# STATE OF MADHYA PRADESH· v. FIRM GAPPULAL ETC

- **Citation:** [1976] 2 S.C.R. 1041
- **Court:** Supreme Court of India
- **Decided:** 1975-12-17
- **Bench:** A. N. Ray, M. H. Beg, R. s. SARKARIA, P. N. SHINGf0L
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-madhya-pradesh-v-firm-gappulal-etc-6693
- **Pages:** 3

## Headnote

1041
Madhya Pradesh Excise Act-Sections 25, 26 and 62-Levy of excise duty
on liquor not lifted by the contri:xtors under a contract is neither authorised
by s. 26 of the Act, nor such a power to levy excise duty Vested in the State
under s. 62 of the Act-Meaning of the word "pratikar"-Whether denotes "comprnsation or excise duty".
Under the provisions of the Madhya Pradesh Excise Act, an excise licensee
has to pay the following :
(i) The prescribed licence fee, which licence gives the licensee
privileges of selling liqnor in a shop.
(ii) The price of liquor which he purchases from the State Government; and
(iii) Excise on the liquor so purchased by him.
In all the appeals, the appellants are the auction contractors to sell liquor
in the various shops.
One of the term~ of the sale memo was that the contractor would have to lift a presoribed minimum quantity of liquor and pay
duty or consolidated duty at the prevalent rate, otherwise they would have to
pay duty on the quantity short of the minimum prescribed.
In all the app·eals, the appellants were served with various demand notices
demanding a fourth item, viz., duty. on liquor: not lifted by the contractor who
was bound to lift under the conditions prescribing minimum quantity. The
vi res of these demands were challenged under Art. 226 of the Constitution
before the Gwalior Bench of the Madhya Pradesh High Court and they were
allowed.
Dismissing the appeals by certificate, the Court,
HELD: (1) "Pratikar" is excise duty. (1042 F]
A
B
c
D
E
( 2) The State confers the right to require by farming out either by auction
or by private treaty. Rental is the consideration for the privilege granted by
F
the Government for manufacturing or vending liquor.
Rental is the consideration for the agreement for grant of privilege by the Government. [1042 GJ
Nashirwar v. State of Madhya Pradesh, [1975] (2) S.C.R. 861; Hari Shankar
v. Deputy Excise and Taxation Commissioner, (1975] (3) S.C.R. 254, discussed
ed.
(3) These appeals relate to the demand of excise only in respect of liquor.
Levy of excise duty on undrawn liquor imposed by the State-respondent was
exercise of powers which the State did not posses.
(1042 H, 1043 El
G
Bimal Chandra Baneriee v. State of Madhya Pradesh, (1971] (1) S.C.R.
844, followed.
.
,
Panna Lal & Ors. v. State of Raiasthan, (1976] (1) S.C.R. 220, not applicable.

## Text

J
J
STATE OF MADHYA PRADESH·
v.
FIRM GAPPULAL ETC.
December 17, 1975
[A. N. RAY, C.J., M. H. BEG, R. s. SARKARIA AND
P. N. SHINGf0L, JJ.]
1041
Madhya Pradesh Excise Act-Sections 25, 26 and 62-Levy of excise duty
on liquor not lifted by the contri:xtors under a contract is neither authorised
by s. 26 of the Act, nor such a power to levy excise duty Vested in the State
under s. 62 of the Act-Meaning of the word "pratikar"-Whether denotes "comprnsation or excise duty".
Under the provisions of the Madhya Pradesh Excise Act, an excise licensee
has to pay the following :
(i) The prescribed licence fee, which licence gives the licensee
privileges of selling liqnor in a shop.
(ii) The price of liquor which he purchases from the State Government; and
(iii) Excise on the liquor so purchased by him.
In all the appeals, the appellants are the auction contractors to sell liquor
in the various shops.
One of the term~ of the sale memo was that the contractor would have to lift a presoribed minimum quantity of liquor and pay
duty or consolidated duty at the prevalent rate, otherwise they would have to
pay duty on the quantity short of the minimum prescribed.
In all the app·eals, the appellants were served with various demand notices
demanding a fourth item, viz., duty. on liquor: not lifted by the contractor who
was bound to lift under the conditions prescribing minimum quantity. The
vi res of these demands were challenged under Art. 226 of the Constitution
before the Gwalior Bench of the Madhya Pradesh High Court and they were
allowed.
Dismissing the appeals by certificate, the Court,
HELD: (1) "Pratikar" is excise duty. (1042 F]
A
B
c
D
E
( 2) The State confers the right to require by farming out either by auction
or by private treaty. Rental is the consideration for the privilege granted by
F
the Government for manufacturing or vending liquor.
Rental is the consideration for the agreement for grant of privilege by the Government. [1042 GJ
Nashirwar v. State of Madhya Pradesh, [1975] (2) S.C.R. 861; Hari Shankar
v. Deputy Excise and Taxation Commissioner, (1975] (3) S.C.R. 254, discussed
ed.
(3) These appeals relate to the demand of excise only in respect of liquor.
Levy of excise duty on undrawn liquor imposed by the State-respondent was
exercise of powers which the State did not posses.
(1042 H, 1043 El
G
Bimal Chandra Baneriee v. State of Madhya Pradesh, (1971] (1) S.C.R.
844, followed.
.
,
Panna Lal & Ors. v. State of Raiasthan, (1976] (1) S.C.R. 220, not applicable.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. (1) 1751,
1747-50 & 1752, (2) 2041 & 2042 and (3) 1753-1756 of 1971.
H
[From the judgment and order dated the (1) 20-1-1971, (2)
17-2-1971, (3) 21-8-1971 of the Madhya
Pradesh
High
Court
1042
SUPREME COURT REPORTS
[1976] 2 s.c.n.
A
(Gwalior Bench) in (1) Miscellaneous Petitions Nos. 19/70 & 10,
109 and 111 of 1969 and 18 and 20 of 1970, (2) in 9 and 10 of
1971 and (3) 123-125 and 127 of 1970 respectively.]
I. N. Shroff for the appellant.
A. K. Sen (in CA 1751/71) for the respondents.
B
Hargobind Misra (in CAs 2041-42/71) for the respondents.
A. Raman (in CA 1751/71) and S. S. Khanduja in all the appeals
with him for the respondents.
The Judgment of the Court was delivered by
RAY, C.J.
These appeals by certificate turn on
the
question
C
whether the Government was right in making a demand of excise duty
on liquor not lifted by the liquor contractors.
D
E
F
G
H
The High Court relying on the decision of this Court in
Bimal
Chandra Banerjee v. State of Madhya Pradesh( 1) held against the
Government.
There is no dispute that in these appeals the demaml notice is in
respect of duty on liquor which has not been lifted.
The liquor contractors were subject inter alia to the following
conditions at auction which the Government wants to enforce :
"In case the fixed monthly quantity is not taken in any
month, the concerning contractor shall be liable to pay to
the Government the amount of PRATJKAR at
the rate
lixed by the Government for spiced spirit and plain spirit
to the extent to which it would be less
than
the fixed
monthly minimum quantity and the amount of such PRATIKAR shall be paid within the tenth day of the month
such shortage is concerned.
Security to the extent of one
sixth to one tenth of the whole of the amount of yearly
PRATIKAR will have to be given".
Pratikar is excise duty.
This Court in the recent decision in Nashirwar v. State of Madhya
Pradesh(2); Hari Shanker v. Deputy Excise and Taxation Commissioner(") and Panna Lal & Ors. v. State of Rajasthan( 4 ) held that
the State has exclusive right to manufacture and sell liquor and to sell
the said right in order to raise revenue.
The State confers the right
to vend liquor by farming out either by auction or by private treaty.
Rental is the consideration for the privilege granted by the Government for manufacturing or vending liquor.
Rental is the consideration for the agreement for grant of privilege by the Government.
In Bimal Chandra Banerjee's case (supra) this Court held that a
levy of excise duty on undrawn liquor imposed by the State was
exercise of powers which the State did not possess.
(1) [1971] (I) S.C.R. 844.
(2) [1975] (2) S.C.R. 861.
(3) [1975] (3) S.C.R. 254.
(4) [1976] (I) S.C.R. 220.
t
) -
•
\
't
M. P, STATE V. FIRM GAPPULAL (Ray, C.J.)
l 043
In the recent decision of this Court in Panna Lal's case (supra)
this Court said that there is no levy of excise duty in enforcing the
payment of the guaranteed sum or the stipulated lump sum mentioned in the licenses. It was also pointed out in
Panna
Lal' s case
(supra) that the lump sum amount stipulated under the agreement is
not to be equated with issue price.
The issue price is payable only
when the contractors take delivery of a particular quantity of specified
value of country liquor. The issue price relates only to liquor drawn
by the contractors and does not pertain to undrawn
liquor.
This
Court in Panna Lal's case (supra) said that "no excise duty is and
can be collected on undrawn liquor".
In Panna Lal's case (supra)
the excise duty component of the issue price was found to be a measure of the quantum of or extent of the concession or the remission
to be given to .the liquor contractor. The concession is not what is
paid by the contractor to the State but it is a remission or a reduction in the stipulated amount for exclusive privilege allowed by the
State to the contractor. The lump sum amount payable for the exclusive privilege is not to be confused with the issue price.
In essence what was sought to be recovered from the liquor contractors in
Panna Lal's case (supra) was the shortfall occasioned on account of
failure on the part of liquor contractor to fulfil the terms of license.
It was pointed out in Panna Lal's case (supra) as follows :-
"To suggest that the license obliges the contractors to
pay excise duty on undrawn liquor is totally misreading the
conditions of the license.
The excise duty is collected only
in relation to the quantity and quality of the country liquor
A
B
c
D
which is drawn.
No excise duty can be predicated in resE
pect of undrawn liquor".
These appeals are, therefore, not of the type of Panna Lal's case
(supra). These appeals are of the type of Bimal Chandra Banerjee's
case (supra). These appeals relate to the demand of excise only
in respect of undrawn liquor.
The High Court rightly quashed the
demands.
The appeals are, therefore, dismissed.
Each party will
F
'
pay and bear its own costs.
S.R.
Appeals dismissed .