1. After obtaining a Distillery Licence under the Andhra Pradesh Distillery Rules, 1970(hereinafter called 'the Rules'), made by the Government of Andhra Pradesh in exercise of the powers conferred on it by Section 72 of the Andhra Pradesh Excise Act, 1968 (hereinafter called 'the Act'), the petitioner, Anabeshahi Wine & Distilleries Private Ltd., Hyderabad, has been carrying on the business of manufacture and sale of wine and other ailed products in its factory, located at Hyderabad. In pursuance of Section 28 (2) of the Act, the Excise authorities posted one Inspector, one Sub-Inspector and four constables at the petitioner's Factory premises and required the petitioner to pay their entire salaries, allowances and pension contributions. The demand of salaries etc., of the departmental employees is without jurisdiction and illegal. Representations made by it to the Excise authorities against the said demand had no effect on them, but resulted in threats of cancellation of its license. The petitioner, therefore, filed this writ petition under Article 226 of the Constitution of India. for the issue of a writ of mandamus restraining the Excise Department from demanding or collecting the salaries etc., of the departmental employees posted at its factory.
2. The legality of the demand is mainly challenged by the petitioner on two grounds. They are: (1) By virtue of Entry 51, in List Ii of the 7th Schedule to the Constitution of India, no duty other than excise duty could be levied or collected under the Andhra Pradesh Excise Act; and (2) the demand of the establishment charges of the supervisory staff is neither an 'excise duty' within the meaning of the Act, nor a 'fee'.
3. The Government, In its counter, opposed the writ petition. According to the Government, the staff is not posted only to ensure proper collection of excise duty, but for the convenience of the licensee to whom certain facilities are granted. Neither Section 28 (2) of the Act, nor Rule 15 of the Rules is ultra vires of Entry 51 in List II of the 7th Schedule. After having agreed to pay, the petitioner cannot repudiate its liability. for the services rendered to the petitioner, the Government is levying establishment charges of the supervisory staff. Apart from Entries 8 and 66 of list II of the 7th Schedule. entry 7 in List III of the 7th Schedule also gives power to the State Legislature to demand an collect the establishment charges from the petitioner.
4. The two principal contentions that are raised in this writ petition, are: (1) the establishment charges of the supervisory staff are not 'excise duty', and hence the power to levy such charges is outside the ambit of entry 51 in List Ii of the 7th Schedule; and (2) no service s are rendered to the licensee by the supervisory staff posted at its factory premises, so as to justify the Government to collect the establishment charges from the petitioner as a 'fee'.
5. All public charges, by whatever name they be called, viz., tax, duty cess, or fee, amount to deprivation of property of a person. Under Article 265 of the Constitution, no tax shall be levied or collected except by authority of law.
6. No doubt, the establishment charges of the supervisory staff are demanded from the petitioner under Section 28 (2) of the Act and Rule 15 of the Rules made in pursuance of the power granted to the State government by Section 72 of the Act. But, the petitioner contends that Section 28 (2) of the Act is ultra vires of the powers of the State Legislature conferred on it by Entry 51 in list Ii of the 71st Schedule. If Section 28 (2) of the Act is ultra vires of the power of the State Legislature . then automatically. Rule 15 under which the establishment charges could be levied on the petitioner would also be ultra vires of the powers of the State Legislature.
7. Entry 51 in List II of the 7th Schedule, reads as follows:----
'51: Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India:--
(a) alcoholic liquors for human consumption:
(b) Opium, Indian hemp and other narcotic drugs and narcotics: but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.'
8. By virtue of the above Entry, the State Government can make a law levying excise duty on alcoholic liquors produced or manufactured in the State for human consumption.
9. The preamble to the Andhra Pradesh Excise Act (XVII) of 1968, reveals that the Act has been made for achieving two objects: (I) to consolidate and amend the law relating to:---
(d) Transport, and
(e) Purchase , and sale of intoxicating liquors and drugs: and (ii) to levy duties of excise and countervailing duties on alcoholic liquors, opium. Indian hemp and other narcotic drugs and narcotics and to provide for matters connected therewith.
10. Section 2 (1) of the Andhra Pradesh Excise Act says that the terms 'excise duty' and 'countervailing duty' occurring in the Act are the excise duty and countervailing duty mentioned in Entry 51 in list II of the 7th Schedule.
11. From a reading of Entry 51 in List II of the 7th Schedule, in so far as it is relevant for our purpose, it is manifest that excise duty can be levied on alcoholic liquor for human consumption, which is produced or manufactured in the State,.
12. Section 21 of the Andhra Pradesh Excise Act authorises the levy of excise duty on excisable articles manufactured or produced in the State, and countervailing duty on such articles produced or manufactured elsewhere in India but brought into the State. This is the charging section under the Andhra Pradesh Excise Act.
13. We are award that the allocation of the subjects to the lists is not by way of a mere simple enumeration of broad categories and, therefore, a large and liberal interpretation should be given to those Entries. It is difficult for us to accept the contention of the learned Government Advocate that, even by putting a large and liberal interpretation on Entry 51 in List II of the 7th Schedule, the establishment charges of the supervisory staff can be called or described as 'excise duty' on the alcoholic liquors for human consumption produced or dependent upon the quantity of the alcoholic liquors produced or manufactured by the petitioner in its factory premises. We, therefore, hold that the establishment charges of the supervisory staff are not 'excise duty' within the meaning of that expression under the Andhra Pradesh Excise Act.
14. Then the next question that has to be considered is whether the establishment charges of the supervisory staff can be levied or collected as a 'fee'.
15. Under Entry 66 in List II of the 7th Schedule, a fee can only be levied in respect of matters contained in list II. The Government seeks to justify the levy of establishment charges of the supervisory staff as a 'fee', in exercise of its powers derived by virtue of Entry 8 in List II of the 7th Schedule.
16. Entry 8 in List II of the 7th Schedule reads as follows:-----------
'8. Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors.'
17. Entry 8, when read with Entry 66 in list II of the 7th Schedule , authorises the State Legislature to make a law levying fees with respect to intoxicating liquors, that is to say, production manufacture, possession, transport, and purchase and sale of intoxicating liquors. the establishment charges of the supervisory staff cannot, by any stretch of imagination, be called a 'fee', because it is not based either on production, manufacture, possession, transport, or on purchase and sale of liquors. Hence we hold that the establishment charges of the supervisory staff are not 'fee' that can be lived under any of the provisions of the Act made by the State government , by virtue of the powers conferred on it by Entry 8 in List II of the 7th Schedule.
18. We shall next consider the question, whether the State Government can levy on the licensees the establishment charges of the supervisory staff under the in list III of the 7th Schedule, read with Entry 47 of the said List. Since the Andhra Pradesh Excise Act has not been passed with the object of regulating contracts, it is difficult for us to accept the contention of the Government that it can levy the establishment charges of the supervisory staff under Section 28 (2) of the Act, by virtue of the powers derived by the State Legislature under Entry 7 in list III of the 7th Schedule, read with Entry 47.
19. Even assuming without admitting that the levy of establishment charges of the supervisory staff is a 'fee' which the State Legislature can demand and collect, under Entry 8 read with Entry 66 in List II of the 7th Schedule, can it be said that the State Government has validity levied it on the petitioner?
20. This brings us to the question as to what precisely is the difference and distinction between a 'tax' and a 'fee'.
21. The difference between a 'tax' and a 'fee' is no more in doubt. In the well known Sirur Math Case. : 1SCR1005 , Mukherjea, J., approved the definition of a tax' given by Latham, C. J., which is as follows:-------
'. . . . . . . . . . . . A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered . . . . . . . . . '
'A fee is generally defined to be a charge for a special service rendered to individuals by some Government agency and is supposed to be based on the Expenses incurred in rendering the services though in many cases the costs are arbitrarily assessed. Ordinarily, fees are uniform and no account is taken of the varying abilities of different recipients to pay. It is true that a fee is not a voluntary payment because on a careful examination it will be seen that there is an element of compulsion in all cases of fees. Since a fee is a sort of return for services rendered, it is essential that the provision for the levy of a fee should be correlated to the expenses incurred in rendering the services,.. . . . . . . . . .'
22. In S. T. Swamiar v. Commissioner, H. R. & C. E., : AIR1963SC966 , it has been held by the Supreme Court, that:-----
'. . . . . . . . . . . A levy in the nature of a fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee that it must have direct relation to the actual services rendered by the authority to reach individual who obtain the benefit of the service. . . . . . . . . .'
23. If the special service rendered is distinctly and primarily meant for the benefit of a specified class or area, the fact that in benefiting the specified class or area, the State as a whole may ultimately and indirectly be benefited, would not detract from the character of the levy as a fee.
(See Hingir Rampur Coal co., Ltd. v. State of Orissa, AIR 1961 459 (at page 466).
24. In the corporation of Calcutta v. Liberty Cinema : 2SCR477 , Sarkar J., who spoke for the majority, said:----------
'. . . . . . . . . . . .We have referred to these cases only for showing that to make a levy a fee the services rendered in respect of it must benefit, or confer advantage on, the person who pays the levy . . . . . . . .
25. The difference and distinction between a 'tax' and a 'fee' has also been considered by the Supreme Court in The Indian Mica and Micanite Industries Ltd. v. The State of Bihar. : AIR1971SC1182 . After discussing various cases. Hegde, J., speaking for the Supreme Court, observed that:
'. . . . . . . From the above discussion it is clear that before any levy can be upheld as a fee, it must be shown that the levy has reasonable co-relationship with the services rendered by the Government. In other words, the levy must be proved to be a Quid Pro Quo for the services rendered. But in these matters it will be impossible to have an exact co-relationship. The correlationship expected is one of a general character and not as of arithmetical exactitude.. . . . . . . . . . . '
26. From the above discussion it emerges that, whereas a tax is a compulsory exaction of money by a public authority for public purposes enforceable by law, a fee is a Quid pro Quo for the services rendered either to the person concerned or to the specified class or area.
27. For justifying the demand of establishment charges of the supervisory staff as a fee, it must be established that services are rendered by the supervisory staff posted by the Excise Department at the petitioner's Factory premises, and that the expenses incurred by the Excise Department for rendering the services must have some relationship with the fee that is charged.
28. We shall now consider whether the so-called 'services' rendered by the supervisory staff are really services rendered to the petitioner in particular, or to the licensees, in general, regarding the production or manufacture of alcoholic liquors for human consumption, or whether the posting of the supervisory staff was only to ensure the collection of tax, which is a duty cast upon the Excise officials or staff.
29. It is stated in the counter that, under Section 16 (3) of the Andhra Pradesh Excise Act, no person shall remove any intoxicant without the sanction of the Government, from any Distillery established, continued or licensed under the Excise Act, unless the duty, if any imposed, has been paid under this Act. Under Section 76 (a) of the Andhra Pradesh Distillery Rules, 1970, no spirit or liquor manufactured or stored in a Distillery shall be removed unless the excise duty specified in Rule 16 is paid before such removal.
30. Since the excise duty is collected by the Government on the quantity of alcoholic liquor produced in a factory, a duty is cast on the Excise officials to see that no liquor is at any time taken out of the factory without payment of excise duty. The presence of the Excise officials t the factory premises will prevent the manufactures from removing alcoholic liquor from their factory premises without payment of Excise duty on it. The purpose for which the Excise Officials are posted at the petitioner's factory premises can hardly be said to be with the object of affording any facility to the petitioner; much less can it be said that their posting at the factory premises is with the object of rendering any service to the petitioner. The object of the Government in posting the Excise staff at the factory premises is only to see that the Excise staff discharge their duties as Government officials to collect proper excise duty on the entire quantity of liquor that is produced in the factory.
31. The petitioner does not manufacture spirit in its factory. a quota of spirit is allotted to the petitioner to draw its requirements of spirit from other distilleries. The petitioner is permitted to transport spirit under Bond from other distilleries without payment of duty before its removal from those distilleries. This is contained in Section 16 (3) of the Act and Rule 76 (a) of the Andhra Pradesh Distillery Rules. Spirit is used in the manufacture of potable liquors, on which duty is paid when released from the distilleries to other dealers. during the manufacture of liquor, by the use of the spirit, certain wastage's occur on which no duty is collected. The Government says that the above facility would not be extended to the petitioner if the Excise staff is not posted to exercise if the Excise staff is not posted to exercise supervision over the spirit and the manufacture in the distillery. If the petitioner agree to pay duty on the spirit before it is drawn at the distillery, the payment of cost of the establishment by the Government will be considered.
32. Rule 64 of the Andhra Pradesh Distillery Rulers provides that blending or reduction of plain spirit may be permitted in the store-vats, provided the blending and reduction is done in the present of the Distillery Officer and under his supervision.
33. The Act authorises the levy of excise duty on all excisable article once only, and not at different times and on the different forms of the same exercisable article. Spirit is an exercisable article on which exercise duty is collected. The petitioner is allowed to lift spirit from the distilleries where it is manufactured, without payment of duty. The petitioner, however, pays the excise duty on such spirit when it is converted into potable liquor. So the Government collects duty on spirit either at the distillery where it is manufactured, or at the distillery where, out of it, alcoholic liquor is manufactured. There is no loss of revenue to the Government on spirit. Some spirit is lost in the process of its conversion into potable liquor. The government is interested in seeing that no false wastage is show or claimed by the distillery where spirit is converted into alcoholic liquor. The Excise Officials posted at the factory premises keep a watch over the petitioner to see that no false wastages of spirit are claimed or reported. The object of keeping the Exercise official, at the factory premises is, therefore, to safeguard the collection of proper excise duty that is leviable either on spirit or on its altered form which is alcoholic liquor. The object of keeping the Excise staff at the factory premises cannot, therefore, he said to be with a view to afford any facility to the petitioner; much less can it be said that they render any service to the petitioner.
34. If the petitioner is asked to pay excise duty on spirit before it is removed from the distilleries where it is manufactured, then the power of the Government to levy excise duty on spirit is exhausted and, in such a case, it may not be legal for the Government to levy excise duty on alcoholic liquor which is only an altered form of spirit. The presence of the Excise Officials at the factory premises is, therefore in our view, to ensure proper collection of excise duty, and not with a view to afford any facility, or render any service to the petitioner.
35. A more-or-less similar argument was advanced on behalf of the Government in the Indian Mica and Micanite Industries Ltd., v. The State of Bihar, : AIR1971SC1182 . In that case, the vires of Rule 111 of the Rules framed under Section 90 of the Bihar and Orissa Exise Act (II) of 1915 was in issue. The averments in the counter filed by the Government opposing the contention of the petitioner in the case, were:---
'. . . . . . . . . . . . To denature spirit and issue it to Licensee, proper supervision and control is needed vide Board's Rules 63 to 68 at pages 177 to 181 of Excise Manual Volume II. There is every risk that any person may attempt to render denatured spirit fit for human consumption which is punishable under Section 49 of the Excise Act,
'Besides the above rulers of the Board certain instructions have been issued in paragraphs 187 to 196 of the Excise Manual, Volume III (Pages 67-71) for the process of denaturing and issue of denatured spirit to the licensees. State Government have to employ supervisory staff and chemical examiner to carry out these obligations of supervision and control.
'It may be added that Excise Department does not only supervise and control these intoxicating liquors in the interest of police policy but renders services to the petitioner by getting alcohol manufactured at the distillery by supplying raw materials like molasses and coal to these distilleries at controlled cheap rates. This is the only reason of getting spirit distilled at a very cheap cost by the licensees including the petitioner. And hence levy of fee by the it is clearly fee in return for services rendered as well as for proper supervision, control and regulation of an activity which the legislature desires to control.'
36. Dealing with the question whether the amount sought to be collect by the Government was a 'tax' or a 'fee', the learned Judge observed, that:----------
'. . . . . . . . . . . . The State in maintaining an elaborate staff to prevent the licensees from converting it into potable alcohol and converting it into potable alcohol and thereby avoiding payment of heavy duties renders little or no service to the licensees but only protects its own interest. . . . . . . . . . . . . '
37. The next object, according to the Government for which the Excise staff is posted at the factory premises, is that Rule 66 (4) of the Distillery Rules provides that no bottle shall be filled with liquor except in the joint presence of the Distillery Officer and the representative of the licensee. It permanent staff is not posted specifically for the unit, the licensee may not be able to bottle the liquor at his convenience during any time, which may result in heavy loss of labour to the licensees and the petitioner has to wait till the officers who are in charge of several concerns find time and inspect.
38. When the rules framed by the Government enjoin that the bottling of the liquor should be done in the presence of the Excise Officials, it is the duty of the Excise Officials to be present at the factory premises when the bottling of the liquor is done. The posting of the Excise Officials at the factory premises would, therefore, be in discharge of the duty cast upon them by the rules, and not with a view to afford any facility or to render any service to the petitioner . By discharging the duties imposed upon them by the Rules, the Excise officials cannot say that they are rendering any service to the petitioner.
39. Then it is said that the entire quantity manufactured at the distillery is not released on payment of duty for internal consumption, but a substantial portion of it is exported on which duty is not collect by the State of Andhra Pradesh. A little 'export Fee' is collected on exports. For export of liquor, the price at which the liquor is to be exported from the State of Andhra Pradesh must favorably compare with the price of such liquor exported from other States. If the excise duty is already collected on such liquor, its price might go export the liquor outside the State. Posting of the Excise Officials is once again to see that the excise duty is paid on the entire quantity of alcohol that is released from the distillery for internal consumption. We are unable to agree with the learned Counsel appearing for the Government that the posting of the Exercise Officials at the factory premises would amount to either affording a facility to the petitioner, or rendering of any service to it.
40. None of the above objects for which the Excise staff is posted at the petitioner's factory premises is, in our opinion, an object with a view to render any facility, or any service to the petitioner in the manufacture and production of alcoholic liquor.
41. No services are rendered by the Exercise Staff that is posted at the petitioner's factory premises and the establishment charges of the members of the staff cannot, therefore, be demanded or collected by the Government as a 'fee'.
42. Moreover, no material is placed by the Government in its counter on the basis of which we could come to the conclusion that the expenditure incurred by the Government in rendering those alleged services to the petitioner has got any relation to the fee that is sought to be charged. The Government has, therefore, filed to establish that the fee charged is a Quid Pro Quo for the services rendered. The Government is, therefore, not entitled either to levy or demand or collect the establishment charges of the supervisory staff from the petitioner.
43. The Government should not think that by conferring a license on the petitioner to produce or manufacture alcoholic liquor for human consumption, it is conferring a great benefit or privilege on the licensee. Hegde, J., speaking for the Supreme Court in : AIR1971SC1182 , observed that:
'. . . . . . . . . . . Generally speaking, by granting a licence the State dose not confer any privilege or benefit on any one. All that it does is to regulate a trade, business or profession in public interest. There may be cases where a Government which is the owner of a particular property may grant permit or licence to someone to exploit that property for his benefit. Such a right may be given for consideration. It is only in those cases that a licence or a permit is a conferment of a benefit or a privilege and not in the case of grant of a licence for carrying on any ordinary trade, business or profession . . . . . . . . . . . . . . . '
44. The Government should not, therefore, think that by granting a license to manufacture or produce alcoholic liquor. it is conferring any benefit or great privilege on the manufacturer.
45. It has also been brought to out notice that for granting the license the Government have charged a fabulous fee of Rs. 3,000/- as against Rs. 100/- which was previously charged. Under Rule 4 of the Distillery Rules, the deposit which a licensee had to make, was Rs. 1,000/- previously, but it has now been raised, by the present Rules, to Rs. 10,000/-. Under Rule 16 of the Distillery Rules, the petitioner has also given a Bank guarantee of Rs. 53,000/- towards the payment of excise duty. For whatever services it is rendering, the Government is already collecting an enhanced fee of Rs. 3,000/- as against Rs. 100/- which was collected. It has also safeguarded its interest of collection of the excise duty by increasing the security deposit to Rs. 10,000/- from Rs. 1,000/-, and also by taking a Bank guarantee of Rs. 53,000/- from the petitioner.
46. In the result, we hold that the demand of the establishment charges of the supervisory staff under Section 28 (2) of the Act or under Rule 15 of the Andhra Pradesh Distillery Rules, is not an 'excise duty' . It is not a fee either, for, no services have been rendered by the Department by posting the Excise staff at the factory promises of the petitioner. Nor has any material been placed in the counter filed by the Government, to show that the expenditure incurred by it for rendering those alleged services has got a reasonable relation with the fee that is sought to be charged.
47. We, therefore, accept the writ petition and direct the issue of a writ of mandamus as prayed for restraining and prohibiting the Department from either demanding or collecting the establishment charges of the supervisory staff posted at the factory premises of the petitioner. The writ petition is allowed with costs. Advocate's fee Rs. 100/-.