarantors who can challenge action of opposite parties. Sri R.C. Shukla in addition to these arguments urged that increase of price from Rs. 7 to Rs. 11 has in fact enhanced duty as strength has been reduced. He urged that if by this method sale of liquor was attempted to be boosted then it violated Article 4? He urged that exercise of power by Excise Commissioner being colourable was liable to be struck down. Sri Ranjeet Saksena added further and submitted that the action of opposite parties was discriminatory as the excise duty on Foreign liquor was reduced whereas on country liquor it was increased, thus driving out the dealer of country liquor from business. On the other hand learned Advocate General submitted that issue price was transferring exclusive privilege which vested in the State, therefore, it was beyond challenge. He submitted that fixation of price is legislative function which cannot be interfered by this court. According to learned Advocate General selling of liquor which is exclusive privilege of State is regulated by agreement. It is not a civil right much less a fundamental right as the licensees do not have a right to carry on business in liquor, and the transfer of the privilege does not vest any ownership in licensee who at best can be considered to be agent and not holder of an independent right. Reliance was placed on Article 31(1)(c) of the Constitution and it was urged that since the rules were framed to subserve objective of clauses (b) and (c) of Article 39 of Constitution they could not be challenged for violation of Article 14 and 19 of Constitution. Taking up the last argument of learned Advocate General first, in support of which he relied on various decisions of the Hon'ble Supreme Court explaining meaning of, 'resources' in Article 39 and the purpose of levying duty to raise revenue for the State, it appears unnecessary to dilate on it as proviso to Article 31C of Constitution excludes operation of the Article to a Law made by the Legislature unless such law having been reserved for the consideration of the President has received his resent. And on this there is no dispute that U.P. Excise Act was not reserved for consideration of the President nor received his assent.
(3.) SIMILARLY the argument that price fixation cannot be scrutinised by this court appears to be too broadly stated. In Union of India v. Cynamide India : A.I.R. 1987 S.C. 1802, the Hon'ble Court while laying down that price fixation was generally a legislative function to which principle of natural justice was not attracted observed: Price fixation is neither the function nor the forte of the court. We concern ourselves neither with the policy nor with the rates. But we do not totally deny ourselves the jurisdiction to enquire into the question, in appropriate proceedings whether relevant considerations have gone in and irrelevant considerations kept out of the determination of the price. For example, if the Legislature has decreed the pricing policy and prescribed the factors which should guide the determination of the price, we will, if necessary, enquire into the question whether the policy and the factors are present to the mind of the authorities specifying the price.;