# STATE OF ANDHRA PRADESH v. Y. PRABHAKARA REDDY MARCH 4, 1987 - **Citation:** [1987] 2 S.C.R. 513 - **Court:** Supreme Court of India - **Decided:** 1987-03-04 - **Case number:** Civil Appeal Nos. 437448 Of 1978 - **Bench:** 0. Chinnappa Reddy, M.M. Dutt - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-andhra-pradesh-v-y-prabhakara-reddy-march-4-1987-9496 - **Pages:** 21 ## Headnote B Andhra Pradesh Excise Act, 1968: ss.2(10), 17, 21-23/Andhra ( Pradesh (Arrack, Retail Vend Special Conditions of Licences) Rules, \ 1969: ".7, II & 15/Andhra Pradesh (Lease of Right to Sell Liquor in Retail) Rules 1969: ".2(ix), 3, 16, 18 & 22/Andhra Pradesh Excise ... ,-··- (Amendment) Act, 1984--Minimum guaranteed quantity of a"ack C short drawn-Contractor whether entitled to deduct from issue price excise duty component-Issue price-Connotation of. -J. Section 17 of the Andbra Pradesh Excise Act 1968, as it stood at the relevant time, provided for the grant of lease for the manufacture or sale of an intoxicant. It also provided that a lease shall not take effect D until a licence under the Act was also issued. Section 23 provided that the sum accepted in consideration for the grant of any lease under s.17 was to be the excise duty payable in respect of that excisable articleRule 3 of the Andbra Pradesh (Lease of Right to Sell Liquor in ;., Retail) Rules, 1969 prescribes that every lease of right to sell liquor in E retail shall be granted by auction. Rule 7 of the Andbra Pradesh (Arrack Retail Vend Special Conditions of Licences) Rules, 1969 requires the licences to purchase arrack from the distillery, warehouse or depot allotted by the Government and to pay 'issue price' as notified. Rule 15 provides for the purchase of a specified minimum guaranteed ~ quantity of arrack every month and for the adjustment of the issue F "" price in case of any short-fall in the purchase of the minimum + guaranteed quantity ofliquor. A question arose as to whether under the Excise-Law prevailing in the State, the Government was entitled to claim from the excise contractors, wbo failed to lift -the minimum guaranteed quantity of liquor, G the amount said to represent the excise duty component in the issue price of liquor relating to such unlifted quantity of liquor. A Full Bench of three Judges of the High Court in V. Narasimha Rao v. Superintendent of Excise, (AIR 1974 AP 157) held In favour of the Government_ It took the view that three items, namely, duty, cost H 513 • 514 SUPREME COURT REPORTS [1987] 2 s.c. R. A and sales tax constituted the issue price. Thi~ view, however, was over· ruled by the Full Bench of Five Judges of the same High Court In Atluri Brahmanandam v. Tahsildar of Gannavaram, (AIR 1977 AP 196) wherein it was held !hat the Government could not do so. It treated the excise duty as a severable element of issue price. That judgment was assailed in the appeals and petitions filed by the Government. B To nullify the effect of that judgment and to validate the demands raised by the Government the State Legislature enacted the Andbra Pradesh Excise (Amendment) Act X of 1984. The amended s.17 pro· vides for grant of lease or licence for exclusive privilege of manufacture, supply by wholesale or sale of any liquor or other intoxicants. The new C s.23 empower~ the competent officer to accept payment of a sum in consideration of the grant of lease or licence or both for the exclusive privilege in respect of the liquor or any other intoxicant under s.17. Section 4 of the Amending Act, provides for the validation of earlier demands made in respect of issue price of short drawn minimum guaranteed quantity of liquor. Demands raised pursuant to the Amend· D ing Act were upheld by the High Court by a later judgm~nt. The aggrieved excise contractors filed appeals to this court. Some of the contractors who bad originally succeeded because of the decision of Five Judges Bench and were again called upon to make good the deficit after the Amending Act was passed, having failed iu the High E Court filed special leave petitions to this Court. It was contended for the aggrieved contractors that what was sought to be recovered from them was excise duty on unlifted quantity of liquor which was not authorised by the provisions of the Act, as the excise duty being a part of the issue price it could onl:' :elate to liquor F drawn by them and not p ## Text _Characters 0–39,971 of 48,569. This is a partial read: ask again with offset=39971 for what follows._ STATE OF ANDHRA PRADESH v. Y. PRABHAKARA REDDY MARCH 4, 1987. A [0. CHINNAPPA REDDY AND M.M. DUTT, JJ.] B Andhra Pradesh Excise Act, 1968: ss.2(10), 17, 21-23/Andhra ( Pradesh (Arrack, Retail Vend Special Conditions of Licences) Rules, \ 1969: ".7, II & 15/Andhra Pradesh (Lease of Right to Sell Liquor in Retail) Rules 1969: ".2(ix), 3, 16, 18 & 22/Andhra Pradesh Excise ... ,-··- (Amendment) Act, 1984--Minimum guaranteed quantity of a"ack C short drawn-Contractor whether entitled to deduct from issue price excise duty component-Issue price-Connotation of. -J. Section 17 of the Andbra Pradesh Excise Act 1968, as it stood at the relevant time, provided for the grant of lease for the manufacture or sale of an intoxicant. It also provided that a lease shall not take effect D until a licence under the Act was also issued. Section 23 provided that the sum accepted in consideration for the grant of any lease under s.17 was to be the excise duty payable in respect of that excisable articleRule 3 of the Andbra Pradesh (Lease of Right to Sell Liquor in ;., Retail) Rules, 1969 prescribes that every lease of right to sell liquor in E retail shall be granted by auction. Rule 7 of the Andbra Pradesh (Arrack Retail Vend Special Conditions of Licences) Rules, 1969 requires the licences to purchase arrack from the distillery, warehouse or depot allotted by the Government and to pay 'issue price' as notified. Rule 15 provides for the purchase of a specified minimum guaranteed ~ quantity of arrack every month and for the adjustment of the issue F "" price in case of any short-fall in the purchase of the minimum + guaranteed quantity ofliquor. A question arose as to whether under the Excise-Law prevailing in the State, the Government was entitled to claim from the excise contractors, wbo failed to lift -the minimum guaranteed quantity of liquor, G the amount said to represent the excise duty component in the issue price of liquor relating to such unlifted quantity of liquor. A Full Bench of three Judges of the High Court in V. Narasimha Rao v. Superintendent of Excise, (AIR 1974 AP 157) held In favour of the Government_ It took the view that three items, namely, duty, cost H 513 • 514 SUPREME COURT REPORTS [1987] 2 s.c. R. A and sales tax constituted the issue price. Thi~ view, however, was over· ruled by the Full Bench of Five Judges of the same High Court In Atluri Brahmanandam v. Tahsildar of Gannavaram, (AIR 1977 AP 196) wherein it was held !hat the Government could not do so. It treated the excise duty as a severable element of issue price. That judgment was assailed in the appeals and petitions filed by the Government. B To nullify the effect of that judgment and to validate the demands raised by the Government the State Legislature enacted the Andbra Pradesh Excise (Amendment) Act X of 1984. The amended s.17 pro· vides for grant of lease or licence for exclusive privilege of manufacture, supply by wholesale or sale of any liquor or other intoxicants. The new C s.23 empower~ the competent officer to accept payment of a sum in consideration of the grant of lease or licence or both for the exclusive privilege in respect of the liquor or any other intoxicant under s.17. Section 4 of the Amending Act, provides for the validation of earlier demands made in respect of issue price of short drawn minimum guaranteed quantity of liquor. Demands raised pursuant to the Amend· D ing Act were upheld by the High Court by a later judgm~nt. The aggrieved excise contractors filed appeals to this court. Some of the contractors who bad originally succeeded because of the decision of Five Judges Bench and were again called upon to make good the deficit after the Amending Act was passed, having failed iu the High E Court filed special leave petitions to this Court. It was contended for the aggrieved contractors that what was sought to be recovered from them was excise duty on unlifted quantity of liquor which was not authorised by the provisions of the Act, as the excise duty being a part of the issue price it could onl:' :elate to liquor F drawn by them and not pertain to undrawn liquor, that without amending ss.21 and 22 of the Excise Act the amendment of s.23 affected by the Legislature led nowhere towards achieving the result aimed at by the Legislature and that the Legislature could not validate the demands earlier made and struck down hy the Courts, merely by enacting that the demands were to be deemed to be valid without removing the vices G and the defects. Disposing of the appeals and the special leave petitions, the Court, HELD: 1.1 Once 'issue price' is . determined its components, such as excise duty, cost price, transport charges etc. cease to retain H their individual character. They cannot then be severed from the issue • . --.; - .... -- + I STATE OF ANDHRA PRADESH v. Y.P. REDDY 515 price and dealt with separately. The Five Judges Bench of the High Court was, therefore, wrong in holding that excise duty was a severable A element of issue price. [526H; 527A-B] 1.2 Issue price is the sum total of whatever has gone into the price of liquor at the time it is issued and it is a single pre-determined definite sum per bulk litre and not the total of separate sums representing to B many specified components. The 'issue price' is that which is notified as issued price and not its components, if any. These components which have come together to become 'issue price' are rendered incapable of being separated again. Excise duty loses its identity, as it were, and becomes an inseparable part of 'issue price'. [525H; 526A] A lessee-licensee, therefore, was not entitled to claim deduction C from the issue price payable by him in respect of short drawn quantity of arrack the amount attributable to the excise duty. [528F] V. Narasimha Rao v. Superintendent of Excise, AIR 1974 AP 157, distinguished. D Atluri Brahamanandam v. Tahsi/dar of Gannavaram, AIR 1977 AP 196, overruled. 2.1 The issue price is no more and no less than the price which the contractor agrees to pay for the grant of the privilege to sell liquor, E drawn or undrawn. The minumum guaranteed quantity of liquor as well as the issue price are both fixed well in advance of the auction in regard to each shop and it is with full knowlege of the issue price and the minimum guaranteed quantity that every bidder participates in the auction. [527D; 526C-D) 2.2 There can be no question that issue price must generally relate to liquor which is drawn by the contracor but it does not follow therefrom that issue price cannot be adopted by agreement between the parties as a measure of compensation to be paid in the case of undrawn liquor. [527C-D) Panna Lalv. State of Rajasthan, [1975] 2 SCR 633, referred to. 3.1 Even prior to the 1984 amendment, the amount which each of the contractors was required to pay or to have adjusted was not excise duty on undrawn liquor, but was part of the price which he had agreed F G to pay for the grant of the privilege to sell liquor. [527D) H 516 SUPREME COURT REPORTS [1987] 2 S.C.R. A 3.2 All rights in regard to manufacture and sale of intoxicants vest in the State. It is open to the State to part with those rights for a consideration. The consideration for parting with the privilege of the State is neither excise duty nor licenee fee but it is the price of the privilege. [527E-F] B c D 3.3 Reading sections 17 and 23 of the Andhra Pradesh Excise Act 1968 together with the Andhra Pradesh Excise (Lease of Right to Sell Liquor in Retail) Rules 1969 and Andhra Pradesh (Arrack Retail Vend Special Conditions of Licences) Rules 1969, makes it evident that the privilege of selling liquor, which includes the lease of the shop for an area and.the licence to sell liquor therein may be granted by the State by public auction subject to : (1) payment of rental being the highest bid at the auction, (2) the requirement that the licensee shall purchase arrack at the issue priee, and (3) the further requirement that the licensee shall purchase a minimum guaranteed quantity of arrack, which he has to make good in case of short fall. The consideration for the grant of the privilege to sell liquor is not merely the rental to be paid by the lessee but also the issue price of the arrack supplietI or treated as supplied in case of short fall, which is also to be paid by the lessee-licensee. There is no question of the lessee-licensee having to pay the excise duty though it may be that the issue price is arrived at after taking into account the excise duty payable. [5288-E) E Panna Lal v. State of Rajasthan, [1975) 2 SCC 633; State of Haryana v. Jage Ram, [1980] 3 SCR 746 and Har Shankar & Ors. v. The Dy. Excise & Taxation Commr. & Ors., [1975] 1 SCC 737, referred to. Bimal Chandra Banerjee v. State of Madhya Pradesh, [1971] 1 \ F SCR 844; Madhya Pradesh v. Firm Cappulal etc., [1976] 2 SCR 1041 -t" and Excise Commissioner, Unar Pradesh v. Ram Kumar, 1976 (Suppl) SCR 532, distinguished. 4. The new s.17 of the Excise Act makes it clear that what is proposed· to be granted is the exclusive previlege to manufacture or sell G liqnor in the shape of a lease or licence or both. The explanation makes it clear that the lease shall not take effect unless a licence is issued. Having regard to the vital amendment of s.17, no further amendment of s.21 and 22 was necessary. In the new s.23 it is now specified that the· pa~ent in consideration of the grant of lease or licence or both for the exclusive privilege is to be instead of or in addition to any excise duty or H fees Ieviable in ss.21 and 22. The amendments effected to ss.17 and 23, -·{ I STATE OF ANDHRA PRADESH v. Y.P. REDDY [REDDY, J.) 517 therefore, have fulfilled the object of removing the vices or defects in A the Act if indeed there were any. [533C-F] CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 437448 Of 1978 Etc. From the Judgment and Order dated 18.1.1977 of the Andhra Pradesh High Court in Writ Petition No. 4485, 3399, 4979, 5819 of 1974. Y.S. Chitale, SoliJ. Sorabjee, P.P. Rao, A.S. Nambiar, A. Chitale, T.V.S.N. Chari, N. Mathur, W. Quadri, Ms. V. Grover, Ms. Sunita Mudigouda, T.D. Ramayya, f'>· Mariarputham, T.C. Gupta, K.V.G. Rama Rao and G. Narayana Rao for the appearing parties. The Judgment of the Court was delivered by CHINNAPPA REDDY, J. The primary question involved in thB c ese appeals and petitions is whether under the 'Excise-Law' prevailing D in the State of Andhra Pradesh, the Government is entitled to claim from the Excise Contractors who have failed to lift the 'Minimum Guaranteed Quantity' of liquor the amount said to represent the 'excise duty component' in the issue price of liquor relating to such unlifted quantity of liquor. A full bench of three judges of the High Court of Andhra Pradesh, in V. Narasimha Rao v. Superintendent of E Excise, AIR 1974 AP 157 held that the Government could but this view was overruled by a Full Bench of Five Judges of the same High Court in Atluri Brahmanandam v. Tahsildar of Gannavaram AIR 1977 AP 196 where it was held that the Government could not. It is the judgment of the Full Bench of Five Judges which is in question in the appeals and petitions filed by the Government. With a view to cure the F defects pointed out by the Full Bench of Five Judges and to validate the demands raised by the Government, the Andhra Pradesh Legislature enacted the Andhra Pradesh Excise Amendment Act X of 1984. Demands raised pursuant to the Amending Act were upheld by the High Court by a later judgment. The aggrieved Excise Contractors have filed appeals and they are also before us. In some cases the G contractors who had originally succeeded because of the decision of the Five Judge Full Bench were again called upon to make good the deficit after the Amending Act was passed. They questioned the fresh demands but failed in the High Court. Their petitions for Special Leave to Appeal are also before us. H A B 518 SUPREME COURT REPORTS [1987] 2 S.C.R. Entry 51 of List II of the seventh schedule to the Constitution empowers the State to levy duties of Excise on alcoholic liquors for human consumption (not including medicinal and toilet preparations containing alcohol) manufactured or produced in the State' and counter availing duties on such alcoholic liquors manufactured or produced elsewhere in India. An Excise duty levied by the State on alcoljolic liquors is therefore, primarily a duty on the manufacture or production of such alcoholic liquors. Section 2(10) of the Andhra Pradesh Excise Act. 1968 defines "Excise. Duty" or "Countervailing duty" to mean "the duty of Excise or countervailing duty, as the case may be mentioned in Entry 51 is List II of the Seventh Schedule to the Constitution." 'Excise Revenue' is defined by s.2(12) to mean C 'Revenue derived or derivablt; from any duty, fee, tax, rent, fine, penalty or confiscation levied, imposed or ordered under the provisions of this Act or other law for time being in force elating to intoxicating drugs'. Section 17 of the Act, before and after the amendment was and is as follows: D "Section 17 before amendment Section 17 as amended by Act No. JO of 1984 E Power to grant lease: Sec. 17: Grant of exclusive (i) The Government may, subprivilege of manufacture etc: ject to such conditions as (!) subject to the provisions they may deem fit to impose, of s.28 and any rules made grant for a fixed period to in this, the Govt·. may, subject any person, at any_place a to such conditions as thay F lease jointly or severally may deem fit to impose, grant for the supply, manufacture for a fixed period to any or sale of any intoxicant. person at any place a lease or licence or both either Explanation: A lease shall jointly or severally for the not take effect until the exclusive privilege- • G collector or any other competent officer has issued (i) of manufacturing or of a licence under this Act. supplying by wholesale or of both, or (2) The Government may (ii) or selling by wholesale confer on any officer the or by retail, or H power mentioned in sub- + STATE OF ANDHRA PRADESH v. Y.P. REDDY [REDDY, J.] 519 section(l). (iii) of manufacturing or of supplying by wholesale, or of both, and of selling by retail, any liquor or other intoxicant within any such area in the State as may be specified in the said order. Explanation: A lease shall not take effect until the Collector or any other competent officer has issued a licence under this Act. (2) The Government may confer on any officer the power mentioned in sub-section(l)." A B c Sections 21and22 which remained unchanged are as follows: "Section 21: Excise duty or Countervailing duty on excisD able articles: (1) The Govt. may, by notification levy an excise duty on any excisable article manufactured or produced in the State at such rate, not exceeding the rates mentioned in the Schedule, as may be specified in the notification. (2) The Govt. may by notification, levy a countervailing duty on any excisable article manufactured or produced elsewhere in India and imported into the State at such rate as may be specified in the notification which may not exceed the rates on excise duty on similar excisable articles E levied under sub-section(l). F (3) Different rates may be specified in sub-section(l) and (2) for different kinds of excisable articles and different modes of levying duties under s.22. Section 22:- Modes of levying duties: The excise duty and G the countervailing duty under s.21 shall be levied in one or more of the following modes: (a) rateably, on the quantity of any excisable article produced or manufactured in ,or issued from a distillery, brewery or manufactory or warehouse or imported into the H State; A B c 520 SUPREME COURT REPORTS [1987] 2 S.C.R. (b) in the case of spirits or other liquors produced in any distillery, brewery or manufactory in according with its quality or strength or in accordance with such scale of equivalents calculated on the quantity of materials used, or by the degree or attenuation of the wash or wort as the case may be, prescribed; ( c) In the case of today, in the form of a tax on each variety J of excise tree from which teddy is drawn having due regard to the period during which such tree is capable of yielding today; ) -~ ( d) by fees on licences for the manufacture supply olale of . any excisable article." Section 23 before and after amendment was as follows: D "Section 23 before amend ment Section 23 as substituted by Act IO of 1984. Excise duty in respect of lease: Notwithstanding anything in Sections 21 and E 22, the sum accepted in consideration of the grant of any release relating to any excisable article under s.17, shall be the excise duty or countervailing F duty payable in respect of the excisable article, in addition to any duty or fees paid under s.21 & 22. G H Sec. 23: Payment for exclusive privilege: Instead of or in addition to any excise duty or fees leviable under sections 21 and 22, the Commissioner or any any other competent officer may accept payment of a sum in consideration of the grant of lease or licence or both for the exclusive privilege in respect of the liquor or any other intoxicant under sec. 17. Validation: Where before the commencement of this Act, any issue price (which includes excise duty also) has been collected or recovered from the licensee in respect of short-drawn STAIE OF ANDHRA PRADESH v. Y.P. REDDY [REDDY, J.) 521 or undrawn minimum guaranteed A ' 1 quantity of arrack in pursuance of rule 15 of the A.P. Excise (Arrack Retail, Vend and Special conditions of Licences) Rules, 1969, by deducting such price from B •1 the advance money paid by the licensee, then, notwithstanding anything contained ,.., ;r-V-· in any judgment, decree or order of any court, tribunal or other authority to the c contrary, the price so collected or recovered shall be deemed to be and shall be deemed always to have been validly collected or recovered as consideration for the grant D of lease or licensee or both to the lessee or licensee for the exclusive privilege in respect of sale of liquor in accordance with the provisions of the principal Act as amended by this E Act as if the amendments made to the principal Act by a - sections 2 and 3 of this Act had been in force at all material + . times and accordingly (a) all acts, proceedings or things F done or taken by the State Govt. or by any officer of the State Govt. or by any other authority in connection with the collection of such price shall for all G ~ purposes, be deemed to be and to have always been done or taken in accordance with law; (b) no suit or other proceeding shall be maintained or contained in any Court or before any authority H A B c D E F G H 522 SUPREME COURT REPORTS [1987] 2 S.C.R. for the refund of and no enforcement shall be made by any Court of other authority of any decree or order directing the refund of any such price which has been collected as if the provisions of the principal Act as amended by tjiis Act had been in force at all material times." The first entry in the Schedule to the Act is as follows: "No. Description of excisable article 1. Arrack Mode of levying duty on the quantity issued from the distillery of warehouse. Maximum rate of duty Rupees eight per litre of the strength of proof spirit." We mentioned earlier that the Andhra Pradesh Legislature amended the Andhra Pradesh Excise Act to nullify the effect of the Full Bench judgment in Atluri Brahmanandam v. Tahsildar of Gannavaram (supra). We may refer to the provisions of the amending Act. Section 2 of the Amending Act provides for the substitution of a new s.17 for the old. s.17. We have already extracted both the old and the new sections. Sections 3 of the amending Act provides for the stlbstitution of old s.23 by a new s.23. We have already extracted both the old and the new sections. Section 4 of the amending Act provides ~ for the Validation of earlier demands made in respect of issue price of short-drawn minimum guaranteed quantity of liquor. It is necessary to set out the whole of this provision. It is as follows:- "4. Validation -Where, before the commencement of this Act, any issue price {which includes excise duty also) has been collected or recovered from the licensee in respect of }- short-drawn or undrawn minimum guaranteed quantity of arrack in pursuance of rule 15 of the Andhra Pradesh Excise {Arrack Retail, Vend and Special Conditions of Licences) Rules, 1969, by deducting such price from the advance money paid by the licensee, then, notwithstanding - STATE OF ANDHRA PRADESH v. Y.P. REDDY [REDDY, J.l 523 anything contained in any judgment decree or order of any court, tribunal or other authority to the contrary, the price so collected or recovered shall be deemed to be and shall be deemed always to have been validly collected or recovered as consideration for the grant of lease or licence or both of the lessee or licensee for the exclusive privilege in respect A of sale of liquor in accordance with the provisions of the B principal Act as amended by this Act as if the amendments made to the Principal Act by sections 2 and 3 of this Act ~ .. -· had been in force at all material times and accordingly, :- (a) all acts, proceedings or thing done or taken by the State Government or by any officer of the State Government or by any other authority in connection with the collection of such price shall for all purposes be deemed to be ancl to have always been done or taken in accordance with law. (b) no suit or other proceeding shall be maintained or continued in any court or before any authority for the refund, of, and no enforcement shall be made by any Court or other authority of any decree or order directing the refund of, any, such price which has been collected and which would have been validly collected as if the provisions of the Principal Act as amended by the Act had been in force at all material times.'' The Andhra Pradesh( Arrack, Retail Vend Special Conditions of Licences) Rules, 1969 were made by the Government of Andhra Pradesh in exercise of the powers conferred by various provisions of "t the Andhra Pradesh Excise Act. Rule 7 obliges the licensee to buy arrack from a recognised distillery, warehouse or depot as may be alloted by the department at the issue price as notified by the Commis· sioner from time to time. Rule 11 provides for remittences of duty etc. into the Government treasury. Rule 15 deals with minimum guaranteed quantity of liquor. It is necessary to extract the first two clauses of rule 15 and they are as follows:- "15. Minimum guaranteed quantity of arrackc D E F G ( 1) No licensee shall purchase arrack less than the specified minimum guaranteed quantity in any month. If in any month, quantity less than the minimum guaranteed H 524 A c D E SUPREME COURT REPORTS [1987] 2 S.Q.R. quantity fixed for that month is drawn, at the.end of that month issue price to the extent of deficit purchase shall be deducted from the advance money paid by ti)e licensee under the minimum quantity of arrack guaranteed by him ' and the licensee shall be called upon to indemnity the a.mount so adjusted by the end of the succeeding,month in .• which..short drawn quantity had occured . . Provided that the Excise Superintendents may permit the licensee to lift the short drawn minimum guaranteed quantity of the previous month in the suceeding month for . · ,._ 1 • special reasons expert for the month of September, unless ..,. the licensee has committed default in lifting the mmimum guaranteed quantity for two successive months; Provided further that where the Commissioner deems it necessary to permit a shop keeper to draw the deficit quantity short drawn in any month in the subsequent, he shall obtain the prior approval of the Government for granting such perrnission. (2) Where a licensee fails to lift the arrack as perrnitted by the Excise Superintendent or to indemnity the advance amount so adjusted by the end of the succeeding month in which the short dnt'wal of quantity had occurred, the right acquired by the defaulting licensee shall be reauctioned forthwith." Rule 17 prescribes "every licensee shall be bound by the provisions of Andhra Pradesh Excise Act, 1968, and the rules and orders made F under from time to.time." ~ The Andhra Pradesh Excise(Lease of right to sell liquor in retail) rules 1969 are another set of rules made under the various provisions of Andhra Pradesh Excise Act. Rule 2(ix) defines "rental" to mean 'the rent payable in respect of a shop or group of shops in consideraG ti on of the grant of lease for sale of liquor'. Rule 3 provides for the lease of the right to sell liquor in retail. Clause 1 of Rule 3 may be usefully extracted here and it is as follows: H "3. Lease to right to sell liquor in retail: (1) Subject to the provisions of these rules, every lease of right to sell f-.. . STATE OF ANDHRA PRADESH v. Y.P. REDDY [REDDY, J.l 525 liquor in retail shall be granted by auction. The lease shall ordinarily be for a period of one excise year; ' Provided that where the Commissioner considers it necessary to grant the lease of right to sell liquor in retail in ,, any other manner, he shall do so with the prior approval of . the Government." The rest of. the rules relate to the procedure to be followed at the auction and thereafter. Rule 16 requires the auction purchaser to pay2 A B per cent of the annual rental as earnest money together with one month's rental on the day of auction immediately after the acceptance of tender or bid as the case may be. The earnest money and one month's rental are to be in addition to the deposit of rental prescribed C by Rule 18. Rule 18(1) provides for the deposit by auction purchaser within fifteen days from the date of auction, two months' rental in cash or in fixed deposit certificates. Rule 21 provides for execution of counterpart agreement by the licensee in form 42. This is required to · be done before taking out a licence in respect of lease granted to him D for the sale 'of liquor. Rule 22 provides that the lease shall not take effect until the auction purchaser obtains a licence. Rule 24 prescribes that every auction purchaser shall be bound by all the provisfons of the Excise Laws which are in force or which may come into force and of the rules or order5 made from time to time by the Government or Commissioner or by the competent authority. The prescribed form for E the counterpart agreement provides among other thing for an undertaking that tbe licensee shall abide by "11 the provisions of the Andhra Pradesh Excise Act and the Rules and Orders thereunder existing and also those that would be issued from time to time in that respect. The Andhra Pradesh Excise (Lease of right to sell liquor in retail) Rules, 1969 and the'.Andhra Pradesh Excise(Arrack, Retail Vend Special F Conditions for Licences) Rules were duly amended in 1984. - It is to be mentioned here that the issue price of arrack is notified well in advance of the Excise year and the minimum guaranteed quantity of liquor is. also fixed in regard to each shop well in advance of the auction. The issue price is always a definite sum per bulk litre of G liquor. The notification specifying the issue price does not attempt to split up the issue price into various components such as cost price, Excise duty, transport charges etc. Cost price, Excise duty and transport charges are not separately and individually charged. Issue price is the sum total of whatever has gone into the price of liquor at the time it is issued and it is a single pre-determined definite sum and not the total H A B 526 SUPREME COURT RIEPORTS [19871 2 S.C.R. of separate sums representing so many· specified components. For . example, the issue price of arrack for the year 1979-80 was notified in the following manner:- "In exercise of the powers conferred by Rule 7(1) of the Andhra Pradesh Excise (Arrack, Retail sale Spec'ial Conditions for Licences) Rules, 1969, the Commi·ssioner of Excise, Andhra Pradesh, hereby notifies the is~.ue price of arrack for the Excise Year 1979-80 at Rs.5.10 per bulk liter of 30° U.P. strength and Rs.3 per bulk liter of 60° U.P. strength." C It is however not disputed that excise duty does enter the determination of the issue price but that has nothing to do with the excise contractor whose obligation is to pay the whole of the issue price. As we > said the issue price as well as minimum guanμ1teed quantity are both fixed well in advance and it is with full knowledge off the issue price and the minimum guaranteed quantity that every bidder participates in D the auction. We wish to emphasise here that the 'issue p•rice' is that which is not notified as issue price and not its compom:nts, if any. These components which have come together to b•ecome 'issue price' are not to be separated again. To borrow the analogy of Chemistry it is a chemical compound and not a mechanical mixture. Excise duty loses its identity, as it were, and becomes an inseparable part of 'issue E price'. The learned counsel for the contractors however, argued that excise duty was admittedly a part of issue price 2md that the legislature, ~ while amending the Excise Act in 1984, had also recognised the distinctive duty element in issue p·rice. He also iinvited our attention to Narasimha Rao v. Superintendecnt of Excise (sup