MITHU LAL Vs. DISTRICT MAGISTRATE

JUDGEMENT

(1.) THE petitioners in this group of writ petition are retail vendors of foreign liquor operating either under a licence in Form F. L. 4 or Form F. L. 5. THEy paid the requisite fixed as well as assessed licence fees for the years 1974-75 and 1975-76. It appears that at the audit inspection of the Excise Department, the Accountant General's office raised an objection that the fixed fee has not been adequately charged from the petitioners. When the audit objection came to the notice of the Excise Commissioner, he issued an order on or about June 22, 1976 indicating that in view of the audit objection fixed fee has to be charged on the basis of bottles sold irrespective of their size. This has to be in effect from March 24, 1972 till March 10, 1975 when the system would be of charging fixed fee in relation to quart bottles. Acting on this directive, the District Excise Officer issued an order requiring the petitioners to pay the difference. Being aggrieved, the petitioners have challenged this demand by way of the present writ petition. By a notification dated March 27, 1974, the Excise Commissioner amended Rules 642, 653, 654 and 656 of the Rules in the Excise Manual. Rules 654 related to the licence-fee for the retail vend of foreign liquor in form F. L. 4 to F. L. 12. For different kinds of licences, it prescribed an assessed fee at different rates but at per reputed quart bottle sold. Rule 654 runs as under - "(a) THE fees for all sales made under a shop licence in form F. L. 4 consumption both on and off the premises shall be assessed according to the following scale : 1- Spirits, wines, liquors, cordial etc. of all kinds Rs. P 5-00 per reputed quart bottle

(2.) BEER, stout and other for-mented liquor 30 per reputed quart bottle. (b) The fees for all sales made under a hotel or staging or dak bungalow licence (F. L. 6) or under a restaurant or hotel bar licence (F. L. 7) or under a beer bar licence (F. L. 7-A) or under a railway refreshment room or dining car licence (F. L. 8) or under a theatre or cinema bar licence (F. L. 12), shall be assessed according to the following scale : Rs. p 1. Spirit, wines, liquors, cordials etc. of all kinds 4.00 per reputed quart bottle 2.BEER, stout and other fomented liquor 0.30 per reputed quart bottle. (c) The fees for all sales made under a shop licence (F. L. 5) for consumption 'ff the premises shall be assessed according to the following scale : L spirits, wines, liquors, cordials Rs.P etc. of all kinds 3.00 per reputed quart bottle. 2. BEER stout and other fermented liquor 0.10 per reputed quart bottle. (d) The annual assessment of fees under sub-clauses (a), (b) and (c) shall be subject to the following minima : Rs. For "on and off" licence (F. L. 4) 2, 500 For "off" licence (F. L. 5) 500 For hotel licence (F. L. 6) 500 For restaurant and hotel bar licence (F. L. 7) 500 For BEER bar (F. L. 7) 250 For 'Railway' refreshment room and dining car licence (F. L. 8) 250 For 'staging' or dak bungalow licence (F. L. 6) 250 For Theatre, bar licence (F. L. 12) when taken for full Rs. P. year 2, 500 For first class cities i., 500 For second class cities 1, 000 Note-In the prohibition areas the Collector with previous sanction of the Excise Commissioner may fix minimum fees for an oif licence according to the volume of business likely to be transacted under the class of licence. (e) In addition to the assessed fees mentioned above, at the following rates shall also be payable by the licencee in advance : (i) F. L. 5, licence Fixed fee for sales not exceeding 5000 bottle of spirits per annum For sales exceeding 5,000 bottles per annum Rs. 3,000 The fee increased by shall be Rs. 2,000 (ii) F. L. 4. licence, F.L. 7 licence F.L. 8 licence and F. L. 12 licence Fixed fee for sales not exceeding 5,000 bottle of spirits per annum (iii) F. L. 6 licence (L) for hotels recognized by Tourist and Develop ment Department. For sales exceeding 5,000 bottles per annum Fixed fee for sales not exceeding 5,000 bottle of spirits per annum For sales exceeding 5,000 bottles per annum (2) Other hotels For sales not exceeeding 5,000 bottles of spirits per annum For sales exceeding 5,000 bottles per annum for every.5,000 bottles or fraction thereof. Rs. 6,000 The fee. shall be in creased by Rs. 4,000 for every 5,000 bottles or fraction thereof. Rs. 4,500 The fee shall be increased by Rs. 3,000 for every 5,000 bottles or fraction thereof. Rs. 3, 75) The fee shall be in creased by Rs. 2, 50 .0 of every 5,000 bottles or fraction thereof. (iv) F. L. 7-A Fixed fee of Rs.1,000". The Excise Department as well as the dealers understood that the under clause (e) fixed fee was payable for the number of bottles sold, the bottles being quart bottles. In respect of the sale of nips, four nips were treated as equivalent to one quart bottle while in the case of pints the calculation was made at the rate of two pints equal to one quart bottle. It was on this basis that the calculations were made and the fixed fee was assessed, charged and paid. The audit objection was that the notification dated March 27, 1974 uses the phrase 'per reputed quart bottle' in clauses (a) to (d) of rule 654 but in clause (e) which related to fixed fee the word used was 'bottle' without the prefix 'reputed quart' and, therefore, the fixed fee was liable to be assessed in respect of the number of bottles sold irrespective of their size. A nip or a pint was a bottle and so was liable to be calculated as a single bottle irrespective of its quantity or content. This audit objection was apparently accepted by the Excise Department. The directive issued in June 1976 clarified that the fixed fee be charged in accordance with the audit objection. On March 10, 1976, the Excise Commissioner issued a notification amending these rules again. Rule 653 provided that the fee for any retail licence in Form F. L. 5 may be fixed by public auction. Rule 654 laid down the scale of assessed fee 'per reputed quart bottle'. Clause (c) of rule 654 as amended in 1976 provide for fixed fee for sales made under forms F. L. 6, 7 and 8. For each of these licences the fixed fee was chargeable in respect of reputed quart bottles sold per year. It is thus clear that when it came to laying down the scale of fixed fees in relation to bottles sold it was made clear that the bottle referred to in the relevant clause was 'reputed quart bottle' just as in the case of clause relating to assessed fee. The notification of March 10, 1976 operated prospectively, i. e., for the year 1976-77 onwards. On its face, it did not in terms apply to the years 1974-75 or 1975-76. The procedure prescribed by the Excise Manual is that the dealer has to submitt a return inform F. L. 13 soon after the close of the excise year in which he has to mention the number of bottles sold and the rate per quart. On receipt of such returns, the Assistant Excise Commissioner submits a consolidated statement of all the returns relating to his circle to the Excise Commissioner who then sanctions the fee payable. The fee payable is based on the quantum of sales actually affected in a particular-year. The amount calculated on that basis is payable for the -subsequent year subject to adjust ment at the end of that year on the basis of actual sales made during that year. This rule further says that the return submitted shall show the total quantity of each kind of foreign liquor sold under the licence during the previous year together with the licence-fee payable by the vendor. It is thus apparent that the licence- fee both fixed and assessed is calculated keeping in mind the total quantity of liquor sold. That is why the return in Form F. L. 13 specifically requires the dealer to mention the rate per quart at which the liquor has been sold. The standard measure for noting the quantity sold is the quart for purposes of assessing the licence-fee. This also indicates that when clause (e) of Rule 654 mentions the word 'bottle' for assessing the fixed fee, the intention was that the bottle was the quart bottle. This interpretation is fortified by the Uttar Pradesh Bottling of Foreign Liquor Rules, 1969. Their licence- fee has been specifically prescribed in accordance with the size of the bottle. A bottle fee of 25 p. per bottle is prescribed for bottle of 650 mililitre size and 10 p for a bottle of 325 mililitre size. This method of distinguishing bottles of smaller sizes for fixing a different fee was well known in the excise vocabulary. If the intention in the amendments affected under rules 654 in 1974 was to use the word bottles irrespective of their size, a specific clarification was necessary, because normally the bottle is used in the sense of quart bottle. This conclusion is strengthened by the amendment to the rule by the notification of March 10, 1976 where the word 'quart- was specifically added. This was specifically mentioned because the audit party had raised an objection which created a confusion. The use of the word 'quart bottle' in the 1976 notification was clearly by way of clarification. We are not satisfied that it was by way of a definite change in policy. The reason seems to be that if fixed fee which is fixed at a particular figure of 5,000 bottles sold and then increases with each slab of 5,000 that may be sold in a year should make a distinction between the size of the bottle because the fee is for the vend of the liquor and the main criteria is the quantity sold and not the actual number of bottles sold. There fore the dealers as well as the Excise Department were justified in treating the nip as one-fourth of the quart bottle and pint as one-half of the quart bottle for purposes of calculations of the fixed fee. In our opinion, the audit objection was misconceived and the impugned demand based thereon is illegal. In the result, the writ petition succeeds and is allowed. The impugned demand of excess fixed fee demanded for the years 1974-75 and 1975-76 is quashed. The petitioners will be entitled to costs.