M VENKATESWARLU Vs. SLATE OF ANDHRA PRADESH

JUDGEMENT

(1.) A group oflicensees of arrack shops in Khammam District are challenging the constitutional validity and legality ot Section 23 of the Andhra Pradesh Excise Act, 1968, and certain Rules in A.P. Excise (Lease of Right to Sell Liquor in Retail) Rules, 1988 (hereinafter referred to as "AuctionRules").' Excise revenue is one of the major sources of revenue for the State Government. Along with toddy and Indian made foreign liquor, arrack manufactured in the distilleries (both in public and private sectors) fetches sizable income every year. Until the excise year 198889 (excise year starts with ist of October end erds with 30th of September in the following year) the arrack licences were granted in accordance with A.P. Excise (Lease of Right to Sell Liquor in Retail) Rules, 1969. The system obtaining under the said Rules (old Rules) was this : Licences were granted by auction. Shops were sold either individually or in groups. Before conducting the auction, a minimurn guaranteed quota was fixed for each shop/group of shops, which the licensee was bound to lift. The licensee was obliged to lift such quantity from the specified depots/distilleries. Even in case he failed to lift the whole or part of the MGQ, he was liable to pay the entire issue price, which included excise duty and sales-tax. The person who offered the highest bid for shop/group of shops was awarded the licence. There was also a small licence fee for each licence. In short, the consideration for the privilege of right to sell liquor, conferred upon the licensee, comprised (i) the annual rental amount, (ii) the issue price of the annual MGQ, and (iii) licence fee.

(2.) Under the 1988 Auction Rules, a modification has been effected in the mode of grant of arrack licences. Under these Rules, a licence is granted to a person who offers to lift the highest quantity of liquor for that shop/group of shops. The quantity offered to be so purchased by him, is called 'Minimum Guaranteed Quantity', and it is divided into twelve months. The licensee has to lift his quantity on remitting the app-opriate price Even if he fails to lift, he has to remit the same. The licence fee has been raised substantially. Whereas previously the licence fee ranged between a couple of hundred rupees, it now ranges between Rs. 2,000/- to Rs. 36,000/-. Apart from the above two components, namely, price of arrack (issue price) and licence fee, a licensee is also obliged to pay 'privilege fee'. Privilege fee corresponds to, and is in substitution of the annual rental hitberto in vogue. Privilege fee is determined for each Mandal separately by the Collector. It represents the aggregate of annual rental fetched for the shop/group of shops for the previous three excise years, This privilege fee is divided into twelve months, and is payable in the manner prescribed. It is thus evident that even under the present Rules the consideration for grant of privilege to sell liquor in retail, comprises three components, namely, (i) issue price, (ii) licence fee, and (iii) privilege fee, whereas under the old Rules it comprised (i) issue-price, (ii) licence fee, and (iii) annual rental amount.

(3.) The petitioners (appellants) have come forward with the following averments : The 27 petitioners are licensees in respect of various shops mentioned in Annexure-I to the writ petition. (Annexures I and II give the particulars relating to MGQ for each shop and the alleged short-fall in supply). The respondents have not been able to supply the MGQ for each month, but at the same time are demanding the full amount for each month. This demand is invalid and arbitrary. "Section 17 of the Act which enables the State to manufacture the arrack itself is unconstitulional for being utterly violative of Articles 14 and 19 (g) of the Constitution of India, since by virtue of Section 17 alone State has developed exclusive monopoly, manufacturing, supply and distribution of arrack..........". Entrics 8 and 51 in List II of Seventh Schedule to the Constitution do not permit the State to create a monopoly in the matter of manufacture, sale and distribution of arrack. Section 17, therefore, is unconstitutional. Section 23 of the Act is equally unconstitutional inasmuch as the grant of privilege to sell arrack, is made subject to Section 28 and any Rules made in that behalf. There are no guidelines given to the executive in the matter of grant of this privilege. This amounts to abdication of essential legislative function. Section 23 is also unconstitutional inasmuch as the privilege fee provided by it and defined in clause (xii) of Rule 2 (and payable in accordance with Rule 20) is neither a duty nor a fee, nor a tax, and hence has no constitutional sanction behind it. The duty payable is provided by Section 21, and the fee by Section 22. Apart from these two items, no other type of fee can be collected. There is no quid pro quo. Even if it is held that the levy and collection of privilege fee is not incompetent, still it should fail because the task of determining the privilege fee is delegated to the Collector and is fixed separately for each Mandal, which amounts to sab-delegation and is, therefore, bad.