1. This application under Article 226 of the Constitution is by a person doing business in the sale of country liquor under the name and style of 'Baboolal and Balgovind Company' and who obtained a licence for the year 1967-68 for sale of country liquor by retail at some shops in Mhow. The respondent No. 3, Ganesh Prasad, also secured a licence for the sale of country liquor by retail at sixteen shops for Indore City and Pargana, and Sanwer Pargana The petitioner paid Rs. 1,82,000 for obtaining licence in respect of Mhow shops, and the respondent No. 3 paid Rupees 14,11,111 in respect of shops at Indore and Sanwer. He has also averred that the price of Masala, Dabara and Rasi liquor sold at his shops is respectively at Rs. 6, Rs. 4 and Rs. 3 per bottle; and that the respondent No. 3 charges for each bottle of Masala, Dabara and Rasi Rs. 10, Rs. 7.50 P., and Rs. 6 respectively. The statement given by the applicant with regard to the price of liquor at his shops is disputed by the respondents Nos. 1 and 2 in their return. But it is not denied that the prices charged by the petitioner for different kinds of liquor are lower than those charged by the respondent No. 3.
2. The petitioner's case is that on account of the low prices at which he sells country liquor, persons residing in Mhow and in villages nearabout Indore purchase liquor from his shops and consume it either at their residence or carry the liquor bottles along with them to the place in Indore where they work or carry on trade; that they do not prefer to purchase liquor from the respondent No. 3's shops in Indore as he charges exorbitant rates for the same; and that this has resulted in large sales of country liquor from his shops and affected adversely the sale of liquor at the shops in Indore run by the respondent No. 3. In order to check this fall in his sales, the respondent No. 3, Ganeshprasad, moved the Government to declare the area of the sixteen shops run by him as high-duty area so that no country liquor could be transported at all from Mhow area of the petitioner's shops to Indore area. The petitioner says that at the time when excise licences were obtained by him and third respondent, the excise-duty payable in respect of Mhow and Indore shops was the same, but the Government, yielding to the pressure of the respondent No. 3, declared the Indore areas to be a high-duty area and increased the excise duty payable in Indore area in respect of Masala and plain country liquor; and that after the enhancement of this duty the liquor sold at the shops of the respondent No. 3 is differently coloured so as to distinguish it from the liquor sold by the petitioner in the low-duty area. The applicant contends that the declaration of the Indore area as high-duty area by the Government is mala fide arbitrary and altogether illegal, and prays that the declaration and the enhancement of duty in Indore area be struck down as illegal.
3. In the return filed by the State, it has been denied that the declaration of high-duty area and the enhancement of duty is mala fide and illegal. In justification of the declaration and the enhancement of duty, it has been stated in paragraph 5 of the return that:--
'It is submitted that there is a regular racket which takes country liquor from the surrounding liquor shops and smuggles it into the Indore City area. Those that drink liquor do not so much care to go to Mhow only for this purpose and bring stock of liquor with them for consumption in city area. It is submitted that it has come to the knowledge of the Department that the interested shop-keepers in the surrounding area regularly employ a number of persons who buy liquor from them at a lower rate and smuggle the liquor into the Indore City area just for the purpose of running down the business in the city area. This practice it wholly unauthorised but the Department is not able to catch any of these persons because the liquor available in the city area cannot be distinguished from the liquor purchased from the surrounding area. Since an individual is entitled to keep two bottles for his consumption, the possession of liquor to the extent of two bottles is quite legal and no action was possible until he was caught selling the same. Such a practice would adversely affect the revenue. If the sales at the Indore City group shops falls, they will not bring the same price which they are expected to normally. Moreover, the Indore City shops are the main source of income in this area and if the revenue in these shops falls, it would be a serious loss to the Government.'
It appears from the return and the annexures filed to it that the application of the respondent Ganeshprasad for enhancement of duty on Indore City liquor shops was first presented to the Collector, who forwarded it to the Excise Commissioner, Madhya Pradesh, Gwalior. While recommending the enhancement, the Collector in his forwarding letter dated the 21st July 1967 (Annexure R/II to the return of the respondents Nos. 1 and 2), said:--
'in General Auction for the year 1967-68 the local contractors of Indore, who had formed themselves into a combine, offered very low bids and the City shops were put to resale. In this resale the applicant, who is an outsider from Bilaspur took the City group shop by offering tender for Rupees 14,11,111-00 The local contractors had secured number of surrounding shops. Liquor from these surrounding shops is being smuggled on a very large scale in the Indore City to cause loss to the new incumbent by rival group contractors. Within a period of three months 89 cases of Illegal possession of duty paid liquor have been detected in Indore City as against 6 of last year. Out of 89, fortynine cases were detected while smuggling liquor into the city...... Most of the interior shops are well connected by road and rail and are also close to the Indore City. Some people have made it their regular business. They bring liquor upto the legal limit of possession on cycles or by train and bus from interior shops and repeat the process a number of times in a day. In such cases no legal action is possible. Due to vast area of the City it is also not possible for the limited Excise Staff to check smuggling from all sides. Specially, when the old contractors have made it their business to put the new contractor to loss and thus maintain their monopoly.' The Collector also added in his letter that enhancement of duty yield an additional income of Rs. 20,000 approximately.
4. Having heard learned counsel for the parties, we have reached the conclusion that this application must be granted on the short ground that there is no valid order of the Government enhancing the excise duty in respect of country liquor sold in Indore area. The excise duty on country liquor sold at the shops in question has been levied under Section 25 of the Central Provinces Excise Act, 1915, which is as follows:
'25. (1) An excise duty or a countervailing duty, as the case may be shall, if the State Government so direct, be levied on all excisable articles--
(a) imported; or
(b) exported; or
(c) transported; or
(d) manufactured, cultivated or collected under any licence granted under Section 13; or
(e) Manufactured in any distillery established, or any distillery or brewery licensed, under this Act:
Provided that it shall be lawful for the State Government to exempt any excisable article from any duty to which the same may be liable under this Act.
(2) Duty may be imposed under Sub-section (1) at different rates according to the places to which any excisable article is to be removed or according to the strength and quality of such article. ** ** *'
There is no dispute that the excise duty in respect of country liquor can be levied by the State Government under Section 25 (1) (e) of the Act. It is also not disputed that the Government has power to impose under Sub-section (1) a duty at different rates in accordance with the second sub-section. It will be seen that under Section 25 the power to impose an excise duty or a countervailing duty can be exercised only by the State Government. The Act does not contain any provision for delegation of this power and in fact, the Government has not delegated its power of imposing excise duty to any officer or authority. That being so, a valid imposition of excise duty under Section 25 of the Act can only be by an order of the State Government and only when that order is made in the name of the Governor and authenticated in accordance with the Rules of Business as provided by Article 166(2) of the Constitution.
5. No such order of the Government expressed in the name of the Governor and duly authenticated has been exhibited by the respondents or produced before us. What happened was that after receiving the proposals from the Collector of Indore for enhancement of duty in respect of Indore shops, the Excise Commissioner addressed a communication to the Under-Secretary, Separate Revenue Department, Government of Madhya Pradesh, recommending that excise duty in respect of plain and Masala liquor sold at Indore shops be enhanced as proposed by him. Thereafter the Secretary and the Deputy Secretary of the Department had some discussion with the Excise Commissioner in regard to the matter, and ultimately the Deputy Secretary recorded a note on 27th August 1967 saying that the matter was discussed with the Minister for Separate Revenue Department on 26th August 1967 at Indore and he had accepted the proposal of the Excise Commissioner and also directed that, if necessary, 'quota' in respect of the shops should be fixed; and that the Excise Commissioner was asked to act accordingly and the orders of the Government be issued. On the basis of this note, the Under-Secretary wrote a letter to the Excise Commissioner on 1st September 1967 (Annexure R-III to the return) saying that the proposal with regard to increase of excise duty in Indore area has been accepted and, if necessary, quota should be fixed in respect of the shops. The Under Secretary signed this letter as 'By order and in the name of the Governor of Madhya Pradesh '. The Government record shows that after this letter was despatched, the Deputy Secretary placed the matter before the Minister, Separate Revenue Department, with a note saying that according to his directions orders have been issued which may kindly be confirmed. On this note, the Minister. Separate Revenue Department, just put, his signature. On 6th September 1967, the Collector of Indore issued a notice informing the public about the enhancement of duty in Indore area Near about the same time, the Excise Commissioner also published a notice in the Gazette informing the public that the Government has enhanced the rate of duty in respect of liquor shops in Indore area.
6. The foregoing narration about the way in which the proposal of the Excise Commissioner was dealt with by the Separate Revenue Department plainly shows that at no time any order was passed by the State Government in exercise of the powerconferred on it by Section 25 of the Act enhancing the duty payable in respect of country liquor sold in Indore area shops. Thenote, which the Deputy Secretary recordedon 27th August 1967, did not in terms or inform purport to be an order made by theState in exercise of the powers conferred onit by Section 25 of the Act. It was nothingmore than the recording of the fact that theMinister, in charge of the Excise Department, had accepted the proposal of theExcise Commissioner with regard to theenhancement of duty and had also given instructions that, if necessary, quotas in respect of the shops should be fixed. The notealso said that the Excise Commissioner hadbeen directed 'to act accordingly'. Butwhen the note further said that Governmentorders be issued.
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it was clearly contemplated that an order of the Government, in exercise of its powers under Section 25 of the Act, should be passed and that it should be made and authenticated in the manner prescribed by Article 166(2) of the Constitution. No such order of the Government was made.
The letter, which the Under Secretary addressed to the Excise Commissioner on 1st September 1967 informing him that the proposed increase in excise duty in respect of Indore area has been sanctioned and that, if necessary, quotas in respect of the shops should be fixed, was nothing but a departmental communication to the Excise Commissioner informing him about the increase in duty. It was not any order of the State made in exercise of the powers conferred on it by Section 25 of the Act; nor can it be so regarded merely because the Under Secretary chose to sign the letter 'By order and in the name of the Governor of Madhya Pradesh' In fact, there being no order of the Government under Section 25 of the Act, the letter, which the Under Secretary addressed to the Excise Commissioner on 1st September 1967 purporting to be 'By order and in the name of the Governor of Madhya Pradesh', was without any sanction The position is in no way improved by the fact that subsequently on 4th September 1967 the Minister for the Separate Revenue Department confirmed the orders which had been issued by putting his signature on the note of the Deputy Secretary, namely, that orders according to instructions have been issued and they be kindly confirmed If there was a valid order of the State with regard to an increase of duty under Section 25 of the Act, then there was no necessity of having it further confirmed by the Minister. If, on the other hand there was none, then the confirmation of a non-existing order of the State by the Minister could not bring into existence a valid order of the State in the Exercise of the power conferred on it by Section 25 of the Act. That confirmation was nothing more than a confirmation of the oral acceptance of the Minister of the proposal of the Excise Com-missioner for the increase of duty.
The notice issued by the Collector, Indore, or the Excise Commissioner informing the public that Government had increased the rates of duty in respect of liquor sold in Indore area shops was simply one informing the general public of a supposed action taken by the Government. It was not an order of the Government raising the excise duty. In fact, there was no valid sanction behind the notice whom Government had not passed any order under Section 25 of the Act increasing the duty in regard to Indore area. A valid order can only be one made by the Government in exercise of its power under Section 25 and in conformity with Article 166(2) of the Constitution and the Rules of Business. Such an order was never made. The enhancement of excise duty in regard to shops in Indore area, cannot, therefore, be sustained.
7. The objection of the respondents that the petitioner has no locus standi to challenge the increase in excise duty, is without any force. It is plain from the annexures to the petitioner, as also from the return filed by the respondent Nos. 1 and 2 and the letter dated the 21st July 1967 of the Collector, Indore, to the Excise Commissioner (Annexure R-II to the return) that when the duty for Indore and Mhow areas was the same, there was a considerable rise in the sale of liquor at the petitioner's shops and a substantial quantity of liquor purchased from the applicant's shops used to be transported to Indore without any breach of any provisions of the Act or the rules made thereunder. The increase of duty in respect of Indore-shops had the effect of prohibiting the transport of country liquor from Mhow area to Indore area because of the ban placed by Rule 1(b) of the Country Spirit Rules made under the C.P. Excise Act. That rule says:--
'No country spirit shall be transported from an area under the distillery supply system to an area in which a higher rate of duty is levied without the general or special permission of the Collector.'
Thus the enhancement of duty in respect of Indore shops substantially affects the sales of the petitioners, and he is, therefore, vitally interested in seeing that the rates of duty at Mhow and Indore are the same.
8. In the view we have taken of the matter, it is not necessary to consider the contention of the petitioner that under Section 25(2) of the Act, read with Section 15 thereof, Government had no power at all to increase the rate of duty in respect of Indore shops when there was no difference between the Mhow and Indore shops either as regards the strength or quality of the liquor sold at the shops or as regards the 'removal' of country liquor to Mhow and Indore shops from thedistillery or warehouse supplying the country liquor to the shops at Mhow and Indore.
9. For all these reasons, this petitionis allowed, and the enhancement in the excise duty in respect of Indore shops notifiedby the Collector, Indore, on 6th September1967, as also by the Excise Commissionernear about the same time, is quashed. Therespondents Nos. 1 and 2 are restrained fromgiving effect to that enhancement. Thepetitioner shall have costs of this application from the respondents. Counsel's fee isfixed at Rs. 200, the burden of which shallbe placed equally on the State and the thirdrespondent, Ganeshprasad. The outstandingamount of security deposit shall be refundedto the petitioner.