# STATE OF MADHYA PRADESH & ORS v. TJKAM DAS

- **Citation:** [1975] Supp. 1 S.C.R. 234
- **Court:** Supreme Court of India
- **Decided:** 1975-04-22
- **Case number:** Civil Appeal No. 668 of 1968
- **Bench:** V. R. Krishna Iyer, R. S. Sarkar!A, A. C. Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-madhya-pradesh-ors-v-tjkam-das-6513
- **Pages:** 6

## Headnote

Madhya Pradesh Excise Act (2 of 1915)-General conditions of licence
1nade u11der the Act, r. 26 and Foreign Liquor Rules n1ade u11der the Act,
r. 4-Balance of stock 011 expiry of licence-Enhanc~nzent of licence fee for
next year-If bafance of stock liable to enhanced fee.
Delegated legislation-When rule can be n1ade retrospective.
The respondent had a licence for sale of foreign liquor is..'!tted under the
J;orcign Liquor Rules made under the Madhya Pradesh Excise Act, 1915. On
the date of the expiry of the licence (Jlvlarch 31, 1964), he had a large quantity of unsold foreign liquor, \Vhich had to be surrendered by him to the authorities.
As the Government was conten1plating enhancing the licence fee. he
gave an undertaking to pay the difference and he \\'as allowed to keep the execs.;
stock.
He also obtained a fresh licence for one year comn1encing on A::iril
1, 1964.
On April 25, 1964, the Foreign Liquor Rules were amended.
The scale
of licence fees i,.vas enhanced \Vith retrospective effect from April 1, 1964;
and r. IV wa~ amended providing that the licensee shall be liabl~ to pay the
difference in the event of the enhancement of the scale of fees on the balance of
stocks during the currency or on the expiry of the licence.
But the State's demand for the difference was successfully challenged by
the' respondent, in the High Court, on the ground that the balance of stocks on
f\iarch 31, 1964, was covered by the licence fee already p<iid and conld not
be subjected to enhanced levy.
F
Allowing the appeal to this Court,
HELD : (1) Subordinate legislation made by a delegate cannot have retrospective effect unless the rule-making power in the concerned statute expressly
er by necessary implication confers power in this behalf.
But s. 63 of ~he
Act does contemplate not merely the po\ver to make rules but to bring th~:n1
into force from any previous date. It states that all rules made under the 1\ct
shall have effect from the date of publication in the official gazette or frtJln
.n1ch other date as may be specified in that behalf. Therefore, the enhanced
G
levy of licence fees operates from April I, 1964. [236F, H 237AJ
(2) Rule XXVI of the General Licence Conditions provides that if there
is enhancement of duty, the licensee shaJI pay the difference of duty on the
'balance of stocks' as on the date preceding the expiry of the licence. The rule
tilso provides for refund by the State if there is a reduction of duty. -Reading
this rule with the amended r. IV of the Foreign Liquor Rules, the 'balance
of stocks' is the surplus stock· held by the licensee immediately before the expiry
cf his licence. Therefore the quantity held over on March ,31, 1964, became
H
liable to the enhanced licence fee on April l, 1964.
[238E-F]
(3) (a) If the respondent's contention is accepted l?ersons \Vho ~1.ve huge
stocks Jeft over will not have to pay the enhanced licence fee while fre:o;h
licensees would be so liable i and [238-G]
(b) If the respondent had surrendered his stock as he should have but for
his undertaking he would have had to pay the enhanced rate for such left-over
stock. [238HJ
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M.P. STATE v. TIJ!:AM DAS (Krishna lyer, J.)
235

## Text

234
A
B
c
D
E
STATE OF MADHYA PRADESH & ORS.
v.
TJKAM DAS
April 22, 1975
[V. R. KRISHNA IYER, R. S. SARKAR!A AND A. C. GUPTA, JJ.]
Madhya Pradesh Excise Act (2 of 1915)-General conditions of licence
1nade u11der the Act, r. 26 and Foreign Liquor Rules n1ade u11der the Act,
r. 4-Balance of stock 011 expiry of licence-Enhanc~nzent of licence fee for
next year-If bafance of stock liable to enhanced fee.
Delegated legislation-When rule can be n1ade retrospective.
The respondent had a licence for sale of foreign liquor is..'!tted under the
J;orcign Liquor Rules made under the Madhya Pradesh Excise Act, 1915. On
the date of the expiry of the licence (Jlvlarch 31, 1964), he had a large quantity of unsold foreign liquor, \Vhich had to be surrendered by him to the authorities.
As the Government was conten1plating enhancing the licence fee. he
gave an undertaking to pay the difference and he \\'as allowed to keep the execs.;
stock.
He also obtained a fresh licence for one year comn1encing on A::iril
1, 1964.
On April 25, 1964, the Foreign Liquor Rules were amended.
The scale
of licence fees i,.vas enhanced \Vith retrospective effect from April 1, 1964;
and r. IV wa~ amended providing that the licensee shall be liabl~ to pay the
difference in the event of the enhancement of the scale of fees on the balance of
stocks during the currency or on the expiry of the licence.
But the State's demand for the difference was successfully challenged by
the' respondent, in the High Court, on the ground that the balance of stocks on
f\iarch 31, 1964, was covered by the licence fee already p<iid and conld not
be subjected to enhanced levy.
F
Allowing the appeal to this Court,
HELD : (1) Subordinate legislation made by a delegate cannot have retrospective effect unless the rule-making power in the concerned statute expressly
er by necessary implication confers power in this behalf.
But s. 63 of ~he
Act does contemplate not merely the po\ver to make rules but to bring th~:n1
into force from any previous date. It states that all rules made under the 1\ct
shall have effect from the date of publication in the official gazette or frtJln
.n1ch other date as may be specified in that behalf. Therefore, the enhanced
G
levy of licence fees operates from April I, 1964. [236F, H 237AJ
(2) Rule XXVI of the General Licence Conditions provides that if there
is enhancement of duty, the licensee shaJI pay the difference of duty on the
'balance of stocks' as on the date preceding the expiry of the licence. The rule
tilso provides for refund by the State if there is a reduction of duty. -Reading
this rule with the amended r. IV of the Foreign Liquor Rules, the 'balance
of stocks' is the surplus stock· held by the licensee immediately before the expiry
cf his licence. Therefore the quantity held over on March ,31, 1964, became
H
liable to the enhanced licence fee on April l, 1964.
[238E-F]
(3) (a) If the respondent's contention is accepted l?ersons \Vho ~1.ve huge
stocks Jeft over will not have to pay the enhanced licence fee while fre:o;h
licensees would be so liable i and [238-G]
(b) If the respondent had surrendered his stock as he should have but for
his undertaking he would have had to pay the enhanced rate for such left-over
stock. [238HJ
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M.P. STATE v. TIJ!:AM DAS (Krishna lyer, J.)
235
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 668 of 1968.
A
From the Judgment and Order dated 2nd March 1965 of the
Madhya Pradesh High Court in Misc. Petition No. 348 of 1964.
Ram Panjwani, l. N. Shroff and H. S. Parithar, for the appellants.
B. N. Lokur and A. G. Ratnaparkhi, for the respondent.
The Judgment of the Court was delivered by
B
. KRISHNA IYER, l-The claim of the appellant, the
State
of
Madhya Pradesh, to leavy enhanced license fee on the spill-over stock
C
of intoxicating liquor held as on April 1, 1964 by the respondent who
runs a bar, was successfully challenged in the High Court. So the State
has come up in appeal, by certificate, under Art. 133 and disputes the
correctness of the view accepted by the High Court.
As is obvious, the facts are brief and beyond dispute, the issue of
law straight and simple and our decision, on a careful study of the
alternative constructions of the relevant provision, is that the State is
entitled to collect the fee on the revised scale. The respondent runs a
cafe at Indore and a foreign liquor bar booths expensive sales and
attracts affluent a&:licts. Naturally, as a profitable proposition the respondent obtained a licence for the sale of foreign liquor (in Form
F. L. 3) issued μnder the Foreign Liquor Rules framed under the Excise
Act, 1915('). The licenc~ which he held was for one year from April 1,
D
J 963 to March 31, 1964. At that time, under the extant rules the fee
payable was 37 paise per quart bottle of malt liquor and different
rates for other kinds of foreign liquor. On the date of expiry of the
licence, viz., 31st March 1964, the respondent had with him a large
quantity of unsold liquor which was already in the licensed premises,
having been brought earlier. He obtained a fresh licence for a further
period of one year commencing from April 1, 1964. Meanwhile Government was entertaining the idea of enhancing the scales of licence
ree for the various kinds of foreign liquor. The balance quantity left
over with the respondent at ·the end of the licensed period, viz., March
31, 1964 was checked by the concerned Excise Officials and a panchnama prepared in that behalf. Ordinarily, the surplus stock has to be
surrendered by the licensee but, on an undertaking to pay !he difference
in the event of an enhancement of the rates, the bar owner was permitted to keep on his premises the balance quantity so ascertained.
Apparently the State Government had decided on the increased rate
because we find from Annexure B a demand being made by the Excise
Inspector on the licensee -to pay the difference of fees consequent on
the enhancement of the scale of fees, as worked out on the stock
which remained in hand with the owner of the bar on the night of
March 31, 1964: Despite !he undertaking given to comply with such
enhanced demand, the hotelier resisted it and took up the stand that
the balance stock had already been subjected to licence fee when it
was brought in and that the subsequent raising of the rate of licence
(1) Madhya Pradesh Excise Act, 1915 (Act II of 1915).
E
F
G
H
236
SUPREME COURT REPORTS
(1975] SUPP· S.C.R.
A fee could not be applied validly to such stocks. Since the State insisted, on levying at the larger rate even on the balance stock held on
March 31, 1964 the respondent moved the High Court for the issuance of a writ quashing the demand as illegal. The legality of the levy
depends on the applicability of the enhanced scales of licence fee to
the balance of foreign liquor stock held by the licensee on the miclB
night of 31/3-1/4/1964.
c
The facts being thus plain, we will straight go to the law relied
on by the State in support of its claim. The Excise Act and the Foreign
Liquor Rules made thereunder govern sales of these intoxicants and
Form F.L.3 applies to bars which sell foreign .liquor for consumption
on the premises.
On April 25, 1964, the Government, by virtue of its powers under the Act, amended in certain respects the Foreign Liquor Rules.
One such amendment concerns the scale of fees in respect of licence
in Form F.L.3, an upward revision having been effected. The rule
itself, although promulgated on April 25, 1964 was given effect reD trospectively from April 1, 1964. Apart from raising the rates. Rule
IV was also amended by the addition of the (ollowing provision at
the end of it :
E
F
"The licensee shall be hablc to pay the difference of fees per
bottle on the balance of stocks of foreign liquor in the
event of the enhancement of the scale of fees during the
currency or on expiry of the licence.'·
Based on this modification of the rules, the State made the demand
for the difference.
Let us examine the rival contentions and test the soundness of each
briefly. First of all, we have to ascertain the scope and area of the
rule-making powers, the limitations thereon and the retro-active operation of such rules. There is no doubt ·that unlike legislation made
by a sovereign legislature, subordinate legislation made by a delegate
cannot have retrospective effect unless the rule-making power in the
concerned statute expressly or by necessary
implication
confers
power in this behalf. Our attention has been drawn to ss.62 (g) and
(h) and 63 in this connection, by counsel for the State. The State
G Government may make rules for the purpose of carrying out the provisions of the Act (s.62). Such rubs may regulate the amount of
fee, the terms and conditions of licences and the scale of fees and
the manner of fixing the fees payable in respect of such licences [62
(g) and (h)].
This provision, by itself, does not expressly grant
power to make retrospective rules. But s. 63 specifically states
that
'all rules made and notifications issued under this Act shall be published in the Official Gazette, and shall have effect from the date of
such publication or from such other date as may be specified in that
"
behalf.' Clearly the Legislature has empowered ils delegate, the State
Government, not merely to make the rules but to give effect to them
from such date as may be specified by the dekgate. This provision regarding subordinate legislation does ,contemplate not merely the power
to make rules but to bring them into force from any previous date.
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M.P. STATE v. TIKAM DAS (Krishna Iyer, J.)
237
Therefore antedating the effect of the amendment of Rule IV is not
obnoxiou• to the scheme nor ultra vires s.62.
The focus must now turn on the disposal of the balance stocks
A
with licensees held on the expiration of the period. Rule XXV (') regulates the disposal of such balance of intoxicants left with vendors
after the expiration of their licences; if they get new licences on the
B
expiry of the old in respect of the same premises, they are allowed
to retain the balance of stock for the purposes of the new licence
[r. XXV (a)]. In the event of the fee or duty being enhancee or reduced, r. XXVI makes such change applicable to
the balance of
stock. It is useful to reproduce r .. XXVI here :
"XXVI. Procedure to be followed when duty is enhanced or
C
reduced.
If it is notified by the Collector that from any particular date
the duty leviable on any intoxicants is to be enhanced, all
licensed vendors in possession of such intoxicants shall,
on the evening preceding that date, dep'osit their . stock
with such persons as the District Excise Officer may appoint for the purpose. Sqch stocks shall remain in deposit until verified and the District Excise Officer may order
that the difference of duty be levied on. the balance of
the stocks, and the licensee
shall then pay such duty
within thirty days of the date on which the enhanced rare
of duty comes in!o force :
(a) Provided that if such stock, or part of such
stock, be
destroyed, the difference of duty shall not be levied on the
stock destroyed; and
D
E
(b) Provided also that if the balance of stock so deposited is
transferred to another licensed vendor, the difference of
F
duty shall be levied from the transferee before the transfer is completed.
The above procedure regarding the deposit and verification of
stock of intoxicants consequent on the enhancement
of
duty shall also apply when duty leviable on any intoxicants is reduced. Refund of the difference in duty conG
sequent on the reduction in its rate may be sanctioned by
the Excise Commissioner on receipt of an
application
from the licensee through the Collector of the district."
A fair reading of this rule yields only one result. The licensed vendor in possession of surplus intoxicants on the eate preceding expiry
of his licence should ordinarily deposit such stock with the appointed
Excise Officer. On verification of the actual quantity of such stock,
H
the District Excise Officer 'may order that the difference of duty be
levied on the balance of stocks, and the licensee shall then pay such
duty ...... '. Of course, the above procedure primarily visualizes. enhancement of duty. but is made. applicable to reduction of duty when
( 1 Under the General Licence Conditions under s. 62.
,
238
SUPREME COURT REPORTS
[1975] SUPP· s.c.R.
A refund of duty shall be made by the State. Rule IV virtually extends
this kind of dealing with balance of stocks when the subject matter
is license fee as distinguished from duty. Moreover, licensees
are
"'
B
bound by the general licence conditions (vide condition No. 6 of the
license) and the general licence conditions with which we are concerned are set out in rr. XXV and XXVI already adverted to.
In this background of the law, the short question is whether the
respondent is liable to pay enhanced fee brought about by amendment
of the rules on April 25, 1964.
The first contention that has been raised by the respondent in supC
port of the judgment of the High Court is that in any case subordinate
legislation cannot be retrospective and the State Government cannot
therefore make rules and give effect to them retroactively. We have
already set out the provisions of ss. 62 aud 63 bearing on the subject
and have no doubt that, in the present case, the statute does authorise
the State, as its delegate, to make retroactive rules. Therefore we neD
gative the contention that the enhanced levy of licence fee cannot
operate as from April 1, 1964.
E
F
The second contention which has found
favour with the High
Court is that the balance on hand on March 31, l 964 is covered by
the license fee already paid and cannot therefore be subjected to the
enhanced levy on April 1, 1964. There is a measure of absurdity in
the ruk, if this be the construction. Indeed, the High Court itself
notices that the words used to tax at a higher rate the balance of
stocks would become redudant in r. XXVI. A fair reading of the rule
giving full effect td the words used in r. XXVI of the Excise rules
and the explanation added to r. IV (of the Foreign Liquor Rules already extracted) leave us in no doubt that the balance of stocks envisioned by the rules and subiected to enhancement or reduction of
duty is such surplus stock as is held iunnediately before the expiry
of the previous license. So construed, in this case the quantity held
over on March 31, 1964 becomes liable to enhancement of license
fee on April J, 1964 and that is precisely what the State has claimed.
G
Indeed, commonsense suggests no alternative construction. For,
otherwise, some persons who by accident have huge stocks left over
will not have to pay the enhanced rate of licence fee while others
with 'virgin' licences for that year and begin with no stock-on-hand
have to pay at a higher rate. Again, if only the respondent had surrendered his surplus stocks on 31-3-1964, as ordmanly he would
have had to had be not been permitted to
retain that quantity in
H
view of his getting a fresh licence for the same premises, he would
have had to pay the enhanced rate for such left-over stock. !h:-is,
both law and logic, correct construction and commonsense, comc1de
in the conclusion that the Eagle Cafe Bar owner (the respondent)
had to pay the higher fee on the balance of stock as on April 1, ! 964.
The High Court erred in its interpretation of •the rules as applicable
to the present situation.
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M.P. STATE v. TIKAM DAS (Krishna Iyer, J.)
239
We allow the appeal but, having regard to the fact that the sum
A
involved is unsubstantial although the Higl> Court regards the question of law involved as substantial, we direct that the parties do bear
their costs.
Appeal allowed.