1 The Appellant before us assail the concurrent findings of the learned
Single Judge and the Division Bench of the High Court of Andhra Pradesh at
Hyderabad, upholding the legality of the levy of an Administrative Fee at the
rate of 50 paise per bulk litre or any other rate as may be fixed by the Government from time to time on industrial alcohol obtained from a distillery.
2 The Appellant is a manufacturer of Ethyl Acetate, the basic raw material
for which is industrial alcohol. The Appellant has been receiving allotments of
denatured spirit from the Respondents since 1972. By way of an amendment to
Rule 3 of the Andhra Pradesh Denatured Spirit and Denatured Spirituous
Preparations Ruled, 1971 (1971 Rules for brevity), the collection of a gallonage
fee, under the head of privilege fees, at the rate of 1 per bulk litre was
introduced. The Appellant filed a writ petition in 1995 contending that the levy
and collection of such an amount without rendering any service is illegal,
arbitrary and without justification. The High Court vide its order dated
13.10.1997 disposed of the writ petition, directing the Appellant to approach the
concerned authorities seeking a refund and with a direction to the authorities to
consider the same in accordance with the law. In pursuance of G.O.M. No. 147
dated 6.3.1998, the Government introduced the collection of Administrative Fee
of 50 paise per bulk litre in lieu of withdrawal of collection of the
abovementioned privilege fees as per the orders of the Seven Judge Bench of
this Court in Synthetics & Chemicals Limited vs. State of U.P. (1990) 1 SCC
109. This Rule was given retrospective effect from 25.10.1989. The
Government therefore responded to the Appellant by issuing G.O.Rt. No. 313
dated 13.3.2000, whereby in accordance with G.O.M. No. 147, the
Commissioner of Prohibition and Excise was permitted to adjust the excess amount of privilege fees paid with effect from 25.10.1989 towards future allotments of alcohol for industrial purposes against Administrative Fee.
Since the Appellants had paid an amount of 2,09,500, it was to get a refund
of 1,04,750 after the adjustment of an equal amount towards administrative
fees. Aggrieved by this order, the Appellant approached the High Court once
again, seeking the issuance of a writ of Mandamus declaring that the
amendment of Rule 3 of the 1971 Rules as amended by G.O.M. No. 147 is
arbitrary, illegal, ultra vires and unenforceable, and a further declaration that the
Appellant is entitled to the refund of the entire amount collected as gallonage
fees with interest at 18% per annum. The Appellant’s case was that the State
cannot make any law in purported exercise of its legislative competence with
reference to Entry 8 of List II to levy privilege fees or any other fees in respect
of alcoholic liquors which are not meant or fit for human consumption.
3 The High Court placed reliance on Synthetics and Chemicals Limited,
wherein this Court observed as follows:
“The State, in exercise of powers under Entry 8 of List II and by
appropriate law may, however, regulate and that regulation could
be to prevent the conversion of alcoholic liquors for industrial use
to one for human consumption and for the purpose of regulation,
the regulatory fees only could be justified. In fact, the regulation
should be the main purpose, the fee or earning out of it has to be
incidental.”
The High Court also considered this aspect of the law in Vam Organics
Chemicals Ltd. vs. State of U.P. (1997) 2 SC 715, the Appellants wherein were
manufacturers of ‘vinyl acetate monomer’, for which industrial alcohol is the main stock. The Appellants therein were liable to pay a denaturation fee at the
rate of 7 paise per litre. They challenged this, contending that the State of U.P.
had no power to legislate or levy taxes in respect of industrial alcohol, and that
the levy was bad as it was not based on a quid pro quo basis. The Supreme
Court held that “so long as any alcoholic preparation can be diverted to human
consumption, the States shall have the power to legislate as also to impose
taxes, etc.” Ergo, the State has the competence and the obligation to supervise
the denaturation of spirit. Furthermore, this Court held that “in the case of
regulatory fees, like the license fees, existence of quid pro quo is not necessary
although the fee imposed must not be, in the circumstances of the case,
excessive.” Keeping in view the quantum and nature of work involved in
supervising the process of denaturation and the consequent expenses incurred
by the State, the fee of 7 paise per litre was held to be reasonable and proper.
The High Court found that the decision of the Supreme Court in Vam
Organics Chemicals Ltd. was a complete answer to the submissions of the
Appellant. There was found to be no reason to hold that the administrative fee at
the rate of 50 paise per bulk litre was excessive.
4 Furthermore, the Appellant’s plea that the Rule could not have been made
efficacious with retrospective effect was dismissed in light of the fact that the
competency of the rule making authority to impart retrospective effect was not
in dispute and no other ground was made out to support this contention. The Single Judge accordingly dismissed the writ petition on 21.10.2003. The
Appellant’s Review Petition was also dismissed on 2.7.2004.
5 The Appellant has now filed these Appeals before us, contending that the
abovementioned amendment cannot be given retrospective effect, and that the
fees should be levied at the rate of 7 paise per litre, since this amount was found
to be “reasonable and proper” in Vam Organics Chemicals Ltd. We find no
force behind either of these contentions. No ground has been made out for the
former contention, and Section 72(3) of the Andhra Pradesh Excise Act, 1968
specifically allows that – “Any rules under this Act may be made with
retrospective effect and when such a rule is made the reason for making the rule
shall be specified in a statement to be laid before both Houses of the State
Legislature.” Regarding the latter contention, 7 paise was deemed to be
reasonable on the facts of that case which does not in any way indicate that a
larger amount would be excessive especially with the passage of time. We have
discussed when administrative and service charges can be recovered along with
the relevant case law in some detail in our judgment of even date in the Appeal
titled as State of Tamil Nadu vs. Tvl. South Indian Sugar Mills, which should be
adverted to in the interests of avoiding prolixity. We uphold the High Court’s
finding that in light of Synthetics and Chemicals Limited and Vam Organics
Chemicals Ltd., the subject Regulatory Fees intended to prevent the conversion
of alcoholic liquor for industrial use to that for human consumption is legal, and need not be strictly quid JUDGMENTpro quo as long as it is not excessive. We find no merit in these Appeals and they are accordingly dismissed.
[SHIVA KIRTI SINGH] New Delhi, August 12, 2015.