M/s. SKOL Breweries Ltd. vs State Of Odisha And Others

K.S. Jhaveri, Cj

By way of this writ petition, the petitioner has challenged the action of the opposite parties in issuing the impugned order dated 28th June, 2005

(Annexure-4) by the Govt. of Odisha in the Department of Excise and demand raised under Annexure-8 series and 12 pursuant to the amendment of

Rules 20 and 34 of Board’s Excise Rules, 1965 and vide notification dated 19th October, 2006 (Annexure-10) and prays for quashing of the same

which is de hors the provisions of Bihar and Orissa Excise Act, 1915.

Mr. Mishra, learned Senior Counsel for the petitioner has taken us to the provisions of the Bihar & Orissa Excise Act, 1915 particularly Sections

90(1), (7) and Explanation thereof, which reads as under:

“Section 90 - Power of the Board to make rules â€

The Board may make

(1) For regulating the manufacture, supply or storage of any [intoxicant], and in particular, and without prejudice to the generality of this provision, may make rules

for regulating -

(a) the establishment, inspection, supervision, management and control of any place for the manufacture, supply or storage of any [intoxicant], and the provision

maintenance of fittings, implements and apparatus therein;

(b) the bottling of liquor for purposes of sale;

(c) the cultivation of the hemp plant;

(d) the Collection of portions of the hemp plant from which intoxicating drugs can be manufactured or produced, and the manufacture or production of intoxicating

drugs there from;

(e) the tapping of tari-producing trees and the drawing of tari from trees;

(f) the making of tari-producing trees in areas notified under Section 14, Sub-section (1), and the maintenance of such marks;

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(7) for prescribing the scale of fees or the manner of fixing the fees payable in respect of any licence, permit or pass granted under this Act, or in respect of the storing

of any [intoxicant]

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Explanation - Fees may be prescribed under Clause (7) of this Section at different rates for different classes of licences, permits, passes or storage,"" and for different

areas.â€​

2.1. He has further taken us to Rule 20 of the Orissa Excise Rules, 1965, which reads as under:

“20. Import to by certain persons and subject to certain conditions â€" (1) Country Spirit may be imported only with the permission of the Commissioner and

under a bond for the payment of duty and by-

(a) a person to whom an exclusive privilege for the supply of sale of such spirit has been granted under Section 22; or

(b) a licensed wholesale dealer in the country spirit.

(2) Rules, 5, 6 and 8 shall, so far as may be, apply to such imports.â€​

2.2. He has also taken us to the impugned notification dated 19.10.2006 (Annexure-10) published by the Excise Commissioner, Orissa whereby Rule

20 of the Boards Excise Rules, 1965 has been amended, which reads as under:

Amendment

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 “2. Rule 20 of the Boards Excise Rules, 1965 shall be substituted by the following:

 “20. OPERATIONS IN DISTILLERIES, BOTTLING UNITS AND BREWERIES: PAYMENT OF OVER TIME FEES ETC. :

(1) All operations in a distillery, bottling unit, brewery which require the presence of an Excise Officer shall be stopped, subject to the provisions of this rule, on

Sundays, other public holidays and specially declared holidays.

(2) The licensee of any distillery, bottling unit or brewery shall also so arrange its operations that no Excise Officer or any of his employee need be on duty for more

than eight hours per day which is prescribed as the schedule hours of duty per shift.

(3) If it becomes necessary for the licensee to run the second shift of 8 (eight) hours, then he can do so only with the prior permission of the Excise Commissioner,

Orissa.

(4) If the production unit will function more than one shift, additional staff shall be posted as would be determined by the Excise Commissioner in accordance with the

provisions of the Rule 34 of the Board’s Excise Rules 1965 and the cost of establishment as prescribed under sub-rule (2) of rule 34 of the Board’s Excise

Rules, 1965 shall be borne by the unit.

(5) The Distillery/brewery/bottling Unit will pay to the State Govt. Rs.1000/- per each extra hour of operation of their bottling unit/ware house beyond the

scheduled hours as prescribed in sub-rule (1) & (2) above, in addition to the overtime fees payable to the Excise Staff in pursuance of the provisions prescribed

hereunder. The Officer-in-Charge of the unit shall deduct the amount due for each day of operation of the Unit beyond the scheduled hours from the P.L. Account of

the licensee. The officer in charge shall submit a detailed report to the Superintendent of Excise of the District with copy thereof to the Excise Commissioner,

Orissa, at the end of the month indicting the work done and the number of hours engaged in the unit beyond the scheduled hours on each occasion and the fee

realized there of, for a cross verification at the level of the Superintendent of Excise.

 (6) On Sundays/Public holidays and special declared holidays, the Officer-in-charge will not be required to attend for conducting any operation in the Unit without

a written requisition of the licensee and overtime fee besides the fee prescribed in sub-rule

(5), may be claimed and allowed for such attendant.

(7) A licensee when requiring the presence of Officer-in-Charge for operation of the Distillery, Brewery, bottling unit beyond the scheduled hours prescribed in sub-

rule (5) or on holidays prescribed in sub-rule(6), he shall submit a written requisition to the Officer-in-Charge indicating the work to be done and the approximate time

the work is likely to cover and the hour at which officer-in-Charge is required to attend. A copy of the requisition shall be kept by the licensee for future reference.

(8) All claims for overtime work must be accompanied by a full statement of work done and the time occupied, stating the hour and minutes and by a copy of the

requisition of the licensee for attendance.

(9) No claim for overtime shall be paid by any Unit it has been examined and passed by the Superintendent of Excise.

(10) When an officer attends on a requisition of the Unit made in accordance with the foregoing conditions, the minimum charges, whatever may be the time

occupied, shall be for one hour.

(11) The fee to be charged for each hour of overtime work done shall be one seventh of a day’s pay of the officer concerned.

(12) The Claim for fees passed by the Superintendent of Excise shall be credited into the Treasury by the licensee and then redrawn on a bill passed by the

Superintendent of Excise.â€​

2.3. The petitioner was supposed to pay the salary of the Excise Officer and Staff who are specifically entrusted with the job of supervision of

operation carried on by the petitioner and they are employed exclusively for the work of the petitioner and their salary including that of the substitute

of officer is also to be borne by the petitioner. However, by virtue of the impugned notification they introduced sub-clause (5) which is the subject

matter of challenge in this petition, i.e., Rs.1000/- per each extra hour of operation of their bottling unit/warehouse beyond the scheduled hours as

prescribed in sub-rule (1) & (2) above, in addition to the overtime fees payable to the Excise staff.

2.4. Learned counsel for the petitioner contended that in view of the provisions of Section 90 of the Bihar & Orissa Excise Act, 1915, i.e. Rule making

power of the Board and more particularly sub-rule 7 which empowers the Board to make Rules for prescribing fees for licence, permit and pass, it is

manifest that the Board clearly travelled beyond the statutory power to amend the Rule 20 of the Board’s Excise Rules, 1965, therefore, it is

required to be held without authority of law. Even if, assuming that power is claimed under Section 90(1) of the said Act, 1915, it only empowers them

to regulate their manufacture, supply and storage of any of the item covered under the Excise Act.

2.5. Mr. Mishra, learned Senior Counsel brought to our notice a decision of this Court in the case of M/s. SKOL Breweries Ltd. vs. State of Orissa

and others, reported in 2007 (Supp-II) OLR 927, against which an SLP was filed and the same has summarily been dismissed by the Hon’ble

Supreme Court and contended that the powers exercised under Annexure-10 is beyond the scope and purview of Section 90(7) of the Act, 1915. For

ready reference, paragraphs 26, 30, 31, 32 and 33 of the said decision are reproduced hereunder:

“26. It has been held in the case of Calcutta Municipal Corporation v. Shrey Mercantile (P) Ltd. and others, reported in (2005) 4 SCC 245 that “where the

Government intends to raise the revenue as the primary object, the imposition is a tax (see paragraph 16 at page 258 of the report). In the instant case it is clear from

the stand taken by the State in its affidavit that the primary object of the State is to augment the Excise revenue by imposition of franchise fee. Therefore, though it is

called a ‘fee’ actually it is a tax.

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On a conjoint reading of Section 38 and Section 90(7) read with the Explanation, it is clear that the Board which is a delegated authority under the said Act, has the

power to prescribe scale of fees or the manner of fixing of fees in respect of any licence, permit or pass and in exercise of that power the BOARD may fix different

rates for different classes of licence, permits, passes etc. But even a conjoint reading of the said provisions does not show that the Board is empowered to prescribe a

new fee which was not in existence in the past. Franchise fee was not in existence in the past. Board has no power to impose the same in exercise of its rule-making

authority under Section 90(7) of the said Act. Admittedly the Board, being a delegated authority does not have the competence to create a new form of fee or permit

which is not provided under the Acct. Sub-rule (4) of Rule 104 under which the franchise fee has been allegedly levied, has been framed by the Board in exercise of its

power under Section 90(7) of the Act. This Court finds that Sub-section (7) of Section 90 does not authorize the Board to impose any new fee.

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Reference in this connection has been made to the judgment of the Supreme Court in the case of Bimal Chandra Banerjee v. State of Orissa Madhya Pradesh and

others, reported in (1970) 2 SCC 467. That was also a case under the Excise Act. In paragraph 13 at page 472 of the report, the Hon’ble Supreme Court held that no

tax can be imposed by any bye-law or rule or regulation unless the statute under which the subordinate legislation is made specially authorizes the imposition, even if

it is assumed that the power to tax can be delegated to the executive. The learned Judges made it very clear that the basis of statutory power conferred by the statute

cannot be transgressed by the rule making authority and learned Judges categorically held that the rule making authority has no plenary power, it has to act within

the limits of the power granted to it by the statute.

Following the said principles, we find that while acting under sub-section (7) of Section 90 of the Act, the Board cannot impose a new fee which is in the nature of

a tax, as has been discussed above, since it has not been authorized to do so under the Act.

Same principles have been reiterated by the Supreme Court in the case of Indian Express Newspapers (Bombay) Pvt. Ltd. others vs. Union of India and others,

reported in AIR 1986 SC 515. In paragraph 73 at page 542 of the report the learned Judges, while dealing with the piece of subordinate legislation, held that a piece of

subordinate legislation does not carry the same degrees of immunity which is enjoyed by a statute. It has also been held that subordinate legislation must yield to

plenary legislation and subordinate legislation must be framed in accordance with the plenary legislation. In the instant case, Rule 104(4) goes beyond the authority

given to the Board under Section 90(7) of the Act and thus Rule 104(4) is ultra vires Section 90(7) of the Act.â€​

Learned Additional Government Advocate for the State-opposite parties supporting the action of the Board referred to the counter affidavit and

additional counter affidavit filed on behalf of the opposite party No.2 and contended that it was well within their powers under Section 90 of the Act,

1915 to amend the Rule 20 as impugned herein and the order raising demand is justified. He also contended that with regard to the averments made in

paragraph-12 of the writ petition that the above fees of Rs.29,52,000/- has been imposed in absence of any provision or authority of law whatsoever, is

misconceived. The object of the Bihar and Orissa Excise Act, 1915 is clearly to augment revenue for the State and to regulate and govern the liquor

trade. Hence the State Government under Section 89 or the Board under Section 90 of the Act have plenary powers to pass an order as well as

amend the law whenever or wherever necessary for the purpose of raising revenue or to regulate and control the liquor trade in the State right from

the point of manufacture to the ultimate sale point. Thus, the averments made in para 12 of the writ application are not tenable in the eye of law.

3.1. Learned Additional Government Advocate further contended that the above fees of Rs.29,52,000/- has been imposed under the provision and

authority of law governing the field.

3.2. It is further contended by learned Additional Government Advocate, in reply to the paragraphs 13 & 14 of the writ petition, that the petitioner

company had made an application seeking permission to operate the plant more than the scheduled hour to meet the demands of beer in the State. The

opposite party No.2 after due consideration of the application of the petitioner company allowed the petitioner company for operation of the Bottling

plant beyond the scheduled hours, subject to payment of Rs.1000/-for each extra hour as initially under notification No.8503/Ex dated 18.11.06.

Subsequently, the Board of Revenue has brought the amendment in Board’s Excise Rules by substituting Rule 20. The said amendment is also

applicable to all Distilleries, Breweries and Bottling Units of the State.

We have heard learned Senior counsel for the petitioner and learned Additional Government Advocate for the State-opposite parties.

It is made clear that the petitioner did not raise any contention with regard to validity of Rule 34 of the Board’s Excise Rules, 1965. Thus, we

express no opinion on the same.

Rules with regard to prescription of fees can be framed only under Section 90(7) of the Bihar and Orissa Excise Act, 1915. Three contingencies

have been envisaged by the legislature for prescription of fees is for license, permit and passes. Imposition of fees at Rs.1000/- per each extra hour

for the job to be undertaken by the employees is not covered under any of the items of fees covered under Section 90(7) of the said Act, 1915. Even

otherwise the Division Bench judgment referred hereinabove has clearly laid down the law, which has been followed by us in another writ petition i.e.

W.P.(C) No.4052 of 2001 disposed of by this Court vide order dated 12.03.2019.

In that view of the matter, sub-rule (5) of Rule 20 of the Board’s Excise Rule, 1965 deserves to be struck down and the same is struck down.

The recovery which has been made will be refunded to the petitioner within a period of four months. If the amount is not refunded within the time

stipulated, the petitioner will be entitled to interest at the rate provided for fixed deposit by the Nationalized Banks with effect from 30.03.2007 i.e.

from the date of filing of the writ petition. The said interest will be recovered from the officer who is responsible for the delay in making refund.

6.1. The writ petition is allowed to the aforesaid extent. All connected Misc. Cases/I.A. are disposed of accordingly.

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