Holding

The payment of excise duty under Rule 6A is a valid, independent component of the consideration for the grant of exclusive privilege and not an unlawful levy, rendering the rule within the State's legislative power.

Summary

The State of Orissa awarded exclusive liquor licences to Narain Prasad and others, who contracted to lift a monthly minimum guaranteed quantity (MGQ) of liquor and remit excise duty in two instalments as per Orissa Excise (Exclusive Privilege) Rules, 1970. The licensees failed to lift the MGQ and to pay the duty, prompting the State to issue demand notices. The licensees filed writ petitions under Article 226, contending that Rule 6A(3) – which requires duty payment even on unlifted liquor – was ultra vires the Bihar & Orissa Excise Act, 1915 and amounted to an unlawful levy of excise duty. The High Court upheld the petitions; the State appealed. The Supreme Court held that the duty payable under Rule 6A is a valid component of the consideration for the grant of the exclusive privilege, not a tax on unlifted liquor, and that the rule is within the statutory power. Consequently, a party cannot evade contractual obligations through extraordinary jurisdiction, and the High Court’s order was set aside.

Issues considered

Whether Rule 6A(3) of the Orissa Excise (Exclusive Privilege) Rules, 1970, which obliges licencees to remit excise duty irrespective of lifting the MGQ, is ultra vires the Bihar & Orissa Excise Act, 1915.
Whether the demand for excise duty on unlifted liquor constitutes a prohibited levy of excise duty under the Act.
Whether a licencee may invoke the extraordinary jurisdiction of a High Court under Article 226 to avoid contractual obligations arising from the licence agreement.
How the term ‘privilege’ is to be interpreted in the context of liquor licences and whether the payments constitute consideration rather than a tax.

Legislation cited

Bihar and Orissa Excise Act, 1915s. 22, s. 27, s. 28, s. 29, s. 89
Constitution of Indias. Article 226

Subjects

Excise dutyExclusive privilegeMinimum guaranteed quantityContractual obligationUltra viresArticle 226Writ petitionConsiderationLicenceLevy of tax

Judgment

STATE OF ORISSA AND ORS. A
v.
NARAIN PRASAD AND ORS.

SEPTEMBER 3, 1996

[B.P. JEEVAN REDDY AND K.S. PARIPOORNAN, JJ.] B

Excise Law:

Orissa Excise (Exclusive Privilege) Rules, 1970: Rules 6A and 6.

Liquor licence-Under contract-Considerations for grant of-Licensee
c
required to lift 'minimum guaranteed quantity' (MGQ) every month-As well
as to remit excise duty twice every month-While licensee obliged to remit
excise duty in case tlie full M.G.Q. was not lifted, Collector could.pennit
deficit to be lifted in subsequent n01th-Licensee as per tenns of contract
unde1took to remit excise duty plior to lifting of liquor-However, licensee D
failed to lift M.G.Q. as well as to remit excise du{JWl1en demand for
payment of excise duty was made, licensee filed wlit petition challenging the
Rules obliging payment of excise duty even p1ior to lifting and sale of
liquo1~Held : Rules valid-Payment of excise duty was independent obliga-
tion unrelated to lifting of M.G.Q.-Licensee obliged to remit excise duty E
whether or not he lifted full M.G.Q.-Licensee was bound by tem1s of
contract-Bihar and Olissa Excise Act, 1915, Ss. 27, 28 and 29.

Constitution of India, 1950 : Anicle 226.

Extraordinary jwisdiction-Invoking of-Person who entered into con- F
tract could not later be allowed to challenge validity of tenns of that contract
by invoking extraordinary julisdiction of High Coult.

Words and Phrases :

''Plivilege''-Meaning of-In the context of grant of liquor licence. G
The respondents were the highest bidders in respect of the various
liquor shops in the State. Their bids were accepted. They executed agree·
ments in the prescribed form and were issued licences. Each of them had
undertaken under the agreement/contract to lift a particular specified
quantity of liquor every month during the relevant excise year as well as H
465
466 SUPREME COURT REPORTS [1996] SUPP. 5 S.C.R.

A to remit the excise duty as specified in the Orissa Excise (Exclusive
Privilige) Rules, 1970. They did the business under the said licences for
the entire excise year. They failed to lift the agreed Minimum Guaranteed
Quantity (M.G.Q.) They also failed to remit the excise duty as provided by
Rule 6-A of the Rules. And when notices were served calling upon them to
remit the appropriate amount, they approached the High Court by way of
B
writ petitions questioning the demand notices. The High Court allowed the
writ petitions. Being aggrieved, the appellants preferred the present ap·
peal.

The main contention of the respondents-licensees was that the
C demand for payment of excise duty on unlifted quantity of liquor amounted
to levy of duty and that such levy was not warranted by the Bihar and
Orissa Excise Act, 1915. They contended that Rule 6-A(3) of the Rules was
ultra vires the rule-making power or the Government and was outside the
purview of the Act. They contended that if there was a sale of liquor, duty
could be collected on the liquor sold but that seeking to collect the duty
D even in the absence of sale amounted to levy of duty contrary to the
provisions of the Act. While the respondents-licensees looked at the im-
pugned demand as an instance of levy of excise duty, the State looked at
it as a case of enforcing the undertakings contained in the agreement/con-
tract executed by the licensees.
E
Allowing the appeal, this Court

HELD : 1. A person who enters into certain contractual obligations
with his eyes open and works the entire contract, cannot be allowed to turn
round, and question the validity of those obligations or the validity of the
F Rules which constitute the terms of the contract. The extra-ordinary
jurisdiction of the High Court under Article 226, which is of a discretion-
ary nature and is exercised only to advance the interests of justice, cannot
certainly be employed in aid of such persons. Neithl-<" justice nor equity is
in their favour. [480-C-D]
G 2.1. A reading of Rule 6-A of the Orissa Excise (Exclusive Privilege)
Rules, 1970 makes it clear that the licensee shall have to undertake to lift the
Minimum Guaranteed Quantity (M.G.Q.) ofliquor every month. Clause (3)
of Rule 6-A of the Rules, read with clauses (1) and (2) means that the
obligation to lift the M.G.Q. of liquor and the obligation to remit the excise
H duty payable for the month are two distinct obligations. While the obligation
STATEv. NARAIN PRASAD 467

to lift the M.G.Q. is to be discharged before the end of the month, the A
obligation to remit the excise duty for the month is to be discharged in two
equal instalments, viz., first instalment by the fifth and the second instal·
ment by the fifteenth of the month. The consequences of not remitting the
excise duty in the manner specified are set out in clauses (3) and (4), which
make the said obligation mandatory and emphatic. The Rule also makes it B
clear that if a given month, the full M.G.Q. is not lifted, the Collector can
permit the deficit to be lifted in the subsequent month but this has nothing
to do with the obligation to remit excises duty for the month on the dates
specified. Thus the payment of excise duty under the Rules is made an
independent obligation unrelated to lifting of M.G.Q. It is, in truth and
effect, the consideration for the grant of privilege/licence alongwith the C
amounts specified in Rule 6. In this sense, the Rules are clear on the point
that the rental and excise duty (payable under Rules 6 and 6-A) together
constitute the consideration for the grant oflicence. (473-E-F; 485-F-G]

2.2. What all the licensee paid is nothing but consideration for the D
grant of licence and the mere fact that the total consideration fixed
comprises several elements (including excise duty), it cannot be said that
excise duty is levied upon the licensee. The amounts mentioned in Rules 6
and 6-A, as also the undertakings contained therein, together constitute
the consideration for grant of privilege/licence, determined by auction, as
contemplated by Section 29 of the Bihar and Orissa Excise Act, 1915. The E
obligation to remit the excise duty is independent of the sale/purchase of
liquor; it is payable on or before the specified dates every month; it is an
addition to the monthly instalment payable under Rule 6; its remittance is
not tied up to the purchase of M.G.Q. except to the extent that the licensee
has to pay the prescribed instalment of excise duty prior to the lifting of F
the liquor. It, therefore, cannot be said that there is any levy of excise duty
upon the licensee. The concept here is altogether different. It is a case
where the consideration payable by the licensee for grant of licence is made
up of monthly rental plus excise duty besides the obligation to purchase the
M.G.Q. The licensee pays the rental and excise duty as undertaken by him
under the agreement/contract executed by him and as required. by condi- G
tions of the licence under which he is doing business, i.e., as and by way
of consideration. Indeed, the Rules could have provided that the entire
amount provided under Rules 6 and 6-A should be paid in advance before
the issuance of licence in which event it could not have been contended that
it is not in consideration of grant of licence. Merely because, the Rules H
468 SUPREME COURT REPORTS [1996] SUPP. 5 S.C.R.

A provide a concession and provide for collection of the said amounts in
convenient instalments spread over the year, the nature and character of
the payments cannot charge. [486-B-G]

Panna Lal v. State of Rajasthan and Ors., [1976] 1 SCR 219; State of
Andhra Pradesh '" Y. Prabhakara Rao, [1987] 2 SCR 513; Har Shankar v.
B Deputy Excise and Taxation Commissioner, AIR (1975) SC 1211; State of
Haryana and Others v. !age Ram and Others, AIR (1980) SC 2018 and
Nashilwar v. Sate of Madhya Pradesh, [1975] 2 SCR 861, relied on.

Bimal Chandra Banerjee v._ State of Madhya Pradesh, [1971] 1 SCR -
844; State of Madhya Pradesh v. Finn Gappulal, [1976] 2 SCR 1041 and
c Excise Commissioner, U.P. Allahabad v. Ram Kumar, [1976] Supp. SCR
532, held inapplicable,

Central Provinces and Berar Sales of Motor Spirit and Lubricants
Taxation Act, 1938 (1939) F.C.R. 18, referred to.
D
3. The expression "privilege" in the context of intoxicating liquor is
not defined in the Act. In the context of excise enactments, the expression
"privilege" really means the licence permit granted by the State. The State
is entitled to prohibit the trade in intoxicating liquors altogether; it can
impose a total ban; no citizen can claim any fundamental right to manufac·
E _ture or to trade in these liquors; it is, however, open to the State to lift the
ban partially and allow the trade in liquor to be carried on in the manner
prescribed; the State says that a citizen can trade in liquor only under a
licence- to be granted by it for the consideration specified in that behalf
and that the trade therein can be carried on only in accordance with the
regulatory provisions prescribed by it in that behalf. It is this grant of
F
licence/permit, which is called or is described sometimes as grant of
"privilege". It cannot be said that the theory of "privilege" has been ex·
ploded in Synthetics and chemicals case, and that it could ~o longer be
invoked. [487-G-H; 488-A·B; 486-H; 487-A]

G Synthetics and Chemicals Limited and Others v. State of U.P. and
Others, [1990] 1 SCC 109, held inapplicable.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 11509-12
of 1996 Etc. Etc.

H From the Judgment and Order dated 22.12.94 of the Orissa High -_
STATE V'.°'NARAIN PRASAD [B.P.JEEVANREDDY,J.] 469

Court in O.J.C. No. 279, 827, 1359 and 1361 of 1992. A
Indrajeet Roy, Genl. for State of Orissa, P.N. Misra and Raj Kumar
Mehta for the Appellants.

Soli Sorabjee and V.A. Mohta, Vinoo Bhagat, Ashok Kr. (Jupta, J.K.
Das and S.K. Sinha for the Respondents. B

The Judgment of the Court was delivered by

B.P. JEEVAN REDDY, J. Leave granted.

Having voluntarily entered into contracts with the Government of C
Orissa, undertaking to lift a particular quantity of liquor every month and
also to remit the monthly excise duty in two equal instalments on the fifth
an fifteenth of the month, the respondents - licencees committed default
on both counts and when the amount of excise duty is sought to be
recovered from them, they have turned round and are contending that the D
said undertaking in the contract is not enforceable in law. They invoked
the extra-ordinary jurisdiction of the High Court under Article 226 of the
Constitution for the purpose. The High Court has upheld their contention.
Hence, these appeals by the State of Orissa.

The grant of excise licences in the State of Orissa is governed by the E
Bihar and Orissa Excise Act, 1915 (the Act) and the rules made there-
under. Section 22 provides for grant of exclusive privilege of sale of country
liquor, whether wholesale or retail. Section 27 empowers the State Govern-
ment to impose excise duty or countervailing duty, as the case may be, at
such rate as it may direct on any of the activities specified therein. It would
F
be appropriate to set out sub-section (1) of Section 27 :

"27. Power to impose duty on import, export, transport and manufac-
ture. {1) An excise duty or countervailing duty, as the case may be,
at such rate or rates as the State Government may direct, may be
imposed, either generally or for any specified local area, on- G

(a) any excisable article imported, or

{b) any excisable article exported, or

(c) any excisable article transported, or H
470 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A (d) any excisable article (other than tari) manufactured under
any licence ganted in respect of Cl. (a) or S. 13, or

(e) any hemp plant cultivated, or any portion of such plant
collected, under any licence granted in respect of Cl. (b) or
Cl. ( c) of S.13, or
B
(t) any excisable article manufactured in any distillery or
brewery licen~ed, established, authorized or continued under
this Act.

Explanation : Duty may be imposed on any article under this
c sub-section at different rates according to the places to which such
article is to be removed for consumption, or according to the
varying strengths and quality of such article."

Section 28 empowers the levy of excise duty/countervailing duty in
D any of the several ways provided therein. Section 28, insofar as is relevant,
reads:

"28. Ways oflevying such duty. - Subject to any rules made under
S.90, CL (12), any duty imposed under S. 27 may be levied in any
of the following ways :
E
( c) on an excisable article transported, -

(i) ............. .

(ii) by .payment upon issue for sale from a warehouse estab-
F lished, authorized or continued under this Act;"

Section 29 is particularly relevant to the controversy herein. It
reads:

29. Payment for grant of exclusive privilege. (1) Instead of or in
G addition to, any duty leviable under this Act, the State Government
may accept payment of a sum in consideration of the grant of any
exclusive privilege under S. 22.

(2) The sum payable under sub-S. (1) shall be determined as
H follows:
STATE v. NARAIN PRASAD (B.P. JEEVAN REDDY, J.) 471

(a) by auction or by calling tenders or otherwise as the State A
Government may, in the interest of excise revenue, by general
or special order direct; and

(b) by such authority and subject to such control as may be
specified in such order.
B
(3) The sum determined under sub-S. (2) shall be final and shall
be binding on the party making the offer by way of tender, bid or
otherwise once such offer is accepted by the authority referred to
in CL (b) of that sub-section."

A reading of Section 29 shows that the State Government may accept
c
payment of a sum in consideration of the grant of any exclusive privilege
under Section 22. This may be instead of or in addition to any duties
leviable under the Act. Sub-section (2) clarifies that the sum payable under
Sub-section (1) shall be determined by auction or by calling for tenders or
otherwise; sub-section (3) declares that the sum determined under sub-sec- D
tion (2) shall be final and binding upon the party making the offer once
the offer is accepted by the appropriate authority.

Section 89 empowers the State Government to make rules to carry
out the objects of the Act. Sub-section (2) specifies the several heads in E
respect of which rules can be made. Clause (i) of sub-section (2) empowers
the State Government to make rules "for regulating the procedure to be
followed and prescribing the matters to be ascertained before any licence
for the wholesale or retail vend of any intoxicant is granted for any locality."

In exercise of the power conferred by Section 89, the Government of F
Orissa has made rules governing the grant of licences, viz., 'The Orissa
Excise Exclusive Privilege Rules, 1970'. Rule 6 of these Rules prescribes
the manner in which the consideration determined for grant of exclusive
privilege shall be paid. Rule 6(A), as sub.stituted by SRO No. 215/89,
provides for monthly minimum guaranteed quota, the obligation of the G
licencee to lift it before the end of the month and the further obligation to
remit the monthly excise duty in two equal instalments, i.e., on the 5th and
15th of every month. Clauses (1), (2), (3) and (4) of the said Rules read
thus:

"6(A)(i) Minimum guaranteed quantity of Country spirit : Every H
472 SUPREME COURT REPORTS [1996] SUPP. 5 S.C.R.

A successful bidder qf Country Spirit shop shal~ before obtaining
licence, guarantee the sale of the minimum guaranteed quantity of
Country spirit as fixed by the Collector. The bidder shall before
obtaining licences submit monthly distribution of st~tement to the
concerned Collector. The licensee before the 30th June, may revise
and resubmit the monthly distribution statement for the portion of
B
the Excise Year from August to March. The Collector, shall be
competent to revise and approve such revised statement. There
shall be no further changes in the distribution statement so ap-
proved.

c (2) The licensee shall lift the monthly minimum guaranteed quantity
approved for that month before 5.00 p.m. on the last working day of
that month. The right to lift the monthly minimum guaranteed
quantity approved for that month and left unlifted if any by 5.00
p.m. on the last working day of the month shall be forefeited, unless
specially permitted to be lifted in the subsequent month or months
])
by the Collector.

Provided that :

(i) The Collector, may for any special reasons permit the
licensee to lift the short drawn minimum guaranteed quantity
E
of the previous month in the succeeing month except for the
months of February and March. The Collector shall however,
obtain the order of the Commissioner of Excise in case of
default and for any special reasons if the period exceeds over
one month.
F
(ii) The Commissioner, may, wherever if he deems it neces-
sary, permit the licence to lift the short down minimum
guaranteed quantity of any month other than that month of
March in any subsequent month or months.
G (iii) No unlifted quantity of the Country Spirit shall be per-
mitted to be lifted beyond the lest day of February.

(3) Subject to provisions of sub-rule (1) no licensee shall lift less
than the specified minimum guaranteed quantity of country spirit
H in any month. The excise duty of country spirit for the month as
STATEv. NARAIN PRASAD [B.P.JEEVANREDDY,J.) 473

approved in the distribution statement under sub-rule ( 1) Shall be A
remitted in two equal instalments by the licensee into the Government
Treasury of the District in which the shop is situated. The first
instalment shall be remitted by fifth of the month and the second
instalment by fifteenth of that month. Where due date or subsequent
day happens to be a holiday the instalment shall be remitted on
B
the next working day. If in any month, the first or second instalment
of the excise duty of country spirit for that month is not remitted as
required above, the excise duty to the extent of deficit payment
without prejudice to any other mode of recovery shall be deducted
first from the Bank Guarantee, if any, and the balance from the
advance deposits furnished or paid under rule 6 and the licensee c
shall be called upon to indemnify the amounts so adjusted in the
case of first instalment by fifteenth of that month and in the case
of second instalment by twentyfifth of that month in which deficit
payment of instalment of excise duty had expired.
D
(4) Where a licensee fails to indemnify the advance amount adjusted
under sub-rule (3) in the case of first instalment of fifteenth of that
month and in the case of seco~d instalment by twentyfifth of that
month, the license is liable for cancellation and the right acquired
by the defaulting licensee shall be liable for redisposal subject to
provisions of sub-section (1) of Section 22 of the Act." E

A reading of Rule 6-A makes the following matters clear : the
licencee shall have to undertake to lift the M.G.Q. of liquor every month.
Clause_ (3) of the Rules, read with clauses (1) and (2) means that the
obligation to lift the M.G.Q. of liquor and the obligation to remit the excise F
duty payable for the month are two distinct obligations. While the obligation
to lift the M.G.Q. is to be discharged before the end of the month, the
obligation to remit the excise duty for the month is to be discharged in two
equal instalments, viz., first instalment by the fifth and the second instal-
ment by the fifteenth of the month. The consequences of not remitting the
excise duty in the manner specified are set out in clauses (3) and (4), which G
make the said obligation mandatory and emphatic. The Rule also makes
its clear that if in a given month, the full M.G.Q. is not lifted, the Collector
can permit the deficit to be lifted in the subsequent month but this has
nothing to do with the obligation to remit excise duty for the month on the
dates specified. It is relevant to point out that the several consequences H
474 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A provided in clauses (3) and (4) follow the non-deposit of excise duty on
specified dates - and not the non-.Jifting of M.G.Q. which is an independent
obligation. It is necessary to bear this aspect in mind.

Every person whose bid/tender has been accepted is required to
execute an agreement/contract in the prescribed form. Under this agree-
B ment, the contractor/licencee agrees to abide by the rules and conditions
relating to retail vend of country spirit (liquor) as stipulated in the licence
as also the general conditions of licence. The said conditions shall be
treated as part of the agreement. Clause (2) obliges the contractor to draw
a particular quantity of liquor every month from the specified warehouse.
c Under Clause (3) the contractor "undertakes to pay the duty at the
prescribed rate at the Warehouse prior to lifting the stock." This condition
provides that excise duty shall be remitted p1ior to lifting; it does not say
it shall be remitted at the time of lifting. Under Clause (7), the contractor-
licencee agrees to abide by all the provisions of the Act and the Rules and
instructions as may be issued from time to time.
D
Conditions 1 and 2 of the licence, as amended in 1989, repeat and
reiterate the provisions contained in Rule 6-A aforesaid in their entirety.

The respondents were the highest bidders in respect of the various
liquor shops in Orissa. Their bids were accepted. They executed agree-
E ments in the prescribed form and were issued licences. Each of them had
undertaken under the agreement/contract to lift a particular specified
quantity of liquor every month during the relevant excise year (1990-1991)
as well as to remit the excise duly as specified in the Rules. They did the
business under the said licences for the entire excise year. They failed to
F lift the agreed M.G.Q. They also failed to remit the excise duty as provided
by Rule 6-A. And when notices were served calling upon them to remit the
appropriate amount, they rushed to the Orissa High Court by way of writ
petitions questioning the demand notices.

The main contention of the respondents (writ petitioners) was that
G the demand for payment of excise duty on uitlifted quantity of arrack
amounts to levy of duty and that such levy is not warranted by the Act.
They submitted that Rule 6-A(3) is ultra vires the rule-making power of
the Government and is outside the purview of the Act. They submitted
that if there is a sale of liquor, duty can be collected on the liquor sold
H but that seeking to collect the duty even in the absence of sale amounts

,,
STATE v. NARAIN PRASAD (B.P. JEEVAN REDDY, J.) 475

to levy of duty contrary to the provisions of the Act. They placed reliance A
upon the decisions of this Court in Bimal Chandra Banerjee v. State of
Madhya Pradesh, (1971] 1 S.C.R. 844 and the subsequent decisions follow-
ing it. According to them, their case did not fall within the ratio of the
decisions of this Court in Panna Lal v. State of Rajasthan and Ors., (1976]
1 S.C.R. 219 and State of Andhra Pradesh v. Y. Prabhakara Rao, [1987] 2 B
S.C.R. 513.

The State of Orissa disputed the several contentions of the writ
petitioners. In particular, they relied upon the Agreement and the under-
takings contained therein. Their case is set out in the impugned judgment
in the following words : C

"It is further contended that the fixation of M.G.Q. was made
considering the. potentiality of sale and by taking other relevant
factors into consideration, and the petitioner and other contractors
were aware of the M.G.Q. at the time when they participated in D
the auction-cum-tender. ...... the petitioner having accepted the con-
tract cannot now turn around and challenge the fixation of M.G.Q.
for the year 1991-92..... the demand was justified being the duty
towards shortfall of the M.G.Q., the challenge of the petitioner to
Annexure-3 is untenable. Sub-rule (3) of Rule 6-A of the Orissa
Excise (Exclusive Privilege) Rules, 1970..... .is valid and has been E
framed in exercise of powers under sub-section (i) of Section 89
of the Bihar & Orissa Excise Act, 1915 which empowers the State
Government to make rules to carry out the objects of the Act, or
any other low for the time being in force relating to the excise
revenue and also by Section 89(2) of the Act which empowers the F
State Government to make rules for regulating the import, export
or transport of any intoxicant... ..... under Section 22(i) of the Act,
an exclusive privilege can be granted to any person on such terms
and conditions and for such period as the State Government may
think fit. The M.G.Q. being one of the conditions for grant of a G
licence, the Government was fully empowered in framing rules
which related to fixation of M.G.Q. and also for providing the
consequences which would follow on reach of such condition. This
power.. .....flows from a combined reading of Sections 22, 27, 29
and 89 of the Act... .. the provisions relating to the M.G.Q. ought
to be considered as a condition of licence, and that being a H
476 SUPREME COURT REPORTS [1996] SUPP. 5 S.C.R.

A condition subject to which the licence was issued and accepted.by
the petitioner, the petitioner cannot, after operating the licence,
challenge the same. He is bound by the conditions and is, therefore,
liable to pay the amount demanded to compensate the State for
the loss sustained by it for failure on the part of the petitioner to
lift the M.G.Q ......The petitioners having entered into an agreement
B
for sale of country liquor and having been granted an exclusive
privilege on certain terms and conditions, cannot now, after enter-
ing into a contract, wriggle out of their contractual obligation and
contend that the amount demanded for shortfall of M.G.Q. is
invalid ...... the sum sought to be realised is damages for breach of
c contract namely, failure to lift M.G.Q. It is in the granting of
damages being the duty on the shortfall, and as such, is in the
nature of a penalty and can be realised on a breach being com-
mitted. Strong reliance is placed on Hari Shankar and Others Etc.
v. Deputy Excise & Taxation Commissioner, AIR (1975) SC 1121,
Panna Lal v. State of Rajasthan, AIR (1975) SC 2008 and State of
D
Hatyana v. !age Ram & Others, AIR (19SO) SC 2018."

The High Court, however accepted the contentions of the respon-
dents-writ petitioners and quashed the demand notices impugned in the
writ petitions.
E
It is evident from the contentions urged by both the sides that while
the respondents-licensees look at the impugned demand as an instance of
levy of excise duty, the State looks at it as a case of enforcing the undertak-
ings contained in the agreement/contract executed by the licensees. Ac-
F cording to the licencees no excise duty can be levied unless there is a sale.
Demand for excise duty where there is no sale of liquor, according to them,
is unsustainable in law. The State's case, however, is that the
licence/privilege was granted to the respondents in consideration of pay-
ment of several items of money, all of which together constitute the
consideration for the grant of licence. The State says that it is merely
G seeking to recover the amount due to it under the contract and that such
a course does not amount to levy of excise duty. Both sides rely upon
certain decisions of this Court in support of their respective points of view.
It would be appropriate to notice them.

H In Bimal Chandra Banerjee v. State of Madhya Pradesh, [1971] 1
STATEv. NARAINPRASAD(B.P.JEEVANREDDY,J.) 477

S.C.R. 844, one of the conditions of the licence stipulated that : A

"The minimum quantity for taking issues from the Warehouse for
sale is fixed at 3213 p. litres spiced spirit and 25940 p. litres plain
spirit. You (Iicencees) shall be liable to make good every month
the deficit of monthly average of the total minimum duty on or
before the 10th day of each month following the month to which
B
the deficit duty relates."

Since the licencee failed to remit the duty as stipulated, the State
made a demand for the same. The contention of the licencee was that the
excise duty is a tax, that it can be levied only on the basis of a valid law C
and that no tax can be levied on the basis of a contract or pursuant to
executive orders. Tax, it was submitted, can be levied only by the legisla-
ture. It was contended that the aforesaid condition of licence is ultra vires
the powers of the Government. In other wards, the contention was that the
Government had no power to amend the Rules so as to include the D
aforesaid clause in the conditions of licence. Section 25 of the Madhya
Pradesh Act provided for the levy of duty on any of the events specified
therein, namely, import, export transport, manufacture and cultivation
while Section 26 provided for levy for duty inter alia on liquor issued from
distillery or warehouse. No provision of the Act, however, empowered levy
of duty even where there was no issue of liquor from distillery or E
warehouse. This Court upheld the Iicencee's contention on the following
reasonmg:

"Neither s. 25 or s. 26 or s. 27 or s. 62(1) or els. ( d) and (h) of s.
62(2) empower the rule making authority viz., the State Govern- F
ment to levy tax on excisable articles which have not been either
imported, exported, transported, manufactured, cultivated or col-
lected under any licence granted under s.13 or manufactured in
any distillery established or any distillery or brewery licensed under
the Act. The legislature has levied excise duty only on those articles G
which come within the scope of s.25. The rule making authority
has not been conferred with any power to levy duty on any articles
which do not fall within the scope of s.25 therefore it is not
necessary to consider whether any such power can be conferred
on that authority. Quite clearly the State Government purported
to levy duty on liquor which the contractors failed to lift. In so H
478 SUPREME COURT REPORTS (1996] SUPP. 5 S.C.R.

A doing it was attempting to exercise a power which it did not
possess.

No tax can be imposed by any bye-law or rule or regulation unless
the statute under which the subordinate legislation is made spe-
cially authorises the imposition even if it is assumed that the power
B to tax can be delegated to the executive. The basis of the statutory
power conferred by the statute cannot be transgressed by the rule
making authority. A rule making authority has no plenary power.
It has to act within the limits of the power granted to it.

c We are of the opinion that the impugned rule as well as the
demands are not authorised by law."

The ratio of the said decision is that inasmuch as the Act does not
empower levy of excise duty on unlifted liquor, no such levy can be created
D by a rule made under the Act. It was also observed that inasmuch as the
Act does not empower the rule-making authority to impose tax on unlifted
liquor, the rule-making authority (the Government of Madhya Pradesh)
had no power to add the aforesaid clause in the conditions of the licence.
It is significant to notice that this decision approached the question from
E the point of view of levy of excise duty. No argument appears to have been
put forward - as was done in later decisions - that the State is merely
seeking to recover the consideration for the grant of privilege/licence as
per the terms and conditions of, and as undertaken in, the Agreement. The
decision, therefore, does not advert to that aspect at all - an aspect which
came to be highlighted in some of the later decisions. This decision was
F followed in State of Madhya Pradesh. v. Finn Gappulal Etc., (1976) 2 S.C.R.
1041 and in Excise Commissioner, U.P., Allahabad v. Ram Kumar,(1976)
Supp. S.C.R. 532. Gappulal was again a case from Madhya Pradesh. In this
case, an attempt was no doubt made by the State to bring its case within
the ratio of Panna /al v. State of Rajasthan (which was decided meanwhile),
G but it-was repelled by the Court holding that the facts of the case before
them placed the case within the ratio of Bimal Chandra Banerjee and not
within the ratio of Panna Lal. In Ram Kumar, a case arising under the U.P.
Excise Act, one of the conditions of the licence provided that in case the
licencee failed to lift the minimum guaranteed quota, "he shall be liable to
H pay to the State Government compensation at the rate equal to the rate of
STATE v. NARAIN PRASAD [B.P.JEEVAN REDDY, J.) 479

stillhead duty per liter by spiced spirit .......". In this case too, the State tried A
to bring its case within the ration of Panna Lal but the Court did not agree.
It preferred to apply the ratio of Bimal Chandra Banerjee. It held that
none of the provisions of the U.P. Act authorised the levy of the duty even
where there was no sale. The Court held further that though disguised as
compensation, the demand is in reality a demand for excise duty on the B
unlifted quantity of liquor, which is not authorised by the provisions of the
Act.

The licencees-respondents submit that the present cases, having
regard to the language of the enactment, Rules and conditions of the
licence fall within the ratio of the above decisions while the State of Orissa C
submits that these cases properly fall within the ratio of the decisions in
Pamra Lal and Prabhakara Reddy. Before referring to these decisions, it
would be appropriate, in our opinion, to refer to the decision of the
Constitution Bench in Her Shankar v. Deputy Excise and Taxation Commis-
sioner, AIR (1975) SC 1211. In Har Shankar, one of the objections raised D
by the State to the maintainability of the writ petitions filed by the
licencees was that the writ petitioners were seeking to enforce contractual
rights thereby. This was denied by the writ petitioners therein. They said,
they were merely seeking to vindicate their legal rights. The contention of
the writ petitioners was repelled by this Court in the following words : E

"The short answer to this contention is that the bids given by the
appellants constitute offers and upon their acceptance by the
Government a binding agreement came into existence between the
parties. The conditions of auction become the terms of the contract
and it is on those terms that licences are granted to the successful
F
bidders in Form L. 14-A of the Rules."

The Court further observed :

"One of the reliefs which the appellants ask for is ·that Rules 27-A, G
30 and 31 be declared ultra vires and unconstitutional and conse-
quently the respondents be directed to refund the assessed fees
,, already recovered. By attempting to exploit the licences without the
burden of assessed fees originally attaching to them under the rules
framed by the Financial Commissioner, the appellants are seeking H
480 SUPREME COURT REPORTS [1996] SUPP. 5 S.C.R.

A to work the licences on such tenns as they find convenient. The writ
jurisdiction of High Courts under Article 226 of the Constitution is
not intended to facilitate avoidance of obligations voluntarily in-
cwred. That, however will not estop the appellants from contending
that the amended Rules are not applicable as their licences were
B renewed before the amendments were made".

(emphasis added)

The approach adopted in this decision has to be borne in mind in
every such case. It is also to be kept in mind that while the decisions
C referred to hereinbefore are by smaller Benches, this decision is by a
Constitution Bench. A person who enters into certain contractual obliga-
tions with his eyes open and works the entire contract, cannot be allowed
to turn round according to this decision, and question the validity of those
obligations or the validity of the Rules which constitute the terms of the
D contract. The extra-ordinary jurisdiction of the High Court under Article
226, which is of a discretionary nature and is exercised only to advance the
interests of justice, cannot certainly be employed in aid of such persons.
Neither justice nor equity is in their favour.

Panna Lal arose under the Rajasthan Excise Act. The licences were
E given to contractors under a guaranteed system; there was a total guaran-
teed amount. When the contractors failed to pay the guaranteed amount
as per the contract, demand notices were issued. The contention urged by
the licencees was that the demand for shortfall in truth amounted to levy
of excise duty on unlifted quantity whereas the State's case was that they
F were demanding the amount guaranteed by the contractor and payable in
accordance with the agreement. Another argument of the contractors was
that the demand for issue price of unlifted quantity was in effect a demand
for excise duty inasmuch as one of the components of issue price was excise
duty. This Court rejected the contention relying upon the decisions of this
Court in Nashirwar v. State of Madhya Pradesh, [1975] 2 S.C.R. 861 and
G Har Shankar. It was held that rental is the consideration for the privilege
granted by the Government for manufacturing or vending liquor, that
rental is neither a tax nor excise duty and that it is the consideration for
grant of privilege by the Government. The Court referred to the decision
of the Federal Court in the Central Provinces and Berar Sales of Motor
H Spirit and Lubricants Taxation Act, 1938 (1939) F.C.R. 18 and observed :
STATE v. NARAIN PRASAD [B.P. JEEVAN REDDY, J.) 481

"Many Acts provide for lump sum payments in certain cases by A
manufacturers and retailers, which may be described as payments
either for privilege or as consideration for the temporary grant of
a monopoly, but these are clearly not excise duties or anything like
them".

(See 1939 F.C.R. 18 at pp. 53 and 54)
B

After referring to certain other decisions of this Court, it was held :

"171e decisions of this Court establish that the lump sum amount
voluntarily agreed to by the appellants to pay to the State are not C
levies of excise duty but are in the nature of lease money or rental
or lump sum amount for the exclusive privilege of retail sales granted
by the States to the appellants.

There is no levy of excise duty in enfarcing the payment of the guaran-
. teed sum or the stipulated lump sum mentioned in the licences, for these D
reasons. First, the licences were granted to the appellants after .offer and
acceptance or by accepting their tenders or auction bid. The appellants
stipulated to pay lump sum amounts as the price for the exclusive privilege
of vending country liquor. The appellants agreed to pay what they con-
sidered to be equivalent to the value of the right. Second, the stipulated E
payment has no rel~tion to the production or manufacture of country liquor
except that it enables the licensee to sell it. The country liquor is produced
by the distilleries .. Under section 28 of the Act and under the relevant duty
notifications the excise levy is on the manufacture and not on the sale or
retail of liquor: Under the duty notifications no excise duty is levied or
collected from the liquor contractors who are liable only to pay the price of F
liquor. 17ie taxable event is not the sale of liquor to the contractors but the
manufacture of liquor. What the liquor contractors pay in consideration of
the license is a payment for the exclusive privilege for selling country liquor.
171e liability for excise is on the distillery and the liquor contractors are not
concerned with it." G
Dealing with the argument that recovery of issue price is in effect a
recovery of excise duty for the reason that excise duty forms a component
of the issue price, this Court observed :

"Thtlump sum amount payable for the exclusive privilege is not H
482 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A to be confused with the issue price. In essence what is sought to be
recovered from :he liquor contractors is the shortfall occasioned on
account offailure on the part of liquor contractor to fulfil the tenns
of license."

Having regard to the particular stipulations and conditions of the
B contracts concerned therein, the Court observed further :

"The agreements give the liquor contractors an exclusive privilege
to sell country liquor in' a specified area for, the period fixed for
a stipulated sum of money for enjoying the privilege. If the con-
c tractors do not sell any liquor they are yet bound to pay the
stipulated sum. If they sell liquor they are given the benefit of
remission in the price of the exclusive privilege. The measure for
this remission is the excise duty leviable to the extent that the liquor
contractors can neutralise the entire amount of exclusive privilege
in the excise duty payable by them. If the contractors fail to lift
D adequate quantity of liquor and thereby fail in neutralising the
entire price of exclusive privilege the contractors are not called
upon to pay excise duty."

The decision in Har Shankar was followed in State of Haryana and
E Others v. !age Ram and Others, A.l.R. (1980) S.C. 2019. This Court ob-
served:

"In view of these decisions, the preliminary objection raised by the
learned Solicitor General to the maintainability of the writ petitions
F filed by the respondents has to be upheld. We hold accordingly that
the High Court was in error in entertaining the writ petitions for the
purpose of examining whether the respondents could avoid their
contractual liability by challenging the Rule,· under which the bids
offered by them were accepted to conduct their business. It cannot
ever be that a licensee can work out the licence if he finds it profitable
G to do so; and he can challenge the conditions under which he agreed
to take the licence, if he finds it commercially inexpedient to conduct
his business."

Dealing with the nature of the amounts payable by the licencee in
H respect of a liquor contract, the Court observed :
STATE v. NARAIN PRASAD [B.P. JEEVAN REDDY, J.] 483

"The respondent agreed to pay a certain sum under the tenns of the A
auction and the Rules only prescribe a convenient mode whereby their
liability was spread over the entire year by splitting it up into fortnightly
instalments. The Rules might as well have provided for payment of
a lump sum and the very issuance of the licence could have been
made to depend on the payment of such sum. If it could not be B
argued in that event that the lump sum payment represented excise duty,
it cannot be so argued in the present event merely because the quota for
which the respondents gave their bid is required to be multiplied by a
certain figure per proof litre and further because the respondents were
given the facility of paying the amount by instalments while lifting the
quota from time to time. What the respondents agreed to pay was C
the price of a privilege which the State parted with in their favour.
171ey ca111104 therefore, avoid their liability by contending that the
payment which they were called upon to make is truly in the nature
of excise duty and that no such duty can be imposed on liquor not
lifted or purchased by them ....... D

These decisions cannot help the respondents because the true
position, as stated earlier, is that the amount which the respondents
are called upon to pay is not excise duty on undrawn liquor but is
the price oi a privilege for which they offered their bid at the auction
of the vend which they wanted to conduct." E

Finally, we may refer to the decision in Y. Prabhakara Reddy. Rule
15 of the Andhra Pradesh (Arrack, Retail Vend Special Conditions of
Licences) Rules, 1969 read as follows :
F
15. Minimum guaranteed quantity of arrack -

(1) No licensee shall purchase arrack less than the specified
minimum guaranteed quantity in any month. If in any month,
quantity less than the minimum guaranteed quantity fixed for that G
month is drawn, at the end of that month issue price to the extent
of deficit purchase shall be deducted from the advance money paid
by the licensee under the minimum quantity of arrack guaranteed
by him and the licensee shall be called upon to indemnify the amount
so adjusted by the end of the succeeding month in which short
drawn quantity had occured. C'! H
484 SUPREME COURT REPORTS [1996) SUPP. 5 S.C.R.

A Provided that the Excise Superintendents may permit the licensee
to lift the short drawn minimum guaranteed quantity of the pre-
vious month in the succeeding month for special reasons expert
for the month of September, unless the licensee has committed
default in lifting the minimum guaranteed quantity for two succes-
sive months;
B
Provided further that where the Commissioner deems it necessary
to permit a shop keeper to draw the deficit quantity short drawn
in any month in th\! subsequent, he shall obtain the prior approval
of the Government for granting such permission.
c (2) Where a licensee fails to lift the arrack as permitted by the
Excise Superintendent or to indemnify the advance amount so
adjusted by the end of the succeeding month in which the short
drawal of quantity had occurred, the right acquired by the default-
ing licensee shall be reauctioned forthwith."
D
Rule 17 provided that "every licensee shall be bound by the
provisions of Andhra Pradesh Excise Act, 1968, and the rules and orders
made thereunder from time to time."
•
Inasmuch as the licencee failed to lift the minimum guaranteed
E quota, the total issue price of the unlifted quantity was sought to be
recovered from him, which was questioned by the licencee in a writ
petition. The argument of the licencee based upon Bimal Chandra Banerjee
was that the State is really levying excise duty in the name of issue price
and that it has no power to do so. Basing upon certain observations in
F Panna Lal, it was contended by the licencee that issue price can only relate
to liquor drawn by the contractor and that it nnnot pertain to undrawn
liquor. This Court repelled the contention based upon observations in
Panna Lal in the following words :

"There can be no question that issue price must generally relate
G to liquor which is drawn by the Contractors but it does not fallow
therefrom that issue price cannot be adopted by agreement between
the parties as a measure of compensation to be paid in the case of
undrawn liquor. In fact, it may not be quiet co"ect even to view it
as co'ffensation as we shall presently see. It is no more and no less
H than the price which the contractor agrees to pay for the grant of the
STATE v. NARAIN PRASAD [B.P. JEEVAN REDDY, J.] 485

privilege to sell liquor, drawn or undrawn." A

The Court then referred to the provisions of the AP. Excise Act and
the Rules made thereunder and observed that according to these provisions
"the privilege of selling liquor ...... and the licence to sell liquor herein may
be granted by the State by public auction subject to : (i) payment of rental
being the highest bid at the auction ......... (ii) the requirement that the
B
licensee shall purchase arrack at the issue price and (iii) the further
requirement that the licencee shall purchase a minimum guaranteed quan-
tity of arrack which be has to make good in case of shortfall. The con-
sideration for the grant of privilege to sell liquor is not merely the rental
to be paid by the lessee but also the issue price of the arrack supplied or c
treated as supplied in case of shortfall which is also to be paid by the
lessee-licencee. There is no question of the licencee-lessee having to pay
the excise duty though it may be that the issue price is arrived at after
taking to account the excise duty payable."

D
The above statement of law was based upon & reading of Section 17
and 23 of the AP. Excise Act and Rules 3, 7 and 15 of the AP. (Arrack
Retail Vend Special Condition Supply Service) Rules as also the definition
of 'rental' in the AP. (Lease of Right to Sell Liquor in Retail) Rules, 1969.
The provisions of the Orissa Act and Rules are no different. Section 22 of
the Orissa Act corresponds in material particulars to Section 17 of the AP. E
Act whereas Section 29 of the Orissa Act corresponds to Section 23 of the
AP. Act. Rule 6-A of the Orissa Rules corresponds to Rule 15 of the AP.
Rules while Rule 3 of the Orissa Rules corresponds to Rule 3 of the AP.
Rules. The only difference is that while Rule 15 of the AP. Rules provides
for payment of issue price in case of the failure of the licencee to lift the p
M.G.Q., the payment of excise duty under the Orissa Rules is made an
independent obligation unrelated to lifting of M.G.Q. It is, in truth and
effect, consideration for the grant of privilege/licence alongwith the
am_ounts specified in Rule 6. In this sense, the Orissa Rules are clearer on
the point that the rental and excise duty (payable under Rules 6 and 6-A)
together constitute the consideration for the grant of licence. G

A review of the decided cases of this Court on the subject indicates
· a clear shift in the way this matter has been looked at. Initially, the matter
was looked at from the point of view of the levy of excise duty. On that
basis, it was held that unless there is a sale, no duty can be collected (Birnal H
486 SUPREME COURT REPORTS [1996] SUPP. 5 S.C.R.

A Chandra Banerjee, Gappu Lal and Ram Kumar). But then a different view
point emerged with the Constitution Bench decision in Har Shankar which
was carried forward in Panna Lal, Jageram and Y. Prabhakara Reddy. These
decisions look at the matter from the point of view of the several payments
being, in truth and effect, consideration for the grant of privilege/licence.
They point out that the excise duty is a duty on manufacture or production
B and not on sale. It was a case, they said, where the duty was b~ing passed
on to the licencee who in turn passed it on to the consumer. What all the
licencee paid, they held, iF nothing but consideration for the grant of
licence and the mere fact that the total consideration fixed comprises
several elements {including excise duty), it cannot be said that excise duty
c is levied upon the licencee . In our opinion, the Orissa matters fall under
the ratio of Panna Lal and Y. Prabhakara Reddy and not under the ratio
of Bimal Chandra Banerjee, Gappu Lal and Ram Kumar. The amounts
mentioned in Rules 6 and 6-A, as also the undertakings contained therein,
together constitute the consideration for grant of privilege/licence, deter-
D mined by auction, as contemplated by Section 29 of the Act. As explained
hereinbefore, the obligation to remit the excise duty is independent of the
sale/purchase of liquor; it is payable on or before the specified date every
month; it is an addition to the monthly instalment payable under Rule 6; its
remittance is not tied up to the purchase of M.G.Q. except to the extent
that the licencee has to pay the prescribed instalment of excise duty prior
E to the lifting of the liquor. It, therefore, cannot be said that there is any
levy of excise duty upon the licencee. The concept here is altogether
different. It is a case where the consideration payable by the licencee for
grant of licence is made up of monthly rental plus excise duty besides the
obligation to purchase the M. G. Q. The licencee pays the rental and excise
F duty as undertaken by him under the agreement/contract eocecuted by him
and as required by conditions of the licence under which he is doing
business, i.e., as and by way of consideration. Indeed, the Rules could have
provided that the entire amount provided under Rules 6 and 6-A should
be paid in advance before the issuance of licence in which event it could
not have been contended that it is not in consideration of grant of licence.
G Merely because, the Rules provide a concession and provide for collection
of the said amounts in convenient instalments spread over the year, the
nature and character of the payments cannot change.

Mr. Sorabjee, learned counsel for the respondents, licencee then
H contended that the theory of "privilege" has been exploded in the decision
STATE v. NARAIN PRASAD (B.P. JEEVAN REDDY, J.] 487

of this Court in Synthetics and Chemicals Limited and Others v. State of A
U.P. and Others, [1990] 1 S.C.C. 109 and can no longer be invoked. In
support of his submission, Mr. Sorabjee relied upon certain observations
in the concurring opinion of G.L. Oza, J. at page 164 of the Report. The
learned Judge referred to Article 47 of the Constitution and observed :

"This article appears in the chapter of Directive Principles of State
B
Policy. Inclusion of this article in this chapter clearly goes to show
that it is the duty of the State to do what has been enacted in
Article 47 and in fact this article starts with the phrase "Duty of
the State" and the duty is to improve public health and it is further
provided that this duty to improve public health will be discharged c
by the State by endeavouring to bring about prohibition. It sounds
contradictory for a State which is duty bound to protect human
life, which is duty bound to improve public health and for that
purpose is expected to move towards prohibition claims that it has
the privilege of manufacture and sale of alcoholic beverages which D
are expected to be dangerous to human life and injurious to human
health, transferring this privilege of selling this privilege on con-
sideration to earn huge revenue without thinking that this trade in
liquor ultimately results in degradation of human life even en-
dangering human life and is nothing but moving contrary to the
duty cast under Articles 21 and 47 and ideal of prohibition E
enshrined in Article 47. In view of Articles 21 and 47 with all
respect to the learned Judges who so far accepted the privilege
doctrine it is not possible to accept any privilege of the State having
the right to trade in goods obnoxious and injurious to health."
F
It is difficult to agree with Mr. Sorabjee. Firstly, these observations
are found in the opinion of Oza, J. alone. The majority opinion does not
express any opinion on this aspect. Secondly, what does the expression
"privilege" mean in the context of intoxicating liquors. The expression is not
defined in the Act. In the context of excise enactments, the expression
"privilege" really means the licence or permit granted by the State. We may G
explain : the State is entitled to prohibit the trade in intoxicating liquors
altogether; it can impose a total ban; no citizen can claim any fundamental
right to manufacture or to trade in these liquors; it is, however, open to
the State to lift the ban partially and allow the trade in liquor to be carried
on in the manner prescribed; the State says that a citizen can trade in liquor H
488 SUPREME COURT REPORTS (1996] SUPP. 5 S.C.R. r
\,.

A only under a licence to be granted by it for the consideration specified in
that behall and that the trade therein can be carried on only in accordance
with the regulatory provisions prescribed by it in that behalf. It is this grant
of licence/permit, which is called or is described sometimes as grant of
"privilege". We do not think that lhe observations of Oza, J. relied upon by
Mr. Sorabjee can be understood as disabling the State from granting
B licences and permits for trading in and/or manufacture of intoxicating
liquors for a consideration. Nor can they be understood as precluding the
State from carrying on the trade or manufacture of said liquors by itself or
its agents. The learned Judge serms to have looked at the matter from an
idealistic and moralistic angle.The learned Judge observed that in the light
c of Articles 47 and 21" it is not possible to accept any privilege of the State
having the right to trade in goods obnoxious and injurious health."

Lastly, we may also invoke the holding in Har Shankar and Jageram
that that writ petitioners, having entered into agreements voluntarily, con-
taining the conditions aforesaid and having done the business under the
D licences obtained by them, cannot be allowed to either wriggle out of the
agreements nor can they be allowed to challenge the validity of the Rules
which constitute the terms of the contract. The High Court should not have
exercised its extra-ordinary discretionary jurisdiction under Article 226 of
the Constitution in aid of such licencees.
E
For the above reasons, the appeals are allowed, the judgments and
orders of the High Court under appeal are set aside and the writ petitions
filed by the respondents writ petitioners are dismissed with costs.
Advocate's fee Rs. 5,000 in each appeal.

F Before parting with these matters, we may refer to an additional
argument in Civil Appeal No. 11518of1996 (arising out of S.L.P. (C) No.
1122 of 1996). It is submitted that there was a default on the part of the
Government in supplying the liquor and that the non-lifting of M.G.Q. was
not on account of any default on the part of the lieencee. Firstly, we have
G held hereinabove that the obligation to remit the excise duty is independent
of the obligation to lift the M.G.Q. every month and that the remitting of
excise duty is not dependent upon or co-related to lifting of M.G.Q.
Secondly, the judgment of the High ·court does not refer to this submission.
In the circumstances, we decline to express any opinion on this submission.

H v.s.s. Appeals allowed.