# GOVERNMENT OF MAHARASHTRA -~ v. MIS. DEOKAR'S DISTILLERY

- **Citation:** [2003] 2 S.C.R. 852
- **Court:** Supreme Court of India
- **Decided:** 2003
- **Bench:** V.N. Khare, S.B. Sinha, Dr. Ar. Lakshmanan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/government-of-maharashtra-v-mis-deokar-s-distillery-19009
- **Pages:** 47

## Headnote

Bombay Prohibition Act, 1949-Sections 58A, 49, 114 and 143(2)(4):
Maharashtra Distillation of Spirit and Manufacture of Potable Liquor
c Rules, [966- Sections 17(12), 17(43):
Maharashtra Country Liquor Rules, 1973-Sections 6(12), 6(36):
Maharashtra Civil Services (Revised Pay) Rules, 1998:
D
Constitution of India, 1950-Seventh Schedule, List Il, Entry 8, Article
309 proviso thereto and Article 162:
Excise supervision of manufacturer of potable and country liquorSupervision charges-Paid in advance-Revision of pay scale of the
supervising staff with retrospective effect-Demand of differential amountE Whether permissible-At the time of obtaining licence undertaking by
manufacturers to abide by all the Rules made under the Act-Held: The
demand of supervision charges is permissible under Section 58A even
retrospectively as the Section has no /imitation to the effect that costs are to
be recovered only in advance-Right to deal in liquor not being afiindamental
F right, State has exclusive right/privilege in respect of potable liquor and can
charge any reasonable expenses or consideration for permitting such activity
by grant of licence-Licensee having undertaken to abide by all reasonable
orders under the Act, cannot wriggle out of the contractual liability voluntarily
incurred-Del!land notice also not liable to be challenged in absence of
challenge to notification revising the pay scale and the administrative
G instruction to carry out the executive fanction under Section 58A-Maharashtra
Foreign Liquor (Storage in Bond) Rules, 1964-Rule 7.
Respondent-companies were holding licence in Form PLL for
manufacture of Indian made foreign liquor prescribed under the
H
provisions of the Maharashtra Distillation of Spirit and manufacture of
852
·-.
•
GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY
853
Potable Liquor Rules, 1966 and also licence in Form CLL prescribed under A
the provisions of Maharashtra Country Liquor Rules, 1973 for
manufacture oi Country liquor made under Bombay Prohibition Act,
1949. Under Section 58-A of the Act State Government is empowered to
permit the manufacture and other related activities in respect of any
intoxicant under the supervision of excise staff and cost of such staff is to
be made to the State Government by the manufacturers. The cost of such B
staff is required to be paid to the State Government by the licensee in
advance as per Rule 17(12) of 1966 Rules and Rule 6(12) of 1973 Rules.
The pay scales and other allowances of Government employees are fixed
by the State Government. The Commissioner as empowered by the State
Government, issues circulars for levy and recovery of supervision charges C
based on the pay scales and other allowances of the Government employees
fixed by the State Government under the Rules and Government
Resolutions made under proviso to Article 309 of the Constitution of India,
in respect of the excise staff posted for supervision.
State Government by notification dated 10.12.1998 promulgated D
Maharashtra Civil Services (Revised Pay) Rules, 1998 under its power
vested by Article 309 of the Constitution whereby the pay scales of
Government employees were revised and fixed with retrospective effect.
Thereafter by circular dated 30.7.1999 orders were issued for carrying
out executive function under Section 58-A of the Act and Article 162 of E
the Constitution. Pursuant thereto demand notices were issued by
appellant No.4 to the respondent-companies to pay the differential amounts
of cost of supervision on account of revision of pay scales with retrospective
effect.
Respondent-companies informed appellant No.4 that they had p
already paid the supervision charges in advance and hence were not liable
to pay the differential amount as they would not be able to pass on the
burden of the same to the purchasers. Appellant No.4 rejected the reply
and directed to pay the differential amount.
Writ Petition was filed challenging the demand on the ground that G
the challenge sought to be raised by

## Text

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A
GOVERNMENT OF MAHARASHTRA
-~
v.
MIS. DEOKAR'S DISTILLERY
MARCH I 0, 2003
B
[V.N. KHARE, CJ., S.B. SINHA AND DR. AR. LAKSHMANAN, JJ.]
Bombay Prohibition Act, 1949-Sections 58A, 49, 114 and 143(2)(4):
Maharashtra Distillation of Spirit and Manufacture of Potable Liquor
c Rules, [966- Sections 17(12), 17(43):
Maharashtra Country Liquor Rules, 1973-Sections 6(12), 6(36):
Maharashtra Civil Services (Revised Pay) Rules, 1998:
D
Constitution of India, 1950-Seventh Schedule, List Il, Entry 8, Article
309 proviso thereto and Article 162:
Excise supervision of manufacturer of potable and country liquorSupervision charges-Paid in advance-Revision of pay scale of the
supervising staff with retrospective effect-Demand of differential amountE Whether permissible-At the time of obtaining licence undertaking by
manufacturers to abide by all the Rules made under the Act-Held: The
demand of supervision charges is permissible under Section 58A even
retrospectively as the Section has no /imitation to the effect that costs are to
be recovered only in advance-Right to deal in liquor not being afiindamental
F right, State has exclusive right/privilege in respect of potable liquor and can
charge any reasonable expenses or consideration for permitting such activity
by grant of licence-Licensee having undertaken to abide by all reasonable
orders under the Act, cannot wriggle out of the contractual liability voluntarily
incurred-Del!land notice also not liable to be challenged in absence of
challenge to notification revising the pay scale and the administrative
G instruction to carry out the executive fanction under Section 58A-Maharashtra
Foreign Liquor (Storage in Bond) Rules, 1964-Rule 7.
Respondent-companies were holding licence in Form PLL for
manufacture of Indian made foreign liquor prescribed under the
H
provisions of the Maharashtra Distillation of Spirit and manufacture of
852
·-.
•
GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY
853
Potable Liquor Rules, 1966 and also licence in Form CLL prescribed under A
the provisions of Maharashtra Country Liquor Rules, 1973 for
manufacture oi Country liquor made under Bombay Prohibition Act,
1949. Under Section 58-A of the Act State Government is empowered to
permit the manufacture and other related activities in respect of any
intoxicant under the supervision of excise staff and cost of such staff is to
be made to the State Government by the manufacturers. The cost of such B
staff is required to be paid to the State Government by the licensee in
advance as per Rule 17(12) of 1966 Rules and Rule 6(12) of 1973 Rules.
The pay scales and other allowances of Government employees are fixed
by the State Government. The Commissioner as empowered by the State
Government, issues circulars for levy and recovery of supervision charges C
based on the pay scales and other allowances of the Government employees
fixed by the State Government under the Rules and Government
Resolutions made under proviso to Article 309 of the Constitution of India,
in respect of the excise staff posted for supervision.
State Government by notification dated 10.12.1998 promulgated D
Maharashtra Civil Services (Revised Pay) Rules, 1998 under its power
vested by Article 309 of the Constitution whereby the pay scales of
Government employees were revised and fixed with retrospective effect.
Thereafter by circular dated 30.7.1999 orders were issued for carrying
out executive function under Section 58-A of the Act and Article 162 of E
the Constitution. Pursuant thereto demand notices were issued by
appellant No.4 to the respondent-companies to pay the differential amounts
of cost of supervision on account of revision of pay scales with retrospective
effect.
Respondent-companies informed appellant No.4 that they had p
already paid the supervision charges in advance and hence were not liable
to pay the differential amount as they would not be able to pass on the
burden of the same to the purchasers. Appellant No.4 rejected the reply
and directed to pay the differential amount.
Writ Petition was filed challenging the demand on the ground that G
the challenge sought to be raised by them to the impugned demand notices
had already been concluded in their favour in the case of JE Bilimoria and
Sons v. State of Maharashtra and Ors., (1999) Mh. LJ (II) 1079, and the
same was confirmed in Polychem Ltd. and Anr. v. State of Maharashtra and
Ors., (1998] 6 sec 196. State objected to the petition on the ground that H
854
SUPREME COURT REPORTS
[2003] 2 S.C.R.
A the judgment in J.E. Bilimoria's case was no longer good law in view of
the Full Bench judgment of the High Court in Mohan Meakin Ltd. and Anr.
v. State of Maharashtra and Ors., (1993) Mh LJ (1)-13 Bilimoria 's case was
overruled and the view taken by another Division Bench of High Court
in Gustad Mayur Irani v. State of Maharashtra, (1991) 51 ELT 232 (Born.)
was confirmed.
B
c
D
E
F
G
High Court held that the case was squarely covered by decision in
JE Bilimoria's case which was confirmed by Supreme Court in Polychem 's
case and the State was bound by the Supreme Court decision. Therefore,
the demand notices were quashed and set aside and hence the Writ Petition
was allowed.
In appeal to this Court, the State contended that Polychem 's case was
distinguishable; that to recover the cost of supervision as per the pay scales
of its employees from the licensees is an executive function of the State
Government under Section SSA of the Act and Article 162 of the
Constitution which is carried out by circular issued by the Commissioner
and, therefore, it is not a case of any lugislation imposing liability with
retrospective effect by a delegated authority; that factually there was no
effective representation to the licensee that the cost of supervision charges
for the incoming quarter was fixed for the said quarter and will not be
increased with retrospective effect; that the respondent was not and is not
prevented from recovering this additional cost from his further sales; that
the judgment in Polychem 's case was required to be read with decision in
Mohan Meakin 's case in which earlier decision in Bilimoria 's case was
overruled.
Respondent-companies contended that appellants while issuing
demand notices did not consider the fact that the excise duty was to be
levied on the basis of manufacturing cost and supervision charges which
formed part of the manufacturing cost and that the fact that the
manufacturing cost was ultimately to be passed on to the customers,
therefore, the manufacturers are not in a position to recover, when the
goods are already issued for sale and released from warehouse; that
appellants were not entitled to recover supervision charges retrospectively;
that the term "cost of the supervision charges" is not that equivalent to
salaries or wages; that the question of law raised in the case has already
been decided in the Polychem 's case; and that when it has been conclusively
H held by High Court that the rule making authority did not have the power
"
..
.___,,
..
.•
GOVT OF MAHARASHTRA v. DEOKAR'S DISTILLERY
855
to recover the supervision charges retrospectively, the appellants cannot A
rely on any rules enacted by any rule making authority to justify the
retrospective demand which had been struck down by High Court.
Allowing the appe.il, the Court
HELD: Per Dr. AR. lakshmanan, J (For himself and VN. Khare, CJ) B
I. There exists full power under Section SSA of Bombay Prohibition
Act, 1949 to levy and recover all costs of supervision and, therefore, no
limitation can be read into the power to recover all costs present, future
and past which are/or were actually incurred by the State Government in
view of payments made/to be made to its employees posted for excise C
supervision, in spite of provisions of Rule 17(12) of Maharashtra
Distillation of Spirit and Manufacture of Potable Liquor Rules, 1966 and
Rule 6(12) of Maharashtra Country Liquor Rules, 1973. As per the wellsettled rule of interpretation that the words in a provision are to be given
their normal meaning as understood by the common man or by the trade D
as well as the widest meaning unless there is any limitation in that
provision itself, the words "the cost of such staff shall be paid to the State
Government" used in Section SSA of the Prohibition Act would include
in their meaning all the costs incurred by the State Government for the
purpose of disbursing pay and other allowances to the Government
employees posted for supervision, whether recovered in advance or in due E
course the additional amounts which become recoverable on account of
upward revision of pay scales with retrospective effect, because there is
no limitation of any kind in Section SSA of the Prohibition Act to the effect
that the costs are to be recovered only in advance, and that too only such
costs as could be worked out on the date of demand or to the effect that F
the burden of additional amounts on account of revision of pay scales with
retrospective effect should not be recovered from the liquor licensee.
[SS2-G, H; SS3-A-C[
2. The question of application of principle of promissory estoppel
would not arise as for administrative convenience only the costs are G
calculated and recovered in advance from the licensee. Therefore, Rule
17(12) of the Rules of 1966 or under Rule 6(12) of the Rules of 1973 could
not be construed as an effective representation that no further cost would
be recovered when provision under Section SSA of the Prohibition Act is
clearly to the effect that the licensee has to bear the entire cost of the
supervisory staff. Rule 17(12) of the Rules of 1966 and Rule 6(12) of the H
856
SUPREME COURT REPORTS
[2003) 2 S.C.R.
A Rules of 1973 providing for recovery of supervision charges in advance,
do not direct that differential amounts are not to be recovered, if pay scales
are revised. On the other hand, the aforesaid Rules are to be read with
other provisions giving residuary powers in both the sets of Rules viz. Rules
17(43) of the Rules of 1966 and Rule 6(36) of the Rules of 1973, which
B
c
direct that the licensee shall comply with all orders issued under the
Prohibition Act and Section 11 of the Prohibition Act clearly provides that
the State Government may permit business in liquor subject to the manner
and to the extent provided by the provisions of this Act or any Rules,
Regulations or orders made or in accordance with the terms and conditions
of the licence, permit, pass or authorization granted thereunder. 1883-D, GI
3. In the present case, the licensees gave an undertaking at the time
of obtaining grant or renewal of the licence in the application form itself,
both under the Rules of 1966 and the Rules of 1973, that they would abide
by all orders made under the Prohibition Act and the Rules. Under Rule
17(43) of the Rules of 1966 and under Rule 6(36) of the Rules of 1973,
D there are resideuary power of making a demand in special circumstances
not foreseen in Rule 17(12) of the Rules of 1966 or Rule 6(12) of the Rul:es
of 1973. It is seen from Rule 17(43) of the Rules of 1966 that the licensee
shall abide by all the Rules, Regulations and orders made from time to
time under the Act. A similar provision also exists under Rule 6(36) of
E the Rules of 1973. The object of Section SSA of the Prohibition Act and
the intention of the Legislature could not be anything other than that the
F
entire cost incurred by the Government on account of pay-scales paid to
the Government employees posted for supervision should be paid by the
licensee and that this cost should not be met from the Government
exchequer. (884-D-F)
4. The legal licensee does not have a fundamental right to deal in
liquor under Entry 8, List II in the Seventh Schedule to the Constitution
of India and thereby under Sections 49 and 143(2)(u) of the Prohibition
Act, the State has the exclusive right/privilege in respect of potable liquor
and the State can charge any reasonable expenses or even consideration
G for permitting such activity by grant of licence and that respondents ought
fo comply with all reasonable orders as undertaken by them while
obtaining the licence. Once the liquor licensee has undertaken to abide
by all reasonable orders under the Prohibition Act while obtaining the
licence, they cannot wriggle out of the contractual liability voluntarily
H incurred by. them. [885-A-CJ
..
GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY
857
5. The impugned demand notice was also in the nature of demanding A
balance of the price of the exclusive privilege which would become final
only on issue of the Notification order under Article 309, the bulk of which
have already been recovered in advance, which privilege exclusively vests
with the Government considering effect of provisions especially Section
49 and Section 143(2)(u) of the Prohibition Act. The establishment charges
demanded are in the nature of price for parting with the privilege to B
permit manufacture and sale of liquor, and the privilege exclusively vests
with the Government. (885-D, El
Government of Andhra Pradesh v. Mis. Anabeshahi Wine p:nd Distilleries
Pvt. Ltd., (1988) 2 SCC 25, relied on.
C
6. The impugned demand notice was nothing but final settlement of
accounts communicated by appellant No.4, one contracting party to the
other contracting party, the respondents, in terms of the contract executed
between them, which is executed at the time of grant/renewal of the licence.
The contract is executed after the licensee gives the undertaking in the D
application in Form PLA prescribed under the Rules of 1966 or the licence
in Form CLA prescribed under the Rules of 1973, to abide by directions/
orders and complies all other requirements and when the application is
accepted by the appellants by grant/renewal of the licence. The
respondents/licensees, therefore, cannot wriggle out of the contractual
obligation of payment of the entire cost of supervision regarding which E
they receive a final account or bill through the impugned demand notice
and, therefore, the respondents ought to pay the amount demanded.
(887-E-GJ
7. What the respondents agreed to pay was the price of an exclusive F
privilege which the State parted with in their favour. They cannot,
therefore, avoid their liability by contending that the payment which they
were called upon to make is truly in the nature of excise duty and that no
such duty can be imposed on liquor not lifted or purchased by them. The
respondents, must fail in their contention both on account of the objection
to the maintainability of the appeals and on merits concerning the nature G
of the payment which they are liable to make. (887-H; 888-A-BJ
8. The judgment of this Court in Polychem 's case was delivered on
the basis of a concession by the Government advocate that supervision
charges are collected only in advance, when under the residuary powers
under Rule 17(43) of the Rules of 1966 and Rule 6(36) of the Rules of 1973, H
858
SUPREME COURT REPORTS
[2003] 2 S.C.R.
A additional amounts were or could be demanded, as also directly under
Section SSA and Section 114 of the Prohibition Act. ISS6-G, HI
Polychem ltd. and Anr. v. State of Maharashtra and Ors., 1199S! 6 SCC
196, distinguished.
B
JE. Bilimoria and Sons v. State of Maharashtra and Ors., 119901
c
Mh.L.J.(II) 1079, disapproved.
Gustad Mayur Irani v. State of Maharashtra and Ors., 119911 (SI) 232
(Born.) and Mohan Meakin Ltd. and Anr. v. State of Maharashtra and Ors.,
(19931 Mh.L.J. (I) 13, approved.
Income-tax Officer v. M.C. Ponnoose, AIR (1970) SC 3SS; State Bank
of Haiyana and Ors. v. Jage Ram and Ors., (19SOJ 3 SCC S99 and Assistant
Collector Central Excise v. National Tobacco Co., AIR (19721 SC 2563,
referred to.
D
9. High Court is not right in quashing the demand notice issued by
appellant No. 4, without examining the validity of or quashing
Maharashtra Civil Services (Revised) Pay Rules, 199S and the
consequential circular letter dated 30.7.1999 issued by appellant No.2, since
the demand notice was merely a consequential communication issued in
E furtherance of the Rules of 199S and the circular letter dated 30.7.1999.
The statutory provision under Article 309, namely, the Notification dated
I0.12.199S and the consequential administrative instructions/orders issued
for carrying out the executive function under Section SSA of the
Prohibition Act and Article 162 namely, the circular letter dated 30.7.1999
had not been challenged by the respondents herein and, therefore, they
F were not entitled to challenge the demand notice which was merely a
consequential communication. !SS7-B-DJ
Per SB. Sinha, J (Dissenting)
I.I. Although a citizen has no fundamental right to carry on trade
G or business in potable liquor, but when he is permitted to carry on such
business, he would be entitled to claim equal right as against other citizens.
In absence of the State imposing any prohibition or monopolizing the
business, the same may be carried on by the licensee without being
subjected to any discrimination. Such a right although may not be elevated
H to the status of a fundamental right but all the same it is a right. ISSS-G I
-
GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY
859
Khoday Distilleries ltd. v. State of Karnataka, 119951 I SCC 574, A
referred to.
1.2. Section 58A of the Act mandates that the cost of the excise
supervision would be borne by the licensees. The mode and manner of
realization of such costs, however, has been laid down only in the Rules
and/or the conditions of the licence. Such cost of excise supervision does B
not constitute 'tax' or 'fee' but a part of the price for grant of exclusive
privilege to the licensee for carrying on his business. The price required
to be paid is, thus, a contractual one. The charges, thus can be levied either
prior to entering into contract or during the currency thereof. 1889-B, CJ
1.3. By reason of the provisions of the Rules or terms of conditions C
of licence, the demand on account of excise supervision charges was to be
made in advance. The State is entitled to fix the cost of supervision charge
from time to time but the same has to be done during the currency of
contract and not thereafter as there does not exist any contract to the
contrary. [890-B, CJ
D
1.4. Interpretation of a statute, it is trite, must be made on a conjoint
reading of the Act, Rules made thereunder as also the terms and conditions
of the licence. Section 58A of the Act does not provide for the mode and
.manner for recovery of the cost cf excise supervision. It has been provided
for in the Rules as also the conditions of licence. The rule when validly E
made forms part of a statute. It cannot be said that a statutory rule can
be ignored on the ground that the same was made only for administrative
purposes. It cannot further be said that the conditions of the licence can
be interpreted in such a manner so as to impose upon the licensee a burden
which was not contemplated at the time when licence had been granted F
and/or during the currency thereof. 1890-D, El
Government of Andhra Pradesh v. Mis. Anabeshahi Wine and Distilleries
Pvt. Ltd., [1988! 2 SCC 25, relied on.
1.5. The option of the licensee to take or not to take a licence, would, G
thus depend upon the price which was to be fixed. The risk involved in
the matter may be reasonably certain. A licensee before entering into a
contract is entitled to know what price he has to pay for the grant of
exclusive privilege or what are the risks involved in it. A price, thus, must
be predetermined and cannot be redetermined and/or demanded after a
period of four years of the expiry of the licence. (891-El
H
860
SUPREME COURT REPORTS
[2003) 2 S.C.R.
A
1.6. The rights and obligations of the parties to a contract are mutual.
Both the State and the Licensee are bound by it. When a contract is a
statutory one, the terms and conditions of a statute, the statutory rules
would govern the contract. A court of law shall not for the purpose of
interpretation of the terms of the contract read the provisions of statute
B in such a way as a result whereof additional liability may be imposed on
a party to the contract. [891-G I
Assistant Excise Commissioner and Ors. v. Issac Peter and Ors., [1994[
4 SCC l 04, referred to.
1.7. The reason why a manufacturer must have a fair knowledge
C about his liability for obtaining a licence would be that he may during
the currency of the licence fix the price of liquor in such a manner so that
all charges payal;>le by him may be passed on to the consumers. Such costs
cannot be recovered after the demands are made long after the contract
has been worked out. It will be preposterous to suggest that the liability
D in respect of the increased costs of excise supervision for one licensing year
can be passed on to his consumers after four years or more. [891-H; 892-A]
1.8. A party to a statutory contract is bound to discharge his
obligations in terms of the provisions of the Act, Rules or conditions of
licence as they stood. He is also entitled to enforce his rights. No executive
E order, can be issued after a long time to fasten a new liability upon the
licensee particularly when grant of licence for each year would result in a
separate contract which may not only provide for a different price but
also different terms and conditions as well as the mode and manner in
which the rights of the parties thereto are required to be exercised and/
F or the obligations are to be discharged, more so when one contracting
party has no say therein. By reason of an executive act a liability cannot
be created with retrospective effect. The said rule shall squarely apply also
in relation to a statutory contract. Furthermore, the statutory authority
has been enjoined with a duty to follow the mode as regards recovery of
the costs of excise supervision. The mode and manner thereof having been
G fixed, the statutory authorities ordinarily must follow the procedure laid
down therefor. [892-C-E[
1.9. State in pursuance of its welfare activities may increase the pay
of its employees with retrospective effect but such burden cannot be passed
on to a licensee by an unilateral act on its part. For enforcing the same,
H there must be a contract to the contrary. 1892-F[
""
' .
I '
GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY
86 J
1.10. It may be true that under the rules or conditions of licence, A
the licensee is bound to comply with the provisions of the Act, rules and
regulations and conditions of the licence but such undertaking and/or
liability comes to an end with the cessation of contract. 1893-D)
1.11. State of Maharashtra did not expressly protect themselves that B
the respondents must pay any amount by way of increase in wages
pursuant to or in furtherance of the recommendations made by the Fifth
Pay Commission with retrospective effect. Having not done so, they are
not entitled to claim the same from the licencees. 1895-D-EI
1.12. A definite price is an essential element of a binding agreement C
and although a definite price need not be stated but assertion thereof either
by reason of express reason or implied reason is imperative. [897-B]
1.13. An act on the part of the State to increase wages of its
employees is a welfare act. When such increase takes place with
retrospective effect the validity thereof can be upheld only because it is D
for the benefit of the employees. Such a beneficial act on the part of the
State, however, would not bind a third party. An increase in wages by the
State with retrospective effect was an unilateral act on the part of the State.
If it was intended to be passed on by the State to the respondent the same
ought to have been the subject matter of a specific contract so as to avoid
the uncertainty of the terms of contract as contemplated under Section E
20 of the Indian Contract Act. The rule of construction of a contract is
that if the terms of the agreement are so vague and indefinite that it may
not be ascertained with reasonable certainty as regards intention of the
parties, the same would not be enforceable at law. Meaning of a contract
must be clear on its face. In any event, in the instant case, the contract p
had been worked out. Once the contract had been worked out, a fresh
liability cannot be thrust upon a contracting party. 1897-D-FJ
Black Diamond Beverages and Anr. v. Commercial Tax Officer, Central
Section Assessment Wing, Calcutta and Ors., 11998 j 1 SCC 458, relied on.
G
Conway Brothers and Savage v. Mulhern and Co., (Limiled) Vol. XVII
(1900-1901) The Times Law Reports 730; American Commerce Company
(Limited) v. Frederick Boehm (Limited), Vol. XXXV 1918-19 The Times
Law Reports 224; Occidental Crude Sales Inc. v. Lats is, (1976 Vol. 2 Lloyd's
LR 412 and Love v. Norman Wrighl (Builders) Limited Law Reports, (1944)
lKR~~re~redm.
H
862
SUPREME COURT REPORTS
(2003] 2 S.C.R.
A
Hals bury 'slaws of Englana: 4th Edition, Volume 41; Halsbury's Laws
of England, Fourth Edition, Reissue, referred to.
2. There is no rule of practice or precedent that where a Bench of
the High Court is faced with two conflicting views; one rendered by this
Court and another by a Full Bench of the same High Court; both have to
B be read together. In fact both can't be so read unless the decisions are
such which can be explained and the ratio of one may be held to be not
applicable in the fact of the matter. In the instant case, the views of the
full Bench and this Court are diametrically opposite and thus both the
c!ecisions could not have been given effect to simultaneously by reading
C them together or otherwise. 1897-G, H; 898-A, BJ
CIVIL APPEL LA TE JURISDICTION : Civil Appeal No. 7399 of
2001.
From the Judgment and Order dated 9.8.2000 of the Mumbai High
D Court in C.R.P. Nos. 3754 of 2000.
WITH
C.A. No. 7400/2001 and 1302 of 2003.
Soli J. Sorabjee, Attorney General, U.U. Lalit, S.S. Shinde, Arun
E Pednekar and V.N. Raghupathy for the Appellants.
V.B. Joshi, for the Respondent.
The Judgment of the Court was delivered by
F
AR. LAKSHMANAN, J. These three appeals are diiected against the
final judgment and order passed by the High Court of Judicature of Bombay
in Writ Petition Nos. 3754/2000, 3753/2000 and 3898/2000. The common
questions that arise in these appeals are as to whether the State of Maharashtra
is empowered to charge from the liquor licencees, under the Bombay
G Prohibition Act, 1949 (hereinafter referred to as "the Prohibition Act"), at
whose premises Government staff is posted for supervision as perthe provision
of Section 58A, are governed by the Maharashtra Civil Services (Revised
Pay) Rules, 1998 and other rules, resolutions made by the State Government
under the power vested in it by the proviso to Article 309 of the Constitution,
to fix the pay and other allowances of its employees, for levy and recovery
H of the cost of supervision to be paid to the State Governiiient as contemplated
.,
' Ir
GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY [AR. LAKSHMANAN, J] 863
under Section 58A of the Act or not? The further question may also arise as A
to whether the Commissioner is entitled to recover the supervision charges
retrospectively and raise demands for, inter alia, arrears of supervision charges
as per the circular letter No. SUC I 091/197 /Revised/I.!. 96/13-A dated
30.7.1999 for carrying out provisions of Sections 58A and 114 of the
Prohibition Act and carrying out an executive function under Article 162 of
the Constitution and/or a lawful order under the Act, falling under Sections B
58A and 114 of the Prohibition Act or Rule 17(4n of the Rules of 1966 and
Rule 6(36) of the Rules of 1973?
The respondents are holding a licence in Form P.L.L. for manufacture
of Indian made foreign liquor, prescribed under the provisions of the C
Maharashtra Distillation of Spirit and Manufacture of Potable Liquor Rules,
1966 (hereinafter referred to as "the Rules of 1966") and also holds a licence
in Form C.L.J. prescribed under the provisions of the Maharashtra Country
Liquor Rules, 1973 (hereinafter referred to as "the Rules of 1973") for
manufacture of Country liquor, made under the provisions of the Prohibition
Act. All transactions pertaining to receipt, transport, storage of spirit and D
manufacture, bottling and issues of the liquor manufactured are required to
be under excise supervision under both of the aforesaid 5ets of Rules. Under
Section 58A of the Prohibition Act, the State Government is empowered to
permit the manufacture and other related activities in respect of any intoxicant
under the supervision of excise staff and the cost of such staff is to be paid E
to the State Government by the manufacturer. The cost of such staff is required
to be paid to the State Government by the licensee in advance as per sub-rule
(12) of Rule 17 of the Rules of 1966 and sub-rule (12) of Rule 6 of the Rules
of 1973. The pay scales and other allowances of Government employees are
fixed by the State Government by issue of Rules and Government Resolutions
under the power vested in it by the proviso to Article 309 of the Constitution F
of India. The Commissioner, as empowered by the State Government, issues
circulars for levy and recovery of supervision charges based on the pay
scales and other allowances of the Government employees fixed by the State
Government under the Rules and Government Resolutions made under Article
309 in respect of the excise staff posted for supervision. Demand notices G
were issued by appellant No.4 - the Sub-Inspector of State Excise to the
respondents to pay the differential amounts of cost of supervision on account
of revision of pay-scales with retrospective effect ordered vide Government
Notification, Finance Department dated I 0.12.1998, as per the revised pay
scales for one Sub-Inspector and two constables. By the aforesaid Notification,
the State of Maharashtra had promulgated, under the power vested in it by H
864
SUPREME COURT REPORTS
[2003) 2 S.C.R.
A the proviso to Article 309 of the Constitution, the Maharashtra Civil Services
(Revised Pay) Rules, 1998 (hereinafter referred to as "the Rules of 1998"),
whereunder the pay scales of Government employees were revised and fixed
with retrospective effect from 1.1.1996. It was pointed out that because of the
increase in the cost of supervision with effect from 1.1.1996, vide aforesaid
Notification dated I 0.12.1998, on account of revision of pay scales and
B transport charges of the employees posted for supervision, it was necessary
to increase the said charges, which should be paid by the respondent within
15 days. The respondent, vide his letter dated 2.3.1999, informed the SubInspector that he had already paid the supervision charges in advance, he
would not be able to pass on the burden of the differential amount to his
C purchasers and that he was not liable to pay the differential amount. By
reminder letter dated 24.3.2000, appellant No.4 rejected the reply of the
respondent and directed him to pay the differential amount. The respondent
questioning the above letter, preferred Writ Petition No. 3754/2000 in the
Bombay High Court contending that, inter alia, in view of the decision of this
Court in Polychem Ltd and Anr. v. State of Maharashtra and Ors. reported
D in [l 998J 6 sec 196, the demand notice was liable to be quashed and set
aside. The appellants filed a reply to the writ petition and denied the contention
of the respondent herein. The writ petition came up for admission before the
High Court and the learned Judges observed that they were allowing the
petition at the stage of admission itself in view of the judgment in Po/ye hem's
E case (supra), without considering the submissions of the appellants that on
certain facts and aspects the ratio of the Polychem judgment was not applicable
to the case of the respondent, as set out in the affidavit in reply. However,
learned counsel appearing for the respondents herein, contended before the
High Court of Bombay that the challenge sought to be raised by them to the
impugned demand notices has already been concluded in their favour in the
F case of JE. Bilimoria & Sons v. State of Maharashtra and Ors. reported in
1999 Mh.L.J. (JI) 1079, wherein a similar issue was considered by the Division
Bench and it was held therein that the demand notice of the differences of
the supervision charges with retrospective effect was without jurisdiction.
Thus, the notice -in that case was quashed and set aside. Learned counsel
G further contended that the aforesaid judgment of the High Court of Bombay
in JE. Bilimoria 's case (supra) has been confirmed by this Court in the case
of Polychem (supra) wherein this Court was pleased to hold that the payment
of supervision charges with retrospective effect was without jurisdiction and
the impugned demand of differences of supervision charges retrospectively
could not be sustained. Learned counsel appearing for the respondents therein
H (appellants herein) contended that the judgment of the Division Bench of the ,
GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY [AR. LAKSHMANAN, J.] 865
Bombay High Court in the case of JE. Bilimoria (supra) was no longer a A
good law in view of the Full Bench judgment of the said Court in the case
of Mohan Meakin Ltd. and Anr. v. The State of Maharashtra and Ors. reported
in 1993 Mh.L.J. (1) 13. The Full Bench while resolving the conflict did not
approve the view taken in the case of J.E. Bilimoria (Supra) and overruled
the same and confirmed the view of another Division Bench of the High
Court of Bombay in the case of Gustad Mayur Irani v. The State of B
Maharashtra reported in 1991 (51) ELI 232 (Born.) [W.P.No.940/1982]. It
was, therefore, submitted that the ratio of the decision in J.E. Bilimoria 's
case (supra) has no application in the facts and circumstances of the present
case. It was further contended that under Section 58A of the Prohibition Act,
the State Government has the power to recover from a licensee a cost of the C
staff appointed to supervise the licensed premises for excise purposes. The
Maharashtra Foreign Liquor (Storage in Bond) Rules, 1964 (hereinafter
referred to as "the Rules of 1964) also provide that the State Government can
recover from the licensees the cost of staff appointed at the licensed premises/
bonded warehouse for excise supervision. It was further urged that condition
No.3 of the licence requires the petitioners to pay such amount of cost as D
determined by the respondents, appellants herein, in advance before the
beginning of every quarter. This condition is merely for administrative
convenience and it does not prevent the State Government from recovering
the cost of such staff subsequently, especially when both Section 58A of the
Prohibition Act as well as Rule 7 of the 1964 Rules do not prescribe any time E
within which such cost has to be recovered. It was further contended that in
view of the application of recommendations of the Fifth Pay Commission,
the Dearness Allowance and other emoluments payable, inter alia, to such
supervisory staff have been increased with effect from 1.1.1996 and the cost
of supervision charges has proportionately gone up and this is to be recovered
from the licensee. It was further submitted that. the increased cost, however, F
has to be determined from 1.1.1996 because of the retrospective raise granted
to the staff by the Government and that the licensee do not have any say in
the salary and other emoluments paid to such staff. It was also contended that
under Section 58A of the Prohibition Act and the relevant Rules, there is a
clear existing statutory liability on the licensees to pay the cost of the G
supervisory staff and what is sought to be recovered from the respondents
herein is the increased cost of such supervision which has been taken place
from 1.1.1996 and the demand was made when the cost increased.
The Division Bench held that the case on hand is squarely covered by
the decision of the Bombay High Court in JE. Bilimoria 's case (supra) and H
866
SUPREME COURT REPORTS
[2003] 2 S.C.R.
A that the view taken by the Bombay High Court has been confirmed by this
Court in Polychem 's case (supra) wherein it was held that the State Government
is not empowered to collect supervision charges with retrospective effect
under the Prohibition Act. The Division Bench held that they are bound by
the aforesaid view taken by this Court and, therefore, they have no other
alternative but to quash and set aside the demand notices issued by respondent
B No.4 dated 22.3.2000 and 19.2.2000 in W.P.No. 3753/2000 and W.P.No.
3754/2000 respectively. The writ petition was allowed and the rule made
absolute in terms of prayer clause (a) in both the petitions with no order as
to costs.
C
Aggrieved by the orders passed by the Born bay High Court in the
above writ petitions, these appeals by way of special leave petitions were
filed by the Government of Maharashtra and others reiterating the contentions
raised before the Bombay High Court.
We heard Mr. Soli J. Sorabjee, learned Attorney General, appearing for
D the appellants and Mr. V.B. Joshi, learned counsel, appearing for the
respondents.
The learned Attorney General submitted that the High Court erred in
solely relying upon the judgment passed by this Court in the case of Po/ye hem
(supra) without considering the distinguishing facts and circumstances, as
E submitted by the appellants in the case of the respondents and without
considering certain other decisions of this Court on the basis of which these
appellants had submitted that the ratio of Polychem 's judgment was not
applicable to the case of the respondents. He further submi~ed that the High
Court erred in not appreciating the proper effect of the concerned provisions
F and directions under the Act and under the Constitution which have to be
considered together with relevant statutory provisions and the consequential
directions. The learned Attorney General invited our attention to Sections
11, 12, 13 and 49 of the Act, which read as under:
G
H
"11. Notwithstanding anything contained in the following provisions
of this Chapter, it shall be lawful to import, export, transport,
manufacture, bottle, sell, buy, possess, use or consume any intoxicant
or hemp or to cultivate or collect hemp or to tap any toddy producing
tree or permit such tree to be tapped or to draw toddy from such tree
or permit toddy to be drawn therefrom in the manner and to the
extent provided by the provisions of this Act or any rules, regulations
or orders made or in accordance with the terms and conditions of a
GOVT. OF MAHARASHTRA v. DEOKAR'S DISTILLERY [AR. LAKSHMANAN, J.] 867
licence, permit, pass or authorisation granted thereunder.
A
12. No person shall-
(a) manufacture liquor;
(b) construct or work any distillery or brewery;
( c) import, export, transport or possess liquor; or
( d) sell or buy liquor.
13. No person shall-
( a)
bottle any liquor for sale;
(b) consume or use liquor; or
( c) use, keep or have in his possession any materials, still, utensils,
imp1ements or apparatus whatsoever for the manufacture of any
liquor.
B
c
D
49.