MURUGAN AND CO Vs. STATE OF MYSORE

JUDGEMENT

(1.) The petitioners in these eight cases were licensees who held licences under the Karnataka Excise Act to sell arrack in the different parts of the State during the relevant periods. They have filed these petitions for the issue of a writ in the nature of mandamus to the State of Karataka, the Excise Commissioner in Karnataka, and the Commissioner of Commercial Taxes in Karnataka, directing them to refund the Education Cess and Sales fax recovered from them in respect of arrack sold to them from the Government Depots during the relevant period and for a declaration that State Government had no power to collect price in respect of arrack sold to them from the Government Depots in excess of 17 paise per litre. In so far as the claim of the petitioner to the refund of Education Cess is concerned, there is no contest on behalf of the respondents in view of the decision of this Court in Anjanappa v. State of Mysore, (1973) 2 Mys.L.J.278, in which the levy of Education Cess was held to be unauthorised notwithstanding the Karnataka Education Cess (Validation of Levy) Act, 1969. The petitioners, ares therefore, entitled to succeed in so far as their first prayer is concerned.

(2.) As regards the claim of the petitioners for the refund of Sales Tax paid by them, it has to be observed that in Cawasji v. State of Mysore, 21 STC 445, a similar claim has been negatived by a Division Bench of this Court The petitioners, cannot, therefore, request this Court to issue a direction to the respondents to refund the Sales Tax paid by them.

(3.) Sri S.Shivaswamy, learned Counsel for the petitioners, formulated his third contention as follows : Under Rule 31(2) of the Karnataka Excise (Distillery and Warehouse) Rules, 1967, every distiller in the State is bound to supply the entire quantity of arrack manufactured by him to such Government Depqt or Warehouse established by the Government and under sub-rule (3) of Rule 31 the distiller would be entitled to payment of such price as may be prescribed by the State Government for the arrack supplied by him to the State Government. In the instant cases under the notification issued by the State Government the distillers are paid 15 to 17 paise per litre of arrack manufactured by them. The licensees are required under the licences issued to them to purchase arrack from the Government Depqt at a much higher price than what the Government pays to the distillers. The contention of Sri Shivaswamy is that in exercise of its regulatory powers in respect of intoxicating liquors conferred on the State Govt. by Entry 8 of List II of the 7th Schedule of the Contitution, the State Government cannot make a profit indirectly in the absence of any legislation enacted by the State Legislature in exercise of its power under Entry 51 of List II of the Seventh Schedule of the Constitution authorising the same. In support of his contention he relied upon a decision of the Supreme Court in Brij Mohan Nayyar v. State of U. P., CA . 867/64 dt.20-3-67. The facts of the said case are entirely different from the facts of the present case. In the case before the Supreme Court, the question for consideration was whether when a distillery company had entered into a contract with a sugar mill tq purchase molasses with the, permission of the Government of Uttar Pradesh, at Rs.1-8-0 per maund. Out of the purchase price agreed to be paid, Rs. 1-3-3 per maund had to be paid to the Government of Uttar Pradesh on account of 'export levy'. Accordingly Rs.12,031-4-0 was paid to the Excise Commissioner of Uttar Pradesh. Owing to certain changed circumstances the allotment of molasses was cancelled subsequently. Thereafter the purchaser applied to the Excise Commissioner to refund the amount paid to him. When he refused tp refund the same, a suit was instituted. The Supreme Court found that in the circumstances of that case the decision of the Court turned upon the fact that the contract in question was only a contract of sale and there was no law which authorised the State Government to retain the money paid to it as tax payable to the State Government. Accordingly it decreed the suit. The scheme of the Karnataka Excise Act and the Karnataka Excise (Distillery and Warehouse) Rules, is altogether different. Under the Act and the Rules framed thereunder, no distiller is permitted to sell arrack manufactured by him to any person without the permission of the Deputy Commissioner or Commissioner. Under sub-rule(2) (a) of Rule 31, a distiller can be called upon to supply all the arrack manufactured by him to a Government Depot or Warehouse against payment of the price referred to in sub-rule(3) of Rule 31. It is, therefore, clear that when once the distiller delivers the arrack manufactured by him to the Government Depot under sub-rule (2), (a) of Rule 31, there is a sale of the arrack in favour of the Government. Under Rule 5 off the Karnataka Excise (Arrack Vend Special Conditions of Licences) Rules, 1967, a licensee to vend arrack is required to purchase all the quantity of the arrack to be sold in his shop from such depot or distiller or warehouse as the Excise Commissioner may notify on payment of the issue price therefore at such rates as may be prescribed from time to time. The petitioners in these cases were authorised to purchase arrack only from the Government Depots or Warehouses at the prescribed prices, It, therefore, follows that there is a second sale in the series of transactions by the Government in favour of the licensee. In the circumstances, the petitioners who are the buyers from the Government cannot make a grievance in so far as the price is concerned and they have no locus standi to question the right of the Government to purchase at a lower price from the distiller and to sell at a higher price to the licensees. The action of the Government cannot also be considered as unauthorised. Under the Karnataka Excise Act the State Government and the Commissioner are entitled to regulate the sale of arrack and in doing so if the State Government acquires the monopoly to buy arrack from the distillers and then to shall the same to the licensees, it has to be held that the State Government is exercising its power of regulation under the Statute in the manner indicated above. Hence, there is no substance in the third contention urged on behalf of the petitioners.