# BIMAL CHANDRA BANERJEE v. STATE OF MADHYA PRADESH

- **Citation:** [1971] 1 S.C.R. 844
- **Court:** Supreme Court of India
- **Decided:** 1970-08-19
- **Bench:** J. C. Shah, K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bimal-chandra-banerjee-v-state-of-madhya-pradesh-5293
- **Pages:** 7

## Headnote

Madhya Pradesh Excise Act (M.P. 2 of 1915), ss. 25, 26. 27, 62(1)
and 62(2) ds. (d) and (h)-Condition in licence prescribing minimum
liquor to be purchased from the Government and payn1ent of excise duty
on liquor not taken delivery of-Validity.
A
B
The appellants were excise contractors.
In purported exercise of its
powers under els. (d) •nd (h) of s.62(2) of the Madhya Pradesh Exciso
C
Act, 1915, which confers pO\\•er on the State Government to make rules,
the State Government introduced a condition· in the licences of
th~
appellants prescribing the minimum quantity of liquor v.:hich the appellants.
should purchase from the Governmcnt and the compulsory pay111ent uf
£'Xcise duty on the quantity of liquor H'hich they jailed to take de!fi·c1-_i· of.
The State Government issL~ed notices dcman-ding the duty.
On the question of their validity,
D
HELD : Assuming the po\ver to tax can be delegated to the executive, no tax can be imposed by any bye-law or rule or regulation unle:s'i
the statute under which the suborCiinate legislation is 111ade specially
authorises its imposition. [850 C-D]
In the present case, the Legislature has levied excise duty or countervaillini: duty only on the excisable articles \lihich have been either in1ported, exported, transported. n1anufacturcd, cultivated or collected under
E
any licence granted under s.13, or n1anU:factured in
any
distillery
or
brewery established or licensed under the Act; and the State Governn1ent
has not been empowered to levy anv duty on liquor which the contractors
failed to lift.
Therefore, the State Governn1ent was exercising a po\ver
which it did not possess and hence the rule in1posing the condition in
the licences and the demand notices a·re invalid. f8-+9 H; A-Cl
CIVIL APPELLATE Ju;:rsDICTION: Civil Appeals Ncs. 2214
F
of 1969 and 308 of 1970.
Appeals from the judgments and orders dated April 9. 1965
of the Madhya Pradesh High Court in Misc. Petitions Nos. 426
and 524 of 1964 respectively.
M. C. Chagla, R. A. Roman and S. S. Klwnduja, for the
appellant (in C.A. No. 2214 of 1969).
R. A. Roman. S .. S. Khanduja and N. K. Shejwa/kar, for the
appellants (in C.A. No. 308 of 1970).
I, N. Shroff, for the respondents (in both appeals).

## Text

844
BIMAL CHANDRA BANERJEE
v.
STATE OF MADHYA PRADESH
August 19, 1970
(J. C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.]
Madhya Pradesh Excise Act (M.P. 2 of 1915), ss. 25, 26. 27, 62(1)
and 62(2) ds. (d) and (h)-Condition in licence prescribing minimum
liquor to be purchased from the Government and payn1ent of excise duty
on liquor not taken delivery of-Validity.
A
B
The appellants were excise contractors.
In purported exercise of its
powers under els. (d) •nd (h) of s.62(2) of the Madhya Pradesh Exciso
C
Act, 1915, which confers pO\\•er on the State Government to make rules,
the State Government introduced a condition· in the licences of
th~
appellants prescribing the minimum quantity of liquor v.:hich the appellants.
should purchase from the Governmcnt and the compulsory pay111ent uf
£'Xcise duty on the quantity of liquor H'hich they jailed to take de!fi·c1-_i· of.
The State Government issL~ed notices dcman-ding the duty.
On the question of their validity,
D
HELD : Assuming the po\ver to tax can be delegated to the executive, no tax can be imposed by any bye-law or rule or regulation unle:s'i
the statute under which the suborCiinate legislation is 111ade specially
authorises its imposition. [850 C-D]
In the present case, the Legislature has levied excise duty or countervaillini: duty only on the excisable articles \lihich have been either in1ported, exported, transported. n1anufacturcd, cultivated or collected under
E
any licence granted under s.13, or n1anU:factured in
any
distillery
or
brewery established or licensed under the Act; and the State Governn1ent
has not been empowered to levy anv duty on liquor which the contractors
failed to lift.
Therefore, the State Governn1ent was exercising a po\ver
which it did not possess and hence the rule in1posing the condition in
the licences and the demand notices a·re invalid. f8-+9 H; A-Cl
CIVIL APPELLATE Ju;:rsDICTION: Civil Appeals Ncs. 2214
F
of 1969 and 308 of 1970.
Appeals from the judgments and orders dated April 9. 1965
of the Madhya Pradesh High Court in Misc. Petitions Nos. 426
and 524 of 1964 respectively.
M. C. Chagla, R. A. Roman and S. S. Klwnduja, for the
appellant (in C.A. No. 2214 of 1969).
R. A. Roman. S .. S. Khanduja and N. K. Shejwa/kar, for the
appellants (in C.A. No. 308 of 1970).
I, N. Shroff, for the respondents (in both appeals).
The Judgment of the Court was delivered by
Hegde, J.
These appeals by certificates granted by the High
Conrt of Madhya Pradesh raise common questions of law.
Hence
we propose to dispose them of by a common order.
G
H
A
B
c
D
E
F
G
H
B. c. BANERJEE V. M.P. STATE (Hegde, J.)
S45
The appellants herein are excise contractors.
They are the
rnccessful bidders for some of the shops in Madhya Pradesh for
the financial year i 964-65.
The sale memorandum on the
>trength of which auction was held intimated that the successful
bidders will have to sell a prescribed minimum quantity of liquor
in their shops and if they fail to take delivery of the prescribed
minimum quantity of Jiquvr, they will have to pay excise duty on
the quantity of liquor which they failed to
take delivery.
On
~1arch 20. 1 %.+. the Government in the purported exercise of its
powers unc.kr els. I dJ and (h) of s. 62 of the Madhya Pradesh
Excise Act. 1915 I Act II of 1915) (to be hereinafter referred to
'" the Act) issued the notification No. 144401089/V-SR amending the rules published on January 7.
1960.
This notification
prescribed that the conditions mentioned therein should be inserted in the licences to be issued to the successful bidders.
At present we are only concerned with cl. 2(C) thereof.
That clause
reads :
"The minimym quantity for taking issues from the
Warehouse for sale is fixed at 3213 p. litres spiced spirit
and 25940 p. litres plain spirit.
You shall be liable to
make good every month the deficit of monthly average of
the total minimum duty on or before the 10th day of
each month following the month to which the deficit
duty relates."
The appellants are challenging the validity of this notification.
An excise licensee in Madhya t'radesh as in other places has
to meet three charges namely ( 1) he has to pay the prescribed
licence fee for obtaining the privilege of vending liquor in a shop
I 2 ! he has to pay the price of the liquor purchased by himgenerally the Government has a monopoly of liquor manufacture
and ( 3) he has to pay excise duty on the liquor purchased by him.
In this case there is no dispute that the appellants had paid
the prescribed licence fee, the price of the liquor purchased by
them and also the duty on the liquor taken delivery of by them.
The dispute centres round the duty required to be paid by them
imd~r. the impugned clause in the notification of March 20, 1964
referred to earlier.
The controversy is whether the said clause is
valid in Jaw.
The Government of Madhya Pradesh have issued demand
notices on the appellants demanding the duty said to be due from
them as per the impugned clause in the notification.
The appellants have challenged the validity of these notices as well.
It is contended on behalf of the appellants that excise duty is
11 tax.
The same can be levied on the basis of a valid law.
No
SUPREME COURT REPORTS
[1971 J 1 S.C.R.
· tax can be levied on 'the basis of a contract nor can tax be levied
by executive orders.
Tax can only be levied by the legislature.
Hence the fact that cl. 2(C) in the notification of March 20, 1964
has been made- a part of the licence condition is immaterial. It
was contended that the question for decision is whether the Government of Madhya Pradesh was entitled to amend its rules and
add the impugned clause as a part of the licence conditions.
The scheme of the Act is similar to the scheme of other excise
Acts in this country.
In the Act 'Excise Duty' and "countervailing duty" have been defined [in s. 2 ( 6-A)] as meaning any
such excise duty or countervailing duty, as the case may be, as is
mentioned in Entry 51 of List II in the Seventh Schedule to the
Constitution, which entry reads :
"Duties of excise on the following goods manufactured or produced in the State and countervailing duties
at the 'same or lower rates on similar goods manufactured or produced elsewhere in India :- .
(a) alcoholic liquors for human consumption;
(b) opium, Indian hemp and other narcotic drugs
and narcotics;
but not including medicinal and toilet preparations containing alcohol or any
substance
included in subparagraph lb) of this entry."
In view of this entry the State is competent to levy excise duty
only on goods manufactured or produced in the State.
The expression "export'' is defined in s. 2(9) of the Act as meaning to
take out of the State otherwise than across customs frontier - as
defined by the Central Government.
The term manufacture· is
defined ins. 2-.!_14).
It reads:
" 'manufacture' includes every process whether
natural or artificia1 by which any intoxicant is produced
or prepared and also redistillation and every process for
the rectification, flavouring, blending or colouring of
liquor."
The word "transport" is defined in s. 2 (19) to mean to move
from one place to another within the State.
The excise duty is a duty on inanufacture or production and
countervailing duty is a tax imposed on excisable articles brought
into the State from·other parts of the country.
Chapter V of the
Act deals with Duties. and Fees.
That Chapter contains four
sections viz. ss. 25. 26, 27 and 27 A.
Section 25 deals with duty
on excisable articles.
Section 26 prescribes the ways of levying
A
B
c
D
E
F
G
H
B. C, BANERJEE v. M.P. STATE (Hegde, J.)
847
fl.
such duty.
s~ction 2 7 provides for payment for grant of lcas~
licence fee.
Section 27 A saves the duties that were being levied
at commencement of the Constitution.
Herein we are not concerned with s. 27-A.
B
c
D
E
F
G
H
Section 25 reads :
"Duty on excisable articles :-( 1) An excise duty
or a countervailing duty as the case may be, shall, if th~ .
State Government so direct, be levied on excisable
articles-
(a) imported; or
(b) exported; or
( c) transported; or
( d) manufactured, cultivated or collected und~ any
licence granted under s. 13; or
·
( e) manufactured i11 any distillery established, or any
distillery or bw1very licensed under this Act;
Provided that it shall be lawful for the State Government to exempt any excisable article from any duty to
which the same may be 'liable under this Act.
( 2) Duty may be imposed under sub-section ( 1) at
different rates according to the places to which any
excisable article is to be removed or according to the
strength and quality of such article.
( 3) Notwithstanding anything contained in
subsection ( l) duty shall not be imposed thereunder on any
article which has been imported into India and was
liable. on such importation. to duty under the Sea Customs Act. VIII of 1878 or the Indian Tariff Act, VIII of
1894."
Under this section excise duty or countervailing duty can be
imposed on excisable article when they are either imported or
exported or transported or manufactured or cultivated or collected
and not otherwise.
Section 26 deals with the manner of levying the duty.
It
says:
"Subject to such rules regulating the time, place and
manner as the State Government may prescribe, such
duty shall be levied rateably on the quantity of exisable
article imported, exported,
transported collected or
manufactured in or issued from a distillery, brewery or
warehouse.
.848
SUPRf:ME COURT REPORTS
(1971 j l S.C.R .
Provided that :
(I) duty may be levied-
( a) on intoxicating drugs by an acreage rate
levied on the cultivation of the hemp plant
or by a rate charged on the quantity
A
collected;
B
(b) on spirit or bear manufactt:red
rn
any
distii!ery established or any distillery or brewery licensed under this Act-
(i) in accordance with such scale of equivalents calculated on the quantity of
C
materials used, or by the
degree of
attenuation of the wash or wort, as the
case may be, as the State Government
may prescribe, or
(ii) by rate charged directly on the materials used;
D
( 2)
( c) on tari, by a tax on each tree from which
the tari is drawn.
where payment is made upon the issue of an
excisable article for sale from a warehouse,
it
shall be at the rate of duty in force on the date
of issue of such article from the warehouse."
Section 27 says:
"Pa:)'ment for grant of leases : Instead of or in addition to any duty leviable under this chapter, the State
Government may accept payment of a sum in consideraE
tion of the grant of any lease under section 18."
F
Section 18 deals with power to grant lease of right to manufacture or right to sell excisable articles.
The only other relevant section for our present purpose is S. 62
which confers power on the State Government to make rules.
Clause (I) of that section says :
"The State Government may make rules
for the
purpose of carrying out the provisions of this Act."
In Clause 2 reliance was placed on sub-els
( d) and (h).
Those sub-clauses read :
"In particular, and without prejudice to the generality of the foregoing provision, the State Government
may make rules ..... .
G
H
A
B
c
D
E
F
B. c. BANERJEE v. M.P. STATE (Hegde, /.).
849
( d) regulating the import, export, transport, manufacture, collection, possession, s11pply or storage of any
intoxicant, or the cultivation of the hemp plant and
may by such rules, among other matters.-
( i) regulate the tapping of tari producing trees, the
drawing by tari from such trees, the marking of
the same and the maintenance of such marks;
(ii) declare the process by which spirit shall be denatured and the denaturrtion of spirit ascertained,
and
(iii) cause spirit to be denatured through the agency
or under the supervision of its own officers;
( d-1) regulating the import, export, transport, collection possession, supply, storage or sale of Mahua
flowers prescribing
licences
and permits
therefor.
throughout the State or in any specified area or for any
specified period."
•
•
•
•
(h) prescribing the _authority by the form in wliich
and the terms and conditions on and subject to which
any licence, permit or pass shall be granted, and may
by such rules among other matters-
( i) fix the period for which any licence, permit or
pass shall continue in force,
(ii) prescribe the scale of fees or the manner of fixing the fees payable in respect of any such
license, permit or pass.
(iii) prescribe the amount of security to be deposited
by holders of any licence, permit or pass for the
performance d the conditions of the same;
(iv) prescribe the account to be maintained and the
returns to be submitted by licence holders, and
, G
( v) prohibit or regulate the partnership in, or the
transfer of, licences."
Neither s. 25 ors. 26 ors. 27 ors. 62(1) or els. (d) and (h)
of s. 62 (2) empower the rule making authority viz. the State
Government to levy tax on excisable articles which have not been
H
either imported, exported, transported, manufactured, cultivated
or collected under any licence granted under s. 13 or manufactured in any distillery established or any distillery or brewery licensed
under the Act.
The legislature has levied excise duty only on
Ll69 Sup. CI/71 (P)-71
850
SUPREME COURT REPORTS
[1971] 1 S.C.R.
those· articles which come within the scope of s. 25.
The rule
making authority has not been conferred with any power to levy
duty on any articles which do not fall within the scope of s. 25.
Therefore it is not necessary to consider whether any such power
can be conferr~d on that authority.
Quite clearly the State Government purported to levy duty. on liquor which the contractors
failed to lift.
In so doing it was attempting to· exercise a power
which i; did not possess.
No tax can be in1posed by any bye-law or rule or regulation
unless the statute under which the subordi.,ate legisla,tion is made
specially autl'.orises the imposition even if it is assumed . that the
power to tax can be delegated to .the executive.
The basis of the
statutcry power conferred by the statute cannot be transgressed by
the rnle making authority.
A rule .making authority has no plenary power. It has to act within the limits of the power granted
to it
We are of the opinion that the impugned rnle as well as the
demands are 1~.)t authorised by law.
Hence we allow these
appeals as well as the writ petitions from which the5e appeals
arise and quash the impugned notification as well as the demand
notices.
The State of Madhya Pradesh shall pay the costs of ihe
appellants in both these appeals-hearing fee one set.
V.P.S.
Appeals allowed.
\
A
B
c
D
E