Pesticides India vs State of Rajasthan and Others

Milap Chandra Jain, J.—The first writ petition has been filed challenging the vires of Section 3(4), Rajasthan Excise Act, 1950 (hereinafter to be called ''the Act'') defining "excisable article", Chapter IV-A, Rajasthan Excise Rules, 1956 (hereinafter called the Rules) relating to the denatured spirituous preparations and notification dated August 20, 1979 (Annexure 5) adding therein "Denatured Spirituous Preparations" in Rule 69B of the Rules and declaring that ''Malathion Technical'', manufactured by the petitioner, is not an excisable article. The second writ petition has been filed for quashing the notification dated March 16, 1982 (Annexure 2) enhancing the permit fee leviable under Rule 69B of the Rules from 10 paisa to Re. 1/- per liter on denatured spirtituous preparations and for refunding amount of Rs. 1,53,000/- collected in excess as such.

The case of the petitioner, in short, is as follows: It is a public limited company. It carries on business of manufacturing pesticides, insecticides and other chemical preparations including Malathion Technical after obtaining necessary license. For manufacture of Malathion Technical, denatured spirit is used only for cleaning and removing certain chemicals. It does not contain any trace of spirit it is very poisonous. It cannot be consumed by human being. By notification dated August 20, 1979 "Denatured Spirituous Preparations" was also added in Rule 69B of the Rules. On the audit objection, the respondent No. 3 issued demand notice (Annexure 6) for depositing Rs. 17,800/- as permit fee on the Malathion Technical.. Objections (Annexure 7) were unsuccessfully filed. Appeal (Annexure 9) was filed before the Excise Commissioner, Rajasthan, Udaipur against this order. It was also dismissed by his order dated August 17, 1983 (Annexure 10). By notification dated March 16, 1982 (Annexure 2 of the second writ petition), permit fees for denatured spirit and denatured spirituous preparations has been enhanced from 10 paisa to Re. 1/- per litre.

It has been contended by the learned Counsel for the petitioner that levy of permit fee is not constitutional, Section 41 of the Act does not empower the State Government to make rules prescribing scales of fee or the manner of fixing fees payable for any licence, permit or pass and such a power has been given to the Excise Commissioner u/s 42 of the Act. He further contended that there Was no justification for enhancement of permit fee from 10 paisa to Re. 1/- per litre as the State Government and its authorities do not render sufficient service. He lastly contended that Malathion Technical is not a denatured spirituous preparation as defined in Section 3(3A) of the Act.

In reply, it has been contended by the learned Counsel for the respondents that the permit fee is being charged as a part of the regulatory measures and it is not contrary to any provision of the constitution or any law. He relied upon Synthetics and Chemicals Ltd. and Others Vs. State of U.P. and Others, , Bileshwar Khand Udhyog Khedut Sahakari Mandali Ltd. v. State of Gujrat AIR 1992 SC 872 and M/s. Gujchem Distillers India Ltd. Vs. State of Gujarat and another, . He further contended that to supervise the misuse of spirit meant for industrial purpose, proper steps are required to be taken for supervision and regulation, as such fee has been imposed, concept of quid pro quo has recently undergone a considerable change, it is not possible to co-relate services rendered with the amount of fees in a mathematical manner, it is of regulatory nature and the element of quid pro quo in the strict sense is not a sine qua non for a fee. He relied upon Kewal Krishan Puri and Others Vs. State of Punjab and Another, and Sreenivasa General Traders and Others Vs. State of Andhra Pradesh and Others, . He also contended that the controversies raised in these cases are fully covered by the decisions given by Division Benches of this Court in D.B. Civil Writ petition No. 6033 of 1992 M/s Geeta Enterprises v. State of Rajasthan decided on May 28, 1993 and D.B. Civil Writ petition No. 2969 of 1993, M/s Good- will Paints Industries v. State of Rajasthan decided on October 14, 1993. He lastly contended that Malathion Technical is a denatured spitituous preparation.

Section 41(1) of the Act provides that the State Government may make rules for the purpose of carrying out the Provisions of this Act or other law for the time being in force relating to the excisable articles. It Sub-section (2) further provides that in particular and without prejudice to the generality of the foregoing provisions, the State Government may make rules on matters enumerated in its various clauses. Section 42 empowers the Excise Commissioner to make rules subject to previous sanction of the State Government on matters enumerated therein. Admittedly, the Excise Commissioner has not framed rules prescribing the scale of fees or the manner of fixing the fees payable in respect of any licence, permit or pass or of the storing of any excisable article. Rajasthan Excise Rules have been framed by the State Government u/s 41 of the Act. Its Chapter VIII deals with the licences and permit fees. When the Excise Commissioner has not framed rules regarding scales of fees, the same can be framed by the State Government particularly when the Excise Commissioner can frame rules with the previous sanction of the State Government. Sanction of the State Government is essential and under this power the State Government can refuse, grant or partly grant or grant with modification sanction for the proposed rules. It cannot, therefore, be said that the State Government cannot frame rules u/s 41 on the subjects on which Excise Commissioner has been empowered to frame rules u/s 42 of the Act. By framing of the said rules, the Government has not contravened any provision of the Act including Section 42. The State Government has power u/s 41(2) (d) to frame rules regarding permit fee also while framing rules for regulating the import, export, transport or possession of any excisable article. This Clause (d) is of very wide import. Grant of jurisdiction implies the grant of all powers necessary for its exercise. When statute confers power in general terms, all powers incidental and necessary to make such law effective are included by implication.

A Division Bench of this Court in D.B. Civil Writ Petition No. 6033/92 Geeta Enterprises v. State of Rajasthan decided on May 28, 1993, 1993 (2) WLN 564 has observed at pages 27 and 28 of its judgment as follows:

Thus, keeping in view these authorities, it can safely by said that the State Govt. under its regulatory functions may levy the fee in pursuance of Entry 33 of List III of Schedule VII of the Constitution and if the permit fee which has been enhanced from Rs. 1l- per liter which was imposed in the year 1962 to Rs. 2/- per liter vide its Notification dated 26.3.1987, that cannot be said to be exhorbitant keeping in view the price-rise in the intervening period. Thus, the levy of permit fee can neither be said to be unjust or unreasonable nor it can be said to be excessive.

When the State Govt. has power to regulate and monitor the misuse of the industrial alcohol and converting it to that of potable alcohol, the inclusion of the denatured spirit or the denatured spirituous preparation in the provisions of Section 3(4)(i) of the Act, whereby the excisable articles have been defined cannot beheld to be ultra vires of the Constitution.

These observations are based on the aforesaid decisions of the Hon''ble Supreme Court.

It has further been observed in the aforesaid decision given by the Division Bench in M/s Geeta Enterprises that the provisions of Sections 41 and 42 of the Act only provide for rule making power conferring certain powers on the State Government as also on the Excise Commissioner to frame rules. It has also been held at page 29 that the prescription of fee for obtaining permits is also within the legislative competence of the State Government and, therefore, the provisions of Rule 69B of the Rules are not ultra vires of the Constitution. It has declared that the State Government is free to levy permit fee on industrial alcohol including denatured spirit or the denatured spirituous preparation as regards its import and export in exercise of its regulatory functions.

Another Division Bench of this Court in D.B. Civil Writ Petition No. 2969/93-Good-will Paints Industries v. The State of Rajasthan decided on October 14, 1993, has observed and held as follows:

From reading of Section 41(1) read with the definition of "Excise Revenue" and also Section 41(2) (d) of the Act of 1950, it is apparent that the legislature has expressly given powers to the State government to make Rules relating to excise. Revenue and regulating the import, export, transport or possession of any excisable articles. The words "Excise Revenue" include any payment, duty, tax or fine. Thus, it means that the legislature has empowered the State Government to make any rule prescribing fees for import into. Export outside or transport within the State of Rajasthan of the excisable articles. Thus, it cannot be said that Rule 69-B of the Rajasthan Excise Rules, 1951 as framed by the Government is beyond its competence. It is true that the legislature u/s 42(c) of the Rajasthan Excise Act, 1950 has given powers to the Excise Commissioner to prescribe Scale of Fees with the sanction of the State Government but it does not mean that the Government to whom the power has been given for prescribing the fees for import into, export outside or transport within the State of Rajasthan under Rule 69-B of the Rules of 1951 cannot exercise the said powers. It is pertinent to note that the Excise Commissioner cannot exercise its powers without previous sanction of the State Government. Neither the Government has given any sanction to the Excise Commissioner not the Excise Commissioner has prescribed any fees as yet.

It cannot, therefore, be said that the notification dated August 20, 1979 (Annexure 5 of the first writ petition) and notification dated March 16, 1982 (Annexure 2 of the second writ petition) and amendment made in Rule 69B of the Rules and Section 4(3) by which ''Denatured Spirituous Preparations have been included therein and Chapter IV-A of Rules relating to control over denatured spirit and denatured spirituous preparations are ultra vires the Constitution.

Now the question is whether Malathion Technical is a denatured spirituous preparation or not. Para No. l of) of the first writ petition runs as follows:

1/f. In the manufacture of Malathion Technical denatured spirit is used only for cleaning the chemicals to its mark and once Malathion Technical is manufactured, it does not contain any sign of spirit not from chemical analysis the presence of denatured spirit can be traced Out nor by any chemical process any quantity of denatured spirit can be extracted from It. Thus once a Malathion Technical is manufactured, there remains no traces of any sort of spirit and it is free from any kind of spirit.

The respondents have stated in para No. l/f of their reply as follows:

1/f. That the averments made in this para are not relevant because, admittedly, the products manufactured by the petitioners are "Denatured Spirituous Preparations.

Thus in their reply, the respondents have not at all denied the said averments made in para No. l/f of the writ petition. They admit that in the manufacture of Malathion Technical denatured spirit is used only for cleaning the chemicals and it (Malathion Technical) does not show any sign or trace of spirit on its chemical and physical examinations if such a wide meaning of "Preparation" is given as is sought to be put by the respondents, it would also be preparations of all other ingredients or raw materials used in its manufacture. Section 3(3A) of the Act defines "Denatured Spirituous Preparations" as follows:

(3A). "Denatured spirituous preparations" means any preparation of denatured spirit or alcohol and includes lacquers. French polish and varnish prepared out of such spirit or alcohol.

If the meaning sought to be put by the Respondents to the Denatured Spirituous Preparation is correct, in that case it was unnecessary to include in its definition french Polish and varnish as admittedly denatured spirit is largely used in their (polish and varnishes) preparation and on their chemical and physical examination they show its presence. Malathion is an insecticide of Organo phosphates group. In any view of the matter, Malathion Technical cannot be said to be a denatured spirituous preparation as defined in Section 3(3A) of the Act.

Accordingly, the D.B. Civil Writ petition No. 2765 of 1983 is partly allowed. ft is declared that Malathion Technical is not an Excisable Article as defined in Section 3(4) of the Rajasthan Excise Act.

The D.B. Writ petition No. 1709 of 1982 is dismissed.

No order as to costs in both the writ petitions.