ORDER
L. Narasimha Reddy, J.
1. G.O. Ms. No. 630 Revenue (Excise-in) Department dated 24-5-2003 issued by the Government of Andhra Pradesh, according permission to the Commissioner of Prohibition and Excise, to levy import pass fee of Re. 1/- per bulk litre on the import of Rectified Spirit (RS)/ Extra Neutral Alcohol (ENA)/ is/Denatured Spirit (DS), is challenged in this writ petition.
2. The petitioners are three distilleries, established in the State of Andhra Pradesh under licences in Form D2, issued to them by the competent authority for manufacture of Indian Liquor (IL).. They contend that ENA is one of the raw materials used in the manufacture of Indian Liquor. It is their case that having regard to several factors, such as, availability and quality, they purchase ENA from certain distilleries in the neighbouring States. According to them, the regulatory measures for purchase of ENA by the distilleries, be it from the distilleries within the State, or outside the State, in the matter of issue of permits, insistence of provision of escort from the Department, fixation of time limit within which the commodity is to be purchased and transported and provision of indemnity against theft, leakage or breakage of the commodity, are one and the same.
3. It is the case of the petitioners that the Association of Distilleries in the State of Andhra Pradesh have submitted representation to the Government of Andhra Pradesh for imposition of import fee on the ENA purchased from distilleries outside the State, with a view to discourage such imports and to encourage sales from the distilleries within the States. They allege that acting on such representation, the impugned G.O., is issued, requiring the petitioners to pay the import pass fee at the rate of Rs. 1/- per bulk litre on the ENA imported from other States.
4. The petitioners contend that the 1st respondent has no legislative or legal, competence to levy the import pass fee. According to them, the various provisions of the A. P. Excise Act (for short 'the Act') and the Rules made thereunder enable the Government to levy different kinds of fee on liquor as such and not the raw material used therefor. A further contention is advanced to the effect that the present levy violates the provisions of Articles 301 - 304 of the Constitution of India.
5. In the counter-affidavit filed by the respondents, it is stated that the production and capacity of the distilleries in the State producing Rectified spirit (RS) is 1592.18 lakh bulk litres, whereas their production during the previous excise year was only 512.09 lakhs bulk litre. The unwillingness of the manufacturers of EL to purchase ENA from the distilleries within the State is attributed to this disparity. It is stated that with a view to protect the local RS producing distilleries and to regulate the import of ENA, it has become necessary to impose the import pass fee at the rate of Rs. 1/- per bulk litre through the impugned G.O.
6. Sri S. Ravi, learned Counsel for the petitioners, submits that the Act and the Rules made thereunder do not provide for the levy of import fee upon the ENA purchased from the distilleries outside the State alone. According to him, the measure taken through the impugned G.O., cannot be said to be either regulatory or compensatory. He submits that any levy on a product imported from outside the State, can be only for the purpose of bringing about parity with the impost of such fee on the locally manufactured product. Learned Counsel submits that as long as no fee what ever is levied on the ENA manufactured in the distilleries within the State for consumption within the State, the levy under the impugned G.O., cannot be sustained. In support of his contention, he places reliance upon the Judgment of the Supreme Court in Kalyani Stores v. State of Orissa, : [1966]1SCR865 .
7. Learned Government Pleader for Prohibition and Excise, submits that the petitioners cannot challenge the impugned G.O., since they have no fundamental right to carry on trade in intoxicants. He further submits that trade in intoxicants is res extra commercium and the rights which are available for the citizens carrying trade and business of other categories is not available to a trade, which is res extra commercium. He further relies upon the judgment of the Supreme Court in Khoday Distilleries v. State of Karnataka, 1994 (4) Scale 528. It is also his case that having regard to the Scheme of the Act and the Rules mode thereunder, no exception can be taken to the levy in question.
8. Before discussing the matter on merits, the contentions raised on behalf of the respondents as regards maintainability of the writ petition and the absence of right in the petitioners need to be dealt with. Learned Government Pleader raised two contentions in this regard; (1) the petitioners do not have any fundamental right to carry on the trade in intoxicants; and (2) being a res extra commercium, the provisions of Part XIII of the Constitution of India do not apply to the trade in intoxicants. The basis for the contention of the learned Government Pleader is the Judgment of the Supreme Court in Khoday Distilleries case (supra).
9. The 1st contention raised on behalf of the Government Pleader would have become significant, if only the relief claimed in the writ petition is as regards grant of any licence or issuance of any permit for carrying on trade in intoxcants. Time and again, the Supreme Court held that no individual has a fundamental right to carry on trade in intoxicants. The judgment in Khoday Distilleries case had reiterated the same. That however is not the matter here. The petitioners were granted licences under the relevant Rules. The Government cannot be permitted to say that it has got the freedom to grant licences and levy fees and taxes at Its sweet will. Once it has chosen to grant licences, the measures taken by it as regards such business, trade or the activity-so permitted, should accord to the relevant provisions of law, and more particularly to the provisions of the Constitution of India.
10. The 2nd plea as regards the trade in intoxicants being res extra commercium needs to be viewed from the same perspective. Being res extra commercium, the trade or business in intoxicants cannot be claimed by an individual as a fundamental right. However once the State chooses to accord permission for such trade to the individuals by granting licences, collecting, licence fee etc, it cannot take shelter under this concept, to sustain out, if they are otherwise incompatible. At any rate, the two principles referred to above become significant if only the measures taken by the State are regulatory in nature and for restricting the trade, in view of the directives contained in Article 47 of the Constitution of India. No such attempt can be discerned from the impugned G.O. The Supreme Court was dealing with the cases of withdrawal of licences, assumption of monopoly on the trade in liquor by the State and other regulatory measures. Therefore the observations made therein do not apply to the facts of this case.
11. The G.O., which is challenged in this writ petition, is very brief in its content. It is beneficial to reproduce the same in its entirety. It reads as under:
'In the circumstances stated by the Commissioner of Prohibition and Excise in his letter read above. Government after careful examination hereby accord permission to levy import pass fee of Rs. 1/- per B.L, on the import of R.S./R.NA./I.S./D.S. no such levy shall be made on Ethano.
2. The Commissioner of Prohibition and Excise, Andhra Pradesh, Hyderabad, shall take further action accordingly.'
The G.O., does not refer to the provision, in exercise of which, it is issued. However, if such levy can be sustained under the provisions of the A.P. Excise Act or the Rules made thereunder, failure to mention the provision hardly makes any difference.
12. The A.P. Excise Act is enacted to regulate the production, manufacture, transport, purchase and sale of intoxicating liquor and drugs, to levy duties of excise and countervailing duties on alcoholic liquors for human consumption and for matters connected therewith, in the State of Andhra Pradesh.
13. The petitioners were granted licences under the A.P. Distilleries Rules, 1970 in Form D2, for the purpose of manufacture of Indian Liquor. The petitioners manufacture the portable liquor by blending ENA with appropriate flavouring agent and demineralized water. The product so manufactured is bottled and labeled. Such product is subject to levy of excise duty at different rates, depending on the category and strength of the product.
14. The petitioners contend that the ENA manufactured by certain Units in the State of Maharashtra is superior in quality and that they have been purchasing the same duly obtaining the permission from the competent authority under the Act and the Rules. It is also their contention that ENA is not available up to the required quantities in the State of Andhra Pradesh, apart from the quality being somewhat different. The petitioners feel aggrieved by the levy of import duty. It is their case that they are required to incur an additional expenditure of Rs. 1/- per bulk litre. They plead that there is no legal basis for imposition of the said duty. They have categorically stated that the only basis for imposition of the import pass fee is the representation made by the Association of Distilleries of the State of Andhra Pradesh and the pressure exerted by them.
15. In the counter-affidavit, the respondents sought to sustain the fee under Sections 9(1), 23 and 28(1) of the Act.
16. Section 9(1) deals with the-import of intoxicants. ENA is not an intoxicant by itself. It is only raw material used in manufacture of intoxicants. Therefore, Section 9(1) does not enable the Government to levy import pass fee on ENA. Section 23 deals with the power of the Commissioner to accept payment of a sum in consideration of grant of lease or licence, for conferring exclusive privilege in respect of 'liquor or any other intoxicant' under Section 17. This provision too, has no application because the present levy is not for the purpose of grant lease or licence for the exclusive privilege in respect of any liquor or intoxicant. Section 28(1) deals with grant of licences on payment of such fees and subject to such restrictions. Through the impugned order, the respondents do not propose to grant any licence, much less, the prescribed fee for grant of licence. The petitioners were already subjected to payment of licence fee while granting licences in Form D2 under the A.P. Distilleries Rules.
17. Further, in the counter affidavit the respondents have stated as under:
'To protect the interest of the local RS producing distilleries and to regulate the import of RS/ENA. it is felt necessary to impose the import pass fee of Rs. 1/- per bulk litre for the import of RS/ENA.'
At another place in the counter affidavit the respondents have Justified the levy with the following reasoning:
'....the import pass fee is, in the nature of regulating the import in order to protect the locally manufacturing RS distilleries. By levying import pass fee of Rs. 1/- per bulk litre; some, of the IML manufacturing distilleries may purchase the ENA from locally manufactured distilleries. Hence Article 301 of the Constitution of India is not violated. The contention of the petitioners that if the respondents are imposing the said fee as regulatory measure, they cannot discriminate between the ENA produced locally and ENA produced outside the State of A.P. is devoid of merits.'
From a reading of the same, it is evident that what prompted the 1st respondent to come forward with the G.O., is to protect the local distilleries. Therefore, it needs to be seen as to how far such a measure can be sustained.
18. Part XIII of the Constitution of India deals with the trade, commerce and intercourse within the territory of India. Article 301 mandates that trade, commerce and intercourse through out the territory of India shall be free, subject to other provisions of the Part. Article 302 enables the Parliament to impose restriction on the freedom of trade, commerce or intercourse between one State and the other, as may be required in public interest. Articles 303 and 304 regulate the measures, which can be taken under Article 302. They read as under:
'303. Reactions on the legislative powers of the Union and of the States with regard to trade and commerce :--(1) Notwithstanding anything in Article 302, neither Parliament nor the Legislature of a State shall have power to make any law giving, or authorizing the giving of, any preference to one State over another, or making or authorizing the making of, any discrimination between one State and another by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule.
(2) Nothing in Clause (1) shall prevent Parliament from making any law giving, or authorizing the giving of, any preference or making, or authorizing the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India.'
'304. Restrictions on trade, commerce and intercourse among States .--Notwithstanding anything in Article 201 or Article 303, the Legislature of a State may by law--
(a) impose on goods imported from other States or the Union territories any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between -goods so imported and goods so manufactured or produced; and
(b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest:
Provided that no Bill or amendment for the purpose of Clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President.'
The purport of these two Articles is very clear. Discrimination in the matter of giving preference for one State over the other is per se prohibited under Clause (1) of Article 303. It is only under special situations and circumstances, arising from scarcity of goods in any part of the territory, that Parliament can enact under Clause (2) of that Article, giving preference or providing for discrimination in such matters.
19. The mandate under Article 304(a) is very clear. The freedom accorded to the States in the matter of levy of tax or imposition of restrictions on goods is clearly stipulated under Article 304. This freedom, however, is limited to imposition of tax to the extent, to which similar goods manufactured or produced in the State are subjected to. Under Clause (b) thereof, reasonable restrictions can be imposed as may be required in the public interest. Any measure for this purpose, however, is required to be only through an Act passed by the. Legislature of the State. Such an eventuality does not exist here. Therefore, it has to be seen as to whether the step taken by the Government in issuing the impugned G.O., can be said to be within the parameters of Article 304(a).
20. The impugned levy could have been sustained, if only the ENA manufactured in the State was subjected to the same incidence of fee or tax. The nomenclature employed in this regard becomes insignificant in view of slow and gradual blurring of the distinction between fee and tax, in the light of judgments rendered by the Supreme Court from time to time. It is not the case of the respondents that ENA manufactured in the State is subject to a particular tax and by imposition of Import pass fee, an equalizing or balancing exercise is undertaken. The allegation of the petitioners that no fee whatever is levied on the ENA manufactured in the State gets unrebutted.
21. The respondents made an attempt to sustain the present levy on the basis of levy of export fee or duty on the ENA, which is manufactured by the distilleries in the State. This fact hardly comes to the rescue of the respondents. The imposition of export duty cannot be equated with an import pass fee. Both are different and opposite incidences of tax. In the matter of ascertaining the level play in the trade and commerce, as mandated under Part XIII, it is the duties and levy of similar nature that are to be compared and not those with total opposite attributes.
22. In Kalyani Stores's case (supra), the Supreme Court dealt with the imposition of countervailing duty on intoxicants on foreign liquor on the touchstone of Part XIII of the Constitution of India. In that case, the State of Orissa sought to levy the countervailing duty on excise articles imported from outside the State. On the ground that the measure was not undertaken to bring about parity of levy of duties on the goods manufactured within the State, on one hand, and those imported from outside the State, on the other, the provision imposing such duty was set aside. The fact pleaded by the State that such goods were not manufactured in the State at all, was held to be of no consequence.
23. Hence, the impugned G.O., cannot be sustained, either in facts or in law. The same is accordingly set aside and the writ petition is allowed. No costs.