ORDER
A.K. Mathur, C.J.
1. Petitioner has by this writ petition challenged Notification No. 7-B-1-38-91-CTD-V dated 27th March, 1995 issued by the respondent No. 1 State (Annexure-B) as being ultra vires Articles 14, 301, 302 and 304(a) of the Constitution of India.
2. Brief facts giving rise to this writ petition are that the petitioner is a Company having its distillery and bottling unit at village Rojrachakra, District Raisen. The petitioner is manufacturing beer at its Indian Made Foreign Liquor Unit and has entered into an agreement with Jagajit Industries taking franchise of their products for being manufactured at the bottling unit of the petitioner. It is alleged that some more groups are having manufacturing facilities in the State of M.P., namely, U. B. Group, Shaw Wallace, B. D. A Limited; Jagajit Industries and Tilak Nagar Industries. It is alleged that the State of M.P. in exercise of its powers conferred under clauses (g) and (h) of Sub-section (2) of Section 62 of the Madhya Pradesh Excise Act, 1915 (for short the Act of 1915), has published the notification dated 27th March, 1995 by which a new licence in form FL-8A has been, introduced. This licence is granted on a prepayment of an annual licence fee of Rs. 20,000/- and also contains a schedule by which bottling fee has been introduced to be payable at different rates. The impugned notification has been placed on record as Annexure-B. This charge of bottling fee is over and above all the excise duty payable by the licensee. This is known as bottling fee. The bottling fee comes to Rs. 5/- per bottle of Rs. 15/- per proof litre, raising the cost of IMFL by Rs. 135/- per case. This notification is applicable only to the units which have been franchised for bottling certain specified brands of IMFL by the holder of a similar licence in any part of the country outside Madhya Pradesh.
3. In substance, the contention of the petitioner is that the distillers who are locally situated and are engaged in the process of manufacturing, have been exempted and for them, the bottling fee per bottle is of Rs. 0.05 p. but the persons who are having franchise and who are bottling the specified brands of IMFL have to pay bottling fee at the rate of Rs. 5/- per bottle or Rs. 15/- per proof litre by virtue of the notification under challenge. It is this notification which has been challenged in this writ petition on the ground that it is violative of Article 301 of the Constitution of India and Section 27-A of the Act of 1915 and discriminates persons similarly situated. Lastly, it is challenged on the ground that there is no authority for issuance of this notification.
4. Before we examine the contentions raised by the learned counsel, it may be relevant to refer to the relevant provisions of law and the reply of the State which necessitated the issue of the impugned notification. Section 2(2) of the Act of 1915 defines 'bottle' as under :
'(2) 'bottle' means to transfer liquor from a cask or other vessel to a bottle, jar, flask or other similar receptacle for the purpose of sale and bottling includes rebottling.'
Section 2(6-a) defines 'excise duty' as under :
'(6-a) 'excise duty' and 'countervailing duty' means any such excise duty or countervailing duty, as the case may be, as is mentioned in entry 51 of list II in the Seventh Schedule to the Constitution.'
Section 2(8) defines 'excise revenue' as under :
'(8) 'Excise revenue' means revenue derived or derivable from any duty, fee, tax, penalty payment (other than a fine imposed by a court of law) or confiscation imposed or ordered or agreed to under the provisions of this Act, or of any other law for the time being in force relating to liquor or intoxicating drugs.
Section 2(9) defines 'export' which runs as under :
'(9) 'export' means to take out of the State otherwise than across a customs frontier as defined by the Central Government.'
Section 2(11) defines 'import' which runs thus :-
'(11) 'import' (except in the phrase 'import into India') means to bring in the State otherwise than across a customs frontier as defined by the Central Government.'
Section 2(14) defines 'manufacture' as under :-
'(14) 'manufacture' includes every process, whether natural or artificial, by which any intoxicant is produced or prepared and also redistillation and every process for the rectification, flavouring, blending or colouring of liquor.'
Section 13 of the Act of 1915 deals with licence required for manufacture, etc. of intoxicants. Section 13 of the Act reads as under :
'13. Licence required for manufacture, etc. of intoxicants :-
(a) No intoxicant shall be manufactured or collected;
(b) no hamp plant shall be cultivated;
(c) no tari producing tree shall be tapped and no tari shall be drawn from any tree;
(d) no liquor shall be bottled for sale;
(e) no distillery or brewery shall be constructed for work; and
(f) no person shall use, keep or have in his possession any materials, still, untensil, implement or apparatus whatsoever for the purpose of manufacturing any intoxicant other than tari; except under the authority and subject to the terms and conditions of a licence granted in that behalf :
Provided that the State Government may, by notification declare that the provisions of this section shall not apply, in any area specified in this behalf, to the tapping of tari producing trees, or to the drawing of tari subject to such conditions as it may prescribe:
Provided further that the State Government may, by notification, declare that the provisions of this section shall, in the..........not apply in such areas as may be specified in this behalf to the manufacture of liquor for home consumption, subject to such condition as it may prescribe.'
Clause (d) of Section 13 says that no liquor shall be bottled for sale. Likewise, clause (f) says that no person shall use, keep, or have in his possession any materials, still, utensil, implement or apparatus whatsoever- for the purpose of manufacturing any intoxicant other than tari, except under the authority and subject to the terms and conditions of a licence granted in that behalf.
Section 18 deals with power to grant lease of right to manufacture, etc. Section 18 reads thus :
'S. 18. Power to grant lease of right to manufacture, etc. - (1) The State Government may lease to any person, on such conditions and for such period as it may think fit, the right -
(a) of manufacturing, or of supplying by wholesale, or of both, or
(b) of selling by wholesale or by retail or
(c) of manufacturing or of supplying by wholesale, or of both, and selling by retail;
any......liquor or intoxicating drug within any specified area :
(2) The licensing authority may, grant to a lessee under Sub-section (1) a licence in the terms of his lease; and when there is no condition in the lease which prohibits sub-letting, may, on the application of the lessee, grant a licence to any sub-lessee approved by such authority.
Section 18 empowers the State Government to lease to any person the right to manufacture, or of supply of both any liquor. It says that if the licensing authority thinks it fit in terms of current lease it may lease to any person on such terms and conditions as it may think fit the right of manufacturing, supplying, or selling. Section 25 of the Act of 1915 deals with duty on excisable articles. Section 25 reads thus :-
'25. Duty on Excisable articles. - (1) An excise duty or a countervailing duty, as the case may be, shall if the State Government so direct, be levied on all excisable articles other than medicinal and toilet preparations specified for the time being in the Schedule to the Medical and Toilet Preparation (Excise Duties) Act, 1955 (No. 16 of 1955)-
(a) imported; or
(b) exported; or
(c) transported; or
(d) manufactured, cultivated or collected under any licence granted under Section 13; or
(e) manufacture any distillery established, or any distillery or brewery licensed, under this Act:
Provided that it shall be lawful for the State Government to exempt any excisable article from any duty to which the same may be liable under this Act.
(2) Duty may be imposed under Sub-section (1) at different rates according to -
(i) the place to which any excisable article is to be removed; or (ii) the strength and quality of excisable article; or
(iii) the use of excisable article for different purposes; or
(iv) The value of excisable articles based on principles as may be prescribed.
(3) Notwithstanding anything contained in Sub-section (1), (i) duty shall not be imposed thereunder on any article which has been imported into India and was liable, on such importation, to duty under the Sea Customs Act, 1878 (VIII of 1878), or the Indian Tariff Act, 1894 (VIII of 1894); (ii) omitted.
(4) Nothing contained in this section shall be construed to preclude the State Government from enhancing or reducing the rates of duty during the course of a financial year and the power to give retrospective effect to such enhancement or reduction from a date not earlier than the commencement of the financial year. This section empowers the State Government to charge excise duty or a countervailing duty, as the case may be, on all excisable articles other than medicinal and toilet preparations specified for the time being in the Schedule to the Medical and Toilet Preparation (Excise Duties) Act, 1955. Sub-section (4) of Section 25 says that nothing contained in this section shall be construed to preclude the State Government from enhancing or reducing the rates of duty during the course of a financial year and the power to enhance or reduce the rate of duty shall include power to give retrospective effect to such enhancement or reduction from a date not earlier than the commencement of the financial year.
Section 27 of the Act of 1915 lays down payment for grant of leases. It reads as under :
'27. Payment for grant of leases. - (1) Instead of or in addition to any duty leviable under this Chapter, the State Government may accept payment of a sum in consideration of the grant of any lease Under Section 18.
(2) Nothing contained in Sub-section (1) shall be construed to preclude the State Government from enhancing or reducing the sum received in consideration of a grant of any lease under Section 18 during the course of a financial year or during the currency of a licence and the power to enhance or reduce the sum shall include power to give retrospective effect to such enhancement or reduction from a date not earlier than the commencement of the financial year.'
Section 27 says that the State Government may instead of or in addition to any duty leviable under this Chapter, accept payment of a sum in consideration of the grant of any lease under Section 18. Nothing shall be construed to preclude the State from enhancing or reducing the sum received in consideration of a grant of any lease Under Section 18. What is shown is that duty leviable is one thing and grant of lease for manufacture of liquor is another thing. Two are separate and cannot be mixed up. While granting licence for manufacture of liquor, the State parts with its exclusive privilege for manufacture of liquor and for which leases are issued on such conditions and for such period on payment of such sum as may be specified by the State Government.
5. Section 27-A provides savings for duties being levied at commencement of the Constitution : Section 27-A reads as under :
'27-A. Savings for duties being levied at commencement of the Constitution - (1) Until provision to the contrary is made by Parliament, the State Government may continue to levy any duty to which this section applies which continue to levy any duty to which this section applies which it was lawfully levying immediately before the commencement of the Constitution under this Chapter as then in force.
(2) The duties to which this section applies are -
(a) any duty on intoxicants which are not excisable articles within the meaning of this Act;
(b) any duty on an excisable article produced outside India and imported into the State whether across a customs frontier as defined by the Central Government or not;
(3) Nothing in this section shall authorise the levy by the State Government of any duty which, as between goods manufactured or produced in the State and similar goods not so manufactured or produced discriminates in favour of the former, or which, in the case of goods manufactured or produced outside the State, discriminates between goods manufactured or produced in the locality and similar goods manufactured or produced in another locality.'
Sub-section (3) of Section 27-A of the Act provides that nothing in this section shall authorise the levy by the State Government of any duty which, as between goods manufactured or produced in the State and similar goods not so manufactured or produced discriminates in favour of the former, or which, in the case of goods manufactured or produced outside the State, discriminates between goods manufactured or produced in one locality and similar goods manufactured or produced in another locality. Thus, it says that the State shall not discriminate in the matter of levy of duty between two persons similarly situated. Section 28 of the Act deals with form and conditions of licences etc. Section 28 reads as under :
'28. Form and conditions of licences, etc - Every licence, permit or pass granted under this Act:-
(a) shall be granted -
(i) on payment of such fees (if any),
(ii) for such period,
(iii) subject to such restrictions, and on such condition, and,
(b) shall be in such form and contain such particulars as the State Government may direct either generally by rules made Under Section 62 or in any particular instance.'
This section says that every licence, permit or pass granted under this Act shall be granted on payment of such fees, for such period and on such terms and conditions, which may be prescribed by the State Government, either generally by rules made Under Section 62 or in any particular instance.
6. Section 62 of the Act of 1915 lays down power to make rules. Section 62(2)(h) of the Act which is relevant for our purposes reads as under :
'62. Power to make rules-
(1)................
(2) In particular, and without prejudice to the generality of the foregoing provisions, the State Government may make rules -
....................
....................
....................
....................
(h) prescribing the authority by, the form in which, and terms and conditions on and subject to which and licence, permit or pass shall be granted, any by such rules, among other matters, -
(i) fix the period for which any licence, permit or pass shall continue in force,
(ii) prescribe the scale of fees or the manner of fixing the fees payable in respect of any such licence, permit or pass,
(iii) prescribe the amount of security to be deposited by holders of any licence, permit or pass for the performance of the conditions of the same,
(iv) prescribe the accounts to be maintained and the returns to be submitted by licence-holders, and
(v) prohibit or regulate the partnership in, or the transfer of, licenses.'
Thus, the provisions of Sub-section (2)(h) of Section 62 provides that the authority may issue forms laying down terms and conditions on which such licence, permit or pass shall be granted. In exercise of power Under Section 62(2)(h) of the Act, the State Government has framed rules known as Foreign Liquor Rules and Rule I clause (viii) of the Foreign Liquor Rules deals with bottling licence, Clause (viii) of Rule I of the said Rules reads thus -
'(viii) - F.L. 8 - Bottling licence which may be granted to the holders of a licence in Form F.L. 10,11, or D-2 on payment of a fee of Rs. 100 per annum;
Provided that the licensee shall in addition to the licence fees, pay a bottling fee at the rate of 5 paise per bottle of foreign liquor including beer.'
This form F.L. 8 has been prescribed by the State Government. In the original form, it was mentioned that in view of clause (viii) of Rule II of Foreign Liquor Rules and in consideration of the payment of a fee of Rs. 20,000.00 per annum and subject to the payment of a bottling fee at the rate of 5 paise per bottle of foreign liquor including beer, a licence is to be granted in Form F.L. 10, F.L. 11 or D-2 for the privilege of reducing and bottling foreign liquor for sale during the currency of such licence, subject to other terms and conditions. It is this form which has been amended and the State Government in exercise of its power Under Section 62 of the Act of 1915 amended the Foreign Liquor Rules and inserted clause (viii) to Rule II after clause (viii) vide notification dated 27th March, 1995 published in the M.P. Rajpatra. The notification is quoted hereunder:
'BHOPAL, the 27th March, 1995
F. No. 7-B-1 -38-91 -CTD-V- In exercise of the powers conferred by clauses (g) and (h) of Sub-section (2) of Section 62 of the Madhya Pradesh Excise Act, 1915 (No. II of 1915) and all other powers enabling it in this behalf, the State Government hereby makes the following further amendments to the Foreign Liquor Rules, published under this Department Notification No. 14-V-SR, dated the 7th January, 1960, namely :-
AMENDMENT
In the said rules-
1. After clause (viii) of Rule II, the following clause shall be inserted, namely:-
'(viii-a) F.L.8-A special bottling licence which may be granted on prepayment of an annual licence fee of Rs. 20,000/- to such F.L. 10 or D-1 licensee, who has been franchised (authorised/conferred franchise) for bottling certain specified/brand of IMFL by the holder of a similar/appropriate licence in any part of the country outside Madhya Pradesh :
Provided that the licensee under this clause shall in addition to the licence fee as above pay the bottling fees as shown in the schedule below:-
SCHEDULE
____________________________________________________________________________________S. Description of I.M.F.L. to be bottled under Payable bottling fee.No. franchise arrangement.1. 2. 3._____________________________________________________________________________________(A) If the declared ex-distillery selling price per 12 quarts (each containing 750 mls.) of each brandand label does not exceed Rs. 150/-(i) Per quart Bottle Rs. 5.62(ii) Per pint Bottle Rs. 2.81(iii) Per Nip Bottle Rs. 1.40(iv) Per Magnum Bottle Rs. 8.43(B) If such declared ex-distillery selling price per 12quarts (each containing 750 mls.) of each brandand label exceeds Rs. 150/-(i) per quart Bottle Rs. 8.44(ii) Per pint Bottle Rs. 4.22 (iii) Per Nip Bottle Rs. 2.11 (iv) Per Magnum Bottle Rs. 12.66NOTE. - A bottle of the capacity of less than 191 mililitres but not less than 142 mililitres shall be classed as a Nip bottle, a bottle of the capacity of less than 383 mililitres but not less than 246 mililitres shall be pint bottle, a bottle of the capacity of less than 767 mililitres shall be classed as quart bottle, and a bottle of the capacity of less than 1001 mililitres but not less than 767 mililitres shall be classed as Magnum bottle for the purpose of levying and recovering bottling fees.'
2. After form F.L. 8, the following form shall be inserted, namely :-
FORM F.L. 8-A
Licence for manufacture and bottling of Indian Made Foreign Liquor under Franchise arrangement.
Under Clause (viii-a) of Rule II of the Foreign Liquor Rules and in consideration of an annual licence fee of Rs..........that has been paid, this special licence is granted to Shri................for manufacturing and bottling I.M.F.L. from .. to.............subject to following conditions :-
CONDITIONS
(1) The licensee shall pay bottling fees according to the prescribed rates enumerated in the schedule given below the proviso to clause (viii-a) of Rule II of Foreign Liquor Rules.
(2) The licensee shall manufacture/bottle only those brands that have been listed in Schedule II annexed to this licence and for which he has been duly and specially franchised/authorised by...............
(3) All operations relating to manufacture and bottling of the brands listed in Schedule II shall be conducted at the licensed premises situated at........... as per the map and plan approved by Excise Commissioner and enclosed with this licence.
(4) The licensee shall make complete and appropriate entries in Schedule-I annexed to this licence.
(5) The labels pasted on the bottles shall specify all the details prescribed by the Excise Commissioner from time to time.
(6) The licensee shall not affect any manufacturing/bottling operation without prior intimation, well in advance, incorporating all the relevant details, to the officer-in-charge.
(7) Only potable water shall be used in all such operations. The plant and premises shall also be kept reasonably clean.
(8) No ingredient deleterious or injurious to health shall be used in manufacturing/bottling process.
(9) The licensee shall procure spirit for manufacturing the schedule brands from any D-1/F.L.10 licensee of Madhya Pradesh. He will not be allowed to import spirit for the purpose. He may however import specially blended/flavoured spirits for this purpose.
(10) All I.M.F.L. manufactured in one operation shall be bottled and labelled immediately and shall be given the same batch number.
(11) Cartons containing whisky, brandy, rum, gin etc. shall be arranged, stocked and stacked labelwise, bottle sizewise, separate from one another.
(12) The licensee shall have an accessible passage free of cartons containing IMFL in the middle as well as along the walls of the Stove room to facilitate free movement and verification of the stock.
(13) The licensee shall maintain day-to-day labelwise and bottle-size-wise account of IMFL manufactured, bottled and disposed. He will also maintain an accurate account of spirit used.
(14) He shall comply with any subsidiary instructions issued by the Excise Commissioner from time to time during the currency of this licence.
(15) If the licence D-1, and/or EL. 10 to which this licence has been granted as an adjunct stands suspended, cancelled, withdrawn, or the principal/franchiser mentioned in Column 3 of Schedule II this licence, withdraws his authority/franchise, this licence shall automatically stand suspended/cancelled/withdrawn or discontinued as the case may be.
(16) The licensee shall be bound by all the general licence conditions except Nos. II, VIII (2), (1-A), XIV, XVI, XXII and XXIX.
(17) On breach of any conditions of this licence or provisions of the M.P. Excise Act or Rule made thereunder, or order issued by the Excise Commissioner, this licence may be suspended or cancelled by the licensing authority.
SCHEDULE-I
Boundary of the Licensed Premises
____________________________________________________________________________________Description of the licensed premises Boundary of the licensed premisesNorth East South West____________________________________________________________________________________(1) (2) (3) (4) (5)________________________________________________________________________________________________________________________________________________________________________SCHEDULE-II
____________________________________________________________________________________S. Details of the brand/brands for which Full particulars along withNo. the licensee holds franchise. complete address of the franchiser_____________________________________________________________________________________3. This amendment shall come into force with effect from 1st April, 1995.By order and in the name of the
Governor of Madhya Pradesh,
MANOJ KUMAR, Secy.'
It is this amendment which is being sought to be challenged by the present petition.
7. Entry 51 of VIIth Schedule List-II of the Constitution empowers the State to impose a duty. Entry 51 reads as under :
'51. Duties of excise on the following goods manufactured or produced in the State and countervailing duties at the same or lower rates on similar goods manufactured or produced elsewhere in India;
(a) Alcoholic liquors for human consumption;
(b) Opium, Indian hemp and other narcotic drugs and narcotics;
(but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this Entry).'
Entry 8 read with Entry 66 of Schedule-VII, List II of the Constitution deals with the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. Entry 66 provides for fees in respect of any of the matters in this List, but not including fees taken in any court. Entry 8 and Entry 66 of List-II, VIIth Schedule read as under :
'8. Intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors.'
'66. Fees in respect of any of the matters in this list, but not including fees taken in any Court.'
Entry 51 of List-II, VIIth Schedule lays down duties on excise. Article 301 of the Constitution of India gives freedom in trade, commerce and intercourse throughout the territory of India.
8. The State in its reply has pointed out that as per the provisions of the Foreign Liquor Rules, the distillers situated out of State who have got well established brands and marketing network in the State of M.P. were importing Indian Made Foreign Liquor and they were required to pay import fee as per the rates laid down. By way of import fee, the distillers were required to pay Rs. 15/- per proof litre, where the exfactory price is more than Rs. 151/- per case of 12 quart bottles which comes to Rs. 101.25 per case (box containing 12 bottles) for past few years. The manufacturers situated outside the State started giving their franchise to the manufacturing units situated in M.P. and started getting the bottling done within the State. Under this franchise system the liquor of the same distiller under the same brand after getting bottling done in the State is sold within the State and exported as well. Originally, these distillers were importing IMFL in the State of M.P. after paying the import fee. Under this arrangement, the blending material was imported from outside the State. This so called concentrate substance or blending material alleged to be imported from outside the State is not liable to be levied import fee, as it is not excisable article under the Act. The very object of low rates of bottling fee is being defeated by the adoption of this new self created franchise agreement. Therefore this necessitated the amendment to check the evasion of import fee by prescribing the special bottling licence and payment of differential bottling fee of licence holder having franchise agreement and to safeguard the interest of the State exchequer. By this policy the interest of the local liquor manufacturers and bottling units was also safeguarded. The State Government is expected to get approximately three crores rupees as additional revenue and this is likely to increase further.
9. In light of above, we have to examine the arguments raised by the learned counsel for the petitioner. So far as the question regarding Article 301 of the Constitution of India and Section 27-A(3) is concerned, there is no gainsaying that the Constitution and Sub-section (3) of Section 27-A of the Act of 1915 contemplate free flow of the trade and no discrimination should be practised. But the question is whether the notification Annexure-B has discriminated the persons similarly situated or not. In fact, the object of the State Government was to check the device adopted by the liquor contractors by taking advantage or franchise arrangement between the distillers and obtaining certain blending material and then after bottling the same, the liquor is sold out in the State or is exported outside the State. If distillers bring the manufactured liquor, then they will have to pay import duty, but by this device, they stand to gain and save import duty under the garb of bottling. By this, the State was put to a great loss of excise revenue. In order to check evasion of this excise revenue, a class which has obtained franchise and blending material for bottling has been separately classified as against the other class which is locally bottling the liquor. There are two different classes. Since the classification is based on a rationale principle and the object sought to be achieved is the check of loss of revenue, this class of manufacturers which bottle the liquor under the franchise arrangement after obtaining the blending material is a class apart and they cannot be treated to be similarly situated as local class of persons which manufacture and bottle liquor here. There is distinction in these two classes and that distinction is a reasonable classification and makes a class, which bottles the liquor under franchise arrangement by obtaining blending material, easily distinguishable from the class which manufactures the liquor of its own without any franchise arrangement or without obtaining blending material from outside the State. Therefore, State by this amendment has checked the loss of revenue. This kind of classification neither prohibits nor violates the provisions of Article 301 of the Constitution of India nor Section 27-A(3) of the Act of 1915.
10. It is also relevant to mention that Sub-section (3) of Section 27-A of the Act of 1915 says that two classes of persons who are similarly situated should not be discriminated in matter of imposing duty. It is true that such discrimination cannot be permitted but if these two classes of persons stand on different footing, then there is no question of discrimination. Here there are two classes of persons, one who bottles the imported liquor and another who has franchise from a manufacturer and brings blending material from outside and then bottle them in the State. As such, these classes are distinguishable and thus there is no violation of Section 27-A of the Act of 1915.
11. There is another aspect of the matter also that Section 27-A talks of duty and not the fee. It is a fee which the State is charging and not duty. Entry 8 of List-II of VIIth Schedule lays down that the State is competent to legislate on intoxicating liquors, that is to say, the production, manufacture, possession, transport, purchase and sale of intoxicating liquors. In fact, the bottling is a part of manufacturing process. No liquor can be supplied without bottling. 'Bottle' has already been defined Under Section 2(2) of the Act of 1915. The State is competent to legislate in respect of rate of fees and how the bottling is to be done as the bottling is the part of manufacturing process. Entry 66 of List-II says that a fee can be levied by the State. Therefore, the State Government is competent to legislate and impose fee under Entry 8 read with Entry 66 of List-II of Vllth Schedule. It is therefore wrong to contend that the State does not have authority to impose fee. It may also be relevant to mention here that Entry 51 deals with the excise duty and countervailing duty. Bottling fee which is charged is not an excise duty, though it is an excise revenue for the State. It is the fee which is being charged and it is within the competence of the State under Entry 66 of List-II and Entry 8 of List-II of. VIIth Schedule of the Constitution. In this connection, reference of Section 27-A has no relevance as it talks about the excise duty and not the fee.
12. Section 13 (a) and (d) say that no intoxicant shall be manufactured or collected or no liquor shall be bottled for sale except on such terms and conditions of the licence granted in this behalf by the State. In exercise of this power read with Section 18 of the Act of 1915 which deals with power to grant lease of right to manufacture etc. State can grant licence of bottling on such terms and conditions as it deems fit. In exercise of power Under Section 62 of the Act of 1915 State Government framed Rules known as Foreign Liquor Rules. The State Government amended the Foreign Liquor Rules and inserted Rule viii(e) prescribing certain fee for various kinds of bottling. Hence, the issuance of the impugned notification is within the competence of the State and there is no prohibition for the State in issuing such notification. In this connection, a reference may be made to a decision of the Hon. Supreme Court in the case of State of U.P. v. Sheopat Rai, 1994 Supp. (1) SCC 8. In this case, in somewhat identical situation, Allahabad High Court struck down the rule, which was negatived by the Hon'ble Supreme Court and it was held :-
'The term 'licence fee' in the context of the U. P. Excise Law connotes the idea of it being the consideration in money receivable by the Government from a private person by grant of a licence (contract), for parting in such person's favour, its exclusive privilege or right of carrying on certain activities in respect of country liquor or drugs under 'auction system' in public auctions, and the term 'fixed fee' is a fee determined by the Excise Commissioner, in lieu of 'licence fee'.'
It was further observed by their Lordships of Hon. Supreme Court as under :
'As 'duty' or 'cess' stand on the same footing as 'tax', the 'licence fee' or 'fixed fee' under consideration, cannot be regarded either as 'duty' or 'cess'. Since the view taken by the High Court that the Ordinance could not be regarded as that competently made by the State under Entries 51, 62 and 66 of List II, has not been questioned as unjustified, there is no need to examine the correctness of the said view of the High Court.'
Their Lordships quoted from the decision of the Constitution Bench given in the case of Har Shankar v. Deputy Excise and Taxation Commissioner, AIR 1975 SC1121 which reads thus :
'The distinction which the Constitution makes for legislative purposes between a 'tax' and a 'fee' and the characteristics of these two as also of 'excise duty' are well known. A tax is a compulsory exaction of money by public authority for public purposes enforceable by law and is not a payment for services rendered.' A fee is a charge for special services rendered to individuals by some government agency and such a charge has an element in it of a quid pro quo. Excise duty is primarily a duty on the production or manufacture of goods produced or manufactured within the country - Guruswami and Co. v. State of Mysore. The amounts charged to the licensees in the instant case are, evidently, neither in the nature of a tax nor of excise duty. But then, the 'Licence fee' which the State Government charged to the licensees through the medium of auctions or the 'fixed fee' which it charged to the vendors of foreign liquor holding licences in form L-3, L-4 and L-5 need bear no quid pro quo to the services rendered to the licensees. The word 'fee' is not used in the Act or the Rules in the technical sense of the expression. By 'licence fee' or 'fixed fee' is meant the price or consideration which the Government charges to the licensees for parting with its privileges and granting them to the licensees. As the State can carry on a trade or business, such a charge is the normal incident of a trading or business transaction.'
There is always a distinction which has been made between 'excise duty' and 'fee'. So far as the 'duty' is concerned, that stands on different footing than the 'fee'. 'Fee' is chargeable, in the context of liquor contract, for parting away the privilege of manufacturing of liquor, as it is a well settled proposition that no citizen has a right, so far as the manufacturing of liquor is concerned, since it happens to the privilege of the State and if State parts with the said privilege and levy fee for the same, it is within the competence of the legislature. This proposition has been accepted by a series of decisions of the Hon'ble Supreme Court and all the earlier decisions have been discussed by their Lordships in the case of Sheopat Rai (supra).
13. Shri Jain, learned counsel for the petitioner has also invited our attention to various decisions of the Hon. Supreme Court in the case of Lilasons Breweries v. State of M.P., 1992 JLJ 545, Collector of Central Excise, Bombay v. M/s Kiran Spinning Mills, AIR 1988 SC 871 and Dy. Commissioner, Sales Tax, Ernakulam v. Pio Food Crackers, AIR 1980 SC 1226. Suffice it to say that all these cases do not help the petitioner in any manner. In the case of Lilasons Breweries (supra), which is a case from State of M.P., question arose was whether the State Government can assume the power to impose or levy tax or excise duty without sanction of the Act. It is true that so far as the duty which is in the nature of tax cannot be authorised unless the Act empowers the State Government to legislate. But as already mentioned above a distinction has been made between 'tax' or 'duty' on one hand and 'fee' on the other hand. So far as duty is concerned, it cannot be levied by way of rule unless it is sanctioned by the Act. Lilasons Breweries case (supra) stands entirely on different footing. We have already distinguished above that the fee is not an excise duty. It is simple a fee charged by the State for parting of its exclusive privilege of manufacturing liquor and bottling is a part of manufacturing process and therefore the fee can be charged by the State
Case of M/s Kiran Spinning Mills (supra), this is a case of polyester fibre to be utilised in manufacture of polyester staple fibre. This was a case whether cutting the long fibre into short fibre resulted into a new and different article of commerce and whether it amounted to manufacture or not. This was negatived by their Lordships. This case does not help the petitioner. The case of Pio Food Crackers (supra) is also of no help in the present case. State of Madhya Pradesh v. Bhailal Bhai, 1964 MPLJ 705 (SC) = AIR 1964 SC 1006 is a case under the Madhya Pradesh Sales Tax Act (Act No. 30 of 1950) in which the sales-tax was imposed on tobacco imported in Madhya Bharat, whereas no tax was imposed for the tobacco produced in the State. This was found to be invalid under Article 301 of the Constitution. But as already held above that 'fee' is not an 'excise duty', it is a fee for parting away the privilege of the State for manufacture of liquor. Therefore, this case also stand distinguished.
14. As a result of above discussion, we do not find any merit in the petition and the same is dismissed. No order as to costs.