STATE OF KERALA Vs. AJIT KUMAR

JUDGEMENT

(1.) THE main question arising for consideration in the writ appeals is the validity or otherwise of the levy and collection made under Rule 8(1) of the Kerala Abkari Shops (Disposal in Auction) Rules, 1974 (to which we shall hereinafter refer as the Disposal in Auction Rules), as amended in March 1993, on the designated quantum of rectified spirit permitted to be imported from outside the State by licensees of the privilege of vending arrack in independent shops in the State. The learned Single Judge held that the levy was void. He allowed the writ petitions filed by the abkari contractors, and directed refund of the duty so levied and collected. The State and its officers in the Commissionerate of Excise are in appeal before us.

(2.) THE law relating to the import, export, transport, manufacture, sale and possession of intoxicating liquor in the State is the Abkari Act 1 of 1077 M.E. (The Act, in the further discussion), which was in force in the erstwhile Cochin area of the State and was extended to the whole of Kerala with effect from May 11, 1967 by the Cochin Abkari (Extension and Amendment) Act, 10 of 1967, and the various rules and notifications framed or issued thereunder. Section 6 of the Act provides that no liquor shall be imported unless permission of the Government or any officer authorised by the Government in this behalf is obtained for the importation and unless the duties, taxes, fees and such other sums as are due to the Government under the Act in respect of such liquor, have been paid. The permission so granted for import shall be subject to such conditions and restrictions as may be specified by the Government by notification in the gazette. Section 10 mandates that no liquor, exceeding the quantity notified in the gazette, shall be transported except under a permit issued under the provisions of Section 11. Section 17 empowers Government to levy a duty of excise inter alia on all liquor permitted to be imported under Section 6. Section 18 provides the procedure for imposition of the duty of excise, which may be in the shape of import, export or transport duties in such manner as the Government may direct. Sub -section (3) provides that the said duty of excise may be levied at such rates as may be fixed by the Government from time to time by notification in the gazette, but not exceeding the rates specified in the subsection, which in the case of liquors (Indian made) is Rs. 20/ - per proof litre. The rate of duty for Indian made rectified spirit is Rs. 15.50/ - per proof litre, with effect from April 1, 1966 as per notification issued by Government in the year 1961, as amended in 1966. Section 18A which was introduced by Presidential Act I of 1964 relates to the grant of exclusive or other privilege for the manufacture or sale of liquor. It makes it lawful for the Government to grant to any person or persons on such conditions, and for such period as they deem fit, the exclusive or other privilege, among Ors., of selling by retail any liquor within any local area on his or their payment to the Government of an amount as, rental in consideration of the grant of such privilege. The amount of rental may be settled by auction, negotiation or any other method as may be determined by the Government, from time to time, and may be collected to the exclusion of, or in addition to, the duty leviable under Sections 17 and 18. Section 29 empowers Government to make rules for the purpose of carrying out the provisions of the Act. The Disposal in Auction Rules have been framed in exercise of the powers under sections 18A and 29 of the Act.

(3.) THE change in the policy appears to have been dictated by considerations of expediency and the need to plug the escape of revenue by clandestine purchases by the abkari contractors. The affidavits filed on behalf of the Appellants have explained in detail the rationale behind the change in policy. It is pointed out that the supply of arrack by the three public sector distilleries in the State during 1992 -93 was 15872789 bulk litres against the quota of 1.02 crores bulk litres fixed for the year. The State obtained a revenue of Rs. 7,93,63,945/ - as excise duty on the arrack supplied by the three public sector distilleries in 1992 -93. The actual demand for arrack in the State was several times the quota supplied, so that it may not be wrong to presume that the contractors were indulging in clandestine import which affected the revenues of the State. It was to overcome this situation that the rules were amended in March 1993 with effect from 1st April 1993 by which the State gave up its obligation to supply arrack to the contractors, and on the other hand, permitted free import of rectified spirit for sale after conversion into arrack. A minimum designated quantum of rectified spirit to be purchased/imported was prescribed for each group of shops. The designated quantum was fixed after an assessment was made of the total quantum of use of arrack in the State, which was five times the quota given in 1992 -93. Based on this assessment, the designated quantum was fixed at 160 litres of rectified spirit per month for a rental of Rs. one lakh in 1992 -93. The total designated quantum for 1993 -94 was thus 24055680 bulk litres of rectified spirit. Since the intention was to augment the income of the State, which was otherwise being lost, payment of excise duty on the designated quantum was made compulsory, to be paid in advance. The State thus expected its revenue under, this head to go upto about Rs. sixty crores in 1993 -94 compared to Rs. 7.94/ - crores which it had collected in the previous year 1992 -93. Under this revised policy, the rental for the arrack shops actually increased to Rs. 180.37/ - crores in 1993 -94 compared to the total collection of Rs. 123 10 crores in the year 1992 -93.