KALYAN CHEMICALSversusGOVERNMENT OF A.P. & ORS

                         (2015] 9 S.C.R. 186


A                      KALYAN CHEMICALS
                                  v.
                  GOVERNMENT OF A.P. & ORS
               (Civil Appeal Nos. 5307-5308 of 2005)
B
                         AUGUST 12, 2015
       [VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.]
         Andhra Pradesh Denatured Spirit and Denatured
c Spirituous Preparations Rules, 1971: r. 3 - Pursuant to G 0. M.
    No. 147 dated 6.3.1998, the Government amended rule 3
    whereby it introduced the collection of administrative fee of
    50 paise per bulk litre - This Rule was given retrospective
    effect from 25. 10. 1989 - Appellant filed writ petition on the
D ground that the amendment cannot be given retrospective
    effect and that fees should be levied@ 7 paise per litre since
    this amount was found to be reasonable in Vam Organics
    case- Held: s. 72 (3) ofA.P Excise Act, 1968 permits making
    the rules under the Act with retrospective effect- Moreover,
E 7 paise was deemed to be reasonable on the facts of that
    case which would not in any way indicate that a larger amount
    would be excessive especially with the passage of time -
    The subject Regulatory fees intended to prevent the
    conversion of alcoholic liquor for industrial use to that for
F · human consumption is legal and need not be strictly quid
    pro quo as long as it is not excessive.

        Dismissing the appeals, the Court

G      HELD: No ground is made out for the contention
  that amendment cannot be give retrospective effect and
  Section 72(3) of the Andhra Pradesh Excise Act, 1968
  specifi~ally allows that - "Any rules under this Act may
  be made with retrospective effect and when such a rule
H is made the reason for making the rule shall be specified
                              186
·   KALYAN CHEMICALS v. GOVERNMENT OF A. P. & ORS                  187


    in a statement to be laid before both Houses of the State A
    Legislature." As regards the contention that fees should
    be levied @7 paise per litre since this amount was found
    to be reasonable in Varn Organics case, 7 paise was
    deemed to be reasonable on the facts of that case which
    would not in any way indicate that a larger amount would B
    be excessive especially with the passage of time. In light
    of Synthetics and Chemicals Limited and Varn Organics
    Chemicals Ltd., the subject Regulatory Fees intended
    to prevent the conversion of alcoholic liquor for
    industrial use to that for human consumption is legal, C
    and need not be strictly quid pro quo as long as it is not
    excessive. [Para 5) [191-A-E]

      Vam Organics Chemicals Ltd. vs. State of U.P (1997)
      2 SC 715:1997 (1) SCR           403; Synthetics &            D
      Chemicals Limited vs. State ofU.P (1990) 1SCC109:
      19.89 (1) Suppl. SCR 623- relied on.

                       Case Law Reference
                                                                   E
    1989 (1) Suppl. SCR 623           relied on.    Para 2

    1997 (1) SCR 403                  relied on.    Para 3

        CIVILAPPELLATE JURISDICTION: Civil Appeal Nos.
    5307 -5308 of 2005                                             F

         From the Judgment and Order dated 21.10.2003 and
    02.07.2004 of the High Court of Judicature of Andhra Pradesh
    in W.P. No. 5284 of 2001 and Rev. W. P. Misc. Petition No.
    14353 of 2004 respectively                                     G

        A. T. M. Ranga Ramanujam, Hitesh Kumar Sharma,
    Prachar Sharma, Sridhar Reddy, Abhijit Sengupta for the
    Appellant.
                                                                   H
188          SUPREME COURT REPORTS                     [2015] 9 S.C.R.


A           Prerna Singh, Guntur Prabhakar for the Respondents.

            The Judgment of the Court was delivered by

       VIKRAMAJIT SEN, J. 1 The Appellant before us assail
B the concurrent findings of the learned Single Judge and the
  Division Bench of the High Court of Andhra Pradesh at
  Hyderabad, upholding the legality of the levy of an
  Administrative Fee at the rate of 50 paise per bulk litre or any
  other rate as may be fixed by the Government from time to
c time on industrial alcohol obtained from a distillery.

             2 The Appellant is a manufacturer of Ethyl Acetate, the
       basic raw material for which is industrial alcohol. The Appellant
       has been receiving allotments of denatured spirit from the
D      Respondents since 1972. By way of an amendment to Rule 3
       of the Andhra Pradesh Denatured Spirit and Denatured
       Spirituous Preparations Ruled, 1971 (1971 Rules for brevity),
      the collection of a gallonage fee, under the head of privilege
      fees, at the rate of 1 per bulk litre was introduced. The Appellant
E     filed a writ petition in 1995 contending that the levy and
      collection of such an amount without rendering any service is
      illegal, arbitrary and without justification. The High Court vide
      its order dated 13.10.1997 disposed of the writ petition,
      directing the Appellant to approach the concerned authorities
F     seeking a refund and with a direction to the authorities to
      consider the same in accordance with the law. In pursuance of
      G.O.M. No. 147 dated 6.3.1998, the Government introduced
      the collection of Administrative Fee of 50 paise per bulk litre
      in lieu of withdrawal of collection of the abovementioned
G     privilege fees as per the orders of the Seven Judge Bench of
      this Court in Synthetics & Chemicals Limited vs. State of
      U.P. (1990) 1 SCC 109. This Rule was given retrospective
      effect from 25.10.1989. The Government therefore responded
      to the Appellant by issuing G.O.Rt. No. 313 dated 13.3.2000,
H     whereby in accordance with G.O.M. No.147, the Commissioner
 KALYAN CHEMICALS v. GOVERNMENT OF A.P. & ORS                     189
              [VIKRAMAJIT SEN, J.]

of Prohibition and Excise was permitted to adjust the excess A
amount of privilege fees paid with effect from 25.10.1989
towards future allotments of alcohol for industrial purposes
againstAdministrative Fee. Since the Appellants had paid
an amountof2,09,500, it was to geta refund of 1,04,750
after the adjustment of an equal amount towards administrative B
fees. Aggrieved by this order, ·the Appellant approached the
High Court once again, seeking the issuance of a writ of
Mandamus declaring that the amendment of Rule 3 of the 1971
Rules as amended by G.O.M. No. 147 is arbitrary, illegal, ultra
vires and unenforceable, and a further declaration that the C
Appellant is entitled to the refund of the entire amount collected
as gallonage fees with interest at 18% per annum. The
Appellant's case was that the State cannot make any law in
purported exercise of its legislative competence with reference
                                                                   0
to Entry 8 of List 11 to levy privilege fees or any other fees in
respect of alcoholic liquors which are not meant or fit for human
consumption.

   3 The High Court placed reliance on Synthetics and
Chemicals Limited, wherein this Court observed as follows:        E

  "The State, in exercise of powers under Entry 8 of List II
  and by appropriate law may, however, regulate and that
  regulation could be to prevent the conversion of alcoholic
  liquors for industrial use to one for human consumption         F
  and for the purpose of regulation, the regulatory fees only
  could be justified. In fact, the regulation should be the
  main purpose, the fee or earning out of it has to be
  incidental."
                                                                  G
     The High Court also considered this aspect of the law in
Varn Organics Chemicals Ltd. vs. State of U.P. (1997) 2 SC
715, the Appellants wherein were manufacturers of 'vinyl
acetate monomer', for which industrial alcohol is the main
stock. The Appellants therein were liable to pay a denaturation   H
190          SUPREME COURT REPORTS                     [2015] 9 S.C.R.


A      fee at the rate of 7 paise per litre. They challenged this,
      ·contending that the State of U .P. had no power to legislate or
       levy taxes in respect of industrial alcohol, and that the levy was
       bad as it was not based on a quid pro quo basis. The Supreme
       Court held that "so long as any alcoholic preparation can be
B      diverted to human consumption, the States shall have the
       power to legislate as also to impose taxes, etc." Ergo, the
       State has the competence and the obligation to supervise the
       denaturation of spirit. Furthermore, this Court held that "in the
       case of regulatory fees, like the license fees, existence of quid
C      pro quo is not necessary although the fee imposed must not
       be, in the circumstances of the case, excessive." Keeping in
       view the quantum and nature of work involved in supervising
       the process of denaturation and the consequent expenses
       incurred by the State, the fee of 7 paise per litre was held to be
0
       reasonable and proper. The High Court found that the decision
       of the Supreme Court in Varn Organics Chemicals Ltd. was
       a complete answer to the submissions of the Appellant. There
       was found to be no reason to hold that the administrative fee
E      at the rate of 50 paise per bulk litre was excessive.

          4 Furthermore, the Appellant's plea that the Rule could
    not have been made efficacious with retrospective effect was
    dismissed in light of the fact that the competency of the rule
F making authority to impart retrospective effect was not in
  . dispute and no other ground was made out to support this
    contention. The Single Judge accordingly dismissed the writ
    petition on 21.10.2003. The Appellant's Review Petition was
    also dismissed on 2.7.2004.
G      5 The Appellant has now filed these Appeals before us,
  contending that the abovementioned amendment cannot be
  given retrospective effect, and that the fees should be levied
  at the rate of 7 paise per litre, since this amount was found to
H be "reasonable and proper" in Varn Organics Chemicals Ltd.
 KALYANCHEMICALS v. GOVERNMENTOFA.P.&ORS                           191
             [VIKRAMAJIT SEN, J.]

We find no force behind either of these contentions. No ground A
has been made out for the former contention, and Section 72(3)
of thb Andhra Pradesh Excise Act, 1968 specifically allows
that~ "Any rules under this Act may be made with retrospective
effect and when such a rule is made the reason for making the
rule shall be specified in a statement to be laid before both B
Houses of the State Legislature." Regarding the latter
contention, 7 paise was deemed to be reasonable on the facts
of that case which does not in any way indicate that a larger
amount would be excessive especially with the passage of
time. We have discussed when administrative and service C
charges can be recovered along with the relevant case law in
some detail in our judgment of even date in the Appeal titled
as State of Tamil Nadu vs. Tvl. South Indian Sugar Mills, which
should be adverted to in the interests of avoiding prolixity. We D
uphold the High Court's finding that in light of Synthetics and
Chemicals Limited and Vam Organics Chemicals Ltd., the
subject Regulatory Fees intended to prevent the conversion
of alcoholic liquor for industrial use to that for human
consumption is legal, and need not be strictly quid pro quo as E
long as it is not excessive. We find no merit in these Appeals
and they are accordingly dismissed.

Devika Gujral                                 Appeals dismissed.