Liquors India Limited vs Govt. of A.P. and Others

D. Reddeppa Reddi, J.—The petitioners in these three writ petitions are manufacturers of Indian Made Liquor (IML). The common point for our consideration in these petitions is whether the respondents are entitled to demand the licence fee at the rates specified in Rule5(1)(b) of A.P. Distillery Rules, 1970 (for short ''the Rules'') based on the actual production capacity of the petitioners manufacturing units, ignoring the quantity they were permitted to manufacture per annum as endorsed in column (3) of the licence granted to them in Form D-2 or without making any endorsement in the licences issued to them as to the quantity they were permitted to manufacture per annum. In order to appreciate this point, it would be useful to refer to the provisions of Rule 5 and Form D-2. Rule5 as substituted by G.O.Ms.No.74, Revenue (E.III) Department dated 1-2-90 and published in A.P. Gazette dated 5-2-90 reads as under:

"5(1) Where the Commissioner is satisfied that the applicant has fulfilled the conditions specified in Rule 4, he may grant a licence to the applicant. Every licence granted under these rules shall be in Form D2 and shall be issued in the name of the applicant and shall not be transferable.

(a) The annual licence fee for D2 licence for manufacture of Rectified spirit shall be paid as prescribed hereunder;

Licence capacity of production per annum in bulk litres Annual licence fee

(1) (2)

Upto twenty lakhs above twenty lakhs Rupees three lakhs Rupees four lakhs

(b) The annual licence fee for D-2 licence for the manufacture of Indian Made liquor shall be paid as prescribed hereunder:

Licence capacity of production per annum in Profit litres Annual licence fee

(1) (2)

below one lakh Rupees two lakhs

From one lakh to 5 lakhs Rupees three lakhs.

Above five lakhs upto twenty lakhs Rupees five lakhs

Above twenty lakhs Rupees ten lakhs.

Provided that in case of a new licence, the licence fee payable shall be limited to Rupees five thousand only till the manufacture commences. However, before commencing manufacture, licence fee as prescribed under clauses (a) and (b) shall be paid proportionately for the remaining period of the licence year.

(2) xxxxx

(3) x x x x x "

Form D2 prescribed under Rule 5 provides as under:

FORM D-2

(See Rule 5)

Distillery Licence (for Spirits and Indian Liquors)

I, Sri ..... Commissioner of Excise under the provisions of Andhra Pradesh Distillery Rules, 1970 and in pursuance of the Letter of Intent No..... dt..... issued by the Government of Andhra Pradesh and on payment of annual fee of Rs..... Licence, you, Sri ..... hereinafter called the ''licensee'' to manufacture the following varieties and quantities of spirits/liquors from..... to..... subject to the conditions laid down by the Government.

Sl. No. Variety of liquor/spirits manufacture under the licence Quantity permitted for manufacture per annum.

(1) (2) (3)

1.

2.

3.

It is significant to note that Rule5(1)(a) which prescribes the annual licence fee for manufacture of rectified spirit and Rule 5(1)(b) which prescribes the annual licence fee for manufacture of Indian Made Liquor refer to only the licensed capacity of production per annum. Likewise, column (3) of Form D2 licence also refers to only the quantity permitted for manufacture per annum Thus, a combined reading of these provisions, in our considered view, leaves no doubt whatsoever that the annual licence fee is payable only on the licenced capacity of production per annum and the quantity permitted to be manufactured per annum by a particular manufacturing unit and it cannot be levied on the basis of actual production capacity of a unit.

Now, let us in brief refer to the facts of each case. In W.P.No. 14913/95, the licenced capacity of production of the petitioner''s unit was fixed at 9000 Bls per month ie., 1,08,000/- BLs per annum for the excise years 1982-83 to 1993-94. The unit paid the licence fee at the rate of Rs.3,00,000/- per annum for the excise years 1989-90 to 1992-93. It may be stated here that we are not concerned with other excise years. There is no dispute that the petitioner paid the licence fee for the excise years 1989-90 to 1992-93 at the rate prescribed under Rule5(1)(b). Yet, the respondents raised a demand for Rs.28,00,000/- towards differential licence fee for the excise years 1989-90 to 1992-93 and Rs-5,65,000/- towards interest thereon on the ground that during the audit by the Accountant General for the years 1991-92 and 1992-93, it was pointed out that the unit''s actual production capacity was 26.33 lakhs PLs. The petitioner unit paid the amount demanded under protest and filed the writ petition for the refund of the same.

In W.P.No.25854/95, the licenced capacity of production of the petitioner''s unit was fixed at 30,000 BLs of rectified spirit which is equivalent to 49,500 PLs of IML in the year 1982 and the same was endorsed in D2 licence. D-2 licence was renewed from year to year. For the excise year upto 1988-89 the petitioner paid the licence fee at the rate of Rs.1,00,000/- per year. During the excise year 1989-90 there was enhancement of licence fee as already shown in Rule 5(1)(b). Therefore, the petitioner paid the enhanced licence fee of Rs.2,00,000/- for the excise year 1989-90. During the excise year 1990-91 it had produced 1,34,231.68 PLs of IML by procuring rectified spirit from other States with the permission of Commissioner of Prohibition and Excise, Andhra Pradesh, Hyderabad. As the production was above 1,00,000 PLs, the petitioner unit paid Rs.3,00,000/- towards licence i.e., the rate prescribed under Rule 5(1)(b). However, during the subsequent excise years i.e., 1991-92 and 1992-93 it could produce only 89,266.59 PLs of IML and 61, 174.44 PLs respectively. Therefore, for these two excise years, the petitioner unit paid licence fee at the rate of Rs.2,00,000/- per annum together with interest as there was some delay in payment. However, the respondents raised a demand for Rs. 2,94,245/- towards differential licence fee and Rs.52,553/- towards interest thereon for late payment for the excise years 1991-92 and 1992-93. They also raised a demand for Rs.2,30,000/- towards label approval fee and Rs.83,251/- towards interest thereon. Obviously, the differential licence fee was claimed on the basis of petitioner''s production of more than one lakh litres during the excise year 1990-91. Hence, this writ petition is filed questioning the levy of differential licence fee for the excise years 1991-92 and 1992-93 and interest thereon and the label approval fee of Rs.2,30,000/-and interest thereon. However, Sri P. Sitaramaraju, learned Counsel for the petitioner confined his submission only with regard to levy of differential licence fee for the excise years 1991-92 and 1992-93.

In W.P.No.1362/96, the licenced capacity of production of the petitioner''s unit was fixed at 4500 BLs i.e., 54000 PLs and the same was endorsed in D2 licence. D-2 licence was renewed from year to year. The petitioner was paying licence fee at the rate of Rs. 1,00,000/- per year for the excise years upto 1988-89. For the subsequent excise years, the licence fee was paid at the rates specified in Rule 5(1)(b). During the year 1989-90, the petitioner procured rectified spirit from other States with the permission of the Commissioner of Prohibition and Excise, A.P. Hyderabad and produced 1,42,506.430 PLs of EVIL. Likewise, during the excise year 1992-93 it produced 1,19,114.262 PLs of IML by procuring rectified spirit from other States with the permission of the Commissioner. However, for the excise years 1990-91 and 1991-92 its production was less than 1,00,000 PLs of IML. The petitioner unit paid licence fee at the rate specified under Rule5(1)(b) basing on actual production of IML during each excise year. However, the respondent raised a demand for Rs.3,85,528/- towards differential licence fee i.e., at the rate of Rs.3,00,000/- per annum together with interest thereon for the excise years 1990-91 and 1991-92 and Rs. 18,5607- towards excise duty for the alleged shortage of rectified spirit. The petitioner unit paid the same under protest and filed this writ petition for refund of excise collection of Rs.3,85,528/-, However, Sri P. Sitaramaraju, learned Counsel for the petitioner, confined his submissions only with regard to refund of differential licence fee at Rs.3,66,968/-.

It is not disputed before us that the petitioners paid the licence fee for each excise year on the basis of the actual quantity of IML produced by them during each excise year. Further, the basis for demanding differential licence fee is stated in the common additional counter affidavit filed in W.P. Nos.25854/95, 7280/96, 26163/95, 14913/95 and 5388/96 and batch. The relevant portion of it reads as under:

"It is submitted that prior to issuance of G.O.Ms.No.74 Revenue (Ex.III) Department dated 1-2-1990 licence fee was paid on the basis of actual production as per G.O.Ms.No. 1058 dated 8-11-1987. Therefore, the production capacity of distilleries were not fixed, subsequent on issue of G.O.Ms.No.74 dated 1-2-90 efforts were made to fix up the production capacity of IML distilleries. However, in Commissioner of Excise Lr.No.23561/92/ Ex/J5 dated 18-11-92 Government was requested to order fixing of licence fee on the basis of actual production within the slab. Pending finalisation of issue it was decided to process the proposals for renewal of D2 licences for the year 1992-93 on the maximum production during the previous years. In a bid to fix up the production capacities, information was obtained from the Excise Officers incharge of distilleries on the plant and machinery available and the tentative production capacities. As per the information obtained from the Excise Officer incharge of distilleries, the particulars of bottling lines available and production capacity in respect of the petitioners in the following writ petitions are furnished as under:..."

From the above, it is evident that the proposal to levy licence fee either on the basis of actual production capacity or on the basis of production during the previous years is still under process. In the present cases, it is the admitted case of the respondents that the differential licence fee was collected or demanded from the petitioners either on the basis of their actual production capacity or on the basis of their production in the previous years and not on the basis of licenced capacity of production per annum as endorsed in Form D2 licences granted to them. In such view of the matter and in the light of our interpretation of Rule 5(1)(a) and 5(1)(b), we have no hesitation to hold that the demand raised against the petitioners for payment of differential licence fee cannot be sustained. The orders of the respondents are quashed to that extent Consequently, the respondents are directed to refund the amounts already paid by the petitioners or to adjust them towards licence fee payable by them for future years or any other amount legally due from them.

In the result, these writ petitions are allowed to the extent of demanding differential licence fee from the petitioners. In other respects, they are dismissed. No costs.